A Look Inside Turkey

A Look Inside Turkey

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Turkey

Recep Tayyip Erdogan

Speakers provide an update on Turkey's domestic politics, the challenges the country faces after the coup, and the likely future of Turkey's foreign and economic polices with the United States.

DROZDIAK: Well, good afternoon, everybody, and welcome to the Council on Foreign Relations. I’m Bill Drozdiak, and I’ll be presiding over this panel of experts on Turkey, a strategic nation in a tough neighborhood, and which has ramifications for American foreign policy in many respects.

So we’re delighted to have with us today on the far side Henri Barkey, who is with the Council on Foreign Relations as part of their Middle East Program, and also a professor of international relations at Lehigh University.

In the middle we have Jim Jeffrey, who is a distinguished fellow at the Washington Institute for Near East Policy and a former ambassador to Turkey from 2009/2010.

And on my right, Jennifer Miel, who is the executive director of the U.S.-Turkey Business Council at the U.S. Chamber of Commerce.

So there’s a nice division of labor. Jennifer will address economic issues. Jim will talk about foreign policy. And I’ll start with Henri on the issue of domestic politics, since he among his other talents is considered to be—is accused of being part of the coup plot last year, which has kept him from visiting Turkey recently. But, Henri, 10 years ago it seemed that Turkey was being cited as a model for Islamic democracy. Now we see the move toward authoritarianism under Erdogan has pushed it to such an extent that the institutions that once seemed to be part of its democratic foundation seem to be eroding very quickly. So we look forward to hearing your remarks on how you see the political situation in Turkey today.

BARKEY: Thank you, Bill. Yeah, my new business card says “failed coup plotter,” so. (Laughter.)

But, look, we all have read stories about what’s going on in Turkey. But what I would like to do is kind of put it a little bit in context of the changes that Erdogan has been instituting. I mean, there’s no question that what he’s doing and what we’ve seen at the moment is the institutionalization of what I would call a personalistic illiberal regime.

And it is really a remarkable transformation, is that not only that is the constitution—the new constitution that was accepted in 2017 has been altered to fit the needs and the wishes of the president, but all the domestic institutions—and that’s what I’m going to be essentially focusing on—all the domestic institutions have been bent to his will. And in many ways, altering domestic balances in Turkey in a way in which one can argue that the concept of separation of power no longer exists in Turkey.

There are two central aspects of this transformation. One is, as you said, is a subjugation of all institutions to the presidency. But the other is also—kind of supports this, or helps this, is a personalization of power, and the personalization of power in the presidency and, if you want, a construction of what Max Weber called the charismatic authority. That is to say that Erdogan doesn’t only have a great deal of institutional power, but he also has a great deal of informal power. And I will try to talk about this in a minute.

First of all, let’s put things in context. Turkey was never a democracy, right? It was a—it was a pluralistic system. I like to think of it as kind of—it had a system of arbitrary governance, but with a certain degree of predictability. That is to say, there were rules, but there was also a certain element of randomness. But all the institutions in Turkey kind of operating within a—within certain constraints. And those constraints had been established by the military.

So the military was always out there looking—kind of the oversight acted as an oversight. If people went too far outside certain accepted boundaries, then the military would come in and directly, sometimes with coups, and sometimes—more often than not, indirectly by chastising people and—or forcing them out of office, et cetera. But there was a certain element of predictability, if you want, in the system. The institutions, whether the parliament, the judiciary, the press, there were very predictable—were very predictable, in the sense you knew what to expect from them and you knew what the boundaries are.

What’s happening now is that all those have been thrown out of the window. That is to say, when you look at parliament under the new constitution, parliament has almost no power whatsoever. Yes, it can call for new elections, but you have to remember that parliament and the president get elected on the same day now for a five-year term. Which means that the person who will win the presidency will also—will get a majority in parliament. The president will control parliament. And parliament, yes, supposedly will pass laws, but it is the laws that are generated by the executive, which is—which is the president.

Judiciary, similarly both in terms of institutional structures as well as in terms of institutional structure, as well as in terms of practice, is now under the control of the president. That is to say, don’t think that if you have a case in front of any judge, that you will be—that you should expect, shall we say, a fair trial. Because if the powers that be decide that you are guilty, you’ll be found guilty, even if the judges don’t know what the—whether you’re guilty or not. They will essentially decide on the basis of what your affiliation is, who you are, whether you are seen as an enemy of the people—or, not the people, the president—then you’ll be found guilty. So there’s no judicial.

The military, most interestingly, is the one institution that has completely—and I’ll talk a little bit more about this as to how we got here. The military, which used to be the dominant power in Turkey, has been completely domesticated. In fact, I would argue that one of the—probably the most positive aspects of all the changes, if there’s one silver lining to all the changes that Erdogan has made, is that the military has not only been completely civilianized, but it has been completely subjugated to civilian authority, in the sense that the military from now on will have no say, will not dare to do anything.

And just to give you a sense of the coup, which I’ll come to, the failed coup of July 2016, was a terrible, badly planned—this is why I was not involved—(laughter)—operation. There were a total of 9,000 soldiers on the streets that night. Yet, within a week, 149 generals and admirals were sacked by the—by the government—by the president. That’s 46 percent of all the generals and admirals in Turkey. Then they went on and eliminated pilots, colonels, captains, majors. And a lot of the top echelons of the military, when I said, those officers who were—who had gone through special staff training, were called staff officers, a lot of them had been eliminated. So much so that there are not enough pilots today to fly all the F-16s that the Turks have. And they’ve been putting pressure on Turkish Airlines pilots to give up their job and to go back to the air force to become fighter pilots again.

