1 April 2014 News Roundup

Photo credit: RT.com /AFP Photo/Bulent Kilic

The crucial local elections finally took place on 30 March after a turbulent week. An intelligence meeting on Syria was leaked on YouTube which was consequently banned by the government. Economy, however, seems to stabilise following a strong win by the AKP despite claims of fraud and manipulation of votes.

The long anticipated local elections have occurred in Turkey, with the AKP obtaining the majority of the votes throughout Turkey.

Results show a mild decrease in the votes of the AKP compared to the previous elections. Nonetheless, the AKP has maintained its dominance over the majority of the cities in Turkey. Both the government and the opposition parties treated the elections as though they were more extensive than only electing local authorities and the incumbent government received the vote of confidence that it was looking for following the recent tumultuous months. Over 50 million people in Turkey voted in the elections.

PM Erdogan declared victory in one of his now traditional post-election balcony speeches. He stated that the government’s election success was the nation’s success and vowed to crush ‘the enemies of the nation’.

The capital Ankara experienced a close race between the Justice and Development Party’s (AKP) candidate who has been the long standing municipal mayor of Ankara Melih Gokcek and the main opposition People’s Republican Party’s (CHP) candidate Mansur Yavas. Meanwhile, the AKP continued its hold over Istanbul as the CHP’s candidate, who had been previously quite successful as an independent, lost against the incumbent mayor of Istanbul and the AKP’s candidate Kadir Topbas. The pro-Kurdish party BDP was successful in the eastern and southeastern provinces, winning in ten cities. Although official results are yet to be announced by the Supreme Electoral Board (YSK) the latest overall figures for Turkey are as follows:

AKP (Justice and Development Party): 45.6%

CHP (People’s Republican Party): 28%

MHP (Nationalist Movement Party): 15.3%

BDP (Peace and Democracy Party): 6.4%

SP (Felicity Party): 2%

There have been many concerns raised with regards to several irregularities and fraudulent attempts to manipulate votes during and after the elections. The main opposition party CHP and the BDP officials complained that there were many power outages whilst counting votes in several provinces. The Supreme Electoral Board (YSK) announced that votes will be recounted in several districts.

CHP’s Ankara candidate Mansur Yavas is contesting the results, claiming he will request the higher electoral council to count the votes again. Electricity cuts during election nights in Ankara have been quite common in the past. This election process was no different and the CHP is planning on appealing the results in Ankara.

The highly politicised local elections also resulted in violent incidents. The candidate for Felicity Party (SP) in the southeastern city of Siirt has been killed in front of his house. Overall 9 people have died due to violent encounter regarding the elections. More than 30 people have been wounded across Turkey.

Results in two districts in the southwestern city of Mugla changed after a re-count was performed. The victor shifted from the AKP to CHP in both districts.

Turkey has voted its first communist municipal mayor into office in these elections. The Turkey Communist Party (TKP) candidate Fatih Mehmet Macoglu has become mayor of Tunceli’s Ovacik district.

Access to social media sites Twitter and YouTube are still blocked in Turkey.

Twitter won court case against the government’s blocking access to Twitter. The social media company had filed petitions against the Turkish government to challenge the Twitter ban, but it had to withhold access to content by one twitter user after a court ruled complaint by former Minister of Transport, Maritime and Communication Binali Yıldırım and his son. A Turkish court ruled that the ban should be abolished as it was contrary to the constitution and the European Convention of Human Rights.

The Telecommunication Directorate has now 30 days to repeal the ban on Twitter. The AKP’s spokesperson Huseyin Celik said, however, that Twitter and YouTube could only be unblocked if these social media companies set up mechanisms for the authorities in Turkey to access for further issues.

YouTube was blocked soon after a recording of an intelligence meeting in the Ministry of Foreign Affairs was leaked on the website. Erdogan had blamed YouTube for supporting Twitter in an effort almost to claim that they were both members of the same conspiring gang against the government.

Tweets from Turkey dropped by 50% in the last week. The United Nations urged Turkey to stop the ban.

The conflict in Syria and a possible Turkish intervention into the country has been an important agenda not only for foreign but also electoral politics in Turkey.

Early in the week, ISIL (The Islamic State of Iraq and the Levant) has threatened the Turkish police forces to leave their station in Aleppo. The Turkish forces were protecting the Suleiman Shah Tomb in the city. The Islamist forces have been in an armed campaign to capture the coastal region of Syria in the past few days. Turkish villages in the borders have been evacuated. The Islamists are aiming to re-capture the Keseb village, the only remaining post with the Turkish border. Therefore, Turkey has increased its security measures in the border.

Turkish police raided several buildings in Umraniye, Istanbul as part of an operation to find ISIL suspects. Two policemen and two suspected ISIL militants were injured. The move came after the attack against Turkish Gendarmerie in Central Anatolian city Nigde in the previous week.

As a sign of the escalating violence in the border, three shell fires and one rocket launched from Syria hit the Turkish town Yayladagi in the southern city of Hatay, damaging a mosque in the city centre.

Meanwhile, early in the week PM Erdogan made comments clarifying the mystery surrounding the trucks that were en route to Syria. The trucks that were initially stopped but not permitted to be searched were being operated by the National Intelligence Agency (MIT). According to Erdogan’s remarks, the trucks were transporting aid and armed supplies to the Turkmens in Syria.

