CountryTerritory Report - Turkey

Country/Territory Report - Turkey
27 Jul 2022 - Economics and Country Risk
Executive summary - Turkey

20 Jul 2022 - Country Risk | Profile
Our take: Executive summary - Turkey

Tightening of monetary policies in developed economies exacerbate economic stability risks in
Turkey. Previously, Russia’s invasion of Ukraine had already raised the vulnerabilities,
exacerbating high inflationary pressures. They include supply chain disruption resulting in food
shortages, soaring gas prices increasing operating costs, and the imposition of export and limited
foreign-currency controls to mitigate significant lira deterioration. US, UK and EU secondary
sanctions applied to Turkish companies doing business with Russia are currently considered
unlikely.
Until the invasion, Turkish inflation had been mainly driven by President Recep Tayyip Erdoğan’s
interference with central bank and monetary policy, pressuring the bank to lower interest rates
despite rising inflation and severely damaging the valuation of the lira. The currency depreciated
by more than 44% in 2021, making it the worst performing emerging market currency globally.
Increased supply-side disruption, combined with renewed depreciation, will fuel further
inflationary pressures in 2022, sending annual consumer price growth to over 70% in the first
half of 2022 – well above the 14% policy rate. The central bank’s net negative foreign-currency
reserves leave it without substantial scope to defend the lira. However, depreciation and inflation
should prevent further interest rate cuts. We assess that rate hikes remain less likely than soft
capital controls to stabilise the lira in the coming months.
President Erdoğan will continue to attempt to manage Turkey’s foreign policy positions with
NATO, the EU, the UK, and the US against those of Turkey’s relationship with Russia. Turkey is
reliant upon Russia for gas and food imports, tourism flows, as well as security co-operation in
countries where they are on opposite sides of conflicts, most notably in Syria, with which Turkey
shares a border. Erdoğan will therefore continue to position himself as an interlocutor in the war
and is unlikely to take foreign policy decisions that Russia would consider hostile.
The political opposition remains fragmented, and we expect to see the ruling Justice and
Development Party (Adalet ve Kalkınma Partisi: AKP)-led People’s Alliance using a variety of
strategies to prevent the cross-partisan opposition from coalescing around a preferred
opposition candidate in advance of the 2023 presidential and general elections. An amendment
to the country’s electoral law, approved in March 2022, will likely enable the AKP to gain more
seats in the party’s voter strongholds. Elections are scheduled for 18 June 2023.
The continued deployment of Turkish Armed Forces in Syria and Iraq, as well as concerted
country-wide counter-terror operations, has reduced the number of Kurdistan Workers’ Party
(Partiya Karkerên Kurdistan: PKK) and Islamic State attacks inside Turkey. Nevertheless, there
remains an elevated risk of IED and shooting attacks by PKK affiliates, particularly targeting
security forces and occasionally pipeline infrastructure in southeastern Turkey.
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Risk scores: Executive summary - Turkey
Country Risk Scores
Date of
Risk Value Outlook Trend last
change
Strategic Risk 3.0 High
Political 2.7 High ↗ 03 Mar 2022
Economic 4.9 Severe ↘ 06 May 2022
Legal 2.8 High → 18 Sep 2020
Tax 2.7 High ↗ 23 Jun 2022
Operational 2.3 Elevated ↗ 13 Jun 2022
Security 2.4 High → 04 May 2021
Note: 0.1 = minimum risk; 10.0 = maximum risk
Sovereign Risk Scores
Medium Term Overall

Score / 100 60 B- 60 Very High Payments Risk
Note: 0 = minimum risk; 100 = maximum risk
Ratings form part of enhanced Economic and Sovereign Risk services.
Source: IHS Markit © IHS Markit
Political: Executive summary - Turkey
Copyright © 2022, S&P Global™. All rights reserved and all intellectual property rights are retained by S&P Global. Page 2 of 64
The next presidential and parliamentary elections are scheduled for June 2023 and the government has said they
will be held on schedule, despite the continued deterioration of the currency and excessive inflationary pressures.
President Recep Tayyip Erdoğan’s control over the media, the military, the bureaucracy, and the judiciary
increases the likelihood that his Justice and Development Party (AKP) will remain in power in the next elections.
The AKP lost key municipalities, including Istanbul and Ankara, to the opposition in local elections on 31 March
2019. AKP dissidents established two splinter parties, but, so far, they and other opposition parties have failed to
present a viable challenge to the AKP.
Political Data - Political: Executive summary - Turkey

Political summary
Presidential elections Next contest: June 2023; Last contest: 24 June 2018.
Legislative elections Next contest: June 2023; Last contest: 24 June 2018.
Head of State Recep Tayyip Erdogan (since 28 August 2014)
Vice President Fuat Oktay (since 10 July 2018)
Finance Nureddin Nebati (since 2 December 2021)
Foreign Affairs Mevlüt Çavusoglu (since 24 November 2015)
Defence/Security Gen. (Retd) Hulusi Akar (since 10 July 2018)
Justice/Attorney General Abdülhamit Gül (since 19 July 2017)
Labour Vedat Bilgin (since 21 April 2021)
Interior/Home Affairs Süleyman Soylu (since 31 August 2016)
Source: IHS and CIRCA People in Power © 2022 IHS Markit
Forecast summary - Economic: Executive summary - Turkey

The government’s commitment to expansionary monetary policy will keep inflation elevated and
keep downside risks on the lira high. Annual consumer price inflation will be above 80%
throughout the third quarter, before decelerating somewhat in the final months of 2022, but
remaining over 60% by year-end.
The central bank will not raise interest rates to battle inflation. Sustained, deeply negative real
interest rates will keep downward pressure on the lira. As it was in the first half of the year, the
Turkish lira will be the worst-performing emerging market currency through the end of 2022 and
into 2023.
Significantly higher energy and commodity prices and lost exports exacerbate the country’s
current-account deficit, which will push upward strongly compared with 2021, moving to nearly
5% of GDP in 2022. Negative real interest rates will simultaneously discourage foreign capital
inflows, adding to external financing problems.
Data and forecasts - Economic: Executive summary - Turkey

Turkey: Key indicators and forecasts
Historical
data edge 2020 2021 2022 2023 2024 2025 2026
Real GDP (percent change) 2021 1.6 11.2 2.6 2.2 1.8 1.1 1.9
Nominal GDP (billion USD) 2021 719.3 813.5 807.6 872.8 902.4 966.5 1,049.7
Historical
data edge 2020 2021 2022 2023 2024 2025 2026
Nominal per-capita GDP (USD) 2019 8,528 9,566 9,438 10,153 10,454 11,148 12,046
Consumer price index (percent change) 2021 12.3 19.6 71.6 31.8 16.4 11.4 9.1
Exchange rate (year end, per USD) 2021 7.43 13.34 18.81 22.37 24.26 25.55 26.02
Last update 15 July 2022

Source: IHS Markit © 2022 IHS Markit
Strengths and weaknesses - Business environment: Executive summary - Turkey

Strengths Weaknesses
Large unsaturated market and growing young consumer population. Volatile local currency and high consumption taxes.
Low labour costs, kept down by the Syrian refugee population. Negative net currency reserves.
Strategic geographic location near to European and Middle Eastern markets. High dependency on energy imports, continuing to pressure the wide but
narrowing current-account deficit.
An ambitious infrastructure investment programme, particularly focusing on Discriminatory treatment of companies affiliated with the government's political
transport infrastructure. rivals.
Legal - Business environment: Executive summary - Turkey

Turkey's presidential system, brought about by the new constitution passed in the 16 April 2017 referendum,
stipulates broad oversight by the president for the Council of Judges and Prosecutors (HSK), the highest
regulatory body of the judiciary. Four of its 13 members are appointed by the president, with another seven
appointed by parliament, which is controlled by the president's own party. Its influence over the HSK will allow
the ruling party to target companies affiliated with its domestic political rivals, entailing an elevated risk of
contract cancellations, arbitrary impositions of regulatory requirements, and outright expropriation of assets in
the three-year outlook.
Tax - Business environment: Executive summary - Turkey

Turkey’s overall tax burden is likely to increase once the COVID-19 outbreak has fully subsided. Increased
government expenditure was initially driven by the pandemic response but will expand due to a deterioration in
the nation’s foreign currency reserves. Government tax earnings contribute less than 25% of GDP. The corporate
income tax rate on business profits is 25%. 'Back tax' investigations used as a punitive instrument by the
government are likely for foreign investors partnering with private-sector groups associated with domestic
political rivals of the ruling AKP.
Operational - Business environment: Executive summary - Turkey

Strike action is becoming more frequent in Turkey given continued high inflationary pressures. Striking rights are
constitutionally enshrined, yet given the dominance of government-aligned ‘yellow’ labour unions, and
suppression of strike action through law enforcement, labour strikes and work stoppages in practice remained
uncommon. Demands for bribes remain common from those seeking state tenders or business permits – both
ministerial and municipal – who are without a political connection. Bureaucratic inefficiency has been exacerbated
by upheaval in Turkey's legal institutions since the shift to the presidential political system in 2018, following
instability resulting from government purges of state institutions since late 2016.
War risks - Security: Executive summary - Turkey
In February 2022, Turkey implemented Article 19 of the Montreux Convention which raises war risks with Russia in
the event that Russian warships attempt to enter the Dardanelles and Bosporus straits. Turkey’s East
Mediterranean maritime dispute with Greece is unlikely to trigger an interstate war; both countries agree to a
NATO deconfliction mechanism. Turkey's military entrenchment in northern Syria and Iraq is unlikely to provoke
reprisal attacks targeting Turkish territory by anyone but Kurdish militants. This is significantly reduced by Turkish
military operations and will likely remain limited to shelling of Turkish military positions in Syria and Iraq. An
offensive on Turkish territory is highly unlikely.
Terrorism risks - Security: Executive summary - Turkey

The risk of terror attacks by the Kurdistan Workers’ Party (Partiya Karkerên Kurdistan: PKK) in the country's
southeast has abated after peaking in mid-2016. This is due to Turkey’s concerted strategic military deployment in
Syria, Iraq, and southeast Turkey, which will continue mitigating this risk. Likely targets for the PKK in the
southeast are security forces’ assets and personnel, as well as pipelines and hydropower plants. There remains an
elevated risk of improvised explosive device and shooting attacks by PKK affiliates, especially targeting security
forces, in southeastern Turkey. The risk of attacks by Islamic State affiliates will continue reducing.
Social stability and unrest risks - Security: Executive summary - Turkey

In advance of the 2023 general and presidential elections, mass opposition protests would be likely should the
government seek to dismiss or target elected mayors of key cities such as Istanbul and Ankara, won by the
opposition in the 2019 local elections. Opposition protests would likely trigger counter-protests by government
supporters, resulting in localised violence, entailing collateral property damage risks, resulting from stone
throwing and arson, and the erection of makeshift road barriers. The ability and intent of the security forces and
intelligence services to pre-emptively target protesters and dispel protests mitigates the risk of widespread unrest.
Violent protests in Turkey's Kurdish-majority southeast are unlikely in the one-year outlook.
Risks to individuals - Security: Executive summary - Turkey

There are elevated risks of high-casualty attacks in public spaces in Istanbul and Ankara by PKK affiliates or
Islamist militants, including tourist locations, Alevi and Kurdish sites, or government and security forces. There is
an elevated kidnap and attack risk for Israeli nationals from Iranian or affiliated operatives in areas where Israelis
frequent, including Istanbul, Antalya or Israeli touristic resorts. IED and VBIED attack risks are elevated in the
southeast where PKK is most active and would target government-supported infrastructure projects or security
forces. This is mitigated by the scope of Turkish intelligence. There are high detention risks for nationals suspected
of ties to the Gülen movement or disloyalty to Erdoğan.
Risks to cargo/transport - Security: Executive summary - Turkey

The continued presence of PKK insurgents elevates risks for road cargo in southeast Turkey, including IEDs,
firearm attacks, and associated disruptions to the road network. The maritime dispute between Turkey and
Cyprus in the East Mediterranean has calmed, reducing risks of hailing and boarding to cargo vessels in Turkish,
northern Cypriot and Greek waters. The 2022 Russian invasion of Ukraine raises risks for marine cargo in the Black
Sea, including from floating mines. The risk of attacks on major international airports is mitigated by strong
intelligence capabilities and third-layer security checkpoints at the outer entrances of airport compounds. Shoot-
down risks for military aircraft are elevated and concentrated primarily in southeast Turkey.
Risks to property - Security: Executive summary - Turkey
The PKK insurgency poses elevated risks to government assets and energy infrastructure projects in southeast
Turkey, although the risk continues to fall given ongoing Turkish Armed Forces security operations in the region,
as well as in Syria and Iraq. Government security forces are the most likely target of terror attacks, which raises the
risk of collateral property damage. Should violent confrontations occur between government supporters and
opponents during protests, collateral damage would result from stone-throwing and arson.
Cyber-risks - Security: Executive summary - Turkey

Turkey’s prominent cyberthreat actors are the Russian and Iranian governments, and hacktivist groups like
Anonymous, which have previously launched cyberattacks. Russia and Iran have significant capabilities but lack
intent, due to the need for tolerably good relations with Turkey and economic interests. Turkey has significantly
increased its cyber defence and offense capabilities, likely deterring government actors and increasing capability
to defend against hacktivist groups. There is a high level of digitally exposed infrastructure, as Turkey has engaged
in significant modernisation in recent years. Awareness of cyberattack risks among major companies has likely
risen due to a wave of attacks in the mid-2010s, but remains low among individual consumers.
Political - Turkey
Overview: Political - Turkey

The next presidential and parliamentary elections are scheduled for June 2023 and the government has said they
will be held on schedule, despite the continued deterioration of the currency and excessive inflationary pressures.
President Recep Tayyip Erdoğan’s control over the media, the military, the bureaucracy, and the judiciary
increases the likelihood that his Justice and Development Party (AKP) will remain in power in the next elections.
The AKP lost key municipalities, including Istanbul and Ankara, to the opposition in local elections on 31 March
2019. AKP dissidents established two splinter parties, but, so far, they and other opposition parties have failed to
present a viable challenge to the AKP.
Analysis - Government stability: Political - Turkey

Despite currency losses, Erdoğan remains Turkey's most powerful politician; AKP
dissidents’ splinter parties not yet a threat
The government is unlikely to be forced from office before the June 2023 general and presidential elections.
President Recep Tayyip Erdoğan's party remains the country’s most powerful political party, despite a significant
deterioration in the value of the currency and continued increasing inflationary pressures. Erdoğan's Justice and
Development Party (Adalet ve Kalkınma Partisi: AKP) lost key municipalities to the opposition in Turkey’s March
2019 local elections, including Istanbul and Ankara, the country's economic hub and capital respectively. Both had
been controlled by the AKP since 2004. The results reflected voter discontent, particularly in major economic
hubs, over rampant inflation and rising unemployment. Erdogan’s refusal to accept the initial results, and his
insistence on a rerun in June 2019, turned Istanbul's new mayor, Ekrem İmamoğlu, into a rallying point for the
opposition and a key contender for the presidency.
Erdoğan received 52.6% of the vote in the presidential election of 24 June 2018, which established him as
executive president with diminished checks and balances on his authority. Moreover, in the local elections, the
AKP still gained ground in rural areas and smaller cities, securing a combined 51.4% with junior coalition partner
the Nationalist Movement Party (Milliyetçi Hareket Partisi: MHP). Nonetheless, the AKP losing Istanbul was a
symbolic defeat for Erdoğan, whose own political career had started with his election as Istanbul mayor in 1994.
Two separate groups of sidelined former AKP figures, one led by former Prime Minister Ahmet Davutoğlu and the
other by former AKP Deputy Prime Minister Ali Babacan, have launched splinter political movements. Babacan's
Democracy and Progress Party (DEVA) and Davutoğlu's Future Party (FP) are unlikely to develop into serious
political challengers to Erdogan as they failed to co-opt any deputies from AKP ranks. Critically, Erdoğan has
consolidated control over the media, the military, the bureaucracy, and the judiciary, and is weakening any
independent body that attempts to challenge him.
Worsening inflation rates raise calls for early elections; yet, elections are more likely to be held on time. When
elections are held, the key factor determining the opposition's prospects against Erdoğan will be its ability to
coalesce divergent factions, ranging from secular Turks, conservative Muslims and autonomist Kurds, into a united
front, which they managed for the first time in 2019 local elections. However, Erdoğan’s outreach to opposition
parties improves the prospect of another AKP-led stable government . Erdoğan’s targeting of main opposition
candidates with lawsuits or allegation of corruption or links to terror organisations weakens the viability of
candidates to become rallying points for the opposition. This in turn diminishes opposition candidates’ abilities to
successfully campaign before the elections. In main CHP opposition centres, the deterioration of living conditions
will also be used as leverage to drive discontent with municipal leaders who position themselves as alternative
presidential candidates.
Data - Government stability: Political - Turkey

Political summary
Presidential elections Next contest: June 2023; Last contest: 24 June 2018.
Legislative elections Next contest: June 2023; Last contest: 24 June 2018.
Head of State Recep Tayyip Erdogan (since 28 August 2014)
Vice President Fuat Oktay (since 10 July 2018)
Finance Nureddin Nebati (since 2 December 2021)
Foreign Affairs Mevlüt ÇAVUSOGLU (since 11/24/2015)
Defence/Security Gen. (Retd) Hulusi Akar (since 10 July 2018)
Justice/Attorney General Abdülhamit Gül (since 19 July 2017)
Labour Vedat BILGIN (since 4/21/2021)
Interior/Home Affairs Süleyman Soylu (since 31 August 2016)
Parliament Summary
Party abbr. Party name Seats
Turkish Grand
National Assembly
AKP Justice and Development Party 295
CHP Republican People's Party 146
HDP Peoples' Democratic Party 67
MHP Nationalist Movement Party 49
IYI Good Party 43
Data reflects seat distribution following last election Source: IHS and CIRCA People in Power © 2022 IHS Markit
Analysis - Policy direction and predictability: Political - Turkey

