Has Turkey’s Erdogan gone too far?

Since police detained Istanbul’s popular mayor Ekrem İmamoğlu last week, protests have roared against what Turkey’s opposition is calling a “black stain on democracy.”

And it’s sent markets into a tailspin. 

• The lira collapsed to an all-time low last week, before Turkey’s central bankers burned a cool $12B in an attempt to stabilise it.
• Then yesterday (Tuesday), President Erdogan rolled out his market-darling finance minister (Şimşek) and central bank governor (Karahan) for an emergency Citi/Deutsche-hosted chat with investors to try and calm things further.
• Oh, and in the regulatory equivalent of screaming “don’t panic”, Turkey’s regulators even moved to ban short-selling on stocks.

Basically, markets are rattled at the thought of assets no longer being protected by the rule of law. But still, Turkish authorities have dug in, suspending İmamoğlu on Sunday and formally arresting him on corruption charges (dropping the earlier terrorism allegations). 

Yet as protests raged, Turkey’s long-time leader was defiant, denying any involvement in the mayor’s arrest and calling the protestors evil, before seeking to project calm by sipping tea around town.

Ditto, foreign capitals have mostly shrugged, with Washington calling it an internal affair (though Rubio just raised it with his visiting Turkish counterpart) — and Europe issued a run-of-the-mill rebuke, then moved on. 

So do Turkey’s protests matter? 

Looking at the world around him, Erdogan might conclude not:

• His Saudi counterpart ‘MBS’, for example, brutally assassinated a US-based critic in a consulate and still has warm ties with everyone from East to West, and
• Erdogan’s party continues to argue that İmamoğlu’s case is actually proof of democracy’s strength in Turkey, leaving nobody above the law (though many detained protestors, journalists, plus blocked X accounts now seem below it).

Also, Erdogan has been here before:

• He learned from the mass 2013 Gezi Park protests to just wait out the storm, and
• He learned from the 2016 coup attempt to keep his hands on the levers of power.

But… money talks.

Erdogan allowed inflation to fire at over 70% for much of the post-pandemic period, pressuring his central bank to keep rates low while he sought re-election in 2023 — and despite incinerating real wages, it worked, Erdogan won, and he vowed to course correct.

And that’s why this latest crisis matters: the mayor’s arrest has spooked markets, which have in turn undone hard-fought economic gains, rattling an already anxious people.

That’s why they’re willing to risk it all in the streets.

So what’s next? While the opposition is planning an emergency convention next month, Erdogan is again banking on time and control eventually working in his favour.

INTRIGUE’S TAKE

The focus here is naturally on Erdogan, who’s widely rumoured to be sticking around beyond his constitutional limit (2028) — his allies are already working on the legal hurdle (amendments), and steamrolling İmamoğlu removes the political hurdle.

But maybe a more intriguing place to focus is on Şimşek, his highly regarded finance minister, who might soon find himself in a bind between either a) sticking around while his reputation burns, or b) stepping down to salvage it. Erdogan will fear the market’s response to option b), and that might give Şimşek leverage as he tries to calm investors.

But if that sounds familiar, Intriguers will recall we’ve discussed similar tensions with (for example) how Indonesia’s Prabowo needs his Indrawati, and Russia’s Putin needs his Nabiullina. Markets and their darlings might be the closest these guys have to guardrails.

Yet still, those guardrails might be getting weaker. One reason is (sorry) our emerging multipolar world, which gives Erdogan more leverage as the world realises it needs his energy and arms sectors. That’s partly why capitals are shrugging this time.

But let’s wrap this where we started: with folks in the streets. While Erdogan has support, many Turks still tell us they’ll take the tear gas and handcuffs because they no longer see a future in his Turkey. That’s not the mark of a sustainable status quo.

Also worth noting:

• Istanbul city council is reportedly now moving to elect an interim mayor to replace İmamoğlu.
• Authorities formally charged İmamoğlu the same day his party was set to nominate him as their presidential candidate for 2028. Many see his arrest as a message to the opposition: challenge Erdogan at your peril. But the opposition responded with a message of its own: a record 13 million votes for İmamoğlu.