Turkey’s economic endgame and the Khashoggi crisis

For weeks, the world has wondered whether Turkey is sitting on a smoking gun that directly implicates Saudi Crown Prince Mohammed bin Salman (MBS) in the killing of journalist Jamal Khashoggi.

And, judging by Turkish President Recep Tayyip Erdogan‘s speech to members of his ruling party on Friday, the suspense will likely continue. Erdogan said Turkey has more evidence about Khashoggi’s murder which it will share in due time.

“There’s no point in being too hasty,” he said.

Patience has been a staple of Ankara’s masterclass on how to make a regional rival squirm. Despite initial efforts by Saudi Arabia to play down Khashoggi’s murder in its consulate in Istanbul on October 2, the story has continued to command headlines, thanks to a potent cocktail of leaks drip-fed to the press by unnamed Turkish officials, punctuated by Erdogan’s promises to divulge more.

Of course, Ankara’s pressure campaign has been helped in no small part by Riyadh’s inept crisis response which President Trump derided as “the worst cover-up ever”.

The reputational damage to Saudi Arabia has been considerable. MBS’s image as a progressive reformer is in tatters and the once ironclad bond between the Trump administration and the Saudi crown prince, on whom it has pinned its Middle East strategy, has been sorely tested.

But the damage hasn’t been fatal. MBS is still in power and Erdogan’s big reveals have so far left any clipping of the crown prince’s wings to Riyadh.

“I don’t sense these countries really at each other’s throats,” Steven Cook, senior fellow at the Council on Foreign Relations told Al Jazeera. “There’s no love lost but there’s a certain cordialness because no one wants to blow up the relationship.”

Turkey is no champion of press freedom, being the worst jailer of journalists in the world, according to the Committee to Protect Journalists (CPJ). But Riyadh murdered Khashoggi within Turkey’s borders.

Erdogan undoubtedly wants to send a message that such violations of its sovereignty won’t go unpunished.

Still, throughout the crisis, the Turkish president has been respectful towards Saudi King Salman. And while he’s circled MBS, Erdogan has not explicitly condemned him over Khashoggi’s murder.

The two even spoke by phone on Wednesday.

Perhaps Erdogan’s pulled off a spectacular bluff. But it’s entirely plausible that he’s pulled punches. Because if Turkey does have the goods on MBS, it may calculate that there’s more to be gained from showing restraint.

Never let a crisis go to waste

Turkey and Saudi Arabia both aspire to be leaders of the Muslim world, but the power struggle is not just about faith. Political influence and the economic benefits it can bestow also hang in the balance.

And if there’s a country that could use an economic edge right now, it’s Turkey.

This summer, the Turkish lira lost around half of its value against the US dollar, heaping pain on Turkish banks and firms that borrowed in foreign currencies. And there are serious headwinds on the horizon as more debt repayments loom.

Turkey did get some relief when regional ally Qatar pledged $15bn in direct investment; a small but symbolic financial lifeline. Turkey has aligned itself with Qatar which has been subjected to a 16-month economic and diplomatic blockade led by Saudi Arabia.

But the more cash Ankara can amass, the greater its arsenal to weather the economic storm.

“Erdogan has incentives to try to extract concessions from Saudi in the form of loans, cash payments, or contracts to ease the pressures exacerbated on Turkey’s already struggling economy,” Lisel Hintz, assistant professor at the Johns Hopkins School of Advanced International Studies told Al Jazeera.

The lira’s woes are rooted in a rising dollar and Erdogan’s economic policies, which encouraged reckless borrowing and compromised the independence of Turkey’s central bank.

But this summer’s currency rout was badly exacerbated by deteriorating relations between Ankara and Washington.

The Trump administration slapped sanctions on Turkish ministers and doubled tariffs on Turkish aluminium and steel as a diplomatic standoff raged over the fate of US pastor Andrew Brunson, whom Turkey had detained on terrorism charges.

Souring relations also fed speculation that the US Treasury could impose a hefty fine on Turkish state-lender Halkbank after one of its executives was convicted of taking part in a scheme to help Iran evade sanctions.

Erdogan framed the run on the lira as a plot by foreigners to weaken Turkey. While that may have played to his supporters at home, it did not turn market sentiment in Turkey’s favour.

The country is heavily dependent on external financing and investor confidence is crucial to its economic health.

A dramatic September interest rate increase by Turkey’s central bank helped lift the Turkish currency. A diffusion of tensions with Washington this month in the wake of the Khashoggi crisis has also helped stabilise the lira.

A little over a week after Khashoggi was murdered, Turkey released pastor Brunson, clearing a major diplomatic impasse with Washington.

Turkey and the US are still at loggerheads on many fronts; the war in Syria, Iran, Ankara’s growing ties with Moscow and the ongoing detention of Americans in Turkey.

But the Khashoggi crisis has helped reset relations and in the process, revive investor confidence to a degree.

“Turkey is proving itself to be a responsible citizen,” said Cook. “The fact that their relationship with the United States would be better takes away a certain amount of uncertainty that was rattling the markets this summer.”