Government will progress normalisation with regional neighbours, including Israel, as
expansionary economic platform, hydrocarbon imports drive inflation
The government is likely to continue actively pursuing normalisation with regional neighbours, most notably with
the UAE, but also Saudi Arabia and Israel. The government will seek to balance relations with the United States,
NATO allies, and Russia amid the latter’s invasion of Ukraine and Turkey’s continued use of the Russian S-400 air
defence system.
US sanctions were imposed under the US National Defense Authorization Act 2021 for Turkey’s acquisition of the
Russian defence system, although this, in turn, led Turkey to expand its domestic defence manufacturing sector.
Turkey needs to maintain US co-operation in various regional arenas where Turkey opposes Russia, including Syria
and Libya, and the economy has become too vulnerable for President Erdoğan to tolerate the risk of broad
economic sanctions. Therefore, Turkey will continue to position itself as a counterbalance to Russia through
NATO, mediation with Ukraine, and other partnerships, despite its erstwhile partnership with Russia in key areas,
such as bilateral trade and diplomacy, including gas imports and tourism.
The replacement of the central bank (TCMB) governor in March 2021 and subsequent replacements in bank
leadership, including the monetary policy committee members, in October 2021 reversed previous governor Naci
Ağbal’s anti-inflationary monetary policies, which had been welcomed by financial markets. TCMB governor Şahap
Kavcıoğlu resumed interest rate cutting between September and December 2021, returning to Erdoğan’s
unorthodox economic policies and triggering heavy selling of the currency and Turkish debt securities. Still, given
Erdogan’s insistence on low interest rates, rate rises by the TCMB are not expected in the second half of 2022. The
abrupt changes in central bank leadership and the resultant monetary policy change indicates worsening of
financial risks and political instability, demonstrated by government reshuffles. With Turkish foreign exchange
reserves negative on a net basis and heavily reliant on bilateral currency swaps, the US Fed’s rate raise and the
limited impact of foreign currency swaps on the lira’s value, the likelihood of Turkey imposing capital controls by
introducing transaction taxes and/or limiting transactions between Turkish banks and foreign counterparts is
rising. President Erdoğan has repeatedly rejected seeking an International Monetary Fund support programme,
which would not be forthcoming under his economic policy, and this option thus remains unlikely.
Major parties - Parties and key figures - Political system and players - Political
background: Political - Turkey
Justice and Development Party (Adalet ve Kalkınma Partisi: AKP)
Political stance: The AKP is a pro-business, Islamist-nationalist, right-wing party. Its stance has
shifted from the conservative centre-right, particularly after its third election victory in 2011.
Support base: The AKP's support comprises urban and rural lower-income groups from
Turkey's Sunni Muslim majority, yet retains support from many centre-right voters. The AKP is the
only competitive party across all regions of the country.
Recent history: The party was formed in 2001 by a group including current President Recep
Tayyip Erdoğan, and came to power in 2002. In 2007 and 2008, it overcame implicit threats of a
military coup and an attempt by hard-line secularists in the judiciary. In June 2011, AKP won a
third successive general election. It survived a 2016 coup attempt, enabling it to strengthen its
position. In 2017, it progressed a referendum to alter the mode of governance from a
parliamentary democracy to an executive presidency, which came into force in 2018 with Erdoğan
becoming the country's first executive president. AKP lost key cities of Istanbul, Izmir and Ankara
in 2019 municipal elections, yet remains the most popular party and strongest contender for
2023’s elections.
Potential future leaders: Erdoğan remains unrivalled and will likely remain in power for the
foreseeable future. His son-in-law and former finance minister Berat Albayrak is sometimes seen
as a potential – if still distant – successor.
Republican People's Party (Cumhuriyet Halk Partisi: CHP)
Political stance: The CHP is a strongly secular, centre-left party, and increasingly emphasises
its social democratic credentials.
Support base: CHP support is strongest among Western-orientated urban populations on the
Aegean and Mediterranean coasts. It also has a strong support among Turkey's Alevi heterodox
minority, of which its leader Kemal Kılıçdaroğlu is a member.
Recent history: The CHP re-entered parliament following the 2002 general elections and
Kılıçdaroğlu was elected leader of the CHP in May 2010. Despite initial successes, the CHP's
appeal remains limited, with its vote share consistently at about 25% since 2011. Owing partly to
electoral coalitions, the CHP was able to secure Istanbul and Ankara municipalities in March 2019
local elections, ending their control by AKP and its Islamist predecessors since 1994.
Potential future leaders: Kılıçdaroğlu (born in 1948) struggles to unite the CHP's often-warring
factions and his Alevi beliefs have weakened appeal to the Sunni masses. During the 2018
election, the CHP's presidential candidate Muharrem Ince performed beyond expectations,
eclipsing Kılıçdaroğlu as a potential leader. After Ince lost the election he attempted to replace
Kılıçdaroğlu, but failed. Istanbul’s Mayor Ekrem İmamoğlu is also considered a rallying point in
2023’s elections, which would threaten Kılıçdaroğlu’s place as party leader.
Peoples' Democratic Party (Halkların Demokratik Partisi: HDP)
Political stance: The HDP combines a leftist political platform with a strong commitment to
Kurdish rights. Many of its members and voters support the outlawed Kurdistan Workers' Party
(Partiya Karkerên Kurdistan: PKK).
Support base: The HDP draws its support primarily from Turkey's Kurdish minority. Before the
June 2015 election, the party attempted to broaden its support base beyond Kurdish voters.
Nonetheless, the collapse of the two-year PKK peace process following and the concomitant rise
in hawkish rhetoric means that the HDP finds it increasingly difficult to maintain wider appeal.
Recent history: The HDP was established in October 2012, and entered parliament with an
unprecedented 80 seats in 2015. The government has since targeted the party, imprisoning
Selahattin Demirtaş, its charismatic (now former) co-chairperson, removing its elected mayors
from office, and preventing many party gatherings from occurring. The party performed well in
the 2018 election, however, earning 11.7% of the vote and entering parliament. It lent its support
to the opposition National Alliance in March 2019 local elections, playing a key role in opposition
victories against the AKP, particularly in Istanbul.
Potential future leaders: The HDP divides its leadership position between a man and a
woman. Figen Yüksekdağ and Selahattin Demirtaş were previously co-chairs, with Yüksekdağ
closer to the Kurdish nationalist wing of the movement, while Demirtaş had a far broader appeal
across the country. With Yüksekdağ and Demirtaş imprisoned in 2016, the party chose the
socialist Sezai Temelli and Kurdish activist Pervin Buldan as new co-chairs in 2018. Temelli was
considered a placeholder, and Mithat Sancaar replaced Temelli in February 2020. Osman
Baydemir, who served as mayor of Diyarbakır from 2004 to 2014 is also a key figure, although
targeting by the government limits his ability to lead the party effectively.
Nationalist Action Party (Milliyetçi Hareket Partisi: MHP)
Political stance: The MHP combines Turkish ultra-nationalism with a strong sense of Sunni
Islamic identity while adhering to secularist principles enshrined in the constitution.
Support base: The MHP draws its support primarily from Sunni Muslim Turkish ultranationalists
among lower-income groups in urban and rural areas. It has the most overlap with the AKP and
in 2018 received an electoral boost by allying itself with the government.
Recent history: Following the death of the party's founder, Alparslan Türkeş, Devlet Bahçeli
was elected chair of the MHP in 1999. The party was an outspoken opponent of the
government's so-called "peace process" with the PKK, and a fervent supporter of the
government's subsequent resumption of its war against the group. Following the MHP's dismal
performance in the November 2015 election, a group within the party called for an extraordinary
congress to replace Bahçeli. The rebellion pushed Bahçeli to join forces with the Erdoğan
government, purge his party of disloyal elements, and join the government in the 2017
referendum and 2018 election. There have been some divisions in the MHP's alliance with the
AKP since 2020, however the alliance has persisted and is likely to continue doing so at least
until the next elections.
Potential future leaders: Bahçeli (born in 1948) has purged any potential challengers and is
almost certain to remain head of the MHP for the foreseeable future. However, Bahçeli’s ailing
health puts his leadership in question. Any eventual replacement would likely be subject to an
AKP veto.
IYI Party ("Good Party", direct translation)
Political stance: Much like the MHP, the IYI Party is strongly nationalistic, combining a reverence
for Sunni Islamic identity and commitment to secular Kemalism. However, having been formed as
opposition to the Erdoğan government, it regularly accuses the government of corruption,
injustice, and undemocratic tendencies.
Support base: The party's core is made up of MHP supporters who became disaffected with
Bahçeli's leadership after 2015. The IYI Party tried to move to the centre in 2018, abandoning
nationalist symbols and language, but this has seen limited success. Its leadership by Meral
Akşener, a veteran female politician, increases its appeal among secular and conservative
women.
Recent history: The party entered an alliance with the CHP and the Islamist Saadet (Felicity)
Party in the 2018 elections. It earned 9.96% of the vote, which was far below expectations. The
MHP, meanwhile, earned 11.1%, and became a partner to the AKP's rule. Its nationalist profile,
however, means that there is scope for the IYI Party to replace the MHP as the AKP's partner, if
Erdoğan and Bahçeli were to start disagreeing once again over core issues.
Potential future leaders: Meral Akşener, a minister of the interior under a centre-right coalition
of the 1990s, is the party's founding leader. Ümit Özdağ, a former university professor, and Koray
Aydın, a longtime politician and real-estate player, are influential, but unlikely to mount
challenges for leadership. A more likely contender, particularly in the event of an AKP-IYI
rapprochement, would be Yavuz Ağıralioğlu, the current IYI Party spokesperson.
Data - Parties and key figures - Political system and players - Political background:
Political - Turkey
Leadership
Title Name Appointed
President Recep Tayyip 28 Aug 2014
ERDOGAN
Vice President Fuat OKTAY 10 Jul 2018
Minister for Treasury and Finance Nureddin NEBATI 2 Dec 2021
Minister of Foreign Affairs Mevlüt ÇAVUSOGLU 24 Nov 2015
Minister of Defence Gen. (retd) Hulusi AKAR 10 Jul 2018
Minister of Justice Abdülhamit GÜL 19 Jul 2017
Minister of Labour and Social Security Vedat BILGIN 21 Apr 2021
Minister of the Interior Süleyman SOYLU 31 Aug 2016
Minister of Transport and Infrastructure Adil KARAISMAILOGLU 31 Mar 2020
Minister of Energy and Natural Resources Fatih DÖNMEZ 10 Jul 2018
Minister of Health Fahrettin KOCA 10 Jul 2018
Minister of National Education Mahmut ÖZER 6 Aug 2021
Leadership
Title Name Appointed
Minister of Trade Mehmet MUS 21 Apr 2021
Minister of Agriculture and Forests Bekir PAKDEMIRLI 10 Jul 2018
Minister of Industry and Technology Mustafa VARANK 10 Jul 2018
Minister of the Environment and Urban Planning Murat KURUM 10 Jul 2018
Minister of Culture and Tourism Mehmet ERSOY 10 Jul 2018
Minister of Family and Social Services Derya YANIK 21 Apr 2021
Minister of Youth and Sports Mehmet Muharrem 10 Jul 2018
KASAPOGLU
Key figures - Parties and key figures - Political system and players - Political
President Recep Tayyip Erdoğan
Recep Tayyip Erdoğan was born in Istanbul on 26 February 1954. He was an active member of Islamist student
associations and the youth branches of a succession of Islamist political parties. In March 1994, Erdoğan
successfully stood as the Welfare Party (Refah Partisi: RP) candidate for mayor of Istanbul. In 2001, Erdoğan and a
younger generation of Islamists broke away from RP to establish the Justice and Development Party (Adalet ve
Kalkınma Partisi: AKP). The AKP won the November 2002 general election, taking 363 seats in parliament.
Erdoğan's fiery rhetoric, his ability to connect with the mass of the population and his government's successful
handling of the economy won him strong support. The AKP was re-elected in 2007 and 2011, increasing its vote
each time. However, since 2011, Erdoğan's style of leadership has led to accusations of autocracy and
authoritarianism, and his increased confidence led him to be more direct in trying to reshape Turkish society in
line with his conservative Islamic beliefs. In May 2013 anti-government protests erupted from growing resentment
among those who did not share Erdoğan's worldview. These were initially triggered by protests against an urban
development plan for Istanbul’s Gezi park, however the harshness of Erdoğan's response, including a brutal police
crackdown led to an ongoing widespread anti-government protest movement which continued until that August.
On 17 December 2013 prosecutors launched the first of a series of investigations into corruption involving Erdoğan
close associates. Nevertheless, on 10 August 2014, Erdoğan became Turkey's first directly elected president,
winning 51.8% of the popular vote.
From late 2013, Turkish politics became more volatile. Erdoğan contended with the clandestine Gülen network,
the Gezi Park movement’s opposition, a resurgent PKK, and a fast-growing proxy war in Syria. During this he
consolidated his power and in 2017, Erdoğan held a successful referendum to amend the constitution to create an
executive presidency which concentrates powers in his office. In July 2018 he became Turkey's first "Executive
President", enshrining his de facto dominance of the public sphere. Despite the AKP winning the local elections in
March 2019, it marked a symbolic defeat for Erdoğan as they lost the Istanbul municipality, which had been held
by the AKP and Islamist parties until then.
Erdogan, backed by the AKE, remains the most likely to win 2023 presidential and general elections.
Kemal Kılıçdaroğlu, leader of the Republican People's Party (Cumhuriyet Halk Partisi: CHP)
Kemal Kılıçdaroğlu was born in 1948 in Tunceli, eastern Turkey to a Turkish Alevi family.
Kılıçdaroğlu began with a civil service background in the finance ministry, rapidly rising before transferring to
Turkey's Social Security Institute. In 1999, Kılıçdaroğlu retired from the civil service to enter politics. In 2002, he
became the elected member of parliament for the CHP. In May 2010, incumbent Deniz Baykal was forced to resign
due to a sex scandal, and as his deputy Kılıçdaroğlu became CHP leader.
In 2010, Kılıçdaroğlu failed to block a series of government amendments to the constitution. In the campaign for
the June 2011 general election, Kılıçdaroğlu attempted to replace Baykal's more nationalistic policy platform with
a return to the CHP's social democratic roots. Kılıçdaroğlu failed to erode AKP's support in the local elections of 30
March 2014 or to prevent Erdoğan from being elected to as president on 10 August 2014. His performance in both
national elections in 2015 was similarly uneventful.
As the CHP's candidate in the 2018 presidential election, Kılıçdaroğlu put forward Muharrem Ince, a former
schoolteacher turned populist firebrand. Ince performed comparatively well, engaging support from other
opposition voters and boosting his share of the vote to 30% (still losing to Erdoğan's 52%). There were popular
calls from within the CHP for an extraordinary congress in which Ince would take over the party's leadership, but
Kılıçdaroğlu fended these off , having secured the party with his loyalists.
Devlet Bahçeli, leader of the Nationalist Action Party (Milliyetçi Hareket Partisi: MHP)
Bahçeli was born in the Osmaniye district of western Turkey in 1948. After an academic career, he began working
full-time for the MHP in 1987. His political nous enabled him to win the party leadership in July 1997.
In April 1999, the MHP won 18% of the vote and 129 seats, making it the second-largest party in parliament. The
MHP joined a tripartite coalition government and Bahçeli became one of three deputy prime ministers. However,
the coalition was crippled by internal feuds that played a major role in triggering an economic collapse in 2001.
When an early general election was held in November 2002, the MHP failed even to cross the 10% threshold for
representation in parliament.
Bahçeli was an outspoken opponent of the government's so-called "peace process" with the PKK. The party saw a
jump in its vote in the June 2015 election, largely due to the resentment of nationalist voters of the AKP's
concessions to the Kurdish militant movement. During the ensuing hung parliament, Bahçeli's refusal to work with
the pro-Kurdish HDP leadership allowed the AKP to drag out negotiations, leading to the November 2015 election
being called. In this election, the MHP barely passed the 10% threshold, placing the party behind the HDP for the
first time. Since 2017 Bahçeli has allied himself with Erdoğan, which has enabled him to repel MHP rebels
challenging his leadership, first in a judicial process, then through purges within the MHP. However his ailing health
raises questions as to his ability to manage the party.
Abdullah Öcalan, leader of the PKK
Abdullah Öcalan was born in the southern province of Urfa in 1948. He studied politics in Ankara, where he became
a Maoist and, by 1973, he had organised a Maoist group of Kurdish and Turkish militants. He is widely known as
"Apo", the Kurmanji Kurdish for "uncle", a common male honorific, as well as a diminutive form of the name
"Abdullah" in Turkish.
On 7 November 1978, Öcalan founded the left-wing Kurdistan Workers’ Party (Partiya Karkerên Kurdistan: PKK). He
left Turkey before the military coup of 12 September 1980 and commanded the organisation from Syria and
Lebanon. The PKK's armed struggle against the Turkish government began on 15 August 1984. In the following
decades, it grew and subsumed all rivals, becoming a formidable guerrilla force in Turkey's southeastern
provinces. In February 1999, Öcalan was renditioned by Turkish special forces in Kenya where he had sought
refuge at the Greek embassy. He was returned to Turkey to face trial on terrorism charges. Found guilty, on 29
June 1999, he was condemned to death, a sentence that was subsequently commuted to life imprisonment.
Although he was removed from direct control of the PKK, Öcalan's isolation on the prison island of İmralı has
arguably elevated his status among the broader Kurdish nationalist movement and he has become a wider
symbol for the pan-Kurdish cause. In December 2012, the AKP initiated discussions with Öcalan about possible
solutions to the PKK insurgency. Öcalan responded by calling on the PKK to agree to a ceasefire. Although PKK
field commanders wanted to continue the insurgency, Öcalan's directive left them with little option. In March 2013,
the PKK announced a unilateral ceasefire. From January 2013 until the breakdown of the ceasefire in 2015, the
government allowed Öcalan to communicate indirectly with the PKK through intermediaries who are occasionally
allowed to visit him on İmralı. His communication with the outside world was cut, however, in the lead-up to the
resumption of violence in July 2015.
Major pressure groups - Civil society - Political system and players - Political
Trades and employers' unions
There are three main interest groups in the Turkish business world. The Turkish Industrialists' and Businessmen's
Association (TÜSİAD) is dominated by larger corporations, particularly Istanbul-based conglomerates, and has
been enthusiastic about free trade and EU membership. The Union of Chambers and Commodity Exchanges of
Turkey (TOBB), which was set up in 1950, includes 1.5 million companies, mostly representing the interests of
small and medium-sized enterprises, mainly from Anatolia. The Independent Industrialists' and Businessmen's
Association (MÜSİAD) was established in 1990 by a group of young, conservative businessmen from Anatolia and
has a strong Islamic identity, restricting membership to companies whose activities are deemed compatible with
Islamic values.
The largest trade union confederation in the country, originally set up by the government, is Türk-İş. It has a very
large public-sector component. The second largest, more militant confederation is the Confederation of
Revolutionary Workers' Union (DİSK). There is also a conservative trade union called the Confederation of Turkish
Real Trade Unions HAK-İŞ). The closed-shop practice is illegal but private-sector strikes are permitted, provided
labour activity is not "to the detriment of society". Workers’ strikes were neither authorised nor suppressed by
police during the 2020-2022 COVID-19 epidemic, within the confines of restrictions on gathering.
The military in politics
Until the late 1990s, the military remained the most powerful Turkish institution. Historically amid through
turbulent periods in the multi-party era of Turkish politics, the military had intervened when it considered Mustafa
Kemal Atatürk's secular republicanism under threat. Since 2002, that secularism has meant frosty relations
between the military and the ruling Islamist AKP government. Following its election victory on November 2002,
the AKP refrained from provoking the military politically, while instrumentalising the EU accession process to
reduce the institutional role of the General Staff by limiting the influence of the National Security Council and
removing military representatives from a number of government boards and institutions.
Through late 2009 and into 2010, scores of serving and retired officers were arrested on charges of involvement in
a series of alleged plans to stage military coups, with some of the alleged plots dating back to 2002. The
detentions led government opponents to claim that they have been created by Islamist sympathisers affiliated
with the Gülen movement to discredit the military.
In late 2013, the government's feud with the Gülen Movement, whose affiliated prosecutors were suspected of
having spearheaded the Ergenekon investigations, led the AKP to realign itself with the military and push for
legislative measures that allowed the release of the Ergenekon detainees. This effectively shelved the Ergenekon
investigation. The military now keeps a low profile while staying out of politics entirely.
During the coup attempt on 15 July 2016, Chief of Staff General Hulusi Akar was taken prisoner by the putschists,
reportedly being given the option of joining the coup, which he refused. The aftermath of the coup saw a sweeping
purge of the military's ranks, with thousands of soldiers arrested, including well over 160 generals.
After the presidential system came into effect in July 2018, Hulusi Akar became defence minister. Until then, this
position was a minor role – mostly administering the defence industry. The appointment of a former chief of the
general staff marked the end of this era, and Akar has been given powers comparable to those of his counterparts
in the US and other Western countries. It is now widely believed that the military is firmly under civilian control.
Civil-military relations no longer appear on the country's political agenda.
Constitution - State institutions - Political system and players - Political background:

Political - Turkey
Turkey’s amended constitution was enacted with the simultaneous presidential and parliamentary elections on
24 June 2018. This includes a change giving the president executive powers which allow for presidential oversight
of the legislature and judiciary. The proposal was narrowly accepted in referendum on 16 April 2017.
Under the new constitution, Turkey is to hold simultaneous parliamentary and presidential elections every five
years. If no presidential candidate wins a majority in the first round, the vote goes to a second round in which the
two leading candidates compete. This is designed to align a parliamentary majority with the presidency, thereby
avoiding a divided government.
Public support for this system has since waned given the widespread perception that the new system is failing to
deliver on its twin promises of economic prosperity and effective administration. Concerns persist over the
functionality of the new political system, particularly regarding excessive centralisation of decision-making in the
presidency.
The initial framework of Turkey's current constitution was promulgated in 1982 while the country was still under
military rule following the coup of 1980 and reflects founder Mustafa Kemal Atatürk's core principles of democracy
and secularism. In 2004, then-president Ahmet Necdet Sezer signed a package of 10 constitutional amendments
designed to bring legislation closer to EU requirements.
Executive - State institutions - Political system and players - Political background:

Political - Turkey
The powers of the presidency
Under the 2018 constitution, the president holds executive power. Recep Tayyip Erdoğan became the first of these
following his election in June 2018.
Presidents can now serve for two five-year terms. Should parliament call early elections during a president's
second term, the candidate can run again. The president may also dissolve parliament, appoint cabinets, vice-
presidents and civil servants, and pass decrees regulating, creating or dissolving ministries without parliamentary
approval.
The president appoints four members of the Board of Judges and Prosecutors (Hakimler ve Savcılar Kurulu: HSK),
alongside seven appointed by the parliament.
The institutions of the presidency
The president's chief of staff is responsible for interfacing with the cabinet and policy bodies. The Presidency of
Administrative Affairs administers protocol and day-to-day presidential affairs.
The presidency invests through two banks : the Development and Investment Bank (Türkiye Kalkınma ve Yatırım
Bankası: TKYB) and the Real Estate Bank (Emlak Bank: EB). TKYB is not subject to Turkey's development and
investment banks law and focuses on large construction and flagship megaprojects. The EB focuses on projects to
reduce Turkey's trade deficit, such as financing solar panel technology.
Legislature - State institutions - Political system and players - Political background:
Political - Turkey
Since the revised constitution came into force in 2018, the Grand National Assembly has passed many of its
powers to the Presidency and is now purely a legislative body. Its 600 parliamentarians are elected
simultaneously with the president on five-year terms. The electoral system is based on proportional
representation but parties must overcome a 10% national threshold to gain representation. Parties can form
alliances ahead of the elections in order to pass this threshold.
Parliament has the power to make, amend and abrogate laws. The budget is made by the president, and is subject
to parliamentary approval. If a parliamentary majority does not approve the president’s budget, the president can
continue using the previous year’s budget in order to prevent a government shutdown.
A supermajority of three-fifths of MPs (360) can call for early simultaneous presidential and parliamentary
elections. The same majority can rule for specific or general amnesty.
Parliament has the power to supervise the government. A simple majority of MPs (301) can launch a probe on the
conduct of the president, his deputies, and ministers. A vote of 400 MPs can take them to the Supreme Court. If
being tried, the president no longer has the power to call early elections.
Judiciary - State institutions - Political system and players - Political background:

Political - Turkey
Judicial power is exercised by Judicial (Criminal) and Administrative Military Courts with final rulings passed by
superior courts which include the Constitutional Court, the Court of Appeals, the Council of State, the Military
Tribunal of Appeals, the Supreme Military Administrative Court, the Court of Jurisdictional Dispute, and the Court
of Accounts.
The Council of Judges and Prosecutors (Hakimler ve Savcılar Kurumu: HSK) is a 13-member panel that wields sole
authority to elect and dismiss judges and public prosecutors, making it the key institution shaping the
composition of judicial ranks.
Following the 2016 coup attempt, President Erdoğan conducted a thorough purge of the judiciary, during which at
least 4,000 judges and prosecutors were dismissed (more than a fifth of its ranks), many of whom faced criminal
charges.
The Erdoğan government is therefore widely believed to exert control over the judiciary on key issues. The trials of
foreign nationals has previously been used as a diplomatic tool to extract concessions. This included German-
Turkish journalist Deniz Yücel and US pastor Andrew Brunson.
The government insists that Turkey's judiciary is independent, with a caveat for national interests. This is likely to
be true for the majority of commercial cases, with the exception of those where the government has a stake.
Overview - External relations - Political background: Political - Turkey

