As Turkey’s Gübretaş fertiliser company announced it will produce the first bullion from a gold deposit discovered in the Bilecik province in 2020, the country’s President, Recep Tayyip Erdogan, declared 10 ambassadors from Western states – including Canada, Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden, New Zealand, and the US – persona non grata.
If he had stuck to his words, that ambassadors need to “recognise, understand and know Turkey” and the day they “don’t know or understand Turkey, they will leave”, they will shortly be stepping on a plane home. As it was, the mass ambassadorial defenestration was aborted after the ambassadors did a fast volte-face and said they never intend to cause a “crisis”.
The ambassadors’ offence was to sign a call for the release from prison of Osman Kavala, who is 64. Kavala, a businessman, was last year acquitted of charges linked to 2013’s anti-government protests. That ruling was overturned and fresh charges were added, relating to a coup attempt in 2016. President Erdogan’s Justice and Development Party (AKP) has ruled the country for 20 years.
The long arm of authoritarianism is starting to destabilise Turkey’s economy; the central bank has just $34 billion of ‘usable’ reserves and $170 billion of foreign debt that must be rolled over in the next 12 months. The Turkish Lira, the fiat currency, has plunged to a new low of 9.85 to $1 after Erdogan issued his expulsion order although it has recovered after he rescinded the expulsions and on Tuesday traded around 9.59/$1. The Lira has fallen around 24% so far this year. In the past decade, it has lost more than 340% of its value against the US Dollar. Could the next sovereign debt crisis be Turkey’s?
Gold production in Turkey started in 2001, since when it has mined 382 tonnes. According to the World Gold Council (WGC), Turkey is the world’s fourth-biggest consumer of gold; the WGC estimates that Turkish households have “at least” 3,500 tonnes stashed away.
Turkey’s annual inflation rate is running at 20%; bizarrely President Erdogan – who heavily influences central bank policies – seems to think that inflation can be cured by cutting interest rates. Phoenix Kalen, of Société Générale, told the Financial Times that Turkey is flirting with hyper-inflation and a currency crisis. Commerzbank says a “collapse” in the currency is under way “without an end in sight”.
The ‘Dollarisation’ of the economy – Turks choosing to hold and use the US Dollar rather than the Lira – is well-entrenched. For those whose faith in fiat money per se has been broken, gold provides a safe haven.
The land on which Gübretaş is mining for gold used to belong to a private firm called Koza Altin. But Koza Altin was seized by the ‘Saving Deposits Insurance Fund’ after it was allegedly linked to the Fetullah Terrorist Organization (FETO), the group supposedly behind the 2016 defeated coup. The ‘Saving Deposits Insurance Fund’ was initially overseen by Turkey’s central bank, but now it’s attached to the office of the President.
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