Amid sanction fears, Turkish economy under stress

Economists told Arab News that the economic impact of the sanctions package would depend on the final decision by Trump and on the strength of the Turkish economy. (Shutterstock)
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Updated 12 December 2019

Amid sanction fears, Turkish economy under stress

  • In Ankara, there is a growing concern that the green light for the implementation of CAATSA sanctions may be given in a few months

ANKARA: Following intense debates in the US Senate, economists and investors held their collective breath to watch possible signs about the determination of the White House to apply Countering America’s Adversaries Through Sanctions Act (CAATSA) sanctions against Turkey.

On Wednesday, a sanctions bill against Turkey passed in the Senate Foreign Relations Committee with a 18-4 vote, and it is now up to Senate Majority Leader Mitch McConnell to bring it to the Senate. The bill, among other measures, aims to accelerate the implementation of  CAATSA within 180 days.

If the bill passes, then it will be brought to the House of Representatives for a vote. And if it gets the green light there, US President Donald Trump would have to either sign or veto it.

There is also a possibility to override a veto. For this to happen, each chamber of Congress votes on a bill vetoed by the president, with a two-thirds majority in both negating the veto.

In Ankara, there is a growing concern that the green light for the implementation of CAATSA sanctions may be given in a few months.

Economists told Arab News that the economic impact of the sanctions package would depend on the final decision by Trump and on the strength of the Turkish economy.

If Trump chooses the least damaging five items on the 12-item sanctions menu, the economy is expected to withstand the pressure to a certain extent. However, sanctions such as prohibitions on banking transactions would significantly harm the economy’s fragile dynamics. A harsher set of sanctions could stop access to the SWIFT international banking system.

CAATSA requires US banks to deny services from foreign banks that do business with blacklisted individuals or entities, even if the transactions do not enter into the US jurisdiction.

The Turkish economy grew 0.9 percent year-on-year in the third quarter, overcoming the period of recession which followed last year’s currency crisis in August with a 30 percent slide in the lira, increasing inflation and interest rates. The currency crisis was mainly triggered by the tension between Ankara and Washington.

But amid this rosy picture of economic recovery, economists underline that there is still need for reforms to restore confidence among investors, with many warning that 2020 could be challenging.

In recent months, the mass suicides of three families drew attention to the severe financial problems in many households.

Timothy Ash, a London-based senior emerging markets strategist at Bluebay Asset Management, pointed out two options regarding impending CAATSA sanctions: Either sanctions will be light or stalled by Trump, or the economy is much more resilient and able to withstand them.

“But I am not sure this is entirely correct,” he told Arab News, adding: “The weak spot is external financing and banks. Anything which limits banks’ access to dollar markets will be very painful. Less external financing means higher borrowing costs and lower growth, it might also need a weaker currency.”

According to Ash, Halkbank looks vulnerable as it seems to be mentioned in all the various sanctions bills and is also subject of the Southern District of New York’s legal case.

“The question is whether sanctions on Halkbank cause concern about knock on effects to other banks,” he said.

State-run Halkbank was charged by US prosecutors with being part of a scheme to help Iran evade US sanctions.

But, Wolfango Piccoli, co-president of Teneo Intelligence in London, thinks that the risk of enacting CAATSA sanctions will increase when Turkey activates the S-400s.

As a law ratified by the US Congress two years ago, CAATSA mandates the Trump administration to bring sanctions on countries that have transactions with the Russian defense industry. Turkey began receiving the parts of the S-400 systems in July and in late November it tested radar-detection equipment in Ankara.

“As for the possible impact on the Turkish economy, this will depend on multiple factors, including the type of sanctions that will be selected among 12 possible measures, the reaction of Turkey and prevailing market conditions at that time,” Piccoli told Arab News.

UAE, Israel reach ‘historic deal’ to normalize relations

Updated 14 August 2020

UAE, Israel reach ‘historic deal’ to normalize relations

  • Abu Dhabi Crown Prince says agreement will stop the further annexation of Palestinian land
  • Donald Trump brokered the deal and hailed it as a 'huge breakthrough'

DUBAI: The UAE and Israel have reached a historic deal that will lead to a full normalization of diplomatic relations between the two nations.

The agreement, brokered by US President Donald Trump, means Israel has suspended plans to annex parts of the occupied West Bank. 



Full text of joint statement on UAE and Israel normalizing ties

World reacts to UAE's opening diplomatic ties with Israel


A joint statement from the UAE, Israel and the US said: "This historic diplomatic breakthrough will advance peace in the Middle East region and is a testament to the bold diplomacy and vision of the three leaders and the courage of the United Arab Emirates and Israel to chart a new path that will unlock the great potential in the region."

The agreement was reached after talks between Trump, Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed and Israeli Prime Minister Benjamin Netanyahu.

“HUGE breakthrough today! Historic Peace Agreement between our two GREAT friends, Israel and the United Arab Emirates,” Trump wrote on Twitter.

Sheikh Mohammed said the agreement would stop further Israeli annexation of Palestinian territory.

“During a call with President Trump and Prime Minister Netanyahu, an agreement was reached to stop further Israeli annexation of Palestinian territories,” he said. “The UAE and Israel also agreed to cooperation and setting a roadmap towards establishing a bilateral relationship.”

Netanyahu said it was “a historic day” and that the deal would lead to a “full and formal peace” with the UAE.

“It’s an incomparably exciting moment, a historic moment for peace in the Middle East,” Netanyahu said in a televised address.



The deal means the UAE would become the third Arab country to have full diplomatic relations with Israel.

The statement said Israel would suspend declaring sovereignty over areas outlined in Trump’s peace plan for the region and focus on expanding ties with other Arab and Muslim countries. 

It said efforts would continue to achieve an “enduring resolution to the Israeli-Palestinian conflict.”

“The United States, Israel and the United Arab Emirates are confident that additional diplomatic breakthroughs with other nations are possible, and will work together to achieve this goal,” the statement said.


This section contains relevant reference points, placed in (Opinion field)

Delegations from Israel and the UAE would meet in the coming weeks to sign agreements regarding investment, tourism, direct flights, security and telecommunications among others.

They would also discuss establishing embassies.

“Opening direct ties between two of the Middle East's most dynamic societies and advanced economies will transform the region by spurring economic growth, enhancing technological innovation, and forging closer people-to-people relations,” the statement said.



Palestinian officials reacted angrily to the agreement, with President Mahmoud Abbas ordering the Palestinian ambassador to the UAE to return home.

“The Palestinian leadership rejects and denounces the UAE, Israeli and US trilateral, surprising, announcement,” said Abbas's spokesman Nabil Abu Rudeineh.

But other Arab countries welcomed the step.  

Egypt, which along with Jordan, already has full diplomatic relations with Israel, said the deal would halt Israeli annexation of Palestinian land.

Egyptian President Abdel Fattah El-Sisi said this would help bring “peace” to the Middle East.



“This historic step will contribute to strengthening stability and peace in the region,” Bahrain’s government said.

Speaking in the White House, Trump said similar deals were being discussed with other countries in the region. He said a signing ceremony with delegates from either side would be held in Washington in the coming weeks.

"Everybody said this would be impossible," Trump said. "After 49 years, Israel and the United Arab Emirates will fully normalize their diplomatic relations. They exchange embassies and ambassadors and begin cooperation across the border.”

*With Agencies