Turkey is moderating its expansionary foreign policy to engage with regional neighbours. Normalisation is
occurring with countries such as Saudi Arabia, the United Arab Emirates, and Israel, which will temper Turkey’s
exploratory expeditions in the East Mediterranean and curtail geopolitical and security co-operation with Iran. This
marks a break from the last decade, when, following the 2010 Arab uprisings, Turkey's foreign policy narrative
shifted away from emphasis on EU accession towards seeking a leading role for Sunni Muslim populations in the
Middle East, the Balkans, and North Africa. Turkey will continue balancing its alliance with the West through NATO
membership against that of economic and diplomatic alignment with Russia.
United States - Bilateral - External relations - Political background: Political - Turkey
Relations with the United States
Current status
US–Turkey relations will continue fluctuating between co-operation and opposition in key areas. A core issue
between the two NATO allies is Turkey’s purchase and partial activation of Russian S-400 missile defence systems,
in defiance of categorical warnings from the US. This led to Turkey’s exclusion – both as a producer and as a client
– from the F-35 fighter jet programme, and limited US sanctions imposed on its defense manufacturing industry.
Turkey remains a key partner to Russia in many spheres, which is jeopardising Turkey’s foreign policy balance
during the 2022 Russian invasion of Ukraine. Another point of contention is the US military support for the Syrian-
Kurdish Yekîneyên Parastina Gel (YPG), which Turkey views as synonymous with the separatist Partiya Karkerên
Kurdistan (PKK) that has waged an insurgency against Turkey since the 1980s.
Background
The roots of the Turkish–US alliance are traceable to Turkey’s inclusion in the Marshall Plan with the onset of the
Cold War. Traditionally a Western-oriented bulwark on NATO’s eastern flank, Turkey’s support remained pivotal to
the US in the aftermath of the Cold War, for substantive and symbolic reasons. In the Middle East, Turkey has
traditionally supplemented Washington’s partnership with Israel, and served as a logistical base for projecting its
military influence in the region. Symbolically, as a predominantly Muslim country, Turkey’s membership in NATO
serves as a riposte to critics who claim that the organisation is anti-Muslim.
Yet the relationship has not been without its problems. The 1991 Gulf War triggered concerns that Turkey would
lose its importance after the collapse of communism. Although Turkey did not send troops to fight alongside the
US-led Allies, which drove the Iraqi army out of Kuwait, it allowed the Allies to use a base at Incirlik in its southeast
region for bombing raids during the conflict itself and subsequently to enforce the no-fly zone in Iraq above the
36th parallel. Relations were severely strained by the war in Iraq in 2003, with widespread anger at the invasion
and conduct of US forces in Iraq producing unprecedented levels of anti-Americanism in Turkey. The resentment
was exacerbated by Washington’s refusal either to move against the bases of the Partiya Karkerên Kurdistan (PKK)
in northern Iraq or allow Turkey to do so. Relations soured in 2007 when, in response to an upsurge in PKK attacks
inside Turkey, Ankara began massing troops on its border with Iraq in preparation for a full-scale invasion,
effectively challenging the US to take military action to prevent Turkish troops crossing into Iraq. On 5 November
2007, during Erdoğan’s visit as prime minister to the White House, the US promised to provide Turkey with
actionable intelligence on PKK positions in northern Iraq, in return for which Turkey would limit any military
incursions to airstrikes and commando raids.
Turkey’s relations with the US entered a new phase with the election of Barack Obama as US president in January
2009. Obama travelled to Turkey in his first overseas trip in April 2009, addressing parliament. Ties were strained
by Ankara’s support for Iran during its confrontation with the West over its nuclear programme and by the
deterioration of Turkey’s relationship with Israel. Rapprochement persisted nonetheless, with Turkey’s September
2011 decision – after initial prevarication – to deploy the early-warning radar for NATO’s missile shield in eastern
Anatolia, and its strong opposition to Syrian president Bashar al-Assad’s crackdown on anti-government
demonstrations. However, tensions re-emerged, with a divergence of interests regarding the Syrian civil war and
the increasing authoritarianism of the AKP government. The US frequently expressed its concern at the ease with
which militant Islamists were able to transit Turkey to fight in Syria and accused Ankara of providing extremists
with logistical and military support. This has been accompanied by an increase in anti-US rhetoric by members of
the AKP, which has accused Washington of instigating the anti-government protests that swept Turkey in 2013.
Since 2014, there have been three major points of conflict in Turkey-US relations that have threatened the
bilateral post-war alliance. The first is the Turkish belief that the US was using the Gulenist network as a tool to
topple the Erdoğan government. Fethullah Gülen, the leader of the Gulenists, resides in Pennsylvania. Erdoğan
has hinted – and this is taken as given in pro-Erdoğan circles – that the 2016 coup was a US-orchestrated attempt
on his life.
The second point of antagonism concerns extensive US support for the Syrian Democratic Forces (SDF), of which
the Syrian-Kurdish People’s Protection Units (Yekîneyên Parastina Gel: YPG) form the backbone. During the Obama
administration, Washington focused its Syrian policy on the eradication of the Islamic State by supporting the SDF
rather than committing significant US troop numbers. This strategy enabled the US to significantly reduce the
Islamic State’s territorial hold and drive it underground, but eroded the bilateral relationship with Turkey. The
YPG is aligned with the international network of the Partiya Karkerên Kurdistan (PKK), which has been waging a
separatist insurgency against Turkey since 1980s. The YPG’s personnel include former PKK fighters, and the
organisation has used PKK ideology, symbols, and strategies and pays tribute to its leaders, including imprisoned
PKK founder Abdullah Öcalan, although the SDF have attempted to downplay the connection since Turkey’s
military deployment in the Syrian civil war. Turkey makes no distinction between the PKK and the YPG and views
the latter’s US-supported consolidation on its border as a threat to its territorial integrity. The Trump
administration initially gave signs of discontinuing the US’s reliance on the Kurds as an effective ground force in
Syria, but decided to continue the pro-SDF strategy of the Obama administration.
The third point of contention is Turkey’s purchase of Russian S-400 missile defence systems. Turkey started
receiving its first deliveries of the S-400 in August 2019, when despite categorical warnings from the US. The US had
threatened of exclude Turkey from the F-35 multirole fighter jet programme, which it went on to do. It had also
threatened Turkey with sanctions under the Countering America’s Adversaries Through Sanctions Act (CAATSA),
which were enacted in a limited manner in December 2020 as the Trump administration was departing.
Therefore, from the Erdoğan government’s point of view, the US has supported its two existential enemies, the
Gülen movement and the YPG. Nonetheless, the Russian war in Ukraine has shifted the basis of the bilateral
relationship through NATO co-operation, causing the US and NATO allies to engage with Turkey to counter Russia.
Turkey’s balance between its Russian and Western alliances will cause a wider deterioration of trust against
Turkey, and while there is still scope for high-level co-operation, the overall trajectory of the US–Turkey
relationship is one of decline.
War in Iraq
Turkey’s politicians and public were overwhelmingly opposed to the US-led invasion of Iraq in 2003. However,
there was also an awareness – particularly among the Turkish military – that if Turkey remained disengaged, the
Iraqi Kurds might take advantage of the fall of Saddam Hussein to form an independent Kurdish state, fuelling the
nationalist aspirations of its own restive Kurdish minority. As a result, even if they refrained from explicit support,
Turkish officials assumed they would eventually become involved, and from September 2002, the Turkish military
worked closely with their counterparts in the Pentagon.
In early 2003, the US Congress agreed on an aid package to Turkey worth approximately USD30 billion, while the
Turkish parliament approved a motion allowing US technicians into the country to upgrade ports and airbases, in
preparation for their use in the transit of approximately 65,000 US troops through Turkey to open a northern front
against Iraq. However, on 1 March 2003, the Turkish parliament narrowly rejected a government motion allowing
such a northern front. US ships carrying troops and supplies had already set out for Turkey in anticipation of the
parliamentary motion being passed and had to be re-routed to the Red Sea. Unsurprisingly, the failure of the
parliamentary vote infuriated many in the US, particularly in the US military. Their anger was only partly eased
when Ankara allowed US planes to cross Turkish airspace to strike at targets in Iraq.
Relations reached a nadir on 4 July 2003 when US troops detained a unit of Turkish special forces in Sulaimaniyah,
northern Iraq, on suspicion of plotting the assassination of an Iraqi Kurdish official, cuffing and hooding the
Turkish soldiers before transporting them to a US base for interrogation. For the majority of Turks, the manner in
which their soldiers were treated by the forces of a NATO ally was a national humiliation. Relations improved to
some degree later that year when the US proposed the possibility of Turkey contributing security forces to post-
war Iraq. Ankara continued to press for permission to patrol northern Kurdish areas of Iraq. The US requested
assistance in the form of peacekeepers from Turkey and, in a gesture it claimed was unrelated, it offered Turkey
USD8.5 billion in loans. The Iraqis blocked the plan to send in Turkish troops, but the offer did at least do a little to
soothe injured Turkish pride.
Tensions over the Armenian question
A major source of tension has been the insistence of some in Washington to label the death and displacement of
an estimated 1.5 million Armenians between 1915 and 1918 a "genocide". Turkey denies that the events constitute
genocide, and is in bitter disagreement over this issue with the Armenian diaspora across the world, as well as the
Republic of Armenia. Since 1994, every US president has made a public statement on 24 April, observed by many
as Armenian Genocide Remembrance Day, but none has used the term “genocide” in order to avoid upsetting
Turkey.
In October 2000, a committee of the US House of Representatives approved a resolution calling the events in
question genocide and, although the administration of then-president Bill Clinton blocked the move to appease
Turkey, the latter was greatly angered and talks were cancelled between then-Turkish chief of staff Hüseyin
Kıvrıkoğlu and his US counterpart, former general Henry Shelton.
The issue resurfaced in October 2007 when the US House of Representatives’ Committee on Foreign Affairs passed
another resolution to the same effect. Perhaps more damagingly, even those who opposed the motion
acknowledged that a genocide had taken place and admitted they were only opposing it because it would
antagonise a key US ally and endanger US troops in Iraq. The US airbase at Incirlik in Turkey was a major transit
point for a large proportion of airborne non-lethal supplies to the US troops there. After vigorous lobbying by the
White House, the resolution was not put to the full House. However, the issue was effectively postponed rather
than resolved, and resurfaced in 2015, the centennial anniversary of the 1915 events, when the Armenian
government and diaspora launched a global campaign for the political recognition of the claims.
In the context of heightened tensions between the two countries in 2019, following Turkey’s unilateral military
operation targeting the US-allied YPG in northeast Syria, the genocide resolution returned on to Congress’s
agenda, passing by 405 votes to 11 in the Democrat-led House of Representatives. However, it was voted down by
the Senate, reportedly upon lobbying from the Trump administration in the White House.
Tensions over the Gülen Movement
The Gülen Movement is an Islamist religious organisation that used to have great influence in Turkish business
circles, bureaucracy, civil society, media, and other walks of life. It is headed by Fethullah Gülen, an esoteric cleric
who is known for his tight management of his empire. Gülen fled Turkey in 1999 when the secular military cracked
down on Islamists, and settled in Pennsylvania, US. In subsequent years, his movement flourished under his
remote guidance. It supported the AKP in its early years, especially in its successful struggle against the secular
elite. As this common enemy was defeated by late 2013, a bitter feud began between Erdoğan and Gülen. This was
a damaging process, involving the purging of substantial Gülenist influence across the private and public sectors.
In his highly successful public relations war against the Gülenists, Erdoğan framed the latter as a ’fifth column’ led
by external powers. Given Gülen’s residence in Pennsylvania, the subtext of this narrative, accepted as truth by
broad bases of the Turkish public, is that the Gülen Movement is supported by the US.
The 15 July 2016 coup attempt was driven by undercover Gülenist elements within the military, who formed the
core of the putschists. This is why pro-government media were virulently anti-American in the months following
the coup attempt, with Erdoğan deputy Süleyman Soylu openly alleging US involvement. Soylu stood out for his
resistance on 15 July and later became interior minister. The initial ambivalent US government response, which
stopped short of explicit condemnation of the coup attempt, contributed to this emerging narrative. Meanwhile,
Turkey imposed a prolonged "security lockdown" at the İncirlik Air Base, one of the main bases used by US-led
coalition forces in the fight against the Islamic State, shutting off the power supply and preventing travel to and
from the base. The base has since reopened.
The Turkish government has demanded that the US extradite Gülen. The US responded that it would examine any
evidence Turkey presented and act accordingly. It is unlikely that Turkey will be able to present evidence that the
US deems to be an acceptable basis for extradition, despite the central role of Gulenists in the plot. The Gülen
question was dropped from the Turkish government’s agenda following the election of Donald Trump in the US,
reflecting Turkey’s anticipation of a positive swing in relations under Trump, in contrast to his predecessor. The
Erdoğan government remains convinced that Gülen’s extradition is less a matter of law than the US government’s
national security objectives.
Europe and CIS - Bilateral - External relations - Political background: Political - Turkey
Relations with the Russian Federation
Turkey’s relationship with Russia is significantly challenged by the Russian invasion of Ukraine, with which Turkey
also has amicable relations. The relationship with Russia has, however, overcome several crises in recent years,
and deepened through major economic and military agreements struck between presidents Erdoğan and Putin.
Bilateral ties are underpinned by a number of shared characteristics between the two countries in terms of
location and political approach. Both are located on the perimeter of, and have an often ambivalent relationship
with, Europe and the United States, and both have been building government systems based on authoritarianism
and nationalism. However, Turkey’s ability to maintain these ties or remain neutral during the Russian invasion of
Ukraine is under significant pressure.
Russia has been one of Turkey's leading trading partners, particularly in energy. Despite the fall in the Russian
share of Turkish gas imports due to Turkey’s plan to diversify its gas suppliers, Turkey imports half of its natural
gas and around one-tenth of its crude oil from Russia. Russia is currently building Turkey’s first nuclear power
plant in Akkuyu, and in November 2018, presidents Putin and Erdoğan celebrated the partial completion of
TurkStream, a 31.5 bcm a year pipeline that will provide Russian natural gas to Turkey and Eastern Europe.
Turkey, in turn, has become a favourite tourist destination for Russians, particularly the Mediterranean coast
around the resort of Antalya, while Turkish construction companies have secured billions of dollars' worth of
projects in Russia. Turkey has also purchased and partially activated the Russian S-400 air defence system, which
raised complaints in the US as the technology is not compatible with that of NATO. Turkey has also sought to buy
Russian jets, but further co-operation will likely be disrupted due to the ramifications of the Russian invasion of
Ukraine.
In Syria, relations have fluctuated between co-operation and indirect hostility, with a standoff over the status of
an opposition pocket in northeast Syria. Russia could use this position to pressure Turkey to acquiesce to its
demands over its war in Ukraine. However direct engagement in Syria such as in 2020 and 2015 is unlikely.
In February 2020 Turkey carried out a heavy military deployment in northern Syria and an unmanned aerial
vehicle (UAV) airstrike campaign to stop a Syrian government offensive. On 27 February, a Russian airstrike killed
33 Turkish soldiers near the frontline between the Turkey-backed opposition and the Syrian army, although
Russian responsibility was denied by both Turkey and Russia.
In November 2015 Turkey shot down a Russian Su-24 jet over the Turkish-Syrian border, leading to a significant
deterioration of relations. The incident, while avoidable, was a consequence of the ongoing rivalry of the two
countries in the proxy war in Syria, which had intensified following Russia's direct military intervention in the
conflict in September 2015. Since the outbreak of civil war in 2011, Turkey had become one of the most outspoken
critics of Syrian President Bashar al-Assad, while Russia had remained one of his strongest supporters. The
shootdown of the jet compounded existing strains surrounding Russia's annexation of Ukrainian region of Crimea
in 2014 and ensuing speculation about its ill-treatment of the Crimean Tatars – a Turkic ethnic group with deep
historical ties to Turkey – a substantial population of several million of whom live in Turkey. With its demand for a
Turkish apology initially unanswered, Russia announced a wide spectrum of trade sanctions and restrictions in
retaliation to the incident. Relations were eventually re-established in June 2016, following an official apology
from Erdoğan. Putin was one of the first state leaders to condemn the 2016 coup attempt against Erdoğan, and
was the first leader that Erdoğan visited after it, thanking Putin for his support. The two presidents have since
spoken or met almost on a weekly basis.
Middle East and North Africa - Bilateral - External relations - Political background:
Political - Turkey
Relations with Iraq
Current status
Turkey is engaged in a protracted military operation in the Kurdistan Region of Iraq (KRI) against the Kurdistan
Workers’ Party (Partiya Karkerên Kurdistan: PKK). The entrenchment of the Turkish Armed Forces in Iraq began in
2015 with the reinforcement of its small military presence at a military base in Baashiqa, Ninevah province, where
they were ostensibly providing training to local Sunni forces ahead of a planned operation to liberate Mosul from
Islaimc State. It has deepened since 2018 and will likely continue under the current Turkish presidential
administration.
Turkey provides financial, political, and limited military backing for Iraqi Sunnis in northern Iraq, which it considers
within its sphere of influence. Turkey has maintained its influence in Iraq through former Mosul governor Atheel
al-Nujaifi and former speaker of parliament Osama al-Nujaifi, who share the ambition for a Sunni region in
northern Iraq. The ruling Kurdistan Democratic Party (KDP) maintains strong relations with Turkey and the Nujaifi
brothers and co-operate with Turkey against the PKK and for their 450,00 bpd oil exports through the Kirkuk–
Ceyhan pipeline. Despite repeated warnings by the Iraqi government, Turkey is yet to withdraw its troops. Turkish
government officials have asserted that the invitation to establish a training camp in Bashiqah came from Atheel
al-Nujaifi in 2015 who wanted Turkey to train the Hashd al-Watani (National Mobilisation) forces comprising Sunni
Arabs, Turkmen, Christians and Yezidis, to rival the Shia-dominated Popular Mobilisation Units. Turkey's military
presence in northern Iraq and its relationship with Sunni figures seeking greater autonomy from Baghdad is likely
to be seen as a challenge to the central government and to the Shia Popular Mobilisation Units, as well as to
Iranian influence. There is significant opposition to Turkey’s involvement and influence in Iraq in the Shia-majority
south.
Relations with Baghdad
Turkey’s agenda in Iraq pits it against pro-Iran parties which often leads to bilateral disputes. Following the
formation of the Iraqi Federal Government in 2005, Turkey sought to strengthen its ties with the government in
Baghdad. This was codified by the 2009 Turkey-Iraq Strategic Cooperation Council, under which the two signed
more than 40 co-operative agreements.
Relations between Iraq and Turkey deteriorated during former prime minister Nouri al-Maliki's second term from
2011, largely as a result of Ankara's growing support for the Kurdistan Regional Government (KRG)'s independent
energy policies. Turkey's evident support for Maliki's political rivals in the majority-Sunni Iraqiya coalition during
the 2010 parliamentary election and subsequent negotiations over government formation had a significant
negative impact. Support for Iraq's Sunni politicians has continued since, with Ankara hosting Sunni former vice-
president Tareq al-Hashemi, who had escaped Baghdad after charges of terrorism were brought against him in
2011. Hashemi had been regarded as one of Ankara's main allies in Baghdad. Iraq's Ministry of Trade announced in
September 2012 that the operating licenses of Turkish companies conducting business in the country had been
temporarily halted.
By December 2012, the deterioration in Ankara's relations with Baghdad resulted in a dramatic change in Turkey's
policy. Instead of trying to prevent the KRG from unilaterally extracting and exporting oil and natural gas from the
Kirkuk region, Turkey began to explore ways of co-operating with the Iraqi Kurds. On 4 December 2012, the federal
government in Baghdad prevented then-Turkish energy minister Taner Yildiz from visiting northern Iraq to attend
an international energy conference in the Kurdish city of Erbil by refusing to allow his plane to enter Iraqi airspace.
Yildiz's plane, which was already in the air, was forced to return to Ankara. Turkey therefore proceeded with plans
to import oil from the KRG via a new pipeline from the Kurdish oil fields directly to Turkey, bypassing the existing
line under Baghdad's control. The new pipeline became operational in late 2013 and in January 2014 the KRG
announced that it was ready to start selling oil to Turkey, triggering a further backlash from Baghdad and a
warning to Ankara of irreparable damage to bilateral relations if it went ahead with the plans.
After the Islamic State captured the city of Mosul in 2014 and expanded in Syria, Turkey’s main focus shifted
towards combatting the group, which put it in contention with the government in Baghdad through its counter-
terrorism co-operation with the KRG in Erbil. It began to quietly build up its military bases in parts of the KRG, as
well as ostensibly securing areas liberated from the Islamic State. In 2015, Iraq demanded that Turkey leave
Bashiqa military base, where Turkey claimed that it had been training personnel against the Islamic State.
However, Turkey refused, resulting in yet another crisis and it has since expanded its presence there to combat the
PKK. Turkey has since continued to expand its military footprint in the KRI through its counter-PKK operations and
its political influence in Erbil through providing investment into independent Kurdish oil production.
Relations with the KRG (2003–12)
In the immediate aftermath of the fall of Saddam Hussein, Turkey refused to engage officially with the KRG in case
it was seen as recognising independent Kurdish political authority in northern Iraq which would lead a declaration
of independence. Until 2011, Turkey's primary concerns were the preservation of Iraq's territorial integrity and
unity, and eradicating the Partiya Karkerên Kurdistan (PKK) members in mountainous regions of northern Iraq. In
the past, the Turkish army had conducted frequent large-scale cross-border raids into Kurdish-controlled areas of
northern Iraq in pursuit of PKK guerrillas. Turkey attempted to unite the Turkmen groups in northern Iraq into a
distinct political bloc and use them as a counterweight to the Iraqi Kurds' nationalist aspirations. However, the
Turkmen were not only considerably smaller in number than Turkish projections, but also divided along sectarian
lines between Sunni and Shia Muslims. Many preferred to co-operate with Shia ethnic Arabs rather than Sunni
ethnic Turkmen. The failure of the Ankara-backed Iraqi Turkmen Front, which claimed to be an umbrella for Iraqi
Turkmen, to secure a broad electoral base prompted Turkey to change its policy. From 2005 onwards, it
increasingly encouraged the Iraqi Turkmen to work within the system, co-operating with Sunni Arabs and Shia in
the hope that by doing so they would be better able to prevent the formation of an independent Kurdish state.
However from 2008, Turkey began to engage with the KRG in Erbil to encourage them to restrict the movement of
PKK personnel and supplies to PKK camps in the Qandil mountains, from which the PKK would conduct
operations into southeastern Turkey. From early 2012, Turkey began to cultivate closer ties with the KRG, due to
the KRI being a convenient source of cheap oil and an easier base for operations against the PKK. Although Turkish
companies have profited from these relations, it has precluded them from conducting significant business across
the rest of Federal Iraq.
Current status
Turkey opposes Syria's Assad government, and has actively supported armed Sunni rebel forces, alongside
Western powers and other influential Sunni actors, such as Saudi Arabia and Qatar. After 2016, Turkey relinquished
its previous insistence on Assad's departure, choosing instead to co-operate with Russia and Iran, which support
Assad, under the framework of the Astana Process. Nevertheless, a standoff in opposition-held Idlib pocket,
northeast Syria in 2016 resulted in Turkey deploying its military into the area to counter a government offensive.
Turkey has deployed more troops into northern Syria during operations in 2018, 2019 and 2020, with its primary
aim to reduce Kurdish militant activity and attacks on its borders and limiting refugee flows.
A mixed relationship (1914−2011)
Ottoman imperialism and Turkey's perception that it was betrayed by the Arabs during the First World War have
shaped unfriendly relations between Turkey and Syria. This was not helped by France's ceding of Syrian territory,
the Sanjak of Alexandretta, to Turkey in 1939, seven years before it granted its mandated territory full
independence. Turkey and Syria were also opposed during the Cold War, with Turkey a key NATO member while
Syria remained dependent on the Soviet Union for its military power.
In the 1980s and 1990s, three major issues affected Syrian-Turkish relations: Syria's support for Turkey's Kurdish
separatist group, Partiya Karkerên Kurdistan (PKK); Syrian concern regarding Turkey's intention to harness the
Euphrates River on which it is dependent for its water supply; and the implications of Turkey's alliance with Israel.
After 2001, these areas of divergence became less prominent, and the two countries found strategic areas of
accord. They shared a desire to see post-war Iraq retain its integrity while taking no form that might threaten the
Turkish and Syrian status quo. The Kurdish issue lost prominence after Syria conceded to Turkey's primary
demand by expelling PKK leader Abdullah Öcalan in 1998 while Syria faced a reinvigorated Kurdish movement of
its own. Economically, bilateral trade relations grew to more than USD1 billion per year.
The 2000s were a period of gradual rapprochement towards alliance between the two countries. In late 2004 the
two struck new agreement over water rights. In early 2006, the construction of additional border crossings for
truck shipments was discussed. In 2009, the two countries agreed to end visa restrictions and develop bilateral
trade ties. The improved relationship came as Turkey's ruling Justice and Development Party (Adalet ve Kalkınma
Partisi: AKP) sought to strengthen ties with the Arab and Islamic world, especially in light of slow progress in
Turkey's EU accession talks. This move began to undermine previously strong Turkish-Israeli ties. Trade ties grew
very rapidly, with the Turkish city of Gaziantep and Syria’s Aleppo investing heavily into the relationship.
In 2011 when the ‘Arab Spring’ series of uprisings erupted in the Middle East, Ankara lent its support to Islamist
opposition factions of the protest movement such as Egypt’s Muslim Brotherhood. When protests began in Syria
during March 2011, Ankara expressed its support for them and eventually called for Assad to step down. During
the subsequent months and years, Syria descended into a destructive civil war.
Civil war (2011–present)
Turkey actively supports Syrian rebels fighting the Assad government and serves as a haven and home for Syrian
opposition groups. It has been accused of ignoring the infiltration of foreign fighters to join jihadist forces inside
Syria. Although Ankara is still not communicating with the Assad government directly, it has ceased calling for
regime change in Damascus and appears open to working on a future stabilisation of the conflict through the
Astana Process with Russia and Iran. This has partly been because of Russia's military intervention in Syria to
support Assad, as well as due to the shift of the Turkish government’s priorities towards preventing the
establishment of an autonomous Kurdish territory in northeastern Syria.
Starting in late 2016, the Turkish armed forces have conducted multiple operations into northern Syria, which has
led them to occupy certain areas. This in turn led to the crystallisation of Syrian opposition groups within a tight
central command structure. Turkey argues that it has done this to protect itself from the People's Protection Units
(Yekîneyên Parastina Gel: YPG), the Syrian affiliate of the Partiya Karkerên Kurdistan (PKK) separatists that the
Turkish government has been fighting for 40 years. Turkey has since built fortifications, roads, hospitals, schools,
post offices, and a police force within northern Syria.
Turkey hosts about 4 million Syrian refugees, making it by far the largest recipient of Syrians worldwide. Although
most of these refugees arrived in makeshift camps on Turkey’s southern border, they are today concentrated in
Turkey’s big cities, such as Istanbul, Gaziantep, Bursa, Adana, and Mersin.
Relations with Iran