 But the military now is essentially run by people who have almost no experience in NATO, have all their positions now thanks to the fact that all their senior cadres had been eliminated. In fact, I think the commander of the Navy, if I’m not wrong, is a three-start admiral and not a four-star admiral, which the Turks always—all the commanders of all the major forces have always been four-stars, because they don’t have enough. They don’t have admirals. They have kicked them out. So the military has been completely subjugated.

The press—today 90 percent of the Turkish press is controlled directly or indirectly by Erdogan, and doesn’t dare to say anything against the government. There are a couple of outlets. They’re mostly—there are also a few internet outlets. But the Turkish press, even under the—when the military was, shall we say, in charge, was quite vibrant. You had a variety, variety of opinions and people arguing, fighting, et cetera. Today, when you look at the newspapers, you will see the same headlines, just like Pravda and Izvestia used to be in the old days, right? You know, if the presidency wants you to say so, then you will—that’s what you will say.

And the universities, the educational system is being decimated. Something like almost 6,000 people from the universities have been kicked out—professors and staff members. And the president decides that he knows more about universities than the faculty. He decides who will be the university presidents. And more importantly, recently he went after one of Turkey’s top two universities, Bogazici University, and basically said the reason Bogazici University is not a great institution internationally is it is not sufficiently national. It doesn’t reflect national values, by which he means not just nationalist ideas, but also Islamic ideas.

So, yes, the wave of repression is now quite extensive. Every day people get arrested. Sometimes you know why. Sometimes you don’t know why they’ve been arrested. I won’t bore you with the details, but, you know, Turkey is now the greatest jailer of journalists. Opposition party members are in jail. There’s a wing—and just to give you a sense, I mean, the leader and the—the two co-chairs of the third-largest party have been sent—are in jail. They haven’t been sentenced yet. But the main opposition party leader has yet to say anything about this, right? I mean, there is—it’s not just individuals and institutions that have been cowed, but it’s also the opposition.

All right. So how did we come here? And I’ll try to wrap it up so we’ll have 10 minutes each. Did Erdogan always meant to do this? Did—what I don’t know, and it goes to Bill’s earlier question—when you look at Erdogan’s initial years in power, he was feted by everybody in Europe, United States. He was bringing democracy. He genuinely opened the system in a way in which it which it was unimaginable. But in the process—I mean, the Erdogan of today and the Erdogan of 2004, 2005 and ’6, are two very, very different animals or people. And so the question then is, was he always intending to do this?

And I’m a political scientist. I’m a structuralist by training. So I want to—I want to say that in fact what happened was there were events on the road that enabled him, that opened the door for him. And just walked through. The first one is the 2007 coup—in 2007 there was—kind of the president, who was a non-secularist, was retiring. You had to have a new presidential election. And at the time, the ruling Justice and Development Party proposed Mr. Abdullah Gul as the president. And the military basically issued an ultimatum saying: You’re not going to do that.

What did Erdogan do? Smartly, he called for national elections which were essentially fought on whether or not Mr. Gul would become president. Why did Mr. Gul—why did the military object to Mr. Gul, because his wife covers her head. I mean, imagine the idea of a woman who covers her head sleeping in Ataturk’s bed. I mean, clearly unfathomable. And what happened was that the AKP won a resounding victory. I mean, it increased its votes from 34 percent to 47 percent, almost by half, all right? And that was, if you want, the first death knell of the Turkish military. From that point onwards, the Turkish military no longer had the ability to check he power of Erdogan.

So that was it. And the two—quickly. The two other events were—in fact, once the military was defeated, the two real strong forces left in society were Erdogan and his political party, and then Fethullah Gülen, who was a close, close ally of Erdogan. They did all this together. All of the bureaucracy at the beginning of Erdogan’s rule came from Gülen’s cadres, because the AKP did not have cadres. They brought in from the Gülen movement. So the Gülen movement went after Erdogan in 2013. Erdogan turned the tables, like he did with the military, he turned the tables on them and started going after them.

And, finally, the attempted coup of July 2016, which essentially has enabled what we are seeing today, because now everything is being indexed on the coup. If you are opposed—if you oppose Erdogan, then you must be a coup plotter. That even includes the main opposition party leaders, right? So he has polarized the society in a way in which he can do whatever he wants because the mistakes, especially of the military—and I don’t exactly know what happened the night of the coup, because as I said it was a horribly organized, who was involved, who was not involved? Was Gülen involved? Maybe. But there were plenty of other officers a well who were not Gülen’s. Anyway, so the mistakes of others essentially enabled Erdogan to now transform the society. And he has every intention of being in power until 2033, so.

DROZDIAK: Thank you, Henri. Just a brief question, do you think Gul could challenge him in the 2019 elections, or has he already been effectively—

BARKEY: So, Abdullah Gul has decided that Erdogan has gone—Abdullah Gul stepped down in 2014 and is a private citizen. But where Erdogan has done is he has now pushed out all the people who formed the party with him back in 2001, including Mr. Gul. Mr. Gul is now making noises saying Erdogan is going too far. So everyone is hoping that Gul will challenge him, because Gul is the one person who appeals to everybody and will—could beat him. And in fact, that’s the big fear that Erdogan has. All the stuff that he’s doing now is because he’s not sure that he has 50 percent of the population behind him. So he is now going after Gul. Look, the—waiting for Gul, to me, is like waiting for Godot. (Laughter.) Right? In the end I don’t think he’ll have to the guts to do it.

DROZDIAK: Thank you. Let’s turn to the economy now. Jennifer, I read contradictory accounts that on the one hand the economy is booming, 7 percent growth last year. And then on the other hand, that foreign investors are fleeing because they’re concerned about the political situation, also whether the foundations of the economy are becoming too fragile. Give us your account of where things stand in terms of Turkey’s economy, which is so important in that region.

