The crisis in Turkey

Turkey is in a financial crisis which has international implications. The immediate issues are the trade war between the US and Turkey, and the US's pressure on Turkey to release Presbyterian Pastor Andrew Brunson (arrested in 2016).

But there are deeper issues involved. The crisis cannot be blamed on Trump; he has made a bad situation worse.

Meanwhile, the Turkish leader Recep Tayyip Erdogan is using the crisis as proof of the US's hostility towards Turkey, and so he is playing the populist card of ethnic nationalism. This is Turkey against the world (and so ironically Trump is aiding Erdogan's domestic standing).

The crisis has several roots. Erdogan, one of Turkey's most significant leaders in decades, has sought to develop the country rapidly to provide some wealth to his down-trodden supporters. After the 2001 terrorist attacks on the US "9/11", he enjoyed good support from President George Bush as a "moderate" Islamic leader and exploited his status to attract foreign capital.

But the influx of capital was used to fuel consumerism rather than retool the economy. Turkey is one of the "Fragile Five"; the others being Indonesia, India, Brazil and South Africa (all heavily dependent on foreign investment). There is a fear that foreign investors will panic and an exodus of money will trigger an economic collapse in Turkey which could spread to the other four countries.

There is now rampant inflation but Erdogan has been reluctant to raise interest rates to dampen the inflation. He has ditched his economic team; his son-in-law Berat Albayrak is now the finance minister.

Foreign investors are worried about how Erdogan can stop the economic rot and whether there will be contagion. Investors fear a new "Greece crisis" – but Turkey is a much larger economy and so will have an even bigger impact on the international banking system if the problems continue.

Meanwhile Erdogan is embroiled in many foreign problems. Syria is on its border. Turkey has had a clear policy: prevent the Kurds from gaining control over the Kurdish part of Syria (which could then threaten Turkey's hold over its own Kurds). Now that Assad is winning the civil war, Erdogan wants to make sure that Turkey remains a player in Syria's future.

Unfortunately, the US has had no clear policy for dealing with the "Arab Spring"- inspired Syrian civil war. The US (beginning with Obama) has supported some groups which are anti-Iran and anti-Assad (and probably pro-Islamic State and Al Qaeda). The US has long got on well with Kurds; this goes back to at least George Bush senior in 1991 and the first Gulf War. Syria has therefore long been a point of difference between the US and Turkey.

By contrast, Putin sees an opportunity to improve relations with Turkey (a long-standing major NATO member). He is supplying military equipment to Turkey (thereby reducing Turkey's reliance on the US).

There is also US-Turkish tension over Iran. Trump has ended the Iranian nuclear deal (one of Obama's great foreign policy achievements) and has reimposed sanctions on Iran. Turkey is ignoring the sanctions and still importing Iranian oil.

Saudi Crown Prince Mohammed bin Salman has spoken of the "triangle of evil": Turkey, Iran and Islamist militants.

Saudi Arabia has led a boycott against modernist Qatar. Qatar is lending money to Turkey to stabilize the currency. Turkey has deployed troops to Qatar to help protect the country.

Therefore Erdogan not only has a major economic crisis on his hands, he is also embroiled in some major foreign issues as well.

How might the crisis evolve? Here are four speculations:

1. The crisis could trigger another global financial crisis; the global banking system is still weak (mainly because banks have resisted fundamental reforms), and governments have run out of financial ammunition (printing extra money).

2. Erdogan backs down: lets Brunson go back to the US, accepts International Monetary Fund (IMF) aid (and the tough "austerity conditions" that usually get imposed) and is possibly punished by the voters later.

3. Turkey withdraws from NATO. There is a risk of NATO's splintering. Putin and Erdogan would challenge US's primary role in regional affairs (especially now that Trump does not know what role he sees for the US in those affairs).

4. Erdogan is removed by some form of military coup (this was the standard system for stabilizing the country but Erdogan has tried to weaken the military to reduce this risk).

Whatever happens, Turkey is in for a bumpy ride.