Turkey’s Iranian policy is shifting along with its normalisation of relations with other regional neighbours such as
the United Arab Emirates, Israel and Saudi Arabia, breaking from the last decade of bounded rivalry and co-
operation. For decades, Iran has accepted that Turkey is economically superior and tightly integrated into the
international system, while Turkey has accepted that Iran has superior paramilitary and intelligence capabilities
enabling it to project its influence throughout the region. Issues of trade (especially in energy), their respective
Kurdish minorities, as well as the wars in Syria and Iraq were regulated along these lines. However, as Turkey
became more ambitious in projecting itself militarily throughout the region since 2011, this has positioned it more
directly into confrontation with Iran, such as in Syria and Iraq.
Since the beginning of the Syrian war, Iran supported the Syrian government led by President Bashar al-Assad
while Turkey backed Sunni opposition forces. Iran was better prepared and more effective in the proxy war, with
Turkey only slowly building up the capabilities necessary. Iran also outweighs Turkey in Iraq, which has a majority-
Shia population. Checking Iranian influence has therefore moved up among Turkey’s priorities. Turkey initially
endorsing the Saudi-led campaign against the Iran-aligned Houthi movement in Yemen during March 2015 (which
he would later criticise), while President Erdoğan stated that Iran's efforts to expand its influence in the region
were "intolerable", demanding that Iran remove its support and forces from the conflicts in Yemen, Syria, and Iraq.
The issue of Kurdish independence is one where Turkey and Iran are more likely to find common ground, as both
countries have sizeable Kurdish minorities. Both oppose the secession of the Kurdistan Region (KRI) from Federal
Iraq, fearing that a seceded KRI would risk an upsurge in Kurdish separatist activity within their territories. Both
sides also resort to using northern Iraq and its two main Kurdish political factions, the Kurdistan Democratic Party
(KDP) and the People's Union of Kurdistan (PUK), as proxies which allow them to maintain their respective
influences in both the KRI and Federal Iraqi politics more broadly. Although Iran is generally aligned with the
Patriotic Union of Kurdistan (PUK) in Sulaimaniyah, and Turkey with the Kurdistan Democratic Party in Erbil, Iran
supported an extension in the KDP-affiliated President Masoud Barzani's tenure in August 2015. This likely
reflected Iran's attempt to increase its influence as a counter to Turkey in the Kurdistan Regional Government
(KRG) as well as enhance economic ties with the KRI.
Despite political divergences and competition in the region, Turkey and Iran maintain close economic ties.
Erdoğan has been vocal about supporting Iran under US sanctions. In 2016 they established a joint bank to use
their national currencies for trade, intended to insulate them from international financial sanctions affecting their
foreign currency reserves.
Turkey remains heavily reliant on Iranian oil and gas, although it is seeking to decouple itself from this in the
medium term. It purchases a substantial part of Iran's current natural gas exports under a long-term contract, but
is dissatisfied with what it claims to be above-market prices. Turkey has expressed interest to increase its imports
of Iranian gas if Iran agrees to reduce its prices. Iran and Turkey have been engaged in talks over the construction
of a new pipeline that would carry natural gas from Iran to Europe via Turkey.
However, talks stalled in 2018 due to the reimposition of US sanctions on Iran. Turkey has assisted its neighbour in
circumventing previous international financial sanctions by compensating it in gold. Halkbank, a Turkish state-
owned bank, stands to be fined in a court in the US as a result. Turkey opposed the Trump administration’s fresh
sanctions, and applied for and received an indefinite exemption allowing it to import Iranian gas. However the shift
in Turkish foreign policy from 2021 and a disruption of Iranian gas supply in early 2022 has prompted Turkey to
start decouple itself from Iran from an energy and policy perspective, enabling re-engagement with Israel, the UAE
and Saudi Arabia.
Regional organisations - Multilateral - External relations - Political background:

Political - Turkey
Relations with the European Union
Turkey first expressed interest in formal connections with European democracies in 1963 when it became an
associate member of the European Economic Community (EEC). In the late 1970s, it spurned a chance to become a
full member together with Greece as a result of pressure from protectionist elements in the Turkish business
community and the anti-Western sentiments of then-prime minister Bülent Ecevit.
In April 1987, then-prime minister Turgut Özal formally applied for membership, hoping to accelerate the pace of
modernisation in Turkey. In December 1989, the European Commission endorsed Turkey's eligibility for
membership but deferred considering its application. A Customs Union agreement was signed in March 1995,
lifting customs tariffs on trade, which came into effect from 1 January 1996. At the same time, Turkey also entered
the Single European Market and adopted EU trade legislation and its common external tariff. Despite initial fears,
Turkey has benefited from increased competition, cheaper imports and increased foreign investment.
It was not until December 1999 that the EU finally named Turkey as an official candidate and a further five years
before it agreed to open formal accession negotiations, which took place in October 2005. As the Turkish
government made unexpected progress with the accession reforms, reservations emerged from EU member
states, particularly France, which advocated an alternative framework for the EU-Turkey relationship, such as a
privileged partnership and through the Mediterranean Union. The Republic of Cyprus continues to assert its
willingness to block Turkey's bid unless Ankara recognises Greek Cypriot sovereignty over the island; France has,
in essence, agreed that the veto would be justified.
Public enthusiasm for EU membership has also waned in Turkey, with approval of the EU dropping from 73% in
2004 to 44% in 2013, down from 73% in 2004. The widespread sentiment was that racial and religious prejudice will
prevent the EU from ever fully admitting Turkey even if it meets all the criteria for accession. Starting in 2013,
Turkey underwent a rapid political transformation that put it outside the purview of serious candidacy to the EU.
This began with the Gezi park protests, a nationwide protest anti-government movement, continued with the
Erdoğan government’s feud with the Gülenists, the 2016 coup and subsequent state of emergency, and the 2018
transition to the executive presidential system.
In the lead-up to Turkey's 2017 constitutional referendum, a diplomatic crisis emerged between the Turkish
government and the Netherlands. Turkey escalated the crisis with a view to increase nationalist support
domestically, with President Erdoğan going to the extent of attributing "resurgent Nazism" to Germany and the
Netherlands, while undermining long-term prospects in Turkey's relations with the EU.
While Erdoğan voters have long since lost interest in EU membership, a considerable part of secular voters in the
opposition also feel resentment towards the continent. In October 2018, Erdoğan for the first time signalled that
he could put EU membership to a referendum, which would certainly result in a vote to stop the accession
process. He has since gone retreated to his old position of describing EU membership as Turkey’s “strategic goal,”
but the accession process is no longer on Ankara’s list of priorities. During the transition to the Executive
Presidential system in 2018, Erdoğan merged the Ministry of EU Affairs with the Ministry of Foreign Affairs,
effectively truncating the former within the latter.
Stalled accession
When it assumed power in November 2002, the AKP accelerated its predecessor's domestic reform programme to
try to bring Turkey more closely in line with EU norms. Although there has been progress on ill-treatment of
detainees and other issues, many reforms were stronger on paper than in practice. The AKP has often seemed
keener to protect the rights of its voter base than those of others. For example, under pressure from the EU, the
AKP government undertook a massive reform of its penal code in September 2004, including key provisions to
punish police torture, crimes against women, and infringement of civil liberties. Yet the proposed legislation also
included a clause that would have criminalised adultery and made it punishable by imprisonment. Erdoğan
grudgingly removed the adultery proposal just days before the European Commission was due to issue its annual
report of Turkey's progress towards harmonising its legislation with EU norms.
Once accession negotiations were confirmed, the reform process slowed considerably, largely due to the impasse
over Cyprus and Turkey's refusal to open its ports and airports to transport from the Republic of Cyprus, despite
pledging to do so in June 2005. Even though not an explicit part of the framework, Cyprus has plagued Turkey's
candidacy, particularly since the island acceded to the EU as a full member before Turkey, in May 2004. The
Republic of Cyprus flatly refuses to let Turkey join the EU until it recognises Greek Cypriot sovereignty, and a large
majority of Greek Cypriots oppose Turkey's entry. Turkey has offered halfway measures such as trade relations,
but the Republic of Cyprus insists on full recognition. Turkey's failure to open its ports led to the suspension of
negotiations on a total of eight chapters of the accession process in December 2006. A further nine chapters were
suspended by France and Cyprus. Turkey's refusal to recognise the Republic of Cyprus as the legitimate
government of the island led to Ankara suspending all contact with the EU during the six-month Cypriot
presidency of the EU from July to December 2012. By then, it had been two and a half years since the last time a
chapter had been opened in the negotiations, marking the longest period for any EU candidate to date.
Going forward
The EU–Turkey relationship is at an impasse. Two issues continue to force Turkey and the EU to engage:
immigration and trade. On immigration, Turkey is more important to Europe than ever before. Right-wing political
movements across the continent have risen as voters fear that waves of Muslim immigrants will change their
societies. Turkey has become a transit country for those wanting to make their way to Europe. The roughly 4
million refugees in Turkey, including 3 million from Syria (as of early 2022) feature prominently in the media, but
there are also millions more Afghans, Pakistanis, Iraqis, Iranians and others in Turkey who are in the country as a
stepping stone for a further trip to Europe. This gives Turkey great leverage during its negotiations with EU
leaders. Erdoğan has threatened more than once to open the doors to Greece and Bulgaria and let refugees into
Europe. For the most part however, Turkey and the EU have been able to turn this issue into a mutually beneficial
one, with Turkey receiving large sums of EU support while Europe is spared the prospect of having to deal with
millions of economic migrants and refugees.
In trade, both Turkey and the EU find a safe and reliably stable topic of continued cooperation. The EU is by far
Turkey’s biggest and most sophisticated market to trade with. This was a constant through recent crises. When
Turkey and the Netherlands downgraded their diplomatic representation, the trading relationship was not
affected. Turkey has relied on European partners amid other diplomatic issues. When Turkey-US relations ran into
a crisis over a jailed American pastor in 2018, the US put sanctions on Turkey, sending the lira plummeting.
Erdoğan promptly decided on rapprochement with the EU, taking special care to engage Germany in an effort to
deepen bilateral trade ties, but also normalising relations with the Netherlands and sending his foreign minister to
Brussels warm the frozen accession process. In this context, one idea that is often brought up is to suspend the EU
accession process and instead upgrade the customs union between Turkey and the EU. The Russian invasion of
Ukraine in February 2022 has shifted the dynamics of the relationship, given Turkey’s close relationship with
Russia as well as being a part of NATO. This will allow Turkey to seek more concessions from European NATO
members and will likely shift the focus back on to Turkish accession or at least an upgrade to the customs union.
Economic - Turkey
27 Jul 2022 - Global Economics | Profile
Forecast highlights: Economic - Turkey

The government’s commitment to expansionary monetary policy will keep inflation elevated and
keep downside risks on the lira high. Annual consumer price inflation will be above 80%
throughout the third quarter, before decelerating somewhat in the final months of 2022, but
remaining over 60% by year-end.
The central bank will not raise interest rates to battle inflation. Sustained, deeply negative real
interest rates will keep downward pressure on the lira. As it was in the first half of the year, the
Turkish lira will be the worst-performing emerging market currency through the end of 2022 and
into 2023.
Significantly higher energy and commodity prices and lost exports exacerbate the country’s
current-account deficit, which will push upward strongly compared with 2021, moving to nearly
5% of GDP in 2022. Negative real interest rates will simultaneously discourage foreign capital
inflows, adding to external financing problems.
Changes since last forecast: Economic - Turkey

July 2022 forecast
2022 2023
Current Prior Current Prior Rationale
Real GDP 2.6 2.3 2.2 2.5 Expansionary economic policies continue and leading, partial-year data
(Percent change) suggest that retail trade/consumer activity remains stronger than previously
anticipated. The subsequent GDP growth forecast for 2022 has been adjusted
upward.
Fixed capital -1.8 -1.5 0.6 1.1 Continued expansionary economic policies in the face of soaring annual
investment inflation is undermining the investment environment in Turkey, leading to a
(Percent change) negative revision in the outlook for 2022 and 2023. Enterprises’ available
capital to put toward investment is being squeezed by high input costs.
Increased capital controls are making external financing more difficult.
Industrial 3.8 3.3 2.6 2.7 Although the headline GDP growth rate was adjusted downward, the full-year
production 2022 industrial production growth rate has been lifted owing to strong partial-
(Percent change) year data. With domestic demand faltering and export growth weak, much of
the extra production may be increasing inventories.
Exchange rate 18.810 18.794 22.366 21.573 Expectations that the US Federal Reserve will become more aggressive with
(TRY/USD, year-end) their monetary policy tightening is fueling greater depreciation pressures on
the lira, which remains positioned to be the weakest emerging-market
currency in the world.
Near-term outlook - Near-term outlook: Economic - Turkey

Russia’s invasion of Ukraine adds instability to the Turkish short-term economic outlook.
Despite annual consumer price inflation of nearly 20% at the time, the Central Bank of the
Republic of Turkey (Türkiye Cumhuriyet Merkez Bankası [TCMB]) began cutting its main policy
rate, the one-week repo rate, in September 2021. Additional rate cuts followed in October,
November, and December. By end-2021, the repo rate was at 14.0%, more than 2,200 basis
points below the prevailing rate of annual inflation at that time.
Despite still elevated inflation, the rate-cutting cycle sent lira and market instability risks soaring.
Inflation soared beginning in September, prompting the TCMB to pause in its rate-cutting cycle in
2022. In the first half of 2022, the bank held the rating stable, declining also to raise the rate
even as annual inflation soared toward 80%. The Turkish policy rate is, by far, the farthest-below
annual inflation compared with any other major economy in the world.
Although lower interest rates are intended to spur domestic economic activity, GDP growth will be
modest in 2022–23, averaging only around 2.5% annually. The Russian invasion of Ukraine is
constraining overall economic activity. Lost exports, greater supply disruptions, soaring costs,
and regional instability contribute to the headwinds.
Surging inflation is sharply eroding consumer buying power and sentiment, mitigating the
potential positive impact of expansionary monetary policy. Consumer sentiment, as measured by
an index from the Turkish Statistical Institute, has plunged since early 2021, hovering around
historical lows since December. Household consumption growth, which is likely 4.9% in 2022, will
pace overall economic expansion, but growth will be fairly moderate considering the aggressive
easing of monetary policy.
High producer prices and greater regional uncertainty will more severely undermine fixed capital
formation in the short term. Fixed capital formation will actually contract in 2022 before growing
very mildly in 2023. High producer prices erode the cash on hand, with which enterprises might
otherwise invest. Regional geopolitical problems, capital controls, and uncertain economic
policies all discourage foreign investors from expanding capital. Growing unused capacity
utilization reduce demand for new investment.
The Russian invasion of Ukraine is disrupting Turkish net trade. Lost merchandise and service
exports to Russia and Ukraine, weaker demand from Europe, and renewed supply chain
problems undermine potential export growth in 2022 and 2023. Meanwhile, import growth has
soared as global commodity prices surged. The current-account deficit will widen sharply in 2022,
reaching nearly 5% of GDP. As the war presumably stabilizes, the current-account gap could
retreat somewhat in 2023, but will remain large, still over 3% of GDP.
The interruption of export demand, revival of global supply chain problems, and soaring input
costs will all undermine industrial production growth in 2022–23. Although the presumed exit of
the pandemic will provide some lift to industrial activity, growth will remain somewhat muted in
2022–23, averaging only around 1.5–2.5% annually.
Destabilized by the war raging across the sea from Turkey, the lira is once again depreciating at among the
fastest rates among emerging markets.
In 2021, the lira was the worst performing emerging market currency in the world. Sharp losses
triggered a surge of inflation at the end of the year and pressured repayment on foreign-
currency denominated debts. Along with interest rate cuts so that the main policy rate is now well
below the prevailing rate of inflation, President Recep Tayyip Erdoǧan ramped up his rhetoric
promising continued interest rate cuts moving forward.
After remaining relatively stable throughout most of the first two months of 2022, the invasion
once again destabilized the lira, likely further exacerbated by the US Federal Reserve beginning
its rate tightening cycle. As of mid-July, the lira was once again the weakest major emerging
market currency vis-à-vis the dollar since the beginning of the year—its losses outpacing those
of the Romanian leu and the Argentine peso.
The TCMB spent tens of billions of dollars to defend the currency in 2020. With its current
reserves depleted, the TCMB rapidly added to short-term debt to rebuild its hard currency. Over
2021, the bank worked to improve its reserve balances, but net negative balances remained
large as the year ended. Since November 2021, the TCMB has again spent down tens of billions
of its reserves to defend the currency, resulting in its net foreign currency reserve position
rapidly deteriorating to 2020 levels, and worse. Once again, the bank is searching for foreign
swap support in order to build its reserve levels.
Institutional integrity—already low in 2018—is undermined further as the TCMB is now essentially
controlled by Erdoǧan. The fourth central bank governor in three years removed any sheen of
independence for that institution. The underlying collapse of institutional integrity challenges the
longer-term stability of the currency from improving much.
Turkey’s once-strong fiscal position is taking on greater stress to stabilize the economy.
In 2022, ongoing domestic financial instability will waylay previously assumed progress on
reducing the fiscal deficit. Along with requiring further subsidization of energy import costs, the
substantially weaker lira and soaring inflation will also severely undermine companies’ net profits,
thus hurting tax revenues. Promised easing of tax bills to alleviate inflationary pressures will also
reduce the government’s total revenues. Meanwhile, the government has hiked minimum wages
to deal with high inflation, higher expenditures for the state, which employs many of these
workers.
The government’s relatively defensive position over the past decade has been a critical
counterweight to the often-expansionary monetary policy. With fiscal policy now also forced to
relax, risks of continued instability are heightened.
Despite efforts to stimulate domestic demand, the lira and financial instability combined with global events
have a high risk of disrupting economic growth.
The biggest variable to the forecast will be how Turkey can prevent lira losses that are so sharp
they jeopardize the ability to repay external obligations. With the TCMB’s institutional integrity
undermined, current policy will have a significant impact on the Turkish currency. Short-term
external obligations in 2022-23 are down from their 2020–21 peak but remain onerously high.
Meanwhile, the current-account deficit is on the rise again in 2022 at the same time that net
foreign capital inflows remain outward. The ongoing lira losses jeopardize external financing
capabilities in 2022-23.
Renewed lira losses bring fresh fears of a collapse of the financial system. Heavily reliant upon
hard currency loans, attracting foreign capital is imperative for the health of the banks.
Restructuring and rolling over their own external debts will be critical, as will the restructuring of
their loans to domestic corporations in hopes of avoiding a surge of nonperforming loans (NPLs).
Data - Near-term outlook: Economic - Turkey
Turkey: Recent economic developments (percent change year on year, unless otherwise
specified)
Jun 22 May 22 Apr 22 Mar 22 Feb 22 Jan 22 2022 2021
Industrial production 13.3 10.5 9.7 13.3 8.2 14.4 1.6 16.5
Registered unemployment rate (percent) 11.2 11.2 11.5 11.8 11.8 10.6 12.1 13.2
Consumer price index 78.6 73.5 70.0 61.1 54.4 48.7 54.9 19.6
TRL/USD exchange rate (average) 10.69 9.16 8.55 8.48 8.61 8.61 14.87 8.86
Merchandise exports (in nominal dollar terms) 12.0 6.4 -0.2 -0.2 0.1 1.4 2.1 7.0
Merchandise imports (in nominal dollar terms) 43.5 35.0 30.7 44.5 54.1 29.8 -46.3 23.6
End-period 3-month euro-market rate (percent) 15.6 15.6 15.6 15.6 15.6 15.6 15.6 15.6
Key indicators and forecasts - Near-term outlook: Economic - Turkey
Historical
data edge 2020 2021 2022 2023 2024 2025 2026
Real GDP and its components (percent change)
Gross domestic product 2021 1.6 11.2 2.6 2.2 1.8 1.1 1.9
Domestic demand 2021 7.5 6.1 1.9 2.8 1.8 1.1 2.0
Historical
data edge 2020 2021 2022 2023 2024 2025 2026
Exports of goods & nonfactor services 2021 -14.8 24.9 7.4 1.7 1.2 0.9 0.9
Imports of goods & nonfactor services 2021 7.6 2.0 5.0 3.5 1.2 1.1 1.1
Real per-capita GDP 2019 0.5 10.3 2.0 1.7 1.4 0.6 1.4
Nominal GDP (billions of current US dollars)
Gross domestic product 2021 719.3 813.5 807.6 872.8 902.4 966.5 1,049.7
Domestic demand 2021 746.7 817.0 830.7 889.4 918.1 977.5 1,062.0
Exports of goods & nonfactor services 2021 206.2 288.0 341.9 314.1 304.1 311.3 320.9
Nominal per-capita GDP 2019 8,528 9,566 9,438 10,153 10,454 11,148 12,046
Prices (percent change)
GDP deflator 2021 15.0 28.4 79.3 34.4 13.4 13.4 10.3
Consumer price index 2021 12.3 19.6 71.6 31.8 16.4 11.4 9.1
Wholesale price index 2021 12.2 43.9 139.6 42.8 9.8 15.5 10.5
Terms of trade 2021 2.6 -8.6 -7.0 2.8 0.1 1.7 -0.1
Other indicators
Industrial production (percent change) 2021 2.2 16.5 3.8 2.6 1.9 1.6 1.2
Retail sales (percent change) NA NA NA NA NA NA NA
Unemployment rate (percent) 2021 13.1 12.0 11.3 11.7 11.7 11.9 12.1
Population (millions) 2019 84.3 85.0 85.6 86.0 86.3 86.7 87.1
Percent change 2019 1.1 0.8 0.6 0.5 0.4 0.5 0.5
Exchange rate (year end, per USD) 2021 7.43 13.34 18.81 22.37 24.26 25.55 26.02
Percent change 2021 24.9 79.7 41.0 18.9 8.5 5.3 1.8
Broad money supply (percent change) 2021 32.8 51.1 31.9 22.0 20.8 18.8 16.7
Fiscal balance (percent of GDP) 2021 -3.5 -2.7 -4.3 -4.5 -4.1 -3.1 -2.4
Policy interest rate (percent per annum) 2021 17.00 14.00 14.00 13.00 12.50 11.50 10.50
Short-term interest rate (percent per annum) 2021 10.98 18.27 15.91 17.14 17.37 16.79 14.91
Long-term interest rate (percent per annum) 2021 12.75 17.61 23.91 23.52 23.65 22.29 20.77

Global - Forecast assumptions: Economic - Turkey

The Russia-Ukraine war will likely drag on throughout 2022. Russia’s immediate objective is to
capture the entire Donetsk and Luhansk regions in eastern Ukraine. Luhansk fell under Russian
control on 3 July. Western-supplied artillery will disrupt the Russian advance in other regions. A
negotiated settlement is unlikely in the near future.
Through sanctions, trade policies, and private investment decisions, Russia’s international trade
will be limited for years to come and its economy will undergo a restructuring to increase self-
sufficiency. The Russian invasion and destruction of Ukraine’s key financial and industrial centers
will result in a decline of over 40% in Ukraine’s real GDP in 2022. Recovery begins in 2023 as a
multiyear reconstruction effort gets under way, which is supported by international aid.
In response to rising interest rates and softening demand, a broad retreat in industrial and
agricultural commodity prices is now under way. As problems in supply chains are gradually
resolved, further price declines are expected. Our Materials Price Index is projected to fall 25%
from the second quarter of 2022 to the end of 2023.
Our July forecast assumes that the price of Dated Brent crude oil will average USD105/barrel in
the second half of 2022, USD100/barrel in 2023, and USD90/barrel in 2024. Growth in oil supply
growth will outpace sluggish demand growth, enabling some rebuilding of low inventories.
Major central banks are accelerating monetary policy tightening in response to persistently high
inflation. The US Federal Reserve’s target range for the federal funds rate will rise to 3.25–
3.50% in early 2023 before reverting to its neutral range of 2.50–2.75% in late 2024. The
European Central Bank starts raising interest rates in July 2022, with the policy rate set to reach
a terminal level of 2.00% in mid-2023.
Mainland China’s dynamic zero-COVID policy will stay in place through at least March 2023,
impeding the economy’s return to normalcy. The government will counter the policy’s negative
impacts with economic stimulus measures. Globally, the COVID-19 virus will recede in
significance with the increasing availability of vaccines and treatments.
The energy transition toward a low-carbon economy will move forward in different ways and at
different speeds around the world. Financing and structural economic constraints will prevent
many countries from achieving announced objectives.
Global forecast assumptions