MIEL: Sure. And thank you. And the economy, drawing upon Henri’s remarks and the domestic situation, there was a recent poll that was done by the AKP. And they asked voters: What’s the number-one issue on your mind. And if you asked voters a year ago today, they would have told you terrorism. This latest poll was the first time that the economy has come back into the forefront in a big way, largely due because of this really gravity-defying growth of 7 percent, and the inflation that it’s brought with it.

But let’s take a step back and look at not only the headwinds in the economy that are in front of us, but also the tailwinds that we’ve come off of it in 2017. So we’ll do that, and then I’ll offer a few recommendations from the U.S. business community through our work at the U.S. Chamber of Commerce and U.S.-Turkey Business Council. And it may sound like a mantra to upgrade the commercial relationships, especially during these very fragile times, but because we’re at such a critical moment and the economy is in the forefront, especially for 2018, we need to keep all options on the table. So it’s important to consider in rebalancing the U.S.-Turkey relationship overall.

But let’s take a look at the 2017 growth rate, and some of these tailwinds that we’re coming off of. So a year ago today and we just had this horrible terrorist attack at the Reina nightclub, in addition to about 11 or 12 other major terrorist attacks over a year’s period. Very devastating for the country, especially for confidence and investor climate, not to mention the failed coup attempt in July. So for us to be talking about a 7 percent growth rate a year from that point is very remarkable and can’t be understated in terms of the confidence boon that’s give to the Turkish economy, to consumers, and also to some investors, especially looking at portfolio investment that’s seen double-digit growth because of some of the risk premium that’s been priced in, and the growth that’s come on top of that, really defying all odds.

And why has Turkey grown at this rate? Clearly there’s positive base effects. When you look at Turkey’s growth from 2016, the recession in the third quarter of 2016. So when you compare that to another year on year growth, it’s going to look more robust than it might actually seem. Now, there’s also been this credit guarantee scheme, the credit guarantee fund, that Turkey’s government has stepped in to help with the balance of payments crisis that’s looming in Turkey’s private sector. So you have many Turkish companies and about a 2.5 to 1 ratio of loans to deposits. So there is a lot of concern within the banking community of how much liquidity they can provide moving forward.

But through this credit—the credit guarantee fund, it’s largely been deemed successful by economists. Initially they were critical, but then you start to see the 5 percent growth rate from Turkey’s first quarter. This was also during the election period for the referendum. This really had people breathing a collective sigh of relief for the economy, that, you know, maybe we can get over this period quicker than we thought. The stabilization of the security situation as well—which has not come without its costs, but definitely has been a positive impact for investments.

Now, the quality of growth has changed. You mentioned, are investors fleeing? I wouldn’t say investors, especially not U.S. companies that are foreign direct investors that have a stable presence in the country. There’s 1,700 U.S. companies or companies with U.S. capital, most of them are U.S. companies, in Turkey. They employ about 100,000 people in Turkey. Most of their employees are Turkish. And we’re constantly hearing from the companies that we work with that their Turkish employees are among some of the most talented engineers, managers in their global companies. So it’s not that companies would pull out their expats. They have Turks that are managing their businesses on the ground.

They’re continuing to invest and operate, but it’s a different kind of investment. It’s a different quality of growth. A few years ago, when U.S. Chamber of Commerce launched their U.S.-Turkey Business Council, it was at the height of U.S.-Turkey relations. Prime Minister Erdogan had come to Washington. He spoke with President Obama about a free trade agreement. We’d love to be back to that point again. Vice President Biden had come over to the chamber. We launched this council. And there was high hopes. Companies had very strategic research and development plans, additive value manufacturing, really looking at providing value-added content for Turkey’s growth.

Turkey has a very large current account deficit that they need to finance. So this year we’re looking at about $210 billion total. That’s about $575 million per day that Turkey needs to finance externally. Now, as—the exchange rate has definitely hurt Turkey. And there’s four main sources that they get their exchange rates from. Tourism, which we’ve seen an increase over the last year—largely due in part to the security situation stabilizing, ties with Russia improving, a lot of Russian tourism coming back. So those are very important sources of foreign exchange. Also looking at foreign direct investments, which are down this year, but export growth has been up. And that’s largely due to the positive Turkish lira and euro and U.S. dollar balance.

So there are other sources of foreign exchange besides foreign direct investment. Portfolio investments has also been an area where Turkey’s been able to increase some of these foreign deposits that they’re getting from a lot of either loans or bond markets. Turkey usually goes to the bond markets early in the year. They have another bond sale that’s looked to be out this year. And we were talking beforehand about what do you think the impact of this New York case with—

DROZDIAK: The threat of sanctions. Is that a serious concern?

MIEL: Right. So looking at, at least with Halkbank, there could be a potential appeal of the case. So the timing of this is very important, especially with the 2019 elections on the horizon. So depending on the timing, you know, it can really go one of three ways. This could be delayed. There could be a fine. And some of the reports that are coming out saying the fine could be between $2 to $3 billion. And the treasury has said at one point that they would cover this fine. Then there’s been other statements saying that, you know, Turkey views this as illegitimate and they wouldn’t cover.

That last scenario, it’s hard to imagine when you consider the significance of Halkbank. It’s Turkey’s sixth-largest bank. It provides a lot of small, medium enterprises in Turkey financing. Leading up to the 2019 election, this could be something that, you know, could really destabilize a lot of the private sector, which is an engine of growth, especially a lot of this export-driven growth for Turkey. So those are three scenarios to keep in mind. We were also mentioning about the S-400 sale, and what impact as a headwind this could have in 2018. And in talking with colleagues, you know, really it’s not a done deal until the first battery reaches Turkish soil.

