Turkey Threatens to Respond if US Imposes More Sanctions

Turkey on Friday threatened to respond if Washington levied further sanctions over the detention of an American pastor which has sparked a diplomatic standoff and battered the Turkish currency.

A Turkish court on Friday turned down another appeal to free the pastor in the third such rejection, his lawyer said.

As Ankara sought to reassure markets after the lira went into a tailspin over the deepening spat, U.S. Treasury Secretary Steven Mnuchin warned more sanctions would be on the way until Andrew Brunson was released.

Last week, U.S. President Donald Trump said he had doubled the tariffs on aluminum and steel tariffs from Turkey, prompting Ankara to sharply hike tariffs on several U.S. products.

And on Friday, Turkey’s Trade Minister Ruhsar Pekcan said to expect more of the same.

“We’ve already responded based on the World Trade Organization rules and will continue to do so,” state-run Anadolu news agency quoted him as saying.

The nearly two-year detention of Brunson, who is being held on terror charges, has soured relations between the two NATO allies and sent the lira tumbling.

The lira, which earlier this week traded at well over seven to the dollar, had rebounded slightly over the last three days but on Friday it lost over five percent of its value around 1250 GMT.

In the afternoon trade, it was quoted at 6.1 against the greenback after touching 6.3 at one time.

On Thursday, Trump said Turkey had “taken advantage of the United States for many years” and referred to Brunson as a “great patriot” who was being held “hostage”.

“We will pay nothing for the release of an innocent man, but we are cutting back on Turkey!” he tweeted.

The court in the western city of Izmir ruled that Brunson, who faces 35 years in jail if convicted, would remain under house arrest, his lawyer Cem Halavurt told AFP.

‘United’

U.S. sanctions and the declining lira created panic in the markets but on the streets, many Turks appeared to support the government’s retaliatory measures.

Muharrem Bozkurt sounded upbeat despite the lira crisis.

“As we are a country where patriotic sentiments are high, no matter how much the dollar increases, we will get over this,” he told AFP.

Others agreed.

“American sanctions will have no effect on us as long as we remain united,” said another man called Ibrahim Aktar.

“I think they may even be a reason to join ranks.”

Can Buyuker, who works in an exchange bureau in a busy Istanbul neighborhood, said both Trump and Erdogan were playing up to nationalist voters.

“Both men are seeking to increase their votes by creating an enemy. That’s politics,” he said.

The latest U.S. announcement came after Finance Minister Berat Albayrak tried to soothe the markets during an unprecedented conference call with hundreds of foreign investors, insisting Turkey would emerge “stronger” from the currency crisis and ruling out an IMF bailout.

‘Moderately Convincing’

William Jackson, chief emerging markets economist at London-based Capital Economics said in a note that Albayrak gave a “moderately convincing performance.”

But he suggested Turkish “policymakers only really seem to have done the minimum needed”.

“Even in his call with investors, Albayrak said the fall in the lira was out of line with fundamentals, not acknowledging why confidence in Turkey evaporated,” he said.

“And he seemed to downplay the risks in the corporate and banking sector posed by large foreign currency debts. These could still crystallize over the coming weeks and months, potentially making the crisis more acute.”

Analysts say a sharp hike in interest rates is needed to stop the declining value of lira, but Ankara is opposed to any rate hike to stimulate growth.

Erdogan has remained defiant in the face of the crisis with Washington, saying Turkey could turn to new alternative markets.