2021Q3 2021Q4 2022Q1 2022Q2 2022Q3 2022Q4 2023Q1 2023Q2 2023Q3
Brent crude-oil price (USD/barrel) 73.49 79.67 100.19 113.33 108.00 102.00 102.00 101.00 100.00
US federal funds rate (percent) 0.08 0.08 0.20 1.20 2.53 3.22 3.38 3.35 3.35
ECB refinancing rate (percent) 0.00 0.00 0.00 0.00 0.75 1.25 1.50 1.75 2.00
US dollar per euro (quarter average) 1.18 1.14 1.12 1.07 1.04 1.04 1.04 1.04 1.05
Yen per US dollar (quarter average) 110.10 113.70 116.18 129.56 137.20 139.09 136.57 133.51 130.40

Country - Forecast assumptions: Economic - Turkey

The Central Bank of the Republic of Turkey (Türkiye Cumhuriyet Merkez Bankası [TCMB]) will not
resume its rate-cutting cycle in 2022, at least. The Russia-Ukraine war raises the expected rate
of depreciation, but a collapse is avoided as long as no further rate cuts are made in 2022.
The Russia-Ukraine war remains contained to their borders. Turkey walks a thin line to avoid
antagonizing Moscow while remaining faithful to the letter of NATO obligations. The conflict does
not spill into the Black Sea nor jeopardizes the Montreux Convention regarding the use of the
Bosporus Straits.
No further, major COVID-19 surges disrupt economic activity. Although lockdown measures are
now relaxed, further aggravation of the situation could trigger a reimposition of these
requirements.
The government steps back slowly from its fiscal stimulus program. Among the country’s litany of
problems, overall public debt is not one. The country has fiscal latitude to temporarily raise fiscal
gaps and add to public debt, but will begin to step back cautiously from these deficits in 2023.
Turkey avoids further aggravating the investment situation by further escalating capital control or
participating in expropriation of foreign-owned properties or equities.
Risks and alternative scenarios: Economic - Turkey
Overall risk to the forecast
The stability of the lira remains a primary risk to the country’s economic outlook. The central bank’s lack of
institutional integrity lowers foreign investor confidence. The lira’s vulnerability to a collapse greatly amplifies the
potential of an external financing crisis and missed external obligations.
Downside risks
Should lira losses return to rates of decline similar to those noted in late 2021, Turkey would be
at high risk of missing its external obligations and entering a full-fledged external financing crisis.
Even if the central bank avoids another lira collapse, an external financing crisis could develop
should foreign creditors grow weary or cautious in rolling over existing debts. A banking sector
that has huge foreign currency liabilities would need to draw down their foreign currency assets
to cover a gap that might develop from low debt rollover ratios or high costs.
The Russia-Ukraine situation worsens and potentially spills over those borders. Turkey is
attempting to balance its relations with Moscow and the rest of the world. Should Turkey be
forced to cut off relations with Russia, a deeper disruption to the economy could develop.
Upside risks
A negotiated settlement between Russia and Ukraine would dramatically lessen the now-
anticipated effects on the Turkish economy. Inflation expectations would fall as global energy
prices retreated and economic growth would revive.
Alternatively, the looser monetary policy may facilitate stronger economic growth, encouraging
international creditors to allow heavy Turkish bank and corporate debt rollover, thereby
alleviating a potential trigger to another lira run.
Turkey approaches the International Monetary Fund (IMF) to counter lira instability. Should the
IMF step in, access to significant foreign capital support could stem lira losses and provide
stability to the country. Under IMF protocols, central bank autonomy is rebuilt, repaired, and
extended, with many other structural reforms put into place, buoying long-term growth and
stability fortunes.
Special topic: The central bank’s loss of institutional integrity remains a key inhibitor
to lira stability - Special topics: Economic - Turkey
During the past decade, President Recep Tayyip Erdoǧan steadily eroded the once strong reputation of the
Central Bank of the Republic of Turkey (Türkiye Cumhuriyet Merkez Bankası [TCMB]). Emerging from the 2008–
09 global recession, the TCMB was among the best-managed central banks in the world throughout the crisis. As
then-governor Durmaş Yilmaz’s term ended in 2011, there was discussion of him moving to a leadership position
in the International Monetary Fund (IMF). Political pressure to influence monetary policy accelerated dramatically
under the subsequent governor, Erdem Başçi. By the end of his term in 2016, Başçi was under physical threats for
not relenting to easing monetary policy. The appointment of the following governor, Murat Çetinkaya, was a
compromise between Erdoǧan and relatively powerful high-level members of the Justice and Development Party
who were still in the government—Ali Babaçan and Mehmet Şimşek.
After the 2018 election, Erdoǧan reshuffled his cabinet and consolidated power, ushering in a new period of
direct, political interference in monetary policy. Economic stewardship shifted from Babaçan and Şimşek to
Erdoǧan’s son-in-law, Berat Albayrak. Implementation of “Erdoǧ-nomics”—the president’s theory that high
interest rates were a key contributor to high inflation—was intensified. The TCMB, under Çetinkaya, became much
more expansionary and reactive to political pressures. However, Çetinkaya eventually refused demands to turn
over excess TCMB earnings to the government to fund growing finance deficits, earning him a dismissal before the
end of his term. The new governor, Murut Uysal, was more compliant with political directives, degrading the
TCMB’s integrity further. Uysal oversaw the dismantling of the defensive steps that Çetinkaya put in place to
rescue the Turkish lira from its 2018 crisis. To defend the lira in the face of negative real interest rates, Albayrak
directed the TCMB to spend down tens of billions in hard currency reserves and to ramp up short-term debts in
order to rebuild those reserves.
With the lira plunging and short-term debts surging, Erdoǧan allowed for a return to technocratic leadership
in late 2020, but that period proved brief, with the bank now, once again politically controlled. In November
2020, Erdoǧan replaced Albayrak and Uysal, with Naçi Aǧbal as governor. Aǧbal acted swiftly to begin to rebuild
the integrity of the TCMB, aggressively raising interest rates and staving off further lira losses and an impending
crisis. However, as he prepared to release details of the amount of hard currency squandered in 2019–20 to defend
the lira in the face of unsound monetary policy, Erdoǧan dismissed him—the third premature removal of a bank
governor in just over two years. Current Governor Şahap Kavcioǧlu is an Erdoǧan loyalist. Although he did not
immediately reduce interest, he finally began the easing cycle in September 2021, even as inflation remained
elevated and rising, in line with the president’s recent directives.
The dramatic politicization of monetary policy is one key determinant to the lira’s ongoing instability. Given
the consolidation of power around Erdoǧan, the TCMB will not likely regain any substantial independence or
integrity under him. Even with the installation of Aǧbal in 2020, his tightening of monetary policy was only done
with tacit approval from Erdoǧan and that the president could quickly undo what was done. For any future
attempts to calm markets with a more respected governor appointment, they will only serve at the pleasure of
Erdoǧan and will also be quick to be removed as the president sees fit.
The greatest likelihood of any repair of the TCMB’s integrity depends on Erdoǧan’s departure from power. The
next presidential and parliamentary elections are not until 2023. Erdoğan’s control over the media, the military,
the bureaucracy, and the judiciary improves the prospect of a stable government. However, polls indicate that
while he remains popular, Erdoğan faces a deeply damaged economy, raising the possibility of his defeat.
Presuming any challenger who defeats Erdoğan would be a coalition candidate, political interference in the TCMB
decisions would become much more difficult, raising the possibility that at that time, the bank could begin to
restore its reputation.
Special topic: The tourism sector’s recovery will be a key to economic growth and
healthy external balances - Special topics: Economic - Turkey
The Turkish tourism sector is an important component of the economy, providing a major headwind
throughout the pandemic. The Turkish tourism sector was directly responsible for 7–10% of total employment
and generated 5% of GDP directly, along with additional 7% of GDP in ancillary services before the pandemic. The
onset of the COVID-19 pandemic devastated travel into Turkey, as it did across the globe. Total tourism revenues
in 2020 fell by 65.1%, with foreign earnings falling 68.3% and domestic earnings dropping 49.2%, according to the
Turkish Statistical Institute. In 2021, revenues recovered strongly, more than double compared with 2020 foreign
and domestic earnings. Nevertheless, total tourism revenues in 2021 remained nearly 30% lower than pre-
pandemic levels. Total revenues in 2021 were the second-lowest to be earned annually since 2007.
While the Russia-Ukraine war offers strong headwinds, it also presents an opportunity for growth. With
tourism revenues in 2021 still below pre-pandemic levels, tourism officials have announced that foreign visitor
numbers would rally strongly in 2022. However, Russia’s invasion of Ukraine has unleashed a wave of sanctions
that have crippled the capability of Russians from affording to travel. The country has anecdotally received a
number of upper-middle-class labor migrants that have relocated from Russia to Turkey. Additionally, Turkey
remains one of the few countries in the world still economically interacting with Russia. Russian tourists—those
who still can afford to travel—will increasingly visit Turkey. Tourism should continue to increase in 2022 as a
whole compared with 2021. However, the number of Russians visiting in the third quarter will determine whether
total tourism returns to pre-pandemic levels or only grows slowly.
Foreign tourism earnings not only contribute to economic growth, but will be critical for limiting any
widening of the current-account deficit. Balance-of-payments data from the Central Bank of the Republic of
Turkey report that travel service exports made up 47% of total service exports in 2019. In 2020, these travel service
exports plunged by two-thirds, bringing in only USD10.2 billion. The subsequent services surplus dropped from
USD35.5 billion in 2019 to USD9.2 billion in 2020. The USD26.4-billion downturn in the services was an
overwhelming contributor to the turnaround of the current-account balance from a 0.8%-of-GDP surplus in 2019
to a 5.0%-of-GDP deficit in 2020. In 2021, travel service exports more than doubled to USD20.8 billion, resulting in a
services surplus of USD19.2 billion—still well below pre-pandemic levels. The degree to which tourism recovers in
2022 will either mitigate the expected widening of the current-account deficit or accelerate it.
Although a surge of domestic tourism would not impact the current-account deficit, it could help buoy
domestic economic activity, but such a surge is unlikely. In place of foreign revenues, tourism providers are
targeting the large domestic market to induce greater spending as lockdown measures are relaxed. However,
domestic tourism revenues have historically been a fraction of the foreign earnings—just 16% of total tourism
revenues in 2019. Moreover, unlike wealthier economies, the pandemic did not necessarily create a surge of pent-
up savings in Turkey. Disposable income that would have turned into excess savings in wealthier economies were
used to meet necessities in Turkey, particularly given the surge of inflation that has occurred in the country.
Medium- and long-term outlook - Medium- and long-term outlook: Economic - Turkey
Several hurdles remain in the way of sustainable, long-term economic growth: a lack of institutional integrity,
structural balance-of-payment problems, and lingering exchange rate vulnerability. President Erdoǧan’s long-
time stewardship of the economy has had myriad chances to address these long-term growth problems, but has
failed to follow through, despite various pushes to address the issues.
Most pressing in resuming the long-term growth prospects will be the restoration of the institutional integrity
of the central bank and other economic oversight entities. Unfortunately, a true repair of the reputation of the
Turkish institutions will not be possible until President Erdoǧan is out of power and a new system of checks and
balances are established. There is a possibility that Erdoǧan might be voted out in the 2023 presidential elections,
potentially triggering an improvement in institutional integrity. Should Erdoǧan retain power in the upcoming
election, given his age, it is unlikely that he would win yet another term in 2027 or 2028. Assuming there is a
transition away from Erdoǧan by at least the late 2020s, an improvement in institutional integrity is unlikely. Until
such improvement, however, Turkey will continue to lurch between crises.
An industrial reform will be needed to overcome the country’s structural balance-of-payments problems. The
country remains a net energy importer, also reliant upon imported inputs for its production sector. A push to
become more energy self-sufficient would pay dividends in the longer term in limiting external imbalances.
Additionally, the government must support structural reforms that would unshackle Turkey from import reliance,
or else risk the rewidening of the current-account deficit as economic growth once again accelerates. For now,
financing the current-account deficit is a major risk for the country, particularly as incoming capital will be
interrupted in the short and medium term by political, security, and financial uncertainty.
Without improved institutional integrity and given the still-large current-account deficits, the lira will remain
among the most vulnerable currencies in the world throughout the medium term. External financing needs will
remain substantial throughout the 2020s and into the 2030s, with consistent foreign capital inflows difficult to
attract given the ongoing institutional integrity problems. Until the current-account gaps are narrowed and
confidence is rebuilt to buoy investor sentiment, the lira will remain an extremely vulnerable currency.
On the other hand, assuming structural reforms are eventually pursued, demographic and geopolitical factors
could support relatively robust levels of economic growth compared with the rest of emerging Europe. In mid-
to-late 2020s, as structural reforms are undertaken and economic policies are normalized, Turkish growth will face
severe headwinds with growth dipping to 2% annually or lower. However, after a 3–5 year transition, growth rates
should accelerate in the longer forecast period. With a well-trained and underutilized labor market, a positive
demographic outlook, and an advantageous geopolitical location, fixed capital investment growth should recover
relatively robustly in the longer term, assuming stability in policy. Despite the rapid run-up in recent years,
consumer credit penetration remains relatively low in the country, particularly the use of credit cards. The
banking sector is stable and eager to expand consumer credit opportunities, so assuming short-term economic
crises eventually fade, consumption growth could revive in the long term.
Data - Medium- and long-term outlook: Economic - Turkey
Turkey: National income accounts

Average level or
Historical compound growth
data edge 2020 2021 2022 2023 2024 2025-30 2025-50
Billions of current local currency units
Gross domestic product 2021 5,047 7,209 13,267 18,214 21,031 31,549 75,145
Turkey: National income accounts
Average level or
data edge 2020 2021 2022 2023 2024 2025-30 2025-50
Domestic demand 2021 5,239 7,239 13,647 18,561 21,396 31,993 75,088
Private consumption 2021 2,864 3,995 7,449 10,158 11,609 16,711 36,820
Government consumption 2021 766 942 1,639 2,214 2,559 3,793 8,923
Fixed capital formation 2021 1,382 2,016 3,890 5,393 6,323 10,114 25,726
Change in inventories 2021 3.1 -4.8 -0.6 1.3 0.3 0.3 0.1
Net exports 2021 -192.3 -30.4 -354.8 -347.0 -365.4 -444.0 57.0
Exports of goods & nonfactor services 2021 1,447 2,552 5,618 6,554 7,087 8,800 17,625
Imports of goods & nonfactor services 2021 1,639 2,582 5,972 6,901 7,453 9,244 17,568
Percent change at constant prices
Gross domestic product 2021 1.6 11.2 2.6 2.2 1.8 1.5 2.2
Domestic demand 2021 7.5 6.1 1.9 2.8 1.8 1.5 1.8
Private consumption 2021 3.2 15.1 4.9 1.6 1.2 0.7 1.5
Government consumption 2021 2.1 2.2 -1.3 1.5 3.0 2.2 2.3
Fixed capital formation 2021 7.2 6.4 -1.8 0.6 1.4 1.6 1.9
Change in inventories (contrib. to growth) 2021 3.1 -4.8 -0.6 1.3 0.3 0.3 0.1
Net exports 2021 -115.1 706.5 20.5 -6.9 1.5 1.1 6.9
Exports of goods & nonfactor services 2021 -14.8 24.9 7.4 1.7 1.2 2.0 3.4
Billions of current US dollars
Gross domestic product 2021 719.3 813.5 807.6 872.8 902.4 1,205.7 2,236.1
Domestic demand 2021 746.7 817.0 830.7 889.4 918.1 1,222.6 2,236.6
Private consumption 2021 408.2 450.9 453.4 486.7 498.1 638.8 1,100.2
Government consumption 2021 109.2 106.4 99.8 106.1 109.8 144.9 265.9
Fixed capital formation 2021 197.0 227.5 236.8 258.4 271.3 386.3 763.7
Change in inventories 2021 32.4 32.2 40.7 38.2 38.8 52.5 106.8
Net exports 2021 -27.4 -3.4 -21.6 -16.6 -15.7 -16.9 -0.5
Exports of goods & nonfactor services 2021 206.2 288.0 341.9 314.1 304.1 336.9 528.4

Turkey: Inflation and financial indicators

Average level or
data edge 2020 2021 2022 2023 2024 2025-30 2025-50
Government finances (billions of LCU)
Revenues 2021 1,006 1,376 2,287 2,857 3,489 5,470 12,507

Percent change 2021 17.9 36.8 66.2 24.9 22.1 11.6 7.8
Expenditures 2021 1,182 1,573 2,855 3,682 4,359 6,201 13,947
Percent change 2021 20.8 33.1 81.5 28.9 18.4 9.5 7.3
Balance 2021 -175.7 -196.9 -568.0 -824.2 -869.9 -731.2 -1,439.4
Turkey: Inflation and financial indicators
Average level or
data edge 2020 2021 2022 2023 2024 2025-30 2025-50
Percent of GDP 2021 -3.5 -2.7 -4.3 -4.5 -4.1 -2.4 -2.0
Inflation indicators (percent change)
GDP deflator 2021 15.0 28.4 79.3 34.4 13.4 9.3 5.6
Consumer price index 2021 12.3 19.6 71.6 31.8 16.4 8.6 6.8
Wholesale price index 2021 12.2 43.9 139.6 42.8 9.8 9.4 5.9
Export prices 2021 20.6 41.2 104.9 14.7 6.8 3.7 2.7
Import prices 2021 17.6 54.5 120.3 11.6 6.7 3.6 3.5
Monetary indicators
M1 (billions of LCU) 2021 1,220 2,097 2,719 3,354 3,826 5,673 14,178
Percent change 2021 71.1 71.9 29.7 23.3 14.1 10.7 8.2
Broad money (billions of LCU) 2021 3,419 5,166 6,812 8,309 10,036 16,887 46,635
Percent change 2021 32.8 51.1 31.9 22.0 20.8 13.9 9.3
Policy interest rate (percent) 2021 17.00 14.00 14.00 13.00 12.50 9.17 7.11
Short-term interest rate (percent) 2021 10.98 18.27 15.91 17.14 17.37 13.18 9.91
Long-term interest rate (percent) 2021 12.75 17.61 23.91 23.52 23.65 18.60 14.18
Exchange rates (per US dollar)
Annual average 2021 7.02 8.86 16.43 20.87 23.31 26.08 31.97
Percent change 2021 23.6 26.3 85.4 27.0 11.7 2.5 2.0
Year-end 2021 7.43 13.34 18.81 22.37 24.26 26.33 32.25
Percent change 2021 24.9 79.7 41.0 18.9 8.5 2.0 1.8
Purchasing power parity 2021 2.02 2.49 4.20 5.44 6.04 7.90 11.01
Percent change 2021 13.4 23.1 68.6 29.6 10.9 6.9 3.2

Turkey: Balance of payments

Average level or
data edge 2020 2021 2022 2023 2024 2025-30 2025-50
Current account (billions of current US dollars)
Current-account balance 2021 -35.5 -13.7 -39.2 -32.8 -34.5 -45.8 -54.7
Balance on goods 2021 -37.9 -29.3 -56.3 -42.5 -40.8 -49.9 -57.4
Goods, credit (exports) 2021 168.4 224.7 262.5 242.7 232.9 258.9 420.3
Goods, debit (imports) 2021 206.3 254.0 318.8 285.2 273.7 308.7 477.7
Balance on services 2021 11.5 26.6 28.9 23.7 22.3 25.2 39.9
Services, credit (exports) 2021 35.4 58.2 64.1 56.5 55.2 61.9 92.6
Services, debit (imports) 2021 23.9 31.6 35.2 32.7 32.9 36.7 52.8
Balance on primary income 2021 -9.4 -12.0 -11.7 -13.9 -15.9 -21.3 -37.5
Primary income, credit 2021 6.2 6.7 7.2 7.1 7.7 11.3 28.0
Primary income, debit 2021 15.6 18.8 18.9 20.9 23.7 32.6 65.5
Current-account balance (% of GDP) 2021 -4.9 -1.7 -4.9 -3.8 -3.8 -3.8 -2.8
Turkey: Balance of payments
Average level or
data edge 2020 2021 2022 2023 2024 2025-30 2025-50
Capital account (billions of current US dollars)
Balance on capital account excl. reserves 2021 0.0 -0.1 0.0 0.0 0.0 0.0 0.0
Net direct investment 2021 4.6 7.4 0.6 2.4 2.5 2.1 8.6
Net incurrence of liabilities (inflow) 2021 7.8 13.9 8.1 9.8 9.3 9.0 15.9
Net acquisition of financial assets (outflow) 2021 3.2 6.4 7.5 7.3 6.8 6.8 7.2
Net portfolio investment 2021 -9.6 0.8 -9.4 -0.4 0.7 5.4 9.0
Net incurrence of liabilities (inflow) 2021 -6.7 3.1 -2.9 4.2 4.7 8.9 12.3
Net acquisition of financial assets (outflow) 2021 2.9 2.3 6.4 4.6 4.1 3.5 3.4
Net other investment 2021 12.6 14.5 28.7 25.2 28.7 37.8 37.8
Net incurrence of liabilities (inflow) 2021 10.7 28.1 34.0 24.5 31.3 44.3 43.0
Net acquisition of financial assets (outflow) 2021 -1.9 13.7 5.3 -0.7 2.7 6.5 5.3
Reserves, related items (change in reserves) 2021 -31.9 23.3 -16.5 -5.6 -2.6 -0.4 0.7
Related items
Exchange rate (year-end, per US dollar) 2021 7.43 13.34 18.81 22.37 24.26 26.33 32.25
Forex reserves (billions of current US dollars) 2021 50.04 72.69 57.49 51.70 48.90 46.10 53.09

Currency convertibility: Economic - Turkey

Less than three years after its previous collapse, the lira remains extremely vulnerable. Throughout most of 2020,
the lira was among the worst-performing currencies in the world, until a pivot to more defensive monetary policy
led to a rally from November 2020 to February 2021. However, from February to end-2021, the lira once again
became the worst-performing emerging market currency in the world, with losses intensifying following the
replacement of the governor of the Central Bank of the Republic of Turkey (Türkiye Cumhuriyet Merkez Bankası
[TCMB]). The loosening of monetary policy that began in September 2021 turbocharged lira losses, undermining
foreign capital inflows and complicating foreign debt repayment obligations in 2022.
Downside risks to lira stability are exorbitant owing to underlying lack of confidence in institutional integrity and
outstanding external financing concerns. Depleted foreign currency reserves provide the TCMB little firepower
with which to defend the lira. Headline reserve figures suggest that the country has relatively comfortable levels,
covering approximately three months of imports as of the end of 2021. However, after spending tens of billions of
US dollar to defend the currency in 2020, the TCMB rebuilt those reserves through heavy short-term currency
swaps with its banks. Additionally, the bank is relying upon commercial bank reserves that are obligated to be
kept at the TCMB. Netting out commercial bank reserves and short-term repayment obligations, the TCMB foreign
currency reserves remained negative as the second half of 2022 began, equaling nearly two months of imports.
In the longer term, assuming an eventual repair of the TCMB's reputation, the lira should be relatively stable.
Strong growth prospects in the medium and long terms and a relative narrowing of the current-account deficit
should help the lira revert to a more accurately valued level.
Data - External trade - Economic background: Economic - Turkey