So it’s something to keep in mind and in perspective. However, if there ever were sanctions for S-400 or any other reason, that really could have a devastating effect for the U.S.-Turkey defense relationship, Turkey’s participation in the F-35, the sale of F-35s to Turkey—so many Turkish defense companies that have partnerships with U.S. companies that are supplying exports, you know, worldwide, because of some of the content that they use from U.S. companies and vice versa. So that’s one area that companies are concerned about. And they really hope that there is a solution made on both of those issues so it does not impact the economic—the economy, and also the bilateral relationship.

But moving into 2018, you know, because of this credit guarantee scheme, and the high inflation rates. Turkey’s benchmark inflation is 5 percent, but it hit up to 12 percent last year. Just between November and December, we’ve seen about a 1 percent drop. And inflation is expected to continue to ease over this year, but likely won’t hit into single digits until probably the second half of the year. Now, this has an effect for the average Turkish consumer. Prices are higher. Wages to some degree have stagnated depending on what industry you’re in. Real estate prices are also higher. It’s more difficult to purchase U.S. exports.

So you look at the U.S.-Turkey trade balance. Typically, the U.S. has had a significant trade surplus with Turkey, but it’s becoming increasing balanced, largely due to the foreign exchange, because it’s becoming much more difficult for Turks now to purchase products with U.S. dollars. So we’re looking at about between 17 ½ to 18 billion (dollars) once the final data is collected this year, which roughly is a little bit larger than last year. But it’s nowhere near what the two economies can do if there’s conscientious and concerted effort between our two governments and two private sectors to align ourselves in core competencies and shared investment products.

And that’s where I’ll just launch into a couple of recommendations from the private sector. You know, we really think that the commercial and economic opportunity offers a pillar for the U.S.-Turkey relationship to stand on beyond the military defense security relationship and diplomatic, which have had their share of problems, I think we can all agree. Within this framework on the economic commercial relationship, last year when President Erdogan visited President Trump, one of the few things they agreed upon was to upgrade the relationship. To look at more energy and defense investments, were two that President Erdogan had cited.

We know that both of the presidents are focused on jobs and exports. They’re critical for their basis of support and for their own personal legacies. So we think potentially a U.S.-Turkey jobs and export dialogue or forum that builds upon the already existing trade and investment framework agreement that the U.S. and Turkey had met in Ankara this September on can really bring some not only confidence building between our economies but also help to rebalance the relationship.

And there’s key sectors, such as digital economy, healthy, energy, also looking at what can be done within the Syrian refugee community and potentially rebuilding Syria. Drawing upon Turkey’s construction firms’ expertise, the U.S. has said they plan to invest more in Northern Syria. So potentially this is an area that we can look at together. From a trade perspective, there’s also potentially a QIZ, or a qualified industrial zone, that you can work with qualified Syrian labor, a certain amount of content from Syrian labor, and potentially the export could come in duty free. These are ideas the private sector has put on the table. And we really look forward to putting together some type of forum with our government.

And most of all, we think that between the U.S. and Turkey these are bonds—trade bonds that should be invested in, because they really could pay off in clear dividends, not both for—not only for our private sectors but also for government in providing a path moving forward.

DROZDIAK: All right. Thank you.

Turning to foreign policy, Jim, the relationship with the United States, as Jennifer outlined, in the economic sector has been rather shaky, but what do you see elsewhere? The fact that Erdogan has flirted in some ways with Putin. He attended a summit in Moscow recently looking at the situation in Syria with Rouhani and Putin together. Do you think his authoritarian shift is something that is leading toward a break with the West?

JEFFREY: Nobody can answer that fully, Bill, because I’m not so sure, and Henri indicated some of the history here, how far Turkey was embedded in the West. What I will assert in more detail in a second, however, is that Turkey ultimately—even though I don’t think Erdogan would like to himself—is a status-quo power. And that’s the basis of an essentially transactional relationship with this country, which is extremely important. How you look at Turkey depends on how you look at the world the United States is in in January 2018. There’s a general agreement, that has survived some of Barack Obama’s doubts and probably will survive some of Trump’s challenges, that the United States is running a global collective security, economic, trade, financial, and values system. Has been doing so basically since 1940.

But that comes basically in two flavors. If you think that today we are continuing the post-1989 end of history management of a system that, as Barack Obama put it, is on the arc of history to be inevitable, and we have to consolidate these values and the liberal agenda around the world, then Turkey is a disaster case. It has moved away from a lot of the liberal values. It still is a democracy. But it’s a pretty problematic democracy. And many of the things it does, particularly violations of the rule of law, are very worrisome. If, as I believe, that something has changed—Walter Russell Mead first put his finger on it at the end of 2013 with a piece called “The End of the End of History,” playing off Francis Fukuyama—that we’re back in a situation that, while it differs in quality and quantity from 1940 to 1989 is more like it than that period after 1989, than, folks, we need allies desperately. Look around the world, from Ukraine, to the South China Sea, to North Korea, to Syria and you’ll find that we are in a very difficult geostrategic situation today.

To get out of that situation, Turkey is essential for many reasons. And I’ll only touch on them for a second because they’re so obvious. In looking at, in a situation of geostrategic rivalries and chaos, you look at two things in a country: capabilities and intentions. Classic military thinking applied to diplomacy. Capabilities? Look, while there are all kinds of flaky things with the Turkish economy, they’ve been there for a long time. And the point is, it has tripled its growth in the last 15 years. This is an extraordinarily successful economy and it’s based largely upon its custom union with the EU, i.e., Western integration. While I’ve got a lot of problems, and Henri touched on all of them, with what—the internal situation, it’s a relatively stable country, despite all of the challenges and the situation around it. And Turks have seen little stability other than the 15 years of Erdogan since 1960. And its location, its military capabilities, just operating in the Middle East without Turkey, and into the Black Sea, is impossible, as General Breedlove, the former SACEUR, pointed out in a similar forum a year ago.

