Armenian, Assyrian and Hellenic Genocide News

US faces Turkish dilemma
by Stephen Fidler Published: March 1 2001
Posted: Sunday, March 04, 2001 00:18 am CST

The Bush administration is torn between aversion to intervention and need to support a key ally

Turkey's financial crisis would have the makings of a dilemma for any US administration. But for an administration whose main economic policymakers have a strong aversion to public intervention and financial bail-outs, there could be few more exacting test cases.

Paul O'Neill, US Treasury secretary, has made clear that he views with scepticism the value of bail-outs led by the International Monetary Fund. Privately, he has told the IMF that he expects the package agreed in December, backed reluctantly by the Clinton administration, to be enough.

Then, the IMF enlarged the credit line available to Ankara from $3.8bn to $11.4bn: Turkey has about $7.7bn left.

That is much less than the figures talked about in Ankara. Bulent Ecevit, the prime minister, said on Wednesday that his government was looking for closer to $25bn.

Mr O'Neill may argue that the failure of last year's IMF crisis prevention efforts only underlines the shortcomings of rescue packages. Its failure is a particular embarrassment for the IMF, given that it ignored its own guidelines that suggest it should back either free floating exchange rate regimes or a "hard fix", such as a currency board. Turkey's "crawling peg", which collapsed last week, was neither.

But it remains to be seen whether Mr O'Neill will have the last word. The Treasury has come under pressure from the state and defence departments to listen sympathetically to the Turks. Colin Powell, secretary of state, encouraged President George W. Bush to offer support to Mr Ecevit by telephone last Friday. On Tuesday Mr Bush wrote to President Ahmet Necdet Sezer expressing backing.

"It's a lesson to O'Neill about the dangers of enunciating a policy, because you will be faced with a compelling case that will lead you to make exceptions," says Wayne Merry, a former US diplomat.

The exception may have to be made because Treasury scepticism about financial rescues runs counter to the conventional US view of Turkey's security importance to the US. Along with Mexico and South Korea, Turkey is viewed as one of the developing countries most vital to American interests.

Turkey is an important supporter of Israel in a region where the Jewish state has few friends, and its support has been critical to the US strategy of containment of Iraq. It is also viewed as a secular bulwark to the spread of radical Islam. It forms the eastern flank of Nato, and has been seen as presenting a counterweight to its neighbour Russia in the unstable regions to its east - and, as such, the centre of an east-west US energy policy in the oil-and gas-rich Caspian basin. Now the financial crisis calls some of these assumptions into question. "To what extent is Turkey sufficiently powerful to be seen to anchor such a strategy if it's seen as a country in free-fall?" asks David Makovsky of the Washington Institute for Near East Policy. "Will the states of the former Soviet Union want to deal with it?"

A minority of foreign policy specialists argue that Washington should take a fresh look at Turkey, arguing that like Iran in the 1970s, it is too weak to anchor US policy in the region.

Ted Galen Carpenter of the Cato Institute, a free market think-tank, argues that a financial bail-out would risk creating perverse economic incentives or moral hazard. "Politically, there is a comparable moral hazard if we keep backing a regime and political system that's at best quasi-democratic, and is shot through with corruption."

He says US policy should move closer to that of the European Union, whose policy aims to create incentives for political and judicial reform in Turkey. However, he says that to judge from the confirmation hearings, Mr Powell takes a more conventional view. In remarks in which his praise for Turkey was unqualified, Mr Powell told the hearing: "I think Turkey has been one of our steadfast allies for so many years."

Mr Powell decided against visiting Turkey on his trip last week to the Middle East, despite a request from Ankara, though he talked on Tuesday in Brussels to Ismail Cem, Turkey's foreign minister. One factor making the US response more difficult to predict is that none of the relevant US government departments has anything like a full team in place. "Things have yet to settle down with this administration...the personnel is not in place," says Bulent Aliriza, head of the Turkey project at the Centre for Strategic and International Studies.

It is not clear either who will guide Turkish economic policy following the resignation of the main figures in the Turkish government's economic team, including the central bank governor.

The economic framework following the collapse of the exchange rate is still highly uncertain. "It would be premature and ill-judged for the US to jump in," Mr Aliriza says.

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