Days before the local elections a recording of an intelligence meeting in the Ministry of Foreign Affairs was revealed, showing high level government and security officials in Turkey making plans to enter into Syria. The recording was of a conversation between the Foreign Minister Ahmet Davutoglu, head of the Turkish National Intelligence (MIT) Hakan Fidan, the Foreign Undersecretary Feridun Sinirlioglu and the Deputy Chief of General Staff General Yasar Guler. The attendees were discussing the creation of a situation whereby Turkey could militarily intervene in Syria.

An espionage investigation began to find the perpetrators. Erdogan filed a criminal complaint against two journalists who are also known to be close to the Gulen Movement. He claimed that these journalists had been aware of the leaked tape.

On a different note…

  • European Court of Human Rights granted its verdict on Hasan Bayar’s case against Turkey. The court found Turkey guilty of violating the freedom of expression. Bayar had reported on the PKK in Ozgur Gundem and had quoted PKK in his reports and was sued against by the government for quoting a terrorist organization.
  • PM Erdogan sued two daily Zaman journalists for insulting Erdogan and mocking his tired voice in one of the last election rallies last week. Daily Zaman is one of the Gulen Movement affiliated newspapers and the Prime Minister has often referred to these newspapers as ‘the parallel state’s media tools’.
  • A feminist group, Femen, protested PM Erdogan in one of the schools in Istanbul where Erdogan was going to vote in the local elections. The two French protesters were quickly detained and were deported on Monday as they were charged with “insulting the prime minister,” “violating the bans over election propaganda,” and “displaying themselves in a way against decency.”
  • Turkey is receiving its oil supply from two main pipelines, Baku-Tiflis-Ceyhan (BTC) and Kerkuk-Yumurtalik. The Ministry of Energy and Natural Resources, during his visit to BOTAS (Turkey’s Energy Providing company) stated that oil coming from Northern Iraq and accumulated in Turkey amounts to 1 million 350 thousand barrels. However, this is far less than expected as the capacity of BTC is 50 million tonnes and Kerkuk-Yumurtalik is 70 million tonnes.
  • Turkey Statistics Institute announced the Real Estate Statistics. In February, 82,597 properties were sold, corresponding a 5.8% decrease from last month sales. However, as opposed to its European counterparts, only 29.1% of properties were sold with a mortgage credit. Istanbul became the leader city with 20.7% of all sales.

Local elections turned the winds of the Turkish economy around; expectations of political certainty and have risen hopes of economic stability for investors.

The effects of the elections on the economy were in line with expectations. Just before the elections on Sunday, foreign investors opened positions in Turkey with the expectations of a win by AKP.  It is predicted that in the last two days before the elections $ 1.5 billion entered to Turkish financial markets, which boosted the stock exchange to 67,587 and suppressed USD against TRY to the levels of 2.1850. After the elections the rate against dollar has gone further down to the levels of 2.1650. The clear and strong win of AKP in the local elections raised the expectations of a single party in the next general elections. This was interpreted as lower political risk, stronger domestic consumption and growth.

It was not a coincidence perhaps that the GDP statistics were announced right after the elections. Turkish economy recorded a 4% growth of GDP in 2013. The growth in the last quarter of 2013 became %4.4 as opposed to the expectations of %4 and GDP per capita increased to $ 10,782. This is an almost two fold increase from a %2.1 growth of GDP in 2012. Meanwhile, trade balance was announced $5.1 billion in deficit by a decrease of %27.2 in February from $7.009 billion in January by Turkey Statistics Institute. Minister of Economy, Nihat Zeybekci, stated that they aim to decrease the deficit by increasing local inputs in the production of exported output. However, the problems of the economy are not limited only to trade deficit but also the production. The capacity utilisation increased by 0.4 from last year’s to 73.1 in March. Despite the slight increase this is the lowest level of utilisation within the past year.

The risks in the economy have been so long emphasized by credit rating agencies. Moody’s warned Turkey for increasing external fragility. In its assessment of flow of funds to seven countries including Turkey, Moody’s emphasized the 13 % ratio of foreign exchange denominated debt to GDP is relatively low. The term structure of liabilities is being restructured toward longer-terms and the sensitivity of public debt to interest rates decreased. Despite the strong fiscal policy, the credit rating agency warned against increasing political risks and volatility in the markets. One of the main sources of volatilities in the emerging markets including Turkey was external. Starting with the talks of tapering the gradual decrease in global liquidity due to a change in FED’s policy, emerging economies faced sudden and increasing volatilities. The President of Federal Reserve in United States decreased the asset purchasing a further $ 10 billion this month and announced that they will end the asset purchasing programme at the end of the year. FED provides liquidity to the markets by purchasing US Treasury Bonds and Mortgage Backed Securities. A decrease in the purchase amount means that emerging markets will be deprived of liquidity glut and will be considered riskier than before.

In addition to external risks, Turkish corporates were found the riskiest among the corporates of emerging economies in Europe, Middle East and Africa according to a stress test by Fitch Ratings. The scenario analysis on the background of the test is based on slower growth, a 250 bps rise in interest rates and 15 % further weakening in local currency rates. According to the credit rating agency, Turkish corporates’ income in local currency as opposed to increasing debt in foreign currencies generates increasing risks.

Many economists in Turkey share similar views with rating agencies and draw attention to the risks in Turkish economy. The general agreement among the economists is that there is a possibility that credit rating agencies might downgrade Turkey sovereign rate during the April reviews and yet they believe that this is not very much likely after the clear win of AKP in the local elections. Due to stability in public budget and flow funds into Turkey a downgrade is not expected in the short-term.

CEFTUS Insights Editors