So Turkey’s capabilities are unquestionable. The question is its intentions. Again, I come back to not what Erdogan would like, but where Turkey is. It’s basically a status quo power. The threat to the Turkish stability and security in the region comes from, to some degree, limited terror, including PKK terror, mainly from Iran and Russia. And Erdogan gets this. He railed out at the Assad regime in the most violent terms I’ve heard him in several years, just last week. He’s taking very strong military actions because the Russians and Assad have violated a ceasefire in the northeast of the country—northwest of the country. And he is very, very concerned about what he calls Persian expansionism. That puts him basically in the U.S. camp.

The problem is that he’s not in there like we know other countries being in there. Erdogan is one part Putin, looking at the world through a 19th century lens, and he’s two parts Charles de Gaulle. He, and most Turks, most that I’ve dealt with, want to underline how independent they are of the United States. But nonetheless, they don’t break. Maybe they will in the future, but we haven’t seen that. Take a look at what we have. We have the U.S. supporting in the fight against Daesh and our role in Syria, building up a PKK offshoot led major army right to Turkey’s south. Turkey rails against this every day, but the aircraft that support that force against Daesh and, to some degree, against—to contain the Russians and Syrians, is coming from where? Largely from Turkish bases. Erdogan lets this happen every day.

He is sitting with the Iranians in Astana to talk about the future of Syria the same time the NATO antiballistic missile system that we put in place to protect us from Iran in NATO is dependent upon a radar that Erdogan personally approved in eastern Turkey. He is buying S-400 missiles from Russia at the same time NATO considers Turkey one of the four key countries for what we’re doing in Afghanistan, and while EU-Turkish relations are always in the gutter. His agreement with the EU on stopping refugee flows probably is one of the most important things stabilizing Europe. So in what he actually does and has been doing there’s a tremendous area for cooperation.

Very quickly, what should we do as a country? First of all, all of these legal issues—the Zarrab case, the Gülen extradition, the various things involving even Henri—these are things that we’re not going to fix. Some of them don’t involve governments, particularly on this side, rather courts. Others just aren’t fixable in this environment, I don’t think. Some of the stings and stabs we get from Erdogan, they’re for domestic consumption. The question is, again, what’s happening at our bases in Turkey, what’s happening diplomatically around the world. The key thing we have to do with Syria is figure out what we want to do—we, the United States—in Syria. If it broadly is to fight terror, deal with Syria, and contain Iran, we’ll find a partner in Turkey. We really haven’t had that discussion with the Turks because, folks, we haven’t had that discussion in any comprehensive way yet here in the United States. I’ll stop there, though.

DROZDIAK: Thanks, Jim.

Let me open up the conversation to members for your questions. Please wait for the microphone, stand, and state your name and affiliation. And please be as concise as possible, because we have just a little over 20 minutes left before we have to conclude. And I want to remind everybody, this is on the record. So please keep that in mind.

First question, Paula.

Q: Thank you. Indeed, Paula Stern.

Thank you for superb presentations, all three of y’all. So much substance. My question—I wanted to ask our third speaker, did you say that Turkey was a democracy?

JEFFREY: Yes.

Q: And if you would expound on that. And so I do have a second question, then. And it’s about the Kurds. I don’t know if we even said the word Kurds, but I would love to hear some discussion on it in this context. Thank you.

DROZDIAK: Just to—that’s one of the points of contention with the United States, since the U.S. has supported the Kurdish fighters in Syria. Is that bleeding over into the relationship with Turkey? We’ll start with Jim and then go to Henri and Jennifer, if you have some thoughts.

JEFFREY: It is a democracy. It is not a liberal democracy. It is not a pluralistic democracy, for all the reasons Henri said. It never really was, and it has got less so under President Erdogan. It is still a democracy. That is, in some respects I wish it weren’t because he would have a better policy, from my standpoint, on the Kurds if he didn’t have to be dependent for electoral support on a party—the National Action Party—that is extremely anti-Kurdish. So it is still a democratic dynamic. Again, if our goal in the world is to promote democracies that look—I won’t even say today like ours—but rather like, perhaps, Denmark’s—(laughter)—then we’re failing in Turkey. If our goal is to keep the world from getting—to have more Syrias, you need Turkey.

On the Kurds, I’ll turn to Henri.

DROZDIAK: Henri.

BARKEY: Remember what Shakespeare said about Denmark, right?

JEFFREY: Yeah.

BARKEY: On the Kurds, look, Erdogan in the early part of the 20—the second decade of the century, did something that very few predicted, was he negotiated with the PKK and with the leader of the PKK, Abdullah Ocalan, who is, you know, evil incarnate in Turkey. I mean, it was a very, very gutsy move on his part. But the—again, the question was did he do it because he needed then-Kurdish votes because what—his both presidential and parliamentary ambitions, or was he doing it because he was—genuinely believed in it? I have—initially I thought he genuinely believed it, but I’ve now subsequently come to the conclusion that he did not, that he was—this was all instrumental. For Erdogan, you know, he is Tip O’Neill incarnate. I mean, all politics is local. And he did this because he wanted Kurdish votes. And when the Kurds basically said no, we’re not going to vote for you in the presidential referendum, he switched.