Turkey: Major trading partners, 2021
Exports Imports
Geography Billion USD Share (%) Geography Billion USD Share (%)
Germany 19.3 8.6 China (mainland) 32.2 11.9
United States 14.7 6.5 Russia 29.0 10.7
United Kingdom 13.7 6.1 Germany 21.7 8.0
Italy 11.5 5.1 United States 13.1 4.8
Iraq 11.1 4.9 Italy 11.6 4.3
Spain 9.6 4.3 India 7.9 2.9
France 9.1 4.0 France 7.9 2.9
Netherlands 6.8 3.0 South Korea 7.6 2.8
Israel 6.4 2.8 Spain 6.3 2.3
Russia 5.8 2.6 Belgium 5.6 2.1
Source: IMF, Direction of Trade © 2022 IHS Markit

Exports Imports
Germany 11.5 10.1 Russia 21.6 11.6
United Kingdom 7.2 6.4 Germany 17.5 9.5
Italy 6.5 5.7 China (mainland) 17.2 9.3
France 6.1 5.3 United States 12.3 6.6
Iraq 6.0 5.3 Italy 10.2 5.5
Russia 4.6 4.1 France 8.2 4.4
United States 3.8 3.4 Iran 7.6 4.1
Spain 3.5 3.1 Spain 4.8 2.6
United Arab Emirates 3.3 2.9 South Korea 4.8 2.6
Iran 3.0 2.7 United Kingdom 4.7 2.5

Exports Imports
Germany 5.2 18.6 Germany 7.2 13.2
United States 3.1 11.3 Italy 4.3 7.9
United Kingdom 2.0 7.3 United States 3.9 7.2
Italy 1.8 6.4 Russia 3.9 7.1
France 1.7 6.0 France 3.5 6.5
Netherlands 0.9 3.1 United Kingdom 2.7 5.0
Spain 0.7 2.6 Spain 1.7 3.1
Israel 0.7 2.3 Belgium 1.7 3.0
Belgium 0.6 2.3 Japan 1.6 3.0
Russia 0.6 2.3 Netherlands 1.6 2.9
Exports Imports
Germany 3.1 23.0 Germany 3.5 15.2
Italy 1.1 8.3 United States 2.3 9.9
United States 1.0 7.2 Italy 1.7 7.5
United Kingdom 0.7 5.6 France 1.3 5.8
France 0.7 5.5 Japan 1.1 4.8
Iran 0.5 3.7 Iraq 1.0 4.5
Netherlands 0.4 3.3 United Kingdom 1.0 4.4
Saudi Arabia 0.3 2.5 Saudi Arabia 0.7 3.1
Switzerland 0.3 2.2 Netherlands 0.6 2.5
Japan 0.2 1.8 Switzerland 0.5 2.3
Turkey: Top-12 Commodities

Exports Imports
Share of 2022 2021 Share of 2022 2021
2022 (%) (Mil. (Mil. 2022 (%) (Mil. (Mil.
USD) USD) USD) USD)
Iron & steel 7.9 17,997 22,484 Coal mining 11.9 28,145 37,289
Wearing apparel 10.3 23,580 22,121 Iron & steel 7.7 18,209 29,082
Motor vehicles 11.0 25,062 20,277 Nonferrous metals 10.2 24,165 19,629
Food Products 5.7 13,013 14,320 Synthetic resins 4.3 10,116 14,291
Textiles 5.8 13,363 13,956 Parts and accessories 5.0 11,805 12,401
Nonferrous metals 3.7 8,523 12,597 Basic chemicals 3.7 8,677 11,118
Parts and accessories 4.4 10,103 9,911 Agriculture 4.4 10,446 10,322
Agriculture 4.2 9,560 9,773 Refined petroleum products 4.2 9,972 9,751
Fire & safety, brushes, other nec 4.1 9,310 9,043 Motor vehicles 1.3 3,022 9,179
Plastics products 3.2 7,294 7,937 Pharma: drugs & medicines 2.6 6,167 8,156
Domestic appliances 3.3 7,595 7,778 Food Products 2.4 5,776 7,024
Refined petroleum products 3.6 8,289 6,614 Textiles 2.9 6,835 6,767
Total of top-12 67.2 Total of top-12 60.6
All commodities 100.0 100.0
Updated: 22 July 2022

Source: Comparative Industry Service, IHS Markit © 2022 IHS Markit
Key sectors data - Key sectors - Economic development - Economic background:

Economic - Turkey
Turkey: Top-10 Sectors Ranked by Value Added
2021 level Percent change % GDP
(Billion USD) (2022, real) (Nominal)
1. Public admin & defense, other services (O,S,T,U) 47.8 1.2 6.6
Turkey: Top-10 Sectors Ranked by Value Added
2021 level Percent change % GDP
(Billion USD) (2022, real) (Nominal)
2. Wholesale trade, except of motor vehicles and 46.2 2.8 6.4
motorcycles(G46)
3. Agriculture, forestry and fishing(A) 45.8 0.7 6.3
4. Construction(F) 42.9 1.3 5.9
5. Real estate activities(L) 40.9 0.7 5.6
6. Retail trade, except of motor vehicles and motorcycles(G47) 35.6 3.1 4.9
7. Education(P) 34.8 1.2 4.8
8. Accommodation and food service activities(I) 25.5 3.1 3.5
9. Land transport (H491,H492) 24.7 4.3 3.4
10. Human health and social work activities(Q) 20.9 1.4 2.9
Top-10 Total 365.1 50.4
Updated: 22 July 2022

Source: Comparative Industry Service, IHS Markit © 2022 IHS Markit
Legal - Turkey
Overview: Legal - Turkey

Turkey's presidential system, brought about by the new constitution passed in the 16 April 2017 referendum,
stipulates broad oversight by the president for the Council of Judges and Prosecutors (HSK), the highest
regulatory body of the judiciary. Four of its 13 members are appointed by the president, with another seven
appointed by parliament, which is controlled by the president's own party. Its influence over the HSK will allow
the ruling party to target companies affiliated with its domestic political rivals, entailing an elevated risk of
contract cancellations, arbitrary impositions of regulatory requirements, and outright expropriation of assets in
the three-year outlook.
Analysis - Contract alteration threats: Legal - Turkey

Turkey’s currency shortages make government renegotiations of PPP projects more
likely
Turkey’s net foreign-currency reserves have been negative since December 2020. Worsening foreign currency
shortages increase the risk of contract alterations or delays and non-payment to Public Private Partnerships (PPP)
contractors. Such developments will likely affect payments for projects including the Great Istanbul Tunnel
crossing the Bosporus, and the Çanakkale 1915 Bridge across the Dardanelles strait. There are increasing contract
alteration risks in the healthcare sector as the Turkish government’s debt to international healthcare companies
and pharmaceutical companies reached over USD2 billion by November 2020, and has grown since. The
suspension of government-planned large-scale infrastructure projects is likely following the significant
deterioration of the lira following the COVID-19 pandemic and its economic fallout. Such developments will be
indicated by project-specific announcements, with projects affected likely to include Kanal Istanbul, the planned
artificial waterway parallel to the Bosporus, as well as the Russia-funded Akkar nuclear power plant (affected by
the Russian war in Ukraine). Meanwhile, the transfer to the central government of authority previously held by
municipal administrations over infrastructural investments reduces the risk of contract cancellations by
municipalities led by opposition parties including Istanbul and Ankara, although domestic funding for
infrastructure investment in advance of the 2023 elections will also be limited.
Government threats to expropriate assets linked with political opposition are no longer on the national agenda.
The continuation of Erdoğan’s unorthodox economic policies favouring interest rate cuts is likely to increase risks
for foreign companies. As such, a worsening of the Turkish economy would increase the likelihood of arbitrary
fines against foreign companies. As of June 2022, an unofficial boycott of Turkish imports by Saudi Arabia has
ended. Should the US court fine Turkish state-owned bank Halkbank over breaching Iranian sanctions, there is a
risk of contract alterations for US companies, driven by mid-level state officials.
There is a continued risk of contract alterations or cancellations for oil and gas companies engaged in exploration
in the disputed Eastern Mediterranean territories around Cyprus. Turkey – which is not a signatory to the 1982 Law
of the Sea – has objected to Cyprus exploiting offshore hydrocarbons without including the Turkish Cypriots. In
2013, the Turkish government decided to cease collaboration with the Italian multinational Eni over its
involvement with the Cypriot government. Becoming "blacklisted" also meant that Eni was excluded from the
Samsun-Ceyhan pipeline consortium, to which it had been a party since 2009. However, the Turkish government is
likely to honour rulings against it by international bodies, such as the International Centre for Settlement of
Investment Disputes (ICSID).
Analysis - Contract enforcement: Legal - Turkey

The presidency exercises extensive influence over the judiciary; civil cases are likely to
face delays
The Council of Judges and Prosecutors (Hakimler ve Savcılar Kurulu: HSK), which is responsible for all judicial
appointments in the country, came under the de-facto control of the government with the implementation of
Turkey's new presidential system in 2018. Its members were reduced from 22 to 13, four of whom are now
appointed by the president and another seven by parliament. The latter is controlled by the ruling party and its
junior alliance partner, who have a combined simple majority. This has reinforced a trend of politicisation in
Turkish courts, entailing an increased risk of discrimination in particular for companies from countries with
geopolitical disputes with Turkey. This is unlikely, however, to extend to companies from the US and EU countries.
The Constitutional Court still acts with a degree of independence from the government. This was demonstrated in
a decision in January 2020 to lift an access ban on Wikipedia that had been in place since early 2017, following a
ruling to that effect by the court. In criminal cases related to terrorism, however, there have been rare examples of
the judiciary's non-compliance with the Constitutional Court rulings, in accordance with likely direct instructions
from the government. President Erdogan nonetheless wields strong influence in the Constitutional Court as he
appointed a replacement for a member in January 2021. As of January 2022, with the election of a new member,
10 of the 15 members in the Constitutional Court have links with Erdogan’s ruling alliance while five are linked to
the opposition.
The coronavirus disease 2019 (COVID-19) outbreak increased judicial backlogs, particularly for civil cases, which
tend to get treated as lower in priority. The average duration of trial and enforcement processes, without appeal,
remains between one and two years. Moreover, the judiciary's ranks are filled with inexperienced newcomers, due
to extensive purges of up to one-fifth of all prosecutors and judges following the 2016 coup attempt. This results
in an increased tendency to push cases up to the appeals courts.
Expropriation risks: Legal - Turkey

Elevated expropriation risks for domestic firms affiliated with the government's
political rivals, targeting of foreign business assets remains highly unlikely
The Turkish government is highly unlikely to expropriate foreign businesses during the current currency crisis. The
expropriation of a strategic asset from a foreign investor would likely trigger a further sell of the lira and foreign
divestiture from Turkish companies, deter foreign investment and further limit the ability of the government to be
able to fund running costs or attract further foreign investment for its economic plan in advance of presidential
and general elections in 2023.
There remains an elevated risk of expropriation for domestic firms suspected of affiliation with the government's
political rivals. Following the July 2016 coup attempt, the key targets for expropriation were firms suspected of
being affiliated with the Gülen movement, a social-religious network that the government claims to have
perpetrated the coup attempt. In May 2017, the government announced that it had seized 942 companies since
the coup attempt, with a combined value of USD10.5 billion. High-profile targets, before and after the coup
attempt, included the Koza İpek, Kaynak, Boydak, Naksan, and Dumankaya holdings and their subsidiaries, which
were initially appointed bureaucrat "trustees" and later saw the outright seizure of their assets. Furthermore, a
large number of seized Gülen-affiliated companies went into bankruptcy. However, risks to Gülen-affiliated firms
have now abated, with the majority of high-profile companies having already been taken over. There remains a
moderate risk of confiscation and deprivation for businesses if they are identified as having contracted into a joint
venture with a Turkish company that is perceived to have links with the Gülen movement.
There is an elevated risk that the Turkish government will expand its discriminatory actions in the private sector
from the previously restricted target set of firms affiliated with the Gülen movement. One potential target set
would likely be firms affiliated with the Turkish Industry and Business Association (TUSIAD), the country's main
business group, following a series of public disputes between President Erdoğan and the TUSIAD leadership in the
past. However, any measures taken against TUSIAD member firms are likely to include selective tax levies,
arbitrary regulatory requirements, and cancellations of state contracts, rather than outright expropriation.
Erdoğan would likely be wary of the economic consequences of an outright assault: TUSIAD members account for
more than 50% of private-sector employment and 80% of corporate tax revenue. In February and May 2020,
President Erdoğan renewed his threats to expropriate the CHP's 28% shareholding in İşbank, Turkey's second-
largest bank. Taking the four CHP seats on the bank's board would provide Erdoğan with greater influence over
the bank's lending decisions, allowing the government to use the bank’s resources to boost economic growth.
Erdoğan's threats have subsided since then.
Legal system - Legal background: Legal - Turkey

The Turkish constitution was promulgated in 1982 during a period of military rule and has subsequently been
amended over 40 times. It was mostly recently amended through a referendum in 2017 and came into force in
2018, creating a powerful new executive presidency, with comparatively thin legislative and judiciary branches.
Turkey has separate civil and criminal court systems, overseen by a panel of judges rather than a jury. There are
also regional appeals courts and two supreme appellate courts: the Danıştay, for civil and administrative cases,
and the Yargıtay, for criminal cases. In cases where a constitutional principle is involved, it is also possible to
appeal to the Constitutional Court. Turkey also has specialised intellectual property courts overseen by specially
trained judges.
Although Article 9 of the constitution states that the Turkish judiciary is fully independent, it has always been
vulnerable to political pressure. The Supreme Board of Judges and Prosecutors (HSYK), which undertook all
judicial appointments, was key in determining the political make-up of the judiciary. When the Justice and
Development Party (Adalet be Kalkınma Partisi: AKP) was new in government, its Gülenist allies infiltrated the
institution and began to use it against the old-guard secularists within the state. When the AKP and Gülenists fell
into a bitter civil war, the AKP purged the Gülenists from the body, re-staffing it with some secularists and its own
loyalists. With the new presidential system, the HSYK has been replaced with the Board of Judges and Prosecutors
(HSK). Congress appoints seven and the president four of its 11-member body. Considering that Erdoğan is both
president and head of a parliamentary majority, this means that he has control over judicial appointments in the
country.
Dispute resolution - Business regulation - Legal background: Legal - Turkey

Turkey is a member of the International Center for the Settlement of Investment Disputes (ICSID) and the New
York Convention, as well as having its own Istanbul Arbitration Centre (ISTAC). It has bilateral investment treaties
with 131 countries, with 82 of these currently in force. Since early 2000, companies have been allowed recourse to
international arbitration in disputes with the state. Turkey has no history of non-compliance with ICSID rulings.
However, in October 2019, a Turkish court rejected an ICSID request to temporarily cease criminal proceedings
against a Turkish businessperson while the body arbitrated in a dispute between him and the Turkish
government. There is a moderate risk that this incident sets precedent for further non-compliance.
Company law and corporate governance - Business regulation - Legal background:

Legal - Turkey
General: Turkish business laws are overall transparent, albeit subject to frequent change. Turkey is open for
business, with authorities facilitating access of foreign companies to local markets. Yet significant stumbling blocks
remain, notably with regards to the employment of workers, closing businesses, and dealing with construction
permits. Turkey ranks 53rd out of 190 countries for dealing with construction permits, according to the World
Bank's Ease of Doing Business Report for 2020. Turkey's overall ranking is 33rd out of 190, up from 43rd in 2018.
Procedures: Setting up a company in Turkey became easier after the introduction of a new foreign direct
investment law in June 2003, which streamlined the previously lengthy procedures. In theory, companies can be
set up within 24 hours although in reality it takes up to seven days. Founders need to submit the articles of
association to the notary, and a deposit of 0.04% of the capital in a state bank, fill in the form for company
establishment, and register with the Trade Registry Office where the headquarters of the company are situated.
The most common forms of business organisation are limited partnership companies (Limitet Şirket; Ltd Sti), joint
stock companies (Anonim Şirket; AS), commandite companies (Komandit Şirket), collective companies (Kolektif
Şirket), branches (Şube), and liaison offices (İrtibat Bürosu). Ltd Sti and AS businesses do not have any restrictions
regarding the nationality of the founders.
Corporate governance: Protection of investors is strong by World Trade Organization (WTO) standards, and laws
on foreign investment are largely transparent. The World Bank's Ease of Doing Business Report for 2020 ranks
Turkey as 21st out of 190 countries for "Protection of Minority Investors". The new Turkish Commercial Code (TCC)
came into force on 1 July 2012, 55 years after its predecessor, and aimed to bring Turkey's business environment
into line with that of the EU. The TCC removes the need for board members to be company shareholders. Article
358 of the legislation states that shareholders cannot incur debt to the firm – formerly a traditional part of Turkish
business – although this deals only with joint-stock companies, not unlimited firms. Provisions on independent
auditing became effective on 1 January 2013, while those requiring equity-capital companies to make information
available online come into force on 1 July 2013. Since March 2002, groups have been required to provide
consolidated financial statements. In October 2002, the Capital Markets Board (CMB) issued drafts of new
accounting standards that replaced Turkish accounting regulations with standards translated from international
accounting standards. The CMB proposed that the standards should become compulsory for listed companies
with financial years starting 31 December 2003. In fact, listed Turkish companies were only required to use
international financial reporting standards from 2005. As is the international norm, compliance is voluntary, but
those firms that choose not to use these standards must submit an explanation of the reasons for non-
compliance in their annual reports. Firms are also required to disclose conflicts of interest. In 2005, publicly held
corporations began filing a corporate governance questionnaire along with their financial statements, in a move to
increase transparency. The CMB has also published a Corporate Governance Principles Guide, which public
companies are required to indicate adherence to in their annual statements. The new TCC provides the CMB with
the exclusive authority to regulate corporate governance.
Bankruptcy - Business regulation - Legal background: Legal - Turkey

The World Bank's 2020 Doing Business report rated Turkey 120th out of 190 nations for insolvency resolution,
down from 109th in 2016. It takes an average of five years and costing 14.5% of the debtor's estate. New provisions
in the bankruptcy law enacted in early 2018 allow companies to apply for temporary protection from creditors –
known as 'concordato' in Turkey – while they negotiate for a composition agreement under the supervision of a
government-appointed mediator.
Competition - Business regulation - Legal background: Legal - Turkey

The criteria subjecting merger-and-acquisition deals to notification and clearance procedures are stipulated by the
communiqués of the Competition Board. Turkey subscribes to WTO-compliant anti-dumping regulations, but the
injured party must fill out a questionnaire to launch an investigation by the board, which has extensive power to
request information and conduct investigations.
Employment - Business regulation - Legal background: Legal - Turkey

In 2021, the monthly minimum wage rate was TRY3,577.50 (gross) or USD267.13. As of 1 January 2022, this
increased to TRY5,004.00 (gross) or USD375.80. The new rate applies from 1 January 2022 to 31 December 2022.
The minimum wage applies to all employees, regardless of age, industry, and experience. The only exception
concerns employees working at underground coal and lignite mines, where the minimum wage must equal at
least twice the regular rate; for example, the monthly minimum wage for coal and lignite miners is TRY10,008.00
(gross). The work-permit regime for expatriates in Turkey was made more flexible with the introduction of the
"Turquoise Card" permanent work permit.
Environmental - Business regulation - Legal background: Legal - Turkey

Turkey finally signed the Kyoto Climate Change Protocol in 2008, ratifying it in 2009. The country has a national
climate change action plan covering the period up to 2023, but this does not include an overall domestic target.
The latest version of the Environmental Law introduced the harsher penalty options with fines of up to TRY1
million (USD160,187) and prison terms for providing misleading information. Turkey is one of the 105 countries
that signed a declaration to end deforestation by 2030 at COP26, although in October 2021 it was the last G-20
country to ratify the 2015 Paris Climate accords.
Intellectual property - Business regulation - Legal background: Legal - Turkey

Despite recent efforts to intensify the protection of intellectual property rights (IPR), as stipulated in the WTO's
Trade-Related Aspects of Intellectual Property Rights (TRIPS) requirements, Turkey remains in the spotlight with
regards to piracy and trademark violations, given slow and inadequate enforcement. Turkey is a signatory to the
Paris Convention in line with European IP rights laws. The registration and renewal of patents and trademarks are
managed by Turkish Patent and Trademark Office (TURKPATENT).
Land - Business regulation - Legal background: Legal - Turkey

Amendments to the Land Registry Law in 2012 have allowed foreigners to buy real estate in Turkey. The area
purchasable by a foreigner stands at 10% of the total area of a district and 30 hectares (74 acres) per person across
Turkey. The Council of Ministers can provide exceptions allowing an increase of this up to 60 hectares. Certain
countries’ citizens are precluded from buying land in Turkey.
Investment protection - Business regulation - Legal background: Legal - Turkey

Foreign investors have the same rights and are subject to equal treatment as local investors in Turkey. Foreign
individuals and firms are allowed to acquire property, with only a simpler registration requirement for settling in
the country as foreigners. In almost all industry sectors, 100% foreign ownership is allowed, except in the air
transportation sector (maximum 49%) and private radio or television channels (25%).
Privatisation - Business regulation - Legal background: Legal - Turkey

The Privatisation Administration (PA) is the executive body for the privatisation process. The highly centralised
nature of the Turkish state and the growing opacity of decision-making has allowed privitisation tenders to be
redirected to businesses enjoying close relations with the government.
Major international agreements - Business regulation - Legal background: Legal -

Turkey
Major International Agreements
Arbitration United Nations Commission on International Trade Law (1992)
New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1992)
European Convention on International Commercial Arbitration (1992)
Trade Member of the World Trade Organization (1995)
Member of the Multilateral Investment Guarantee Agreement (1988)
ICSID Convention on Settlement of Investment Disputes (1989)
Intellectual Property Trade-Related aspects of Intellectual Property Rights (1995)
World Intellectual Property Organization (1976)
Environment Kyoto Protocol; Paris Climate Accords
Tax - Turkey
Overview: Tax - Turkey

Turkey’s overall tax burden is likely to increase once the COVID-19 outbreak has fully subsided. Increased
government expenditure was initially driven by the pandemic response but will expand due to a deterioration in
the nation’s foreign currency reserves. Government tax earnings contribute less than 25% of GDP. The corporate
income tax rate on business profits is 25%. 'Back tax' investigations used as a punitive instrument by the
government are likely for foreign investors partnering with private-sector groups associated with domestic
political rivals of the ruling AKP.
Analysis - Taxation risks: Tax - Turkey

