Don Quijones: Nato-Member Turkey Threatens Western-Owned Banks, Shifts East, Cozies up to Russia

By Don Quijones, a freelance writer and translator based in Barcelona, Spain, and editor at Wolf Street, where this article was originally published

Since the U.S. and EU began imposing and then widening and tightening sanctions against Russia, some U.S. allies have been getting second thoughts. The latest nation to begin severing ties with the U.S.-dominated Western alliance is arguably the most important yet.

That nation is Turkey, the largest and one of the fastest-growing economies in the Middle East – and most importantly, a long-standing NATO ally. For years Turkey has been slowly drifting away from the West, as its economy and geopolitical influence have grown. It hasn’t helped that its accession to the European Union has been repeatedly blocked by countries such as France and Austria, and is now directly opposed by Angela Merkel.

With recent events in Ukraine and the Middle East sending geopolitical shock waves around the world, Turkey’s Eastward shift appears to be accelerating. In a harbinger of things to come, Prime Minister Recep Tayyip Erdogan’s chief economic adviser, Yigit Bulut, announced that Turkey needs to “strengthen control of its banks and limit foreign ownership.

Changing the Rules

“The most important thing is to change the structure and weighting of the Turkish banking sector,” Bulut wrote in his column in Star newspaper. The industry “seems to have been abandoned to the control and mercy of both foreigners and ‘foreigners within,’” he said, adding new bank licenses might be granted in pursuit of those goals.

For the moment, Bulut’s comments are just that: comments. But should the recently re-elected Erdogan government – albeit with Erdogan as president rather than prime minister – actually follow through on Bulut’s threats (hardly out of the question given Bulut’s close ties to the president), it could have serious repercussions for a number of large Western banks.

Since suffering one of its worst ever financial crises in 2001, Turkey has attracted a huge influx of foreign banks on the lookout for cheap acquisitions. They include the British giant HSBC, which acquired mid-sized Demirbank in 2001; the Dutch too-big-to-fail institution ING, which swallowed Oyak Bank whole in 2007; and Italy’s Unicredit, whose joint venture with Koc Holding, a Turkish conglomerate, took over Yapi Kredi, Turkey’s fifth-biggest bank, in 2006.

However, the Western bank that is arguably most exposed to a dramatic change in Turkey’s bank ownership rules is Spanish behemoth BBVA, which in 2011 acquired 25% of Turkey’s biggest listed lender, Turkiye Garanti Bankasi AS (GARAN), from the Turkish group Dogus and General Electric. What’s more, BBVA has – or at least had – plans to take majority control of Garanti in 2016.

Old Enemies, New Friends

Turkey is also home to a number of non-Western banks including the world’s largest bank, Industrial and Commercial Bank of China, which recently bought Tekstil Bankasi AS Sberbank. Russia’s biggest bank Sverbank also has a strong market position after acquiring Denizbank, Turkey’s tenth-biggest, from twice-collapsed Belgian lender Dexia last year.

However, the Turkish government – or at least Bulut – seems somewhat less concerned about those particular banks’ activities. As a matter of fact, Bulut argued that Turkey should develop a “cross-border banking alliance” with neighbors such as Iran, Syria, Georgia, Azerbaijan, northern Iraq and… Russia.

It’s yet another sign of the growing rapprochement between Turkey and Russia – a rapprochement that has seen bilateral trade flourish between the two historic imperial rivals. Russia is currently the second (after the EU) among foreign trade partners of Turkey, and Turkey the eighth largest trade partner of Russia. In 2013 alone the volume of trade between the countries amounted to $32.7 billion.

It’s a trend that seems set to continue. Indeed, according to Russian sources, when the Minister of Economic Development of the Russian Federation Alexei Ulyukayev met with Turkey’s Economy Minister Nihat Zeybekchi “on the margins” of the recent G20 meeting of trade ministers in Sydney, the Turkish side proposed strengthening trade and economic relations between the two nations through a bilateral currency agreement that would effectively bypass the US dollar middleman.