Now, you can stop negotiations—and there were plenty of good reasons why he stopped negotiations, because the Syrian Kurds were getting very, very strong. And if you want the Kurds, the PKK was actually on the negotiating table. And if you asked it, they didn’t have it. But it is what he did subsequently. There were a lot of reforms that took place in Turkey in last years, like language. People could speak language, could write in Kurdish signs. When you went to southeast, when I did, I could see signs in Kurdish, which you never saw before. All of that stuff is gone. So the repression now is full-blown, just like at the height of Ataturk or the military period. So you don’t switch that much if you—if you genuinely believe in reconciliation at home.

DROZDIAK: Next question. Yes, over here.

Q: James Saxon-Reese (sp), State Department.

My question is more localized. Can the United States government do anything about Hamza Uluçay, our friend and colleague who’s been working for the U.S. government for 38 years, who spent the last year in jail, keeps getting extended? Same with our colleague in Istanbul, Metin, and others.

DROZDIAK: Yeah. Coup plotter, maybe you—(laughter)—

BARKEY: Yeah, you want me to—look, I’ve been arguing for Hamza for a long time. It’s somebody I know personally. And I really think—I don’t have anything to propose. But I don’t understand why our government—and Jim is better at this than I would be—why our government has not essentially taken a much stronger line on this, and done something about it. To me, the fact that people working for the U.S. government get arrested like this and we don’t do anything for them, what kind of message are you sending to thousands of others who are working for the U.S. government? We have said absolutely nothing. And I know that the president was asked to mention Hamza’s name with the pastor and the NASA scientist who are in jail. He only chose to mention the pastor to Erdogan and not the others.

Jim.

JEFFREY: It isn’t that we haven’t done anything. As you know, we are extremely vocal, both as a government and many of us involved personally. And it has had no impact. It led to a crisis over visa issuance over the past three months. At the end, we pulled back, again. If you believe you’re in the world I believe we’re in in January 2018, you’re going to suck up a lot of things that are very, very bad for the greater purpose of trying to bring some kind of security to that region. Four hundred thousand people have died in Syria since 2011. That’s my starting point in any discussion about anything related to the Middle East.

DROZDIAK: You know, just on that question, the 3 million refugees in Turkey. Jennifer, what has been the economic impact? Has this been a terrible burden or, as some people have said, it’s actually helped juice the Turkish economy?

MIEL: Right. Well, there’s about 3.4 million, now, refugees in Turkey. The vast majority of them being Syria. And when you add that to the about 80 million people in Turkey, you have all of a sudden the largest country in Europe being Turkey. So that’s a huge market—domestic market. A lot of the Syrians that are in Turkey and refugees from Iraq and other countries, they are consumers. They come and they have nothing. So it’s definitely added a boost to the economy. About 90 percent of the refugees in Turkey live outside of camps, so they’re integrated into the economy, but not as much as they should be. The government spent about $25 billion since the start of this crisis with Syria. And there’s also additional funds that will be coming from the EU.

And Ambassador Jeffery pointed out about the EU-Turkey agreement on the refugee flows, it’s definitely helped to curb the refugee flows into Europe. But there’s a lot more that can be done. Latest figures show between 10(,000) to 20,000 Syrian businesses are in Turkey. Now, that’s both formal an informal, hence the large variation. But to the extent possible that Turkey can help them integrate into Turkish companies, because they’re really there to stay, unfortunately. It doesn’t look like they’re going back anytime soon.

DROZDIAK: Right. Yes, up front here.

Q: Hani Findakly, Clinton Group.

I want to ask—

DROZDIAK: Please hold the microphone—

Q: I want to ask about a subject that’s not discussed as often, which is Turkey’s regional relationships. They have injected themselves into the Gulf conflicts by increasing their commitment of troops to Qatar. Erdogan had—seemed to have led Palestinian cause issues from Gaza to the Jerusalem issue. And I’m just wondering whether—and there’s a tension between the UAE and Turkey on the coup issue, where they have accused the UAE of sponsoring or at least supporting the coup. My question is that is there a theme for this regional relationship, or is he just making things as he finds domestically?

JEFFREY: Let me start, but Henri may have more on this. Erdogan and his former prime minister or Foreign Minister Davutoglu had grandiose schemes for a sifir problem, zero problems, foreign policy, where they would be a new Ottoman Empire. None of this has worked, which is why I say it’s not that he wants to be a status quo power, Turkey is a status quo power. And frankly, the status quo since 1952 has—well, since going into Korea has worked out very well for Turkey. They damn well should be a status quo power. Now, rather like us, they have a lot of boutique foreign policies. He has a couple of really key foreign policies—us, Europe, Russia, Syria, Iran, and maybe Iraq. That’s it. The rest is all Kurdistan regional government.

DROZDIAK: Islamic movement.

JEFFREY: Pardon?

DROZDIAK: Islamic movement?

JEFFREY: It’s basically—it’s basically—certainly Daesh, as the Islamic movement, is essentially dead. And it’s seen as dead as a threat. The rest of these things, again, are boutique. They’re driving by his ideology and by the domestic situation. Erdogan’s part of the Turkish religious scene traces its roots to the Muslim Brothers. That’s why he was so supportive of (Morsi ?) and so antagonistic to Sisi. It explains his relations with Hamas. Also to Qatar, which has supporter Muslim Brothers, while the Emiratis and the Saudis—it isn’t that they didn’t support Muslim extremists, they just supported other ones. So it’s kind of a fight within the family. None of this amounts to anything.

