Erdogan and Bin Zayed attend a signing ceremony at the presidential palace in Ankara (photo: AP)
The stumbling Turkish lira was rebalanced last Wednesday as the UAE pledged a 10-billion-dollar investment in Turkey. That pledge was the culmination of a short visit by Abu Dhabi Crown Prince Sheikh Mohamed Bin Zayed Al Nahyan to Ankara to meet with Turkish President Recep Tayyip Erdogan, ending almost a decade of fraught relations between Turkey and the UAE.
The lira recovered slightly, reaching just under 12 liras to a dollar, but started to decline again towards the end of the week. A few days before the visit, it passed the threshold of 13 liras to the dollar, losing over 40 per cent of its value this year.
Turkish officials started expressing optimism about the prospect of Abu Dhabi depositing billions in the Turkish Central Bank to support the ailing currency, with the media quoting government sources announcing a currency-swap deal with the UAE worth some five billion dollars. But this did not stop the economic collapse, the reason behind which has more to do with Turkish economic policy.
Inflation has skyrocketed to over 20 percent, while the Central Bank keeps cutting interest rates (down from 19 per cent in September to 15 per cent now). That goes against all economic wisdom, but the president blames it on a conspiracy, waging a “war of economic independence” as he pleaded with the people to bear the rising prices and cost of living.
Whether the promised Emirati billions will help prop up the Turkish economy is doubtful. A very recent example was last year when Qatar promised 15 billion dollars of support. The impact was limited, and it only had a momentary effect that faded away quickly. Economic ills in Turkey go deeper than a monetary policy hiccup. The country faces short-term external debt liabilities of $167 billion. Though exports increased this year by almost 20 per cent, the government’s current account is still in the red.
Recalibrating Turkish relations with the Gulf might be of help. Billions’ worth of trade with the UAE, Saudi Arabia and others were lost due to political developments in recent years. As Turkey sided with Qatar in the 2017 dispute, the KSA led a boycott of Turkish goods that cost Turkish exporters billions.
But how much can this make Erdogan and his Justice and Development Party electable in the coming general vote in 2023, is the big question. The UAE and KSA are not interested in who rules in Ankara in a year and half, but rather need to mend relations with regional powers before a final settlement is reached concerning such issues as the anticipated rehabilitation of Iran into the world community, once a nuclear deal is concluded with America.
Actually, the day after Sheikh Mohamed Bin Zayed’s visit to Ankara, Turkish Vice- President Fuad Oktay met with Saudi Trade Minister Majid Bin Abdullah Al- Qabasi in Istanbul. The meeting at the Istanbul Convention Centre involved discussing trade and bilateral relations, according to a report by Turkey’s Anadolu Agency. Yet it might be a while before Turkish-Saudi relations are formally resumed.
Emirati commentators say that Turkey already met certain conditions that were behind the souring of relations. For example, it stopped media campaigns against the UAE and Egypt, scaled back its support for the Muslim Brotherhood – designated a terrorist organisation in UAE, KSA and other Arab countries – and stopped meddling in Libya. But only time will tell whether this is really the case. Some views in the Turkish media hold that it is the UAE recognising the importance of Turkey that is behind restoring relations.
In fact, Emirati foreign policy is leading a bold recalibration effort ranging from relations with Israel to Syria to even Iran. Emirati academic and political analyst Abdulkhaleq Abdulla tweeted: “What is driving all of this is an assessment of the regional influence the UAE has gained lately. The UAE is consolidating its influence and wants to project itself as a peacemaker.”
Turkey seems to be part of the UAE’s repositioning of its role in the region. A veteran Western analyst with close ties to the Gulf said that the UAE is probably the most pragmatic among Arab Gulf countries. “It has a sort of entrepreneurial foreign policy approach. As in the equity market, you buy falling shares at a cheap price to make a profit when it goes up. Turkey is ‘buy’ equity now with its deteriorating economic conditions. So the UAE investment into it will yield a capital return later”, he told Al-Ahram Weekly.
The analyst also noted the changes in the region as a conduit to adjusting foreign policy in a new direction, adding that we are not necessarily going to see cosy relations between Ankara and Abu Dhabi, but mainly an interest-based connection. The future depends on how each party benefits and how that factors into national and regional aspirations.
Repeated talk of “a new Middle East” might be a catalyst for these changes. But we were there before, as the Western analyst noted. There is still a year and half of Erdogan’s presidency in Turkey, which is enough time to see the effects of recalibration of relations with the Gulf, and the wider Arab world.
*A version of this article appears in print in the 2 December, 2021 edition of Al-Ahram Weekly.