US Foreign Policy: The Great Uniter

All of which goes to show just how effective U.S. foreign policy can be at bringing other nations together – albeit in mutual opposition to the U.S. In the case of Turkey, one of the main motivations behind distancing itself from the West and cozying up to BRICs nations like Russia are government fears over the prospect of multibillion-dollar SEC fines against its state-owned banks for violating U.S. sanctions on Iran and “financing terrorism.” Don Quijones. An exclusive for Wolf Street.

“The glue of the sanctions is starting to dry,” mused Sergio Trigo Paz, head of emerging market fixed income at BlackRock, the world’s largest asset manager. That was in May. Now the glue had dried. Read…. Sanctions Are Eating their Lunch: Russian CEOs Beg for Bailouts, German Economy Swoons

Print Friendly, PDF & Email


  1. John

    On international affairs Turkey is treated differently. Washington will give Ankara the soft glove approach.

  2. Pepsi

    The relatively open practice of grade inflation in the Ivy leagues, the end of inheritance taxes, the destruction of liberal arts programs, and of philosophy programs, leads me to a single conclusion. And I apologize for going a bit off topic. Our elites have almost no depth of thought, and little ability but to continue full speed on the same looting and rent extracting path.

    Finance is all they know, dollar sanctions leading back to wall street are the only things they can think of.

    Any healthy government system will keep people they disagree with around, and bounce ideas off alternative viewpoints, which is part of the point of having diplomacy and opposition parties. Now it’s huge neoliberal echo chamber and they systematically erase alternative views, which usually means something terribleis going to happen.

    They’re going to push the world away from the dollar as reserve currency and lose a ton of power, because they can’t think things through. They’re going down with the ship.

    1. 1 Kings

      Um, whose below deck, and on the other side of the locked gate?…Third and second guesses don’t count.

      1. thrustonhowell3

        That point is valid, but when there are no lifeboats anyway, a first class ticket wont save you and for once (and only once) all the plutocratic, American – class? what class? , neoliberal platitudes about us “all being in this together” will be true.

    2. Fiver

      “They’re going down with the ship.” An especially apt phrase given, as you note, they are such simple-minded lunatics as to believe it’s ‘their’ ship and they’d rather it was sunk – all innocents first, of course – than see it under better command.

    3. Nathanael

      “Our elites have almost no depth of thought, and little ability but to continue full speed on the same looting and rent extracting path. ”

      This is what I’ve been swearing about for years. I’m looking for a Lord Grey, but I’m seeing nothing but Tories, to use the 1830s Britain political analogues.

  3. Banger

    Interesting. Turkey has been playing all sides. Turkey has a long history of collaboration with U.S. and Israeli intel in many areas–for example, it has been a staging area for attacks on Syria providing, in particular, an opening for ISIS mercenaries and their equipment to transit from Libya into Syria and later Iraq. Turkey is also a major supporter of Hamas (along with the Gulf States).

    Now Turkey is playing along with Russia and perhaps Iran–why not. Turkey is truly at the crossroads and is slated to play a major role in world politics. I suggest to you that there may be many factions within Turkish society and the power-structure as in many modern societies who are all playing a different game. I have little insight into it but perhaps others who post here do.

    1. Jim Haygood

      Eric Margolis alludes to a non-negotiable issue for the Turks — Kurdish independence — which now is likely distancing the Turks from the U.S. and Israel:

      As for de facto autonomous Kurds, they have been a western protectorate since 2003 and would be fully independent today were not for fear of a violent reaction by the irritable Turks. Israel has supplied the Kurds with arms since 1970.

      Interestingly, the Kurds are now exporting oil directly to Israel though a Turkish pipeline and tanker while the regime in Baghdad, cut out of payments, fumes. There’s long been talk of an Israeli air base in Kurdistan.

    2. Fiver

      The cross-currents in Turkey are strong and perilous. Erdogan, or at least Turkey’s military, went out of its way to help enable the US policy of regime change under the guise of the ‘Arab Spring’, but as with the US completely misread the determination of Assad, the strength of the Syrian national, secular identity, and the durability of the commitments of Iran and Russia. When Obama rightly balked, not ready for Putin’s refusal to swallow the bogus chemical weapons charges against Assad, nor a potential regional war, Erdogan was so far out on his limb it’s a testament to his domestic political acumen he wasn’t banished to the political wilderness. The exercise did however cost him dearly in terms of his/Turkey’s regional aspirations in general, and with Russia and Iran (and obviously Syria) in particular. Then, with the US following up on its horrific Syrian debacle with an even more reckless exercise in Ukraine aimed at Russia itself, and its no wonder Turkey would be seriously concerned about potential implications and giving them voice – because the US has turned this into such a serious conflict that the repercussions are now de-stabilizing the entire complex of Eurasian relations.