BARKEY: What I would say is that if you—if you read—if you look at the Turkish press on a daily basis and you listen to Mr. Erdogan speak, you see two things emerging. One is that Turkish foreign policy is amazingly successful. It goes from success to success to success. Well, I mean, there is some truth to that, in some respects. I mean, the Trump decision on Jerusalem opened—I mean, and Erdogan very smartly walked in. I mean, he is very quick on his feet, there’s no question about it. But the truth is, the successes are actually very few in number, partially because of what Jim said.

The other is victimization. I mean, constantly, Turkey is being portrayed as a victim—mostly victim of the West, but a victim.

Those two narratives essentially come in one. They’re both for domestic consumption. Everything is really now focused on the 2019 elections, or maybe it will be sooner. It is Erdogan is trying to build, essentially, a bulletproof vest, if you want, against any type of criticisms, right, and also at the same time show that there’s great success, right? And that is what—foreign policy is really a function of domestic needs.

For reasons—there’s something going on in Turkey—and this is, I think, quite important—he is not feeling confident about the elections. The referendum which officially he won this last year was by a razor-thin majority officially. There are studies that have come out that says that he actually lost the referendum. But considering that in the runup to the referendum there was almost no discussion in public—I mean, the people who were opposed to the referendum could not express their position, and yet the official and unofficial press continuously said, oh, what a wonderful thing this is. And yet, with all of this, he only got 51 percent even if he did not cheat, which I think he did, right? So he is very, very, very worried.

So everything that we see now in large measure is being driven by this need to bolster his position at home. This is a guy who’s really worried about the future. He is worried about Gülen. He’s worried about somebody coming up. And that’s how you have to look at his policies.

DROZDIAK: Jennifer, do you see that in an economic sense? Is everything predicated on victory in the 2019 elections, either putting pressure on the central bank to keep interest rates at a—at a comfortable level so that it’ll cause the economy to continue to boom, or?

MIEL: Well, really since 2014 there’s been some sort of an election every year. And it’s ironic because one election comes and then the government’s saying we’ll have four years or five years of reforms. So, from the economic angle, the elections are seeing as delaying these very critically needed structural macroeconomic reforms. And now that we’ve got 2019 with elections, last year was seen as an election year because of the referendum, and this year is going to be seen as an election year leading up to the election year, if there’s no early elections.

DROZDIAK: Right.

OK, another question. Yes, over here.

Q: Hi. Marisa Lino with Northrop Grumman.

I’d like to go back to the S-400s.

DROZDIAK: Could you please speak up a bit so we can hear you better?

Q: Sorry. I’d like to go back to the S-400s. I do agree with the statement that they are not 100 percent final until the first one is delivered, but I really want to ask a question probably mostly aimed at Jim. The other day, the Turkish government released a—I think it was a request for information for local companies to integrate the S-400s into their air force network. Are they being naïve? And the same statement—press statement said that Turkey completely expects to be running these S-400s independently. Are they naïve to think that the Russians are going to let them run them independently, number one; and, number two, that they will be able to integrate them into their air force network? That NATO’s going to let them integrate them into their air force network.

JEFFREY: Yeah. I think, first of all, Erdogan thinks he can do a deal. Whenever you raise S-400 with him, he says, what about the S-300s? And we just look at ourselves and say, huh? And the Greeks bought S-300s. There’s a backstory to that. But the point is—

BARKEY: They did not buy them.

JEFFREY: They were transferred to Greece. There’s a backstory to that that Henri knows. But the point of it is, nobody made a big deal out of it. In fact, we were kind of happy.

There are ways to deal with an air defense system that doesn’t talk to everybody else, but it makes it not very effective. And obviously, with an F-16 and an F-35 fleet, this is a dumb idea. Again, think of Charles de Gaulle. He did this for political reasons and a little bit of military technological reasons. This was a big issue in my last three tours in Turkey. They don’t like how the U.S., through the defense industrial sector, deals with them, particularly on source codes and their ability to co-produce. You know that. Your firm knows that. And it’s been a longstanding issue. And he decided that he’s going to teach us a lesson, so he goes off and does it.

The problem is—and, you know, that’s a whole other subject, because we’ve been talking a lot about things Erdogan does to us—things we, the U.S., and we, Europe, have done to Erdogan since he has come into power. It’s not all one-sided. And, you know, we might end up sanctioning him, and pulling the plug on his F-35 program, and us pulling the plug on a lot of what we’re planning on, because it’s a 100-plane purchase, one of the largest. Who’s going to—you know, what does that do to the per-unit price of the F-35 if we do that? That, again, is congressional sanctions that were not aimed at Turkey, but will bounce off of Turkey, possibly. So that’s the latest crisis that’s looming on the horizon for us.

But yeah, he’s—he doesn’t care about integrating into the rest of the system.

DROZDIAK: Henri, do you think Erdogan believes the U.S. is seeking to depose him?

BARKEY: Well, he actually made a statement only two days ago that said that the coup now was done by the CIA and the FBI. And everything is seen in the form of a coup. I mean, even the Zarrab case in New York was interpreted in Turkey as an attempted coup against. But again, this is all for domestic consumption.

The problem is that one of the things that you do notice now when you talk to Turks or when you read the press is that they—really, there is a segment of the population that genuinely believes that, that we are after them and that we are after Erdogan, we are trying to overthrow him, and so on and so forth. The question is, to what extent does Erdogan and his people around him also believe that? Because if that’s the case, at some point it will be reflected in policy in one way or the other, right?

But at the moment, I mean, Jim is right. Turkey is a status-quo power. Even its—even its intervention in Syria was actually limited. I think it was also limited by the fact that they suffered a huge number of casualties for the operation that they did, and the military today is not up to par with what it used to be. So they’re afraid of expanding, even though Erdogan keeps talking about expanding the area of operation in Syria and going after the YPG.

