Sultan’s fall: Iranian and Qatari painkillers fail to support Turkish lira (Part 3)

In the previous two parts of the series “Sultan’s fall”, we discussed Turkey’s approach to bankruptcy due to the failed policies adopted by Turkish President Recep Tayyip Erdogan, whether at home or abroad, which led to the collapse of the economy.

In the third part of this, we discuss the collapse of the Turkish lira against foreign currencies, as the exchange rate of the dollar reached 8.18 lira, which has led to an increase in the prices of all goods. Meanwhile, Turkey’s total foreign debt reached $450 billion until the end of June, according to a statement by the Turkish Ministry of Treasury and Finance.

The trade balance deficit continued to rise dramatically, achieving a four-fold increase year-on-year, to reach $1.808 billion, according to the Turkish Statistics Institute (TurkStat).

Inflation and unemployment rates have increased, pressures have increased on indebted private companies, the Turkish economy has entered a recession for the first time in 10 years, and the cost of insuring Turkey's sovereign debt against the risk of default has risen to its highest levels.

The collapse of the Turkish lira has prompted Qatar and Iran to intervene to save their Turkish ally. Governor of the Central Bank of Iran, Abdel Nasser Hemmati, announced that Tehran would transact in the Turkish lira instead of the US dollar, hitting two birds with one stone by circumventing the US sanctions and the ban on Iran’s dealings with the global financial SWIFT system, in addition to saving Ankara.

In an attempt to return the favor, Erdogan defended Iran after accusations of its involvement in attacks on oil facilities in Saudi Arabia. In a televised interview with Fox News on the sidelines of the 74th session of the United Nations General Assembly in New York, the Turkish president said it must be acknowledged that the various parties in Yemen could launch attacks of this size, adding that it is therefore not good to place full responsibility on Tehran, as the available evidence does not necessarily indicate that.

Erdogan continued his defense of Iran, criticizing the US sanctions on Tehran, which he said will never solve any problem. He also denied that his country has helped the mullah regime circumventing US sanctions in the past.

In the same context, Qatari Emir Tamim bin Hamad also rushed to the rescue of his Turkish ally, announcing huge investments in Turkey in an effort to revive the lira, which continues to decline against the dollar.

There have been 52 economic agreements between Qatar and Turkey since the start of the recent crisis, and Doha pumped $15 billion into the Turkish market when it witnessed an economic crisis due to the decline of the lira under the influence of US sanctions.

Turkish companies also contribute significantly to the projects currently taking place in Qatar, especially in terms of construction and infrastructure. The volume of investments of these companies in Qatar is estimated at $16 billion, and the number of Turkish companies operating in Qatar with joint Qatari and Turkish capital is 242 companies, while the number of companies with pure Turkish capital reaches about 26 companies.

Qatari investments in Turkey have reached $23 billion, while the volume of trade between the two countries exceeds $2 billion. The Qatari investments focus on various fields, foremost among which are the Turkish banking, energy, manufacturing, tourism, real estate and agriculture sectors, in addition to military industrialization, which is considered one of the most important facades of the Turkish economy.

The current year witnessed a clear growth in trade exchange between the two countries compared to last year, when the value of Turkish exports to Qatar amounted to $1.36 billion, while this year until September reached $838 million, an increase of 8.7% year-on-year.

Despite the Qatari-Iranian recovery attempts, the Turkish lira continued to decline and became the worst performing among the world's major currencies in October.

Bloomberg confirmed that three government banks in Turkey sold $1 billion to stop the dollar's rise against the lira.

Economists attributed the reasons for the collapse of the Turkish currency against the dollar to the negative consequences of the fabricated military coup that occurred in July 2016, due to the purge that affected a large number of politicians, judges and even businessmen, and placing their institutions under the custody and management of regulatory agencies, as well as some civil society institutions, such as schools and hospitals, which led to political instability and the flight of investors.

The hostilities created in the region by Erdogan's policies, including Ankara’s expansionary step with direct intervention in both Syria and Iraq, as well as Turkey's announcement of establishing a military base in Somalia, negatively affected tourism revenues, in addition to the European Union sanctions due to the violations committed by the Turkish regime.