On August 1^st, the U.S. government announced that the government would prohibit two officials of Turkey from engaging in transactions involving property that they own in the U.S.. These two officials are Justice Minister Abdulhamit Gul and Interior Minister Schlemin Souil, who contributed to the imprisonment of Brunson. After this announcement, all the interests and transactions would be blocked, according to Sarah Huckabee Sanders, the press secretary of the White House. She also notified the Turkish government that the U.S. would impose additional strong sanctions if there was no progress in the release of Brunson.

           However, Turkish President Erdogan did not comply with the U.S.’s warning. As a result, soon after the sanction of the Turkey ministers, U.S. government vowed to impose a double tariff on Turkish steel and aluminum. Turkey also responded immediately to the U.S., imposing 140 percent additional tariffs on alcohol, 120 percent on automobiles, and 60 percent on tobacco items.

 

Once a Best Friend, Turkey and U.S.

Russia and Turkey have a history of unfriendly relations. Since the Soviet Union had frequently invaded Turkey to obtain an ice-free port, Turkey and Russia have fought 13 wars against one another in the last 400 years. As a result, the historic rancor between Turkey and Russia has carried over to modern diplomatic relations. In addition, during the Cold War, the Soviet Union was one of the most threatening rivals to the United States. Turkey and the United States, whose interests in Soviet control were closely aligned, has maintained close ties through NATO agreements since the Cold War.

 

Anderson Brunson, Who is at the Heart of Conflict

           In 2016, conflict between Turkey and the United States began to spark when American missionary Brunson was arrested as an anti-government figure in Turkey. Brunson was a pastor who had devoted himself to missionary work for 23 years before moving to Turkey with his wife. Although Brunson continued to appeal his innocence at the court, he was detained on charges of supporting the Kurdish Workers' Party, which the Turkish government has designated as an illegal organization, and engaging in espionage. The U.S. government and Congress have aggressively pressured the Turkish government to release Brandon. Just a year and a half after his detention, Turkey's court rejected the U.S. government's demand for Brandon’s release, placing him instead under house arrest, out of consideration for his health condition. In response, the U.S. government eventually imposed strong sanctions on Turkey.

          

Why Doesn’t Turkey release Brunson?

           The Turkish government was aware of the significance of Andrew Brunson to the Trump administration. When, then, did Turkey not release Andrew Brunson in spite of facing economic crisis? The answer takes us back to the attempted coup in Turkey in July 2016. At that time, Turkish President Recep Tayyip Erdogan was bent on catching his political enemy Petula Guren, having pointed him out as the leader of the coup. Since Guren had defected to the United States, President Erdogan sent an ultimatum to the United States shortly after the coup attempt, demanding Guren’s repatriation. The U.S., however, was skeptical of Turkey's request because Petula Guren had once been a political ally of Erdogan’s. In response, Turkey held Andrew Bronson in custody.

Later at the NATO summit on July 11, Turkey offered the U.S. an exchange of Brunson and Turkish Ebru Özkan, who had been detained in Israel on charges of smuggling and collusion with terrorists. In response to Turkey's proposal, the U.S. contacted Israel, and finally released Ebru Özkan on condition of acquitting Brunson. Turkey, however, went ahead with Brunson’s trial, dismissing the exchange as a one-sided affair by the U.S. By changing the conditions of the deal, Turkey put itself in danger and at risk of U.S. sanctions.

 

Plunge of the Turkish Lira and the Financial Crisis

Turkey's lira fluctuated after the U.S. approval of sanctions. On August 13^th, the value of the Turkish Lira fell 20 percent to 7.24 lira per dollar. Compared to the standard of 5.80 per dollar, the level at which the Lira is usually kept, the value of Turkey's Lira dropped significantly. The fall in the Turkish currency is related to instability of Turkey's economic structure. Turkey is one of the emerging countries that is very dependent on foreign capital. As Turkey is not rich in natural resources, it has tried to attract foreign investment capital to fill its trade deficit. This structure makes Turkey very sensitive to domestic and international economic situations. Following the 2016 coup attempt, however, as the government tried to gain control over the central bank through various emergency measures, foreign investors began leaving Turkey. In addition, the U.S.'s imposition of a strong tariff dramatically accelerated the outflow of foreign investment capital, all of which led to the plunge of Turkey's Lira.