But you can see at some point somebody making the wrong decision, right? And this is the unpredictability now in Turkey that exists, because the other institutions are not there anymore to balance Erdogan, and Erdogan can make many decisions on his own. And he also may make the wrong one. He hasn’t so far, but—

DROZDIAK: OK.

JEFFREY: As a—as a government, we have never tried to overthrow Erdogan or anybody else in Turkey. But there has been a lot of thinking at various times about how we could tweak what’s going on inside Turkey to our benefit at various times. And Erdogan has definitely gotten wind of that in kind of half-baked ways, and this feeds his real paranoia combined with, as Henri said, his instrumentalization paranoia that he uses for domestic purposes.

DROZDIAK: We have time for just a final round of questions. I’ll take maybe two, possibly three. Yes, you had your hand up first. And then in the back.

Q: Hi. Doug Ollivant with Mantid International.

U.S.-Turkish relations appear to be at their lowest point in some time. How do we get out of this? It doesn’t appear that we’re going to extradite any clerics anytime soon, we seem to be in no mood to abandon the Syrian Kurds, and we have this S-400 issue that could easily go south. On the other hand, had we had this event two-and-a-half, three years ago, we would have been talking about how they were on near-war footing with the Russians and a bad place with the Israelis, and they’ve been able to manage those relationships. Is there a way forward for us to repair our relationship with Turkey?

DROZDIAK: OK, hold that thought. And then we’ll take maybe one or two more, and then we’ll have a final round of comments from the speakers. In the back there, did you have your hand up?

Q: My name’s Ragip Soylu. I work for a Turkish newspaper, Sabah.

My question is addressed to Mr. Ambassador. Do you think Trump administration has a policy on Turkey that they decide to do—to do with Turkey?

DROZDIAK: And, well, you already had—any other questions? All right.

So where do we go from here? What can we do about U.S.-Turkey relations? Jennifer, you mentioned a couple of points on economic improvements that you would see. Is there anything more that can be done?

MIEL: I think the economic and commercial relationship has always been discounted to the political and military/security dimensions. But especially now with the fragility, potentially, of Turkey’s growth rate, and also the focus that both our president and Turkey’s president has on the economy, specifically with the leadup to the 2019 election and potential fallout from the case in New York, I mean, what better way to show that the U.S. is well-intentioned and wants to partner with Turkey, especially on the economy, and is not trying to foment some type of economic coup than to formally partner on the economy through a high-level dialogue, whereby our secretary of commerce and Turkey’s minister of economy resolves to focus on three or four strategic areas? I think that can really put our countries on a path to rebuilding some of this trust that’s been lost.

DROZDIAK: OK, thanks.

Jim, final thoughts?

JEFFREY: Yeah. As one who’s worked with the Chamber to do just that, I did it with a bit of biting my lip because it’s an important thing, it should be done; it’s not a replacement for what’s really important in the relationship, which is diplomatic, political, and security. The key thing there is we have to try to firewall all of these legal issues—and they’re very complicated, and they’re very, very emotional and intense for both sides; they’re very unhappy with Gülen sitting in Pennsylvania, and we’re very unhappy with a whole series of things they’re doing—and focus on those areas where we have common geostrategic interests, which are primarily to the south in Iraq, including somewhat separately the Kurdistan Regional Government, and in Syria. And I think that there is a basis to move forward. But it requires a real cold-blooded, instrumental, transactional approach, which we don’t normally do.

DROZDIAK: Henri, is there anything we can do to improve the relationship?

BARKEY: I’m not sure exactly what we can do, but I do have one suggestion. But I do—I do think that we actually do need to so something, because what I’m—what I am genuinely worried about is that somewhere something is going to happen, there’s going to be an accident, and it’s going to—things are going to get a lot worse. Given the atmosphere in Turkey, something happens to an American or whatever, or think of Cyprus with all the—increasingly this gas issue becoming a flashpoint, things can go wrong in so many different places.

So we need to actually think very carefully and come up with a policy. I mean, Ragip is right. I mean, I don’t know if there is a policy on Turkey here in this government.

But there is something very interesting. I mean, we do have two presidents who in some ways are very much alike. If you remember Rodney Dangerfield, you know, all he wanted was respect. And I think both presidents are very, very anxious to be respected, to be seen as big players on the world stage.

And, look, Erdogan went to Paris; by any stretch of the imagination, this was a disastrous meeting. I mean, Macron was a door on Europe. Macron told him all about people in jail. And yet, when you look at how it was portrayed in the Turkish press and by Erdogan himself, this was a great victory. It was a great victory because Macron essentially invited him to the Élysée, gave him all the honors, and that’s what Erdogan cares about.

Now, we know Trump also cares about all that stuff. So there is a way in which maybe, at a very subtle level, there is something that could be done at a much higher level. But we also do need to have a president who’s also in command of the issues and the facts, and be able to negotiate with Erdogan, because Erdogan is—knows all—I mean, in terms of his own world, he knows all the—all the details. But there is something that could be done, maybe, at a—at a higher level. But it would take a great deal of preparation, especially on our part, for that to happen.

And that maybe—I mean, in exchange for that, we will expect the decline in the anti-American rhetoric, which is really, really very, very dangerous at the moment in Turkey. And so that would be the price that we should expect, at a—at a minimum. But maybe that’s something that could be done.

But beyond that, I don’t see us extraditing Gülen. There’s not—the case has not been made. The issue of Daesh is far too important for us at the moment to give up on the Kurds. We will one day give up on the Kurds. I mean, it’s only—it’s only a habit. I mean, we do it all the time. But not at the moment.

DROZDIAK: Well, that’s all we have time for today. Please join me in thanking our speakers. (Applause.)

(END)

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