Overall tax burden likely to continue increasing through to 2022; selective tax levies
likely against the government’s political opponents
The Turkish government has increased its corporate tax, raising in April 2021 from 20% to 25% for 2021 and then
to 23% for 2022. As corporate tax is less than 10% of tax revenues, additional tax rises are likely to be required,
focusing on consumption taxes, particularly value-added tax (VAT) on fuel, cigarettes, and alcohol. In October
2021, parliament passed a bill that gives the president the power to increase Special Consumption Tax (SCT) on
cigarettes, alcohol and cars by up to three times their current levels. In October 2021, the SCT is 63% on cigarettes
and alcohol and 45–50% on cars. Another area where the government is increasing tax is high-value real estate.
Digital media platforms, affecting companies like Netflix, are likely to be further taxed given the government is set
to demand 0.5% of their Turkish revenues as a new tax.
The overall tax burden is likely to increase in the one-year outlook as the ruling Justice and Development Party
(Adalet ve Kalkınma Partisi: AKP) government seeks to compensate for increased expenditures due to the
government's pandemic response, including tax delays. The government has already imposed an additional tariff
up to 30% on imports of more than a thousand items to shield local producers from competition during the
COVID-19 virus pandemic. This comes against the backdrop of a spending spree in the lead-up to successive
electoral contests, including the presidential and parliamentary elections in June 2018 and the local elections in
March and June 2019. Despite its pledge in late 2018 to implement a fiscal discipline programme, the fiscal deficit
rose 70% in 2019. In the medium term, government compensation for underperforming mega infrastructural
projects, undertaken by private consortia with faulty build-operate-transfer models, will continue creating a
significant drain for the fiscal budget.
Taxation will probably continue to be used as an instrument of coercion, especially against companies and
individuals that have openly criticised the government.
Operational - Turkey
Overview: Operational - Turkey

Strike action is becoming more frequent in Turkey given continued high inflationary pressures. Striking rights are
constitutionally enshrined, yet given the dominance of government-aligned ‘yellow’ labour unions, and
suppression of strike action through law enforcement, labour strikes and work stoppages in practice remained
uncommon. Demands for bribes remain common from those seeking state tenders or business permits – both
ministerial and municipal – who are without a political connection. Bureaucratic inefficiency has been exacerbated
by upheaval in Turkey's legal institutions since the shift to the presidential political system in 2018, following
instability resulting from government purges of state institutions since late 2016.
Labour relations risks: Operational - Turkey

Large-scale protracted industrial action remains unlikely, yet inflationary pressures
raise risk of strikes in strategic sectors
Trade unions in Turkey are politically weak institutions, with only 15% of the country's workforce having
registered union membership. Laws governing union activity are heavily weighed against them, and strong
penalties are in place for violations. Solidarity strikes, general strikes, and strikes not organised by a trade union
executive body are banned, mitigating the risk of wildcat strikes. Although the right to strike is constitutionally
enshrined, the cabinet is able to obstruct a given strike on the grounds of "state security". Similarly, employers are
able to invoke catch-all exemptions in the governing legislation. Furthermore, union members are subjected to
persistent intimidation from the government and employers, which provides the government with a wide
mandate to suppress strike action through law enforcement. Turkey's large shadow economy also undermines
union power, since unregistered workers are precluded from union membership.
Strong ideological and historical differences between Turkish unions make cross-union co-ordination and
confederation mergers problematic. The government has developed good relations with unions that have high
representation in critical sectors such as energy, transportation, and construction, namely "yellow" unions.
Memur-Sen, the largest public-sector labour confederation, has grown substantially during the course of the past
decade, increasing its membership by about 500,000 during the period of the incumbent government. Memur-Sen
has been criticised by other trade unions because of the incentives and resources it has received from the Turkish
government. In March 2012, Memur-Sen was refused entry into the International Trade Union Confederation
(ITUC) on the grounds that it was not an independent union confederation.
The COVID-19 virus pandemic has reduced the likelihood of official strikes overall. However, in the automotive
sector, work stoppages have taken place in recent years, carried out independently and in defiance of the workers'
labour representatives. In February 2020, , a strike of 130,000 workers at 179 workplaces concentrated in the town
of Bursa, İstanbul and İzmit across the metal sector was called off. A last minute deal was agreed by the Turkish
Employers Association of Metal Industries (MESS) and the Turkish Metal Union (Turk-Metal). In the unlikely event
of strikes taking place, violence between union members and the police is occasional at most, and collateral
damage to property and assets during is uncommon.
Corruption risks: Operational - Turkey

Bribery solicitations by local authorities remain common in Turkey
Despite the adoption of a series of anti-corruption laws in accordance with EU accession requirements,
implementation has been limited and corruption remains common. Large investments into Turkey are frequently
accompanied by donations to the ruling Justice and Development Party (Adalet ve Kalkınma Partisi: AKP) or the
inclusion of individuals with close links to the government as business partners to accelerate bureaucratic
procedures. This applies to all sectors of the economy. Turkey has a strong central government against which
regional municipalities have limited autonomy, but solicitations for unofficial payments at the local level,
particularly involving permit-intensive operations such as land acquisition and real-estate development, are
common. Construction companies face similar bribery solicitations when applying for construction licences across
the country. Meanwhile, favouritism is commonplace in government tenders, particularly in those held by the
Ministry of Health, the Ministry of Energy, and the Ministry of Environment and Urban Planning: tenders are often
awarded to companies that enjoy close relations with the government.
The 17–25 December corruption investigation in 2013, exposing numerous incidents of graft among cabinet
members, constituted a milestone for the ongoing authoritarian trend of the AKP government. Implicating
members of President Recep Tayyip Erdoğan's inner circle, including four ministers, the corruption scandal deeply
affected public and business perceptions of corruption in Turkey. Alleged government obstruction of the judicial
process surrounding the scandal shook confidence in the ability of courts to deal with corruption allegations
without political interference.
The state emergency imposed following the July 2016 coup attempt and focus on judiciary coup investigation
raised corruption risks. However, the transformation of Turkey’s parliamentarian system into a presidential one in
July 2018 concentrated power in the hands of President Erdoğan. The change has limited local corruption, but
exacerbated corruption in large contracts by the government, often with irregular tender processes if any at all, in
turn for providing political support.
Overview - Infrastructure - Operational background: Operational - Turkey

Infrastructure: Turkey
Roads
Total road network length (km) 67,333

Paved (km) 24,082
Unpaved (km) 43,251
Railways
Total rail network length (km) 12,710

Standard gauge (mm) 1,435
Waterways
Navigable waterways length (km) 1,200
Ports
Number of ports 72
Name of all ports Akcansa Yalova, Alanya, Aliaga, Ambarli, Bagfas-Iskur
Fertilizer Jetty, Bandirma, Bartin, Bodrum, Borusan,
Bosphorus & Dardanelles Straits, Botas (Ceyhan) Oil
Terminal, BTC Terminal Ceyhan, Canakkale, Cesme,
Ceyhan, Darica, Denbir Port, Derince, Dikili, Diler-
Hereke, Diliskelesi, Dortyol, Edincik, Eregli, Eren Port,
Fatsa, Fethiye, Gebze, Gelibolu, Gemlik, Giresun, Gocek,
Gulluk, Haydarpasa, Hopa, Icdas Port, Inebolu,
Isdemir, Isken Terminal, Iskenderun, Istanbul, Izmir,
Karabiga, Karadeniz LPG Terminal, Karasu, Kusadasi,
Limas, Marmara Ereglisi Terminals, Marmaris, Martas,
Mersin, MMK Atakas Port, MOL FSRU Challenger,
Mudanya, Nemrut Bay, Ordu, Port Akdeniz, Rize,
Samsun, Saraylar, Sinop, Sonmez, Tasucu, Tekirdag,
Toros, Trabzon, Unye, Yalova, Yarimca, Yesilovacik
Harbour, Zeytinburnu, Zonguldak.
Communications
Telephones: Fixed lines (mil.) 11.633

Subscriptions per 100 inhabitants 14
Telephones: Mobile cellular (mil.) 80.117
Telephones: International country code 90
Internet country code .tr
Broadband subscribers (mil.) 13.407
Internet users per cent of population (%) 71.04%
Source: IHS Markit, International Telecommunications Union, CIA World Factbook © 2020 IHS Markit
Security - Turkey
Overview - War risks: Security - Turkey

In February 2022, Turkey implemented Article 19 of the Montreux Convention which raises war risks with Russia in
the event that Russian warships attempt to enter the Dardanelles and Bosporus straits. Turkey’s East
Mediterranean maritime dispute with Greece is unlikely to trigger an interstate war; both countries agree to a
NATO deconfliction mechanism. Turkey's military entrenchment in northern Syria and Iraq is unlikely to provoke
reprisal attacks targeting Turkish territory by anyone but Kurdish militants. This is significantly reduced by Turkish
military operations and will likely remain limited to shelling of Turkish military positions in Syria and Iraq. An
offensive on Turkish territory is highly unlikely.
Interstate war - War risks: Security - Turkey

Escalation in Ukraine raises war risks; recalibration of regional relationships reduces
previous risk of escalation with Greece in East Mediterranean
Turkey is maintaining a balancing act between NATO allies on the one side and Russia on the other. This has
brought it into contention with both sides during Russia’s 2022 invasion of Ukraine. Following the invasion, Turkey
pledged to keep its airspace open to Russia, yet cut off Black Sea access to all naval ships under the Montreux
Convention. This would mitigate it having to enforce the blockage of airspace to Russian military and civilian
aircraft but would require it to enforce militarily the closure of its waters to Russian naval vessels – with caveats –
which it would likely seek to avoid. Attempts by Russian naval vessels to access the Bosphorus or Dardanelles
Straits would likely require Turkey to enforce the closure, and naval engagement would trigger NATO’s Article V,
which would require NATO intervention. Turkey will probably continue to position itself as an interlocutor
between Ukraine, the West, the UN, NATO, and Russia. It would likely attempt to de-escalate any issues with Russia
before becoming a belligerent itself.
Turkey has moderated its foreign policy stance since 2021 towards normalisation with certain regional neighbours,
including primarily the United Arab Emirates, Israel and Saudi Arabia. This requires Turkey to reduce its seismic
research activity in waters around Aegean islands and Cyprus claimed by Greece, which would reduce maritime
war risks with Greece. This breaks from its 2020 deployment of naval vessels in contested waters. The Turkish
government would instead return to negotiations with Greece over continental shelf division and hydrocarbon
exploration, rather that risking naval disruption and both have agreed to a NATO de-escalation mechanism.
Likewise, Turkish military intervention in Libya will likely seek to avoid open military confrontation in the
Mediterranean.
Since 2016, Turkey has launched multiple separate cross-border ground offensives targeting the Syrian
Democratic Forces (SDF) and securing territory in northeast Syria. Turkey has long viewed the consolidation of the
SDF and the Kurdish militia group Yekîneyên Parastina Gel (YPG), which forms its backbone, as a major threat to its
future territorial integrity. The YPG is the Syrian counterpart of the Partiya Karkerên Kurdistan (PKK), the Kurdish
militant group that previously waged an insurgency in Turkey's southeast, although its current ability to operate
in Turkey is reduced to small, limited attacks on government infrastructure and pipelines. Turkish Armed Force
operations in northern Syria, Iraq, and southeastern Turkey has significantly limited the SDF’s ability to target its
southern areas. Rocket or missile fire targeting Turkish territory by the Syrian government is unlikely, given Syria's
likely aim to avoid triggering NATO’s Article V. Russian mediation between the two would be likely.
Civil war - War risks: Security - Turkey
PKK insurgency in southeast likely to remain limited by military operations, political
polarisation unlikely to become violent
Fighting between the Partiya Karkerên Kurdistan (PKK) and government forces remains largely contained to rural
areas in the country's southeast. Its intensity has abated after peaking in mid-2016, when it reached levels
unprecedented in the 40-year history of the PKK insurgency. This is partly a result of the government's
increasingly effective use of technology, such as unmanned aerial vehicles (UAVs), heavy-handed tactics to curtail
the PKK’s strategy to expand the conflict into the urban arena and military deployments against Kurdish militant
groups in Syria and Iraq.
In the winter of 2015–16, the PKK declared "autonomous zones" in densely populated urban areas in southeast
Turkey, including in the historic Sur district of Diyarbakır and smaller townships such as Nusaybin and Cizre. This
was followed by months of intense fighting between the militants and government forces, with the former
entrenching themselves in the densely built neighbourhoods and implementing defensive urban tactics imitating
the Islamic State’s operations in Syria. The neighbourhoods have since been brought back under government
control, at the cost of extensive property and infrastructure damage and population displacement. The destroyed
areas have now been reconstructed in a manner designed to preclude future PKK infiltration. This, combined with
the government's draconian suppression of the PKK's urban grassroots networks, means similar attempts by the
PKK to hold territory in the urban arena are highly unlikely.
While an approximate half of the Kurdish population sympathises with the PKK's cause, for most that sympathy
does not entail approving the PKK's tactics or active support. Notably, the urban fighting of 2015–16 drew no
demonstrations or unrest in Kurdish-majority cities in favour of the PKK, contrary to the PKK's desire to transform
that fighting into a wider urban insurgency. Similarly, no public backlash occurred in response to Turkey's military
operation in late 2019 targeting PKK affiliates in northeast Syria.
There is no indication that President Recep Tayyip Erdoğan would seek a negotiated settlement, or that either side
is interested in a ceasefire. Military operations against the PKK in the southeast and east will continue to prevent
the group’s expansion, with attacks likely continuing to target security force outposts with low-level small-arms
and improvised explosive device (IED) attacks, and to mount ambushes, likely concentrated in the provinces of
Hakkari, Şırnak, Diyarbakır, and Tunceli. Separately, there is a continued, albeit mitigated, risk of vehicle-borne IED
(VBIED) and shooting attacks by PKK affiliates in western Turkey.
Despite the acute polarisation of Turkish society under the rule of President Erdoğan, the animosity between
Erdoğan's supporters and opponents is unlikely to spill over into violence. An extreme scenario would be one in
which mass opposition protests were triggered, for example, by government action against the opposition mayors
of Istanbul and Ankara, and these were met with counter-protests by the government's supporters, giving rise to
localised violence between the two camps. This would not, however, have the potential to escalate into a civil war.
Overview - Terrorism risks: Security - Turkey

The risk of terror attacks by the Kurdistan Workers’ Party (Partiya Karkerên Kurdistan: PKK) in the country's
southeast has abated after peaking in mid-2016. This is due to Turkey’s concerted strategic military deployment in
Syria, Iraq, and southeast Turkey, which will continue mitigating this risk. Likely targets for the PKK in the
southeast are security forces’ assets and personnel, as well as pipelines and hydropower plants. There remains an
elevated risk of improvised explosive device and shooting attacks by PKK affiliates, especially targeting security
forces, in southeastern Turkey. The risk of attacks by Islamic State affiliates will continue reducing.
Hotspots and targets - Terrorism risks: Security - Turkey
PKK attacks on security forces and infrastructure likely in the southeast, risk of
Islamic State IED and shooting attacks elevated but diminishing in major cities
There is an elevated risk of vehicle-borne improvised explosive device (VBIED) and shooting attacks by Partiya
Karkerên Kurdistan (PKK) affiliates in western Turkey, in retaliation to Turkey's ongoing cross-border offensive
targeting the PKK-linked Syrian Democratic Forces (SDF) in northeast Syria. The PKK conducted 10 attacks in
western Turkish cities between 2015 and 2017, mostly focusing on security force targets, and killing approximately
133 people, including collateral civilian casualties. However, the January 2017 attack was the last such assault by
the PKK in western Turkey, due to ongoing concerted counter-terror operations against the group by the Turkish
Armed Forces and military intelligence. The PKK was also likely to have been concerned about jeopardising the
United States' military and financial support in the area for the PKK's Syrian affiliate Yekîneyên Parastina Gel (YPG),
which forms the SDF's backbone.
A new Turkish cross-border offensive targeting the PKK-linked Syrian Democratic Forces (SDF) in northeast Syria
elevates the risk of retaliatory vehicle-borne improvised explosive device (VBIED) and shooting attacks by PKK
affiliates in western Turkey; however, given Turkish intelligence operations, attacks are more likely to be limited to
the southeast and against the Turkish Armed Forces in Iraq and Syria.
The number of PKK attacks in Turkey has fallen dramatically since 2020. Turkey’s continued presence in Syria and
Iraq has significantly hindered the capabilities of initiating attacks inside Turkey. The PKK is likely to continue
targeting security force outposts with small-arms, improvised explosive devices (IEDs), and VBIEDs, and in rare
cases rocket-propelled grenades, as well as mounting ambushes on convoys and patrols, with attacks likely
concentrated in the provinces of Hakkari, ırnak, Diyarbakır, Bitlis, and Tunceli. Also at risk is government-linked
energy infrastructure, particularly pipelines and hydropower dams.
The Islamic State's continued intent for attacks in Turkey was indicated by the deliberate placement of a booklet
entitled 'Wilayat Turkiya' in the April 2019 video by former Islamic State leader Abu Bakr al-Baghdadi. However, its
capacity to launch attacks is highly unlikely to match its intent, with the group having been unable to conduct a
successful attack since January 2017. In the five attacks during the year preceding that, including the 28 June
attack on Istanbul Atatürk Airport, 64 people were killed and at least 309 were injured, most of whom were
civilians. The group would likely seek to conduct attacks in and around tourist attractions and resorts,
government buildings, and Western diplomatic and commercial assets in Istanbul and Ankara, although their
ability to conduct a successful attack will continue to diminish.
Overview - Social stability and unrest risks: Security - Turkey

In advance of the 2023 general and presidential elections, mass opposition protests would be likely should the
government seek to dismiss or target elected mayors of key cities such as Istanbul and Ankara, won by the
opposition in the 2019 local elections. Opposition protests would likely trigger counter-protests by government
supporters, resulting in localised violence, entailing collateral property damage risks, resulting from stone
throwing and arson, and the erection of makeshift road barriers. The ability and intent of the security forces and
intelligence services to pre-emptively target protesters and dispel protests mitigates the risk of widespread unrest.
Violent protests in Turkey's Kurdish-majority southeast are unlikely in the one-year outlook.
Protests and riots - Social stability and unrest risks: Security - Turkey
Mass anti-government protest movements unlikely in advance of June 2023 elections,
despite inflationary pressures
The government and security forces have the capability and appetite to mitigate mass opposition protests
emerging in advance of the June 2023 elections. The risk would increase should the government seek to dismiss
elected mayors of major cities such as Istanbul, Ankara, and Izmir in advance of the elections.
Single-issue protests, which increasingly include those against the deterioration of living standards caused by high
inflationary pressures, are likely to remain frequent yet localised, enabling police forces to easily contain them. In
Ankara, Istanbul, and Izmir where protests would have large numbers of participants, pre-emptive police action to
disperse protests includes roads closures, security deployment around protest sites, security at main transport
terminals, and detentions of protest leaders. Highly effective intelligence capabilities also mitigate protests
developing. This means that protests remain isolated in small groups outside of main squares. Security forces
would likely use tear gas and water cannons, entailing minimal cargo disruption and collateral damage risks.
Further targeting of activists with detentions and legal suits prevents anti-government movements from gaining
wider traction. The government’s targeting of opposition leaders and potential political rivals with legal suits
prevents opponents from becoming a rallying point for anti-government protests.
Should mass opposition protests occur, which we currently assess as unlikely, they would be met with counter-
protests by pro-government supporters, resulting in temporary, localised violence, as well as sweeping arrests of
anti-government protesters and security force suppression. The likelihood of violent protests increases should
Turkey's current economic instability and inflationary pressures evolve into a wider crisis involving large private-
sector bankruptcies. Violence would likely be concentrated in urban centres, including Istanbul (Taksim, Şişli,
Beşiktaş, and Kadıköy), Ankara (Kızılay, Çankaya, and Mamak), and Izmir (Konak and Alsancak) and entail moderate
risks of death and injury to protesters and passers-by, and collateral property damage risks resulting from stone-
throwing and arson. Furthermore, there would be an elevated risk of targeted vandalism for readily identifiable US
retail brands, should the government present Turkey's economic instability as being inflicted by the US. Similarly,
the likely salient presence of Islamist extremist mobs in pro-government demonstrations would raise the risk of
targeted attacks on property and public meeting places associated with Kurdish and Alevi minorities.
Mass violent protests in Turkey's Kurdish-majority southeast are unlikely in the one-year outlook, given the
government's security operations in the region. Limited protests against the dismissal of Kurdish mayors were
easily contained by the security forces. A key factor that mitigated protests is the government's success in
suppressing the PKK's urban networks since the resumption of the PKK conflict in 2015. Previously, in September–
October 2014, 36 people were killed during riots, resulting not only from clashes with security forces but also from
intra-communal strife between the Kurdish leftist and Islamist factions.
Overview - Risks to individuals: Security - Turkey

There are elevated risks of high-casualty attacks in public spaces in Istanbul and Ankara by PKK affiliates or
Islamist militants, including tourist locations, Alevi and Kurdish sites, or government and security forces. There is
an elevated kidnap and attack risk for Israeli nationals from Iranian or affiliated operatives in areas where Israelis
frequent, including Istanbul, Antalya or Israeli touristic resorts. IED and VBIED attack risks are elevated in the
southeast where PKK is most active and would target government-supported infrastructure projects or security
forces. This is mitigated by the scope of Turkish intelligence. There are high detention risks for nationals suspected
of ties to the Gülen movement or disloyalty to Erdoğan.
Death and injury - Risks to individuals: Security - Turkey

Fighting between government and PKK has abated in southeast, collateral death and
injury risks posed by PKK attacks against security forces, infrastructure
Fighting between the Turkish government and the militant Kurdistan Workers’ Party (PKK) has abated following
the peak intensity of incidents in mid-2016. Most incidents are likely to continue following the PKK's traditional
pattern of rural high-impact attacks, commonly targeting security force outposts with small-arms, improvised
explosive devices (IEDs), and, although less likely, rocket-propelled grenades (RPGs) and ambushes on convoys
and patrols, which nonetheless entail elevated collateral death and injury risks to bystanders. The PKK
predominantly relies on IEDs and vehicle-borne IEDs (VBIEDs) to conduct attacks, mainly due to security forces’
increasingly effective usage of technological solutions, such as armed unmanned aerial vehicle (UAV) patrols. The
PKK's ability to consolidate its urban presence appears to have been effectively suppressed by the government's
crackdown on the group since 2015 and 2016.
The risk of high-casualty attacks in Istanbul and Ankara by the Islamic State or PKK affiliates has lowered since the
peak of their simultaneous terrorism campaigns in 2015 and 2016. Since the Islamic State's Istanbul nightclub
attack on 1 January 2017 and the PKK's Izmir courthouse attack on 5 January, neither group has conducted a
single successful mass casualty attack in western Turkish cities. This is largely due to a clampdown by the security
forces, ongoing since early 2017, which includes ongoing military operations in northern Syria and Iraq, in which
the Turkish Armed Forces have sought to create and maintain buffer zones against PKK-affiliated militant factions.
Nevertheless, a new offensive on the PKK-affiliate SDF in northern Syria by the Turkish military would increase the
appetite for retaliatory attacks by the PKK in both southeastern and western Turkey, but their ability to do so
remains limited. The Islamic State remains highly intent on conducting attacks targeting the country's minority
groups, including the Kurds, secular Turks, and Alevis, a Muslim sect in Turkey, with the objective of stoking
sectarian and ethnic conflict. There is a moderate likelihood of further suicide IED and shooting attacks in and
around tourist attractions and resorts, government buildings, and Western diplomatic and commercial assets in
Istanbul and Ankara. In the event of a resumption of the PKK's terrorism campaign, it would be likely to launch
VBIED and shooting attacks on characteristic targets, such as police stations and buses carrying security forces
personnel.
Kidnapping - Risks to individuals: Security - Turkey

