One of the comforting thoughts for observers of the escalating conflict between Russia and Turkey is that both have solid economic incentives to avoid escalating too much. This was emphasized by a 4.39 percent drop in the Turkish stock market, accompanied by the highest five-year debt insurance costs in several weeks, and the Turkish lira sliding 0.6 percent against the dollar.
Hurriyet Daily News quotes securities analyst Tuncay Tursucu blaming these market jitters on the destruction of Russia’s warplane. He described it as a “black swan” event – a “really unexpected incident.”
However, Tursucu also applauded the appointment of former Finance Minister Mehmet Simsek as the new “economy czar,” replacing Ali Babacan, an old friend of Prime Minister Ahmet Davutoglu with an American education who presided over Turkey’s economy for the past 13 years. Today’s Zaman described Babacan’s ouster yesterday as a political move to thwart Davutoglu’s ambitions that could make many investors nervous, but Turuscu seemed to view it as a positive development.
The Wall Street Journal notes that Ankara has been threatening Moscow with economic repercussions ever since Russian planes began violating Turkish airspace in early October, and repeated those warnings as the rhetoric over the Russian plane shootdown heated up.
“Trade between Turkey and Russia has doubled to more than $30 billion annually over the past decade. Turkish exports make up about 20% of the transactions, while imports from Russia, led by natural gas, make up the rest,” the WSJ observed. “Mr. Erdogan has warned Moscow that Turkey could look to divert gas purchases from Russia, and that Ankara would seek another partner to build its first nuclear plant if Russia halts the project. But it wasn’t clear how broad economic punishments from either could be.”