Turkey’s crisis — the decline of the lira against the dollar — has led to a number of opinions, some of which support Turkey’s financial/economic measures, while others expect the collapse of President Erdogan’s government due to the challenges posed by the US government.
Despite the divergence of opinions, the Turkish lira has started to recover slightly after a sharp drop in its exchange rate to reach 5.8 lira against the dollar at the end of last week.
The crisis erupted between the US and Turkey due to the dispute over the detention of a US priest, whom Turkey accuses of espionage.
The lira improved slightly by 6 per cent against the dollar last Thursday, just hours after Qatar announced a direct investment of $15 billion in the Turkish market.
Also, the decision of Turkish President inviting some countries to use national currencies in trade has had a positive impact on lira, especially as the decision has significant implications in the future. There was acceptance of this decision by Russia, China, Iran, Ukraine and other countries.
A spokesman for the Kremlin confirmed in his recent remarks that Russia supports the use of national currencies in international trade, and has long been studying the matter at the highest levels. He said Russian President Putin has already put forward use of national currencies in international trade exchanges as the US used the dollar as a political tool.
The dependence of countries on the US currency sometimes leads to high rates of inflation and political/economic unrest in some, especially those who have difficulties in providing hard currency.
Erdogan’s decision to use domestic currency in foreign trade will reinforce this trend. The decision of these countries to use their national currencies will undoubtedly enhance the value of their local currencies and contribute to easing the pressure of the dollar on them.
However, 40 per cent of Turkey’s debt is in dollars, and it has dollar-denominated commitments. Turkey, therefore, still needs the dollar to meet its obligations. It cannot do without it at the moment. Turkey cannot alone impose a new international economic reality.
The economic blocs, if not supported by the international community, will have a weak influence. So the countries affected by American hegemony such as Turkey, Russia, China, Iran and some EU countries, if they succeed in forming a common economic vision, can achieve success in breaking American domination.
Some European Union nations too suffer from economic harassment from the policies of President Trump. The use of national currencies in such crises reduces some of the risks faced by countries and the total reliance on American currency.
The decision to use the national currencies is a message to the prevailing global monetary system and America that there is a possibility of giving up the dollar in trade settlements, especially if Russia and Turkey, for example, can successfully use their national currency for trade. This may encourage other countries facing US economic sanctions to follow that example.
This friction has caused fluctuations in the price of national currency of Turkey, which has asked its Central Bank to take a series of measures to strengthen the effectiveness of financial markets and create greater flexibility of the banking system in the management of liquidity.
The Turkish authorities have taken some steps to strengthen their alliances with the BRICS (Brazil, Russia, India, China and South Africa) countries. Today there is talk of creating new blocs to counter Trump’s decisions towards many economic policies that may lead to sudden political and economic developments in the world.