Abduction of military and construction personnel by the PKK likely in southeast
Turkey, but risk to foreigners remains very low
There is a moderate risk of kidnappings in the country's southeast in the context of the ongoing counter-terror
operations by government security forces and the insurgent Partiya Karkerên Kurdistan (PKK). Kidnappings are
likely in the provinces of Hakkâri, Şırnak, Mardin, Şanlıurfa, Siirt, Batman, Diyarbakır, and Bitlis. Likely targets are
project contractors and construction workers involved in government-supported infrastructure projects, including
military installations and hydropower plants. Also at risk are security personnel, local bureaucrats, and other
prominent locals. Kidnap victims who are not in the security forces are most likely to be released within 1–4
weeks. The PKK is unlikely to demand ransoms, with the purpose of their kidnappings focused instead on
intimidating the target groups. The last time a large ransom was demanded was the July 2013 kidnapping of a
contractor in Hakkari, for whom, upon learning that he was related to a minister, the militants had requested
USD7.7 million. The prominent security force presence and efficient intelligence services in the southeast mitigates
this risk.
The PKK is highly unlikely to kidnap foreigners, given its desire to maintain a benign image on the international
arena. The last case of the PKK kidnapping an expatriate was in June 2012, when a British citizen was abducted
along Diyarbakır-Bingöl motorway, only to be released two days later. Meanwhile, the PKK is likely to continue
targeting locals for extortion purposes, with a view to extracting what the group calls the "revolution tax".
Turkish security forces’ ongoing operations against Islamic State-affiliated groups in Turkey, as well as Turkish
Armed Forces’ presence in northern Syria which has lowered the risk of Islamic State permeation into Turkey,
lower the risk of kidnapping in the country. However, there is an elevated risk of jihadist kidnappings being carried
out for revenue-generation purposes in major cities such as Istanbul and Ankara. The Islamic State’s ability to
finance its affiliates or operate in Turkey has become increasingly untenable, therefore local networks are likely to
shift to criminal activities such as kidnappings to finance terrorist activities, with a currently low likelihood of
kidnappings in the three-year outlook. Likely targets are expatriates, including diplomats and employees of
multinational companies.
Detention and discrimination - Risks to individuals: Security - Turkey
Private company employees with current or past affiliation with the Gülen movement
face high detention risks; government opponents are likely to face discrimination
more broadly
Foreigners face low detention and discrimination risks in Turkey. This comes with several exceptions, including
those who are suspected of direct ties, whether past or current, with media outlets, businesses, schools, and
universities affiliated with the Gülen movement, which played a central role in the 15 July 2016 coup attempt. Also
at risk are expatriates expressing anti-government sentiments on social media, who risk being refused entry upon
arrival, although detention and deportation while in-country are unlikely. The recurring diplomatic standoffs with
the US are unlikely to give rise to a government-sanctioned policy for applying intensifying legal scrutiny for US
citizens, although there is a moderate risk of low-level officials acting on their own initiative to create difficulties
during customs checks and bureaucratic procedures. Foreigners are likely to be detained in unsanctioned rallies,
including foreign students taking part in protests on university campuses. During the Gezi Park protests in mid-
2013, the police regularly detained dozens of protesters at individual demonstrations, including foreign nationals,
some of whom were deported.
Foreign workers need to apply to the Ministry of Interior for a working visa. As this is usually undertaken by the
companies employing the expatriates, detention of foreigners on the basis of false or incomplete paperwork is
unlikely. Visitors flying through Turkey as transit passengers who do not have the necessary visas to travel on to
their next destination are likely to face detention for at least a couple of hours. Meanwhile, the end of the state of
emergency in July 2018, after having been in place since mid-2016, is likely to reduce delays at international
airports.
There are high risks of detention for local private company employees and civil servants perceived by the
government to have ties with the Gülen movement or, more broadly, suspected of opposition to President
Erdoğan. Individuals who openly sympathise with Kurdish demands for autonomy face high risks of suspension
from government and private-sector jobs alike. Such was the case for the 330 academics who were removed from
their positions with a cabinet decree on 7 February 2017. Similarly, foreign and local journalists covering the
Kurdish insurgency in southeast Turkey and criticising the crackdown initiated by Erdoğan following the
attempted coup, or otherwise critical of government policy, face high detention and deportation risks. In March
2021, a French journalist who was in the country to report on Newroz celebrations in Diyarbakır was detained on
terrorism charges, later deported.
Overview - Risks to cargo/transport: Security - Turkey

The continued presence of PKK insurgents elevates risks for road cargo in southeast Turkey, including IEDs,
firearm attacks, and associated disruptions to the road network. The maritime dispute between Turkey and
Cyprus in the East Mediterranean has calmed, reducing risks of hailing and boarding to cargo vessels in Turkish,
northern Cypriot and Greek waters. The 2022 Russian invasion of Ukraine raises risks for marine cargo in the Black
Sea, including from floating mines. The risk of attacks on major international airports is mitigated by strong
intelligence capabilities and third-layer security checkpoints at the outer entrances of airport compounds. Shoot-
down risks for military aircraft are elevated and concentrated primarily in southeast Turkey.
Ground risks - Risks to cargo/transport: Security - Turkey

Limited PKK ability amid ongoing counter-terror operations decreases risk to ground
cargo
Turkey’s ongoing military presence in Syria and Iraq, as well as significant continued counter-terror operations in
southeastern Turkey, has reduced PKK attacks on ground cargo domestically. This includes tactics such as the
group’s ability to disrupt traffic on key intercity roads, whether by using IEDs to render roads unusable, setting fire
to stolen vehicles along the routes, or establishing temporary checkpoints. However, we currently assess that
direct attacks on vehicles are only likely for those carrying goods to and from government-backed large
infrastructure construction projects, although the capability is diminished. Intensified fighting between the PKK
and security forces remains unlikely, but would see intermittent closures of the Habur border gate into Iraqi
Kurdistan, although protracted closures will remain highly unlikely.
Turkish security forces have been focusing on preventing smuggling activity from Iraq and Syria by truck and
pipeline, creating further potential for border delays because of added inspections. Security forces have also
carried out cargo seizures in southern and southeastern Turkey to combat weapons and drug trafficking across
Iraqi and Iranian borders, creating delays at the Habur and Gürbulak border posts, respectively. Cargo routes into
northern Iraq would likely face severe disruption in the event of a military intervention. Protracted border
closures are highly unlikely, however, as relations between the Kurdistan Regional Government in Iraq and the
Turkish government have improved since 2017.
As inflationary pressures increase, small, sporadic, single-issue protests will also likely increase, although security
forces currently have the appetite and capability to prevent the re-emergence of mass anti-government
demonstrations in advance of elections in June 2023. Mass anti-government protests would greatly raise the risk
of transport delays in major cities. An attempt by the government to unseat mayors of Istanbul and Ankara, who
both hail from the main opposition party, would be a trigger for such a wave of protests. Possible hotspots
include Istanbul (Taksim, Şişli, Beşiktaş, and Kadıköy), Ankara (Kızılay, Çankaya, and Mamak), and Izmir (Konak and
Alsancak), among other smaller cities. Important traffic arteries that would probably face disruptions are as
follows:
Istanbul: Taksim Square, Tarlabaşı Boulevard, Cumhuriyet Avenue (Taksim); Halaskargazi

Avenue (Şişli); Barbaros Boulevard, Dolmabahçe Avenue, Çırağan Avenue (Beşiktaş); Bağdat
Avenue, Söğütlüçeşme Avenue (Kadıköy); Istanbul Inner Beltway (O-1), including Bosphorus
Bridge
Ankara: Atatürk Boulevard, Ziya Gökalp Avenue (Kızılay); Kennedy Avenue, Dikmen Avenue
(Çankaya); Tıp Fakültesi Avenue (Mamak)
Izmir: Basmane Square, Gazi Boulevard (Konak); Talat Paşa Boulevard (Alsancak)
Istanbul's Ambarlı port – Turkey's largest container terminal – is located far from the epicentre of potential civil
unrest. Izmir port, despite its proximity to potential demonstrations, would be unlikely to experience a substantial
disruption, because protesters would not target the port.
Marine risks - Risks to cargo/transport: Security - Turkey

Russia’s invasion of Ukraine pose risks to maritime trade and collateral damage in
Black Sea; maritime territorial disputes with Cyprus and Greece remain elevated in
Mediterranean Sea
The highest risk to maritime cargo transport in Turkey currently stems from the Russian invasion of Ukraine in
February 2022, raising risks to cargo in the Black Sea from collateral damage from the war, floating mines and
arbitrary detention or boarding risks from the Russian navy in the Black Sea. There have been numerous sightings
of freely drifting sea mines in the Black Sea, with at least five discovered off the coasts of Romania, Bulgaria and
Turkey in March and April 2022. These are likely to be Ukrainian mines deployed to protect the approaches to
Odesa and other ports, which broke free from their anchors. There is also a possibility that Russia released the
mines intentionally to blame Ukraine. Minesweeping operations mitigate the risk but do not eliminate it entirely.
Contact with a drifting mine would likely result in an explosion large enough to disable, if not sink, a large
commercial vessel, and would likely penetrate double-hulled tankers and cause loss of cargo.
A continuing maritime territorial dispute between Greece and Turkey in the Eastern Aegean Sea, in which both
countries claim maritime boundaries, presents an elevated risk to commercial vessels operation in the East-
Mediterranean. The suspension of Turkey’s gas searches in the region reduced risks of route disruptions and
arbitrary inspections to commercial vessels. Although currently assessed as unlikely amid the Russian invasion of
Ukraine, a renewed deterioration of EU–Turkey relations would increase the risk of escalation, potentially
resulting in arbitrary inspections of vessels, including temporary detention of the vessels and their crews.
Incidents could extend to warning shots being fired, given that Greece extended territorial waters to 12 miles. The
risk of an armed confrontation between the two countries remains low as NATO initiated a deconfliction
mechanism between the two countries. Risks to cargo vessels travelling in the region are likely to remain elevated,
with the exception of the overlap zones of Greek and Turkish territorial waters. Meanwhile, owing to the existence
of smuggling routes in the area, particularly in the context of the current migrant crisis, private vessels travelling
within these zones are more likely to be hailed, boarded, ordered to leave the area or, in cases of protracted non-
compliance, fired upon.
Turkish harassment targeting vessels travelling between the drilling sites, onshore support bases in Larnaca and
Limassol and military exercise territories, including arbitrary inspections of vessels, would likely result in
temporary detention of the vessels and their crews. The reduction in stand-offs between the navies of the rival
countries since 2020 means that further risks will likely remain limited to harassments between coast-guard
vessels within Greek and Turkey's overlapping NAVTEX territorial waters.
Aviation risks - Risks to cargo/transport: Security - Turkey

Elevated risks of Syrian air-defence missiles accidentally entering Turkish airspace,
posing shootdown risks for military and commercial aircraft near Turkey-Syria border
An escalation in northwest Syria between the Turkish and Syrian armies in February 2020 led to Turkey
significantly degrading Syrian air power and air-defence capabilities. Although a ceasefire is likely to be achieved
and enforced by Russia, periodic escalations will likely continue in the area. However, both Russia and the Syrian
government are likely to avoid targeting aircraft inside Turkish airspace, given Turkey's membership of NATO,
which provides Turkey with a collective security umbrella. Moreover, Russia is expected to seek to avoid a direct
confrontation with Turkey, given its likely concern over preventing a Turkish rapprochement with its traditional
NATO allies. This mitigates, but does not completely eliminate, risks emanating from Russia's advanced S-400 anti-
aircraft missile capabilities. Similarly, there remains an elevated risk of Syrian air-defence missiles accidentally
entering Turkish airspace, posing shootdown risks for military and commercial aircraft alike.
The Russian-backed trilateral ceasefire, which went into effect on 10 November 2020 and ended the 44-day
hostilities between Azerbaijan and Armenia in the Nagorno-Karabakh conflict zone, has reduced the risk of the
shooting down of Turkish military aircraft. Despite Turkey’s likely military support, Armenia is unlikely to directly
confront Turkey because of Russia’s pressure over Yerevan.
The ongoing insurgency of the Kurdistan Workers' Party (PKK) entails elevated shootdown risks for Turkish
military helicopters in the country's southeast, particularly in the context of Turkey's cross-border operations
targeting the PKK's allies in northern Syria. Shootdown risks are likely to be highest in the mountainous provinces
of Ağrı, Şırnak, Bingöl, and Hakkari. The most recent incident was the shootdown of an AH-1 Cobra with a
MANPADS in Hakkari, on 13 May 2016. However, this has not been repeated since. The PKK currently lacks any
surface-to-air missile capabilities that would pose a threat to higher-flying aircraft. Civilian airlines operating out of
major Turkish airports face moderate risks of hijacking or terrorist attacks.
The last high-profile incident at an airport was the 28 June 2016 improvised explosive device (IED) attack by the
Islamic State at Istanbul's Atatürk International Airport. This attack pointed not to a deficiency in airport security
measures, but to the difficulty of protecting airports as terrorism targets with high-volume human traffic.
Additional security measures have been introduced since, including screening of vehicles entering airports, adding
a third layer of security control, which moderates the risk of further similar attacks on airport terminals, as well as
hijackings or attacks targeting grounded airliners. Furthermore, police operations since early 2017 targeting
Islamic State affiliates across the country mean that the key network that would be likely to attempt airport
attacks is now largely incapacitated.
Overview - Risks to property: Security - Turkey

The PKK insurgency poses elevated risks to government assets and energy infrastructure projects in southeast
Turkey, although the risk continues to fall given ongoing Turkish Armed Forces security operations in the region,
as well as in Syria and Iraq. Government security forces are the most likely target of terror attacks, which raises the
risk of collateral property damage. Should violent confrontations occur between government supporters and
opponents during protests, collateral damage would result from stone-throwing and arson.
Overview - Cyber-risks: Security - Turkey

Turkey’s prominent cyberthreat actors are the Russian and Iranian governments, and hacktivist groups like
Anonymous, which have previously launched cyberattacks. Russia and Iran have significant capabilities but lack
intent, due to the need for tolerably good relations with Turkey and economic interests. Turkey has significantly
increased its cyber defence and offense capabilities, likely deterring government actors and increasing capability
to defend against hacktivist groups. There is a high level of digitally exposed infrastructure, as Turkey has engaged
in significant modernisation in recent years. Awareness of cyberattack risks among major companies has likely
risen due to a wave of attacks in the mid-2010s, but remains low among individual consumers.
Overview - Crime: Security - Turkey

Drug trafficking remains the single largest source of illegal proceeds in Turkey. Human trafficking is an equally
severe problem, as Turkey provides a key transit route for immigrants from Central Asia and the Middle East trying
to enter the EU illegally. Widespread financial crime includes the rigging of bids for state and municipal contracts,
bribery, and money laundering at both ministerial and local municipal levels. Lastly, Turkey's porous borders
render the country a frequently-used route for arms trafficking.
Trafficking - Crime: Security - Turkey

Arms
Turkey's porous borders and traditional smuggling routes have meant that it has frequently been used as a
channel for arms trafficking, for both domestic consumption, by armed groups such as the DHKP/C and the PKK,
and as a transit country for final destinations in conflict zones in the Middle East and farther afield. In recent years,
the Turkish government has come under scrutiny for allegations that it facilitates the supply of arms to Islamist
militant groups in Syria, with Jabhat al-Nusra (now called Hayat Tahrir al-Sham) and the former Jaish al-Islam
among the key recipients. Although Turkey firmly denies these claims, IHS Markit sources have confirmed an
ongoing arrangement whereby Turkey supplies weaponry to such groups.
Human
Turkey is an important transit country for immigrants attempting to enter the EU illegally. Although hundreds of
illegal immigrants are captured every month, reliable figures are elusive. Migrants usually arrive in Turkey
overland from neighbouring Georgia and the Commonwealth of Independent States, Asia, and the Middle East.
Once in Turkey, people attempting to cross borders illegally will either try to move north through Turkey's land
border with Greece, or take the sea route in an effort to land on one of Greece's many small islands, at which point
they will be within the Schengen border regime where travel becomes easier.
With the start of the Syrian war in 2011, Turkey became a key destination for Syrian refugees fleeing the violence.
Turkey implemented an open-door policy for Syrians until March 2016, at which point stringent border measures
were put in place. As of early 2020, there were 3.3 million registered Syrian refugees in the country. The 'refugee
crisis' of 2015 saw high numbers of migrant transits from Turkey into Europe, peaking in October, with many of
them crossing, with the help of traffickers, over the Aegean Sea. A steep drop was recorded as of 2016, owing
largely to the 'migrant deal' struck between Turkey and the European Union, which promised Turkey EU funds in
return for Turkey sealing off the transit routes. However, this did not help ease the perception among the Turkish
public of Europe not doing enough to shoulder the burden with Turkey. It was partly owing to this that Turkish
President Recep Tayyip Erdoğan temporarily ordered the cessation of measures against migrant crossings in early
2020, with a view to extract more concessions from the EU as well as appease a growing public backlash
domestically.
Drug
In the private sector, drug trafficking remains the single largest source of illegal proceeds in Turkey. Levels of
domestic drug consumption have increased rapidly in recent years, particularly in major cities such as Istanbul,
although the vast majority of drugs entering the country are bound for Western Europe. Along with Russia, Turkey
is one of the two main trafficking routes into Europe, particularly for heroin from Asia. About 60-70% of the heroin
entering Europe is believed to pass through Turkey, usually after entering the country through its southern and
southeastern borders, particularly the mountainous border with Iran. In the past most of the trafficking routes
were controlled by organised crime groups originating from Turkey's eastern Black Sea region. In recent years,
these have been largely replaced by groups whose origins lie in the predominantly Kurdish southeast of the
country. Some of the heroin is refined inside Turkey, often in one-time laboratories set up either in the southeast
or in the major cities in the west of the country, although this is increasingly taking place in Afghanistan itself, the
original source of most of Europe's illegal opiates.
The high revenue from the narcotics passing through Turkey has made it relatively easy for traffickers to buy
political protection. In rural areas in southeast Turkey, the situation is complicated by a semi-feudal social
structure dominated by tribal lords, many of whom benefit from the narcotics being trafficked through their
territory and can effectively dictate the electoral preferences of tens of thousands of their followers. Although law
enforcement agencies frequently seize large quantities of narcotics, arrests are usually confined to low-level
operatives. A less than stringent regulatory environment has made it difficult to enforce legislation to prevent the
laundering of profits from the narcotics trade through the Turkish financial system and the real estate market.
Most traffickers have established legitimate businesses interests in Turkey ranging from those that facilitate their
operations, such as construction and transport companies, to involvement in many of the country's football
clubs. Until the late 1990s, several of Turkey's leading traffickers used to launder profits through casinos in the
country. When these were outlawed in Turkey, most relocated to the Turkish Republic of Northern Cyprus (TRNC),
which is not internationally recognised and where they can operate with relative impunity.
Financial crime and counterfeiting - Crime: Security - Turkey

Turkey's anti-money-laundering laws fail to meet the standards of the intergovernmental Financial Action Task
Force (FATF). In December 2019, FATF warned Turkey of "serious shortcomings" in its anti-money laundering (AML)
regime and threatened to put it on its grey list again. Previously, a threat to suspend Turkey's membership in 2013
had led to a series of fast-tracked legislative amendments. Following the 2019 warning, Turkey has introduced
new legislation specifically related to terrorism financing. However, enforcement remained highly problematic.
Requirements for customer due diligence for financial services providers other than banks also remain fairly weak.
Penalties for convicted money launderers are also sluggishly applied: a 2021 report by the US Department of State
on International Narcotics Control Strategy argues that Turkey lacks the capacity to effectively identify,
investigate, and successfully prosecute money laundering. The report also found that Turkish authorities had
carried out over 200,000 money-laundering investigations in 2019, but only 220 had led to prosecutions.
A milestone for exposing the prevalence of financial crime in the country was the 17–25 December corruption
investigation in 2013. By revealing numerous incidents of graft among cabinet members as well individuals within
then-prime minister Recep Tayyip Erdoğan's close circle, the scandal deeply affected public and business
perceptions of corruption in Turkey. This was demonstrated in Transparency International's publication of the
Corruption Perceptions Index (CPI) 2015, in which Turkey conceded several places in the rankings, among 175
countries, following a steep drop in the previous year's rankings. Alleged government obstruction of the judicial
process surrounding the scandal furthermore shook confidence in the ability of courts to deal with corruption
allegations without political interference. In a controversial vote on 5 January 2015, a parliamentary inquiry
commission ruled against the referral of the four former ministers to the Supreme Council over graft allegations.
The AKP continues to delay the introduction of necessary legislation to make state and local authority contracts
more transparent, which is a prerequisite for the opening of the chapter on public procurement in Turkey's EU
accession process. Privately, sources close to the AKP leadership estimate that an average of 5% of the value of all
public tenders makes its way to the party in the form of 'donations' by those who have been awarded the
contracts. Similarly, the AKP has displayed little alacrity in investigating, much less prosecuting, alleged financial
irregularities in companies with cordial relations with the party leadership.
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Country/Territory Report - Turkey

27 Jul 2022 - Economics and Country Risk

Executive summary - Turkey

Our take: Executive summary - Turkey

Country Risk Scores

Strategic Risk 3.0 High

Political 2.7 High ↗ 03 Mar 2022

Economic 4.9 Severe ↘ 06 May 2022

Legal 2.8 High → 18 Sep 2020

Tax 2.7 High ↗ 23 Jun 2022

Operational 2.3 Elevated ↗ 13 Jun 2022

Security 2.4 High → 04 May 2021

Note: 0.1 = minimum risk; 10.0 = maximum risk

Sovereign Risk Scores

Medium Term Overall

Source: IHS Markit © IHS Markit

Political: Executive summary - Turkey

Political Data - Political: Executive summary - Turkey

Source: IHS and CIRCA People in Power © 2022 IHS Markit

Forecast summary - Economic: Executive summary - Turkey

Data and forecasts - Economic: Executive summary - Turkey

Last update 15 July 2022

Strengths and weaknesses - Business environment: Executive summary - Turkey

Legal - Business environment: Executive summary - Turkey

Tax - Business environment: Executive summary - Turkey

Operational - Business environment: Executive summary - Turkey

Terrorism risks - Security: Executive summary - Turkey

Social stability and unrest risks - Security: Executive summary - Turkey

Risks to individuals - Security: Executive summary - Turkey

Risks to cargo/transport - Security: Executive summary - Turkey

Risks to property - Security: Executive summary - Turkey

Cyber-risks - Security: Executive summary - Turkey

Overview: Political - Turkey

Analysis - Government stability: Political - Turkey

Data - Government stability: Political - Turkey

Source: IHS and CIRCA People in Power © 2022 IHS Markit

Analysis - Policy direction and predictability: Political - Turkey

Republican People's Party (Cumhuriyet Halk Partisi: CHP)

Peoples' Democratic Party (Halkların Demokratik Partisi: HDP)

Nationalist Action Party (Milliyetçi Hareket Partisi: MHP)

IYI Party ("Good Party", direct translation)

Source: IHS and CIRCA People in Power © 2022 IHS Markit

Abdullah Öcalan, leader of the PKK

The military in politics

Constitution - State institutions - Political system and players - Political background:

Executive - State institutions - Political system and players - Political background:

The institutions of the presidency

Judiciary - State institutions - Political system and players - Political background:

Overview - External relations - Political background: Political - Turkey

Tensions over the Armenian question

Tensions over the Gülen Movement

Relations with Baghdad

Relations with the KRG (2003–12)

A mixed relationship (1914−2011)

Civil war (2011–present)

Relations with Iran

Regional organisations - Multilateral - External relations - Political background:

Forecast highlights: Economic - Turkey

Changes since last forecast: Economic - Turkey

Source: IHS Markit © 2022 IHS Markit

Near-term outlook - Near-term outlook: Economic - Turkey

Data - Near-term outlook: Economic - Turkey

Source: IHS Markit © 2022 IHS Markit

Key indicators and forecasts - Near-term outlook: Economic - Turkey