This week we have some important updates for investors as local elections near and in light of the potential energy and geopolitical reverberations across the Black Sea from Ukraine.
On the domestic politics front â¦.
There is a great deal of speculation that Turkish Prime Minister Erdogan will attempt to secure a fourth term as prime minister, despite the fact that his party rules put a three-term limit on the post. Until recently, it was assumed that Erdogan would shoot for the president (taking over from President Abdullah Gul) in August 2014 elections, and that Gul would then possibly take over the head of the AKP and the Prime Minister's post in 2015 general elections. However, this assumption was based on Erdogan's efforts to turn the largely ceremonial presidency into a more powerful, executive one. That plan has been scrapped for the most part due to the current intense corruption scandal that has hit hard at his government. Though for long staunchly opposed to changing the term limit rules of the Justice and Development Party (AKP), Erdogan is now signaling that he would consider a fourth term "if my party wishes so."
First, however, the AKP has to make it past 30 March local elections, which will be a barometer for what is to come after that-August presidential elections and 2015 general elections.
Earlier this year, Erdogan reshuffled his government and almost completely reorganized the security institutions, effectively neutralizing the…
This week we have some important updates for investors as local elections near and in light of the potential energy and geopolitical reverberations across the Black Sea from Ukraine.
On the domestic politics front â¦.
There is a great deal of speculation that Turkish Prime Minister Erdogan will attempt to secure a fourth term as prime minister, despite the fact that his party rules put a three-term limit on the post. Until recently, it was assumed that Erdogan would shoot for the president (taking over from President Abdullah Gul) in August 2014 elections, and that Gul would then possibly take over the head of the AKP and the Prime Minister's post in 2015 general elections. However, this assumption was based on Erdogan's efforts to turn the largely ceremonial presidency into a more powerful, executive one. That plan has been scrapped for the most part due to the current intense corruption scandal that has hit hard at his government. Though for long staunchly opposed to changing the term limit rules of the Justice and Development Party (AKP), Erdogan is now signaling that he would consider a fourth term "if my party wishes so."
First, however, the AKP has to make it past 30 March local elections, which will be a barometer for what is to come after that-August presidential elections and 2015 general elections.
Earlier this year, Erdogan reshuffled his government and almost completely reorganized the security institutions, effectively neutralizing the prosecutors in the ongoing corruption scandal. The past several weeks, however, have seen the very public emergence of leaked audio tapes from wire taps.
One of the most damaging recordings has Erdogan appearing to advise his son on how to hide a large sum of money from corruption probe. He is also heard advising his son (Bilal) to reject a $10 million bribe from an industrialist as an insufficient amount, among other things. Erdogan has dismissed these as fabrications orchestrated by the Gulen movement, but at the same time accuses them of illegal eavesdropping on his encrypted phone.
Will there be more leaks? Yes. Turkish officials are now saying that Erdogan's political enemies have taken the entire state archive of wiretapped conversations to add to their collection, so we expect to hear about more leaks in the run-up to elections.
The 30 March local elections, then, are a barometer for how Erdogan and AKP are weathering the corruption probe and whether it has hit hard enough at their support base. For the time being, we do not believe that the probe has done enough to destroy this support base-Erdogan remains hugely popular.
The AKP needs to win over 35% of the vote, and in light of tape scandals, the party's own new goal is 38%--while at the beginning of the crisis they were talking about 50%. If it wins 50%, the party will consider this a major victory. If they win less than 35%, they will be in trouble and this will inform Erdogan's next move, which will no doubt be an aggressive one. It is also possible that based on the 30 March election results, Erdogan would seek to hold early general elections (moving them up from 2015). This would indicate the launch of an even more systematic witch hunt to get rid of his opponents.
The leaked wire taps keeping pouring in, though, making the situation highly unpredictable. Our sources on the ground predict that the AKP will do slightly better than 38% at this point, but if too many more damaging leaks come out between now and election day, this could dwindle. After 30 March, we can expect Erdogan to make an aggressive new drive to get rid of his former-allies-turned-enemies, the Gulenists, rooting them out of state institutions. The 30 March elections are critical because how AKP fares in this vote will determine how much power Erdogan has to "de-Gulenize"-particularly if the AKP loses Istanbul or Ankara.
Energy and reverberations from Ukraine â¦
Turkey imports up to 14 billion cubic meters a year of Russian gas through the Transbalkan pipeline, which runs from Ukraine to Turkey, passing through Moldova, Romania and Bulgaria. Any disruption to this would negatively impact Turkey's state-run gas company, Botas (which accounts for 8 billion cubic meters per year of the total shipped through this pipeline), and a handful of private companies who import under contracts tendered in 2007. These private companies import 6 billion cubic meters of gas per from through this pipeline. These private companies include:
⢠Bosphorus Gaz (a Turkish company majority owned by Gazprom)
⢠Akfel Gaz
⢠Kibar Enerji
⢠Bati Hat Dogal Gaz Ticaret
Russian Gazprom has assured the Turks that supplies will not be disrupted due to the crisis in Ukraine and Russia's seizure of the Crimea. Still, Turkey depends on Russia for half of its natural gas imports, so despite Gazprom's assurances, it is a critical issue.
Ukraine has served as a buffer of sorts between Turkey and Russia, who share friendly but skeptical relations. And the situation places Turkey in a very uncomfortable position.
Russia's march into Ukraine's Crimea region on the premise of protecting the majority ethnic Russian inhabitants there from the "terror" of the "coup" that led to the ouster of Ukrainian President Viktor Yanukovych last month is a delicate issue for Turkey.
Crimea is only about 170 miles across the Black Sea from the Turkish coast of Anatolia, and it is also home to a community of ethnic Turks (Tatars), who would very strongly oppose Russia's annexation of the region. It's a complicated ethnic mix: majority ethnic Russian and minority ethnic Ukrainians and Tatars. What Turkish opposition to Russia's moves on Crimea would mean for Turkey's strategic partnership with Russia remains unclear-and Ankara would rather not find out.
To read the full article
Please sign up and become a premium OilPrice.com member to gain access to read the full article.
Register Login