 

Financial Crisis of Emerging Economies

           Investors who try to invest in emerging economies typically fund their interests in multiple countries rather than focusing their investments in one country. In other words, a crisis of one emerging economy can affect others significantly. Likewise, currencies of the emerging economies were hit hard by Turkey crisis, with the Argentine peso, the Indian rupee, the Indonesian rupiah, the South African landing and the Russian ruble all plummeting by at least 10 percent. Recently, The Wall Street Journal has reported that Trump is even considering withdrawing the General Incentive Tax System (GSP) that applies to products of emerging countries. This move is expected to have a bigger impact on emerging economies if Turkey keeps up its current policy stance.

 

Crisis of a Military Alliance

           Some in the U.S. say that it is necessary to approach Turkey more carefully since President Trump is handing over Turkey, the only ally in the West, to Russia. However, Trump and Erdogan continue to fight via the media. Making matters worse, Turkey recently purchased the Russian S-400 missile defense system, despite an agreement with the U.S. to buy the American F-35 system. As the purchase of Turkey became known, the U.S. media criticized Turkey's move. Since then, during an emergency meeting, the U.S. Congress decided to stop delivering the F-35 to Turkey and is even considering whether to exclude Turkey completely from the F-35 project.

 

Booming of Shipping Delivery

           After the confrontation with the U.S., Turkey has suffered a lot both inside and outside the country. But contrary to the diplomatic situation in Turkey, many foreign tourists and people from neighboring countries have been flocking into Turkey. Due to the plunge of Turkey’s Lira, people have been able to purchase luxury goods in Turkey at a cheap price. Crowds of shoppers have filled luxury shops in Turkey, resulting in lines of tourists waiting for more than 30 minutes and flocks of foreign correspondents trying to cover these unusual scenes. When Turkey's exchange rate plunged, Turkey's exchange rate and the shipping agent at Turkey topped the list of popular search word on Korean portal sites all day long.

 

Fluctuation of Turkey’s Lira

           After the tariff was approved for Turkey, Turkey's central bank urgently put forward a policy to maintain foreign currency reserves by restricting currency swaps at commercial banks and raising foreign currency deposits. Furthermore, after news of neighboring Qatar's $15 billion commitment to additional investment in Turkey was reported, the lira, which once soared to 7.24 per dollar, showed a steady return with a record of 5.85 in August 16^th. However, as soon as President Trump made an announcement to Turkey that there would be no concession, the currency rate has continued to fluctuate due to Trump's tweet, which soared to 6.16 per dollar.

 

What options are left for Turkey?

           Economists have also predicted that European countries such as Spain, France and Italy, which are now offering large loans to Turkey, could support Turkey to prevent the spread of shock to banks in each country. Currently, financial exposures of Spain, France and Italy are estimated at $83.3 billion, $38.4 billion and $17 billion respectively as of the first quarter of this year. However, if these countries provide assistances in conjunction with the IMF bailout, this is unlikely to be feasible because of the challenging conditions involved.

           On the other hand, based on Turkish President Erdogan’s remarks that if the U.S. maintains its present attitude toward Turkey he could seek out a new ally, some have speculated that that Turkey could contact Russia, which has remained relatively friendly. Since Russian President Putin is also trying to improve relations with Turkey through the recent visit to Turkey, this could be one of the options.

           However, the prevailing opinion is that the most reasonable option is to respond to the U.S. proposal by releasing the Andrew Brunson. For now, Turkey's economy continues to falter at the remarks of President Trump, and it is uncertain whether additional sanctions will be approved by the United States.

 

           U.S. President Donald Trump and Turkish President Erdogan are still at each other's throats. Turkey is currently not responding to the U.S.’s demand to release Brandon, even in the face of an economic crisis and continuing domestic political turmoil, while the United States is increasingly stepping up sanctions against Turkey. Although the Turkish government is trying to maintain economic stability with the help of policy measures and relations with other countries, it is uncertain how long it can withstand U.S. sanctions. It seems more necessary than ever for the Turkish government to break through the current situation yet to do so it needs to be able to understand the diplomatic situation. What decisions will Erdogan make to breakthrough this conflict? The attention is focusing on whether the Turkish government will choose political or economic stability.