      From the US/Saudis/Qatar pounding on Syria, a military junta fix in Egypt, Libya happily forgotten while the oil changes hands, Iran already ceding to all reasonable and many unreasonable demands, Iraqi oil production booming and Israel building away with great satisfaction, the stage was set to finish Assad, roll up Hamas and Hezbollah, and have someone from Palestine sign away their claims. So what Putin did by insisting on standing by an ally under unprovoked attack was a very big deal indeed – but only to US/Saudi ‘face’, not core interests, if handled by adults who had in fact been caught in a very serious outrage and now needed to face it maturely and reasonably. That’s not what happened…watch it again.

      The game-players take one look around and hit the first button they see. Putin and his Olympics are trashed for months as Ukraine comes to a boil. Qatar is on the outs while the Saudis go ballistic, openly proclaiming their intent to thwart Putin (also backed by China and others, let’s not forget) and create their own army of ‘liberation’ to take Syria, where Assad is clearly winning. Nothing yet to make this a first order crisis. Kaboom! The US ignites a direct confrontation with Russia on Russia’s borders no less, and in the wake of the initial shocks we see: Dubai stalling; Hamas demolished; Qatar humbled; Syria bleeding dry in ruins; ISIS sprout full-grown from the soil like mythical dragon’s teeth with 21st century death squad production values to knock over the Shia Government of Iraq; every capital from Paris to Beijing north of the Equator, London and Wall Street start to vibrate in synch as the awareness grows that a full-scale economic war is a recipe for disaster, that Putin has far more support in the world than the US/NATO were prepared for, and that nobody but the US and its crackpot regime in Kiev thinks a global crisis of unknowable dimension is worth an absolute refusal to negotiate a reasonable deal over Ukraine or Putin’s head on a platter. Whether this can get more stupid from a responsible policy perspective is hard to say, but the political and geopolitical damage this serial, escalating regime change policy has already inflicted is cumulative, immense, systemically dangerous and almost completely antithetical to any legitimate reading of US interests.

      It is impossible to know how much of this Obama owns personally, but if he doesn’t want to own all of it to its sorry, pyrrhic end he will have himself a ‘Gorbachev moment’ that signals the end of Imperium and heralds a new path forward. And now, I sink back into my delirium.

  4. timbers

    Most surprised that Germany went along with sanctions. Germany had all the opportunity of excuses to say no, with the NSA revelations. Perhaps I underestimated the current power of America’s empire.

  5. Tatanya

    Smoke and mirrors. The banks run the show, of course. I am sure the neocons are revisiting their discussions about regime change for Turkey. “The plot and the leading actors are almost the same. Just change the backdrop. Throw in the diplomatic and intelligence machinations into the mix and you have a recipe for regime change. A corrupt leader backed by a powerful next-door neighbour or an overseas sponsor. Internal dissent in the form of mass, on going, and very violent protests, which lead to several deaths in the streets due to confrontation between riot police and demonstrators. Calls for resignation of the (elected) leader and foreign forces manipulating events by meddling in the internal affairs of a sovereign state. After US-EU backed palace coup in Kiev is Ankara the next target?”

  6. Nathanael

    “All of which goes to show just how effective U.S. foreign policy can be at bringing other nations together – albeit in mutual opposition to the U.S. ”

    That’s been the theme of US foreign policy since G W B. Quite consistent. Very pre-WWI (with the US in the role of Kaiser Bill’s Germany).

    The US has absolutely no power over Turkey and had better not pretend that it does. Turkey’s internal situation is pretty messy and complicated, and all the factions are trying to position Turkey as a regional power, but the one thing they’ll all react against (with nationalist fervor) is any attempt at stage-mangement or manipulation by the unreliable and incompetent US, which has given Turkey a lot of trouble lately what with the Iraq war and all.

Comments are closed.