On Sunday, millions crammed into Istanbul's Yenikapi Square to denounce the attempted coup of July 15. In an unprecedented show of support during the "Democracy rally," elected officials from all major political parties joined together in condemning the terrorists and celebrating those who gave their lives in protecting the country. The rally was met with optimism in financial markets as a broad rally took hold on Monday. This, ahead of President Recep Tayyip Erdoğan's trip to Russia today, marks the first meeting of the two presidents since the downing of a Russian jet over Syria. As details from the meeting emerge, the fate of the Syrian war and relations with Turkey hang in the balance.
The benchmark BIST-100 equity index was stronger by over a thousand points or 1.5 percent late Monday as Sunday's rally appears to have signaled the rebirth of a united Turkey. Should the legislative gridlock be overcome, government stimulus coupled with further liberalization of the economy will allow for continued growth in key sectors. Debt markets also applauded Sunday's rally as the benchmark two-year government bond saw yields drop by 1.5 percent. As yields decrease, the price of the underlying bonds increase
In credit-default markets, Turkey's five- year corporate CDSs continued to rally, bringing them down 50 basis points from their July 21 high of 2.99 percent to their current levels of 2.49 percent. Credit default swaps are insurance against economic and political uncertainty. With the country united in opposition to the July 15 coup, investors are confident that no lasting effects of the coup will linger on the economy. Turkey's CDSs currently trade at a discount to countries with the implicit backing of the European Central Bank, such as Portugal as well as natural resource rich countries like Brazil and South Africa, putting it on track to retain its investment grade from credit ratings agencies.
President Erdoğan's first visit to a foreign country in the aftermath of the failed coup will be an important one. The importance of it being to Russia cannot be overstated. Failing a surprise Hail Mary pass in the final days of his presidency, U.S. President Barack Obama's domestic accomplishments (Obamacare, marriage equality) and their place in the history books will be overshadowed by his fumbling of the Syrian war and U.S.-Russia relations.
Tom Rogan of the National Review does an excellent job of summarizing the current predicament Turkish-American relations finds itself it, ironically, published one day before the July 15 coup attempt. "The United States had real opportunities to engage with Erdoğan and force Russia and Iran to make concessions on Syria. But whether it be the August 2013 redline debacle, or Russia's starvation-slaughter of innocent Syrians, or Russia's repeated intrusions into NATO member Turkey's airspace, or the Russia-Assad-Iran axis's consistently brutal breaches of ceasefire agreements, President Obama has repeatedly surrendered to Russia on every major issue concerning Syria."
So it is within this context, the "Obama Power Vacuum," that President Erdoğan goes to Moscow. With no clear U.S. leadership cleaning up the mess of the Iraq War, allowing DAESH to run the table in Syria and Iraq, and no insistence that Egypt return to democracy, Turkey is left with little choice. The fact that the U.S. appears to be dragging its feet in investigating Turkey's claims that Fettullah Gulen was the mastermind of the July 15 coup, is not helping.
The lack of any visit from U.S. officials to Turkey or even its embassy in Washington following the coup is difficult to interpret positively and this leaves the Turkish people disenchanted with U.S.-Turkey relations. As a Turkish-American trying to bridge the divide between the two countries, I find it difficult to explain the U.S.'s actions following the coup. Isn't America for democracy? Isn't this what America is all about? Why hasn't there been more vocal support for the Turkish people and the democracy they fought and died to defend?
Data released from China late Monday reflect a much steeper decline in China's imports and exports. This points to a major slowdown in its ability to buy foreign goods as well as the demand by the global economy to produce goods in China. This means a global recession is afoot and in this post-coup environment Turkey needs to do whatever it can to immunize itself from the impending global recession, including, if necessary, thawing out frozen relationships.