Asia Times By Jonathan Gorvett Dec. 12, 2020 [EU and US weigh punitive measures that if imposed would send Turkey’s collapsing economy into free fall] Battling the European Union (EU) over Eastern Mediterranean maritime disputes while angering the US over a recent Russian missile deal, Turkey now faces the threat of sanctions from two power blocks which combined represent over a third of the global economy. That prospect knocked points off the already embattled Turkish currency this week, the lira, with concerns that new harsh measures might send the already declining economy into a terminal tailspin. The currency has fallen around 25% this year, worsening the economic fallout caused by the pandemic. “Given Turkey’s dire external position, further and stronger action by the EU and/or the US could push the country back to the brink of a balance of payments crisis,” warns Jason Tuvey, from Capital Economics in London. For now, however, internal divisions in Europe and personal ties between the Turkish and US leaders look likely to moderate the impact of any immediate action, though that could quickly change with the incoming Joe Biden administration in the US. “There’s concern on both sides of the Atlantic that harsher sanctions could push Ankara further away,” Aykan Erdemir, senior director of the Turkey Program at the Washington DC-based Foundation for Defense of Democracies, told Asia Times. In the longer term, though, the threat of a harsher response remains, with both Europe and the US increasingly concerned over Turkey’s foreign and domestic policy course, including “Neo-Ottoman” foreign adventures that at least in part seek to restore the country’s Ottoman Empire glory. “Geopolitical tensions still pose a risk to Turkey’s outlook,” adds Tuvey. Yet despite this, Turkey’s leader, President Recep Tayyip Erdogan, “has shown little sign of toning down his belligerent rhetoric.” European blues The EU’s current push for sanctions against Turkey originates in the ongoing dispute between Ankara and EU members Greece and Cyprus over Eastern Mediterranean sea and air boundaries. Turkey does not recognize Greek claims to waters in and around the Aegean Sea, nor Cypriot claims to a 200-kilometer Exclusive Economic Zone (EEZ) off the de facto divided island. In recent years, these disputes have become more active, with Turkey sending its own oil and gas survey and drilling ships into offshore blocks also claimed by Greece and the Greek Cypriots. Collisions and stand-offs at sea have ensued, with warships deployed to protect each side’s oil and gas vessels. Repeated military exercises have also been held in the disputed territories, by Turkey on the one hand and a coalition of Greek, French, Egyptian, Cypriot and Emirati forces on the other. Despite this, the Turkish survey ship, the Barbaros, with a flotilla of naval escorts, continues to sail today within waters claimed by Cyprus. Earlier this summer, Turkey sent the Oruc Reis survey ship into an area disputed with Greece. This triggered mobilization of the Greek armed forces and a diplomatic intervention by EU term-president Germany. The de-escalation that followed saw the Oruc Reis return to port, while the EU deferred any decision on action against Turkey until the December 10-11 EU Council meeting. Within a few days, however, the Oruc Reis had returned to the disputed waters, staying there until just before the EU Council met this week to discuss possible sanctions. Missile trouble At the same time, across the Atlantic, there is growing US dissatisfaction with Turkey. “It’s very hard to find support for Turkey’s positions in Washington DC these days,” Ian Lesser, vice president of the German Marshall Fund of the US in Brussels, told Asia Times. This has followed a number of disputes, with one of the most recent being NATO-member Turkey’s purchase of Russia’s highly effective S-400 anti-aircraft missiles, back in 2019. This led to Turkey’s expulsion from the NATO F-35 fighter jet program, after NATO chiefs said the S-400 deal compromised the aircraft’s security. The rift appeared to ease when Ankara agreed not to activate the S-400s – yet, in October this year, the Turkish military test-fired a missile from the system. As a result, as an add-on to the latest US defense budget, Congress has called for sanctions to be imposed on Turkey, including on its defense industries, under the Countering American’s Adversaries Through Sanctions Act (CAATSA). While President Donald Trump, who has often boasted of his good relationship with Erdogan, initially seemed likely to veto the congressional move, on Friday news reports said that Trump would likely sign off on an undisclosed range of sanctions. “Neither Washington nor Brussels wants to be perceived as appeasing the Erdogan government’s transgressions any further,” says Erdemir. Competing interests Yet, while “There is basically a consensus across the EU that what Turkey has been doing is destabilizing,” says Lesser, “When it comes to a policy response, it is all much less clear.” On one end of the spectrum lies France – along with Greece and Cyprus – which has championed tough action. On the other, “Berlin has a stronger awareness of all the equity at stake when it comes to Turkey.” This “equity” includes Turkey’s major economic role in Europe, its largest overseas market. “Member states Germany, Italy, the Netherlands and Spain, which have significant investments in Turkey, are also worried that any further turmoil in Turkish markets or retaliation by the Erdogan government could hurt their companies,” says Erdemir. Germany is also home to some four million ethnic Turks, representing as much as 5% of the population, while the EU also has a major deal in place with Turkey to prevent refugees from conflicts in Syria, Iraq and beyond heading to Europe – a lightning rod political issue in many European countries. So far, the German view appears to have prevailed. On December 11, the EU Council announced that it would defer any decision until its meeting in March, while also signaling that it would work with the new US administration in formulating a response. At the same time, Trump will likely have a range of possible sanctions available to him under CAATSA, and “The US is expected to tread lightly,” says Tuvey. “Given the fragile state of the Turkish economy, no one wants to see it go into a tailspin,” adds Lesser. For now, then, President Erdogan will likely avoid any major sanctions. Indeed, the veteran Turkish leader has remained largely unruffled by the threat. “Any decision to impose sanctions against Turkey won’t be of great concern to Turkey,” he told reporters ahead of the December EU Council meeting. On Friday, Erdogan doubled down, saying any US sanctions imposed over its S-400 missile purchase would “disrespect” Turkey as a NATO ally. Also on Friday, in a speech to his AK Party, he called on US and EU politicians to “break from the influence of anti-Turkey lobbies.” Yet, the clock is ticking on further action in both Brussels and Washington, with the threat of punitive action still a powerful force on its own, say analysts. “The sanctions threat is a reminder,” says Tuvey, “of Turkey’s economic fragility.”