Turkey’s president fired a new salvo in the growing war of words with the United States on Tuesday, saying Ankara will boycott all American-made electronic products.
Showing no signs of backing down in the standoff, President Recep Tayyip Erdogan said Turkey would stop procuring US-made iPhones and buy Korean Samsung or Turkish-made Vestel products instead.
“If they have the iPhone, there is Samsung elsewhere. We have Vestel.” It was unclear how Erdogan intended to enforce the boycott.
Over the last few days, Turkey has seen a significant devaluation of its currency the lira, which has lost more than 45 percent of its value this year.
The lira pulled back on Tuesday from a record low hit a day earlier, helped by the central bank’s new liquidity measures and news of a planned conference call in which the finance minister will seek to reassure investors.
But analysts have raised concerns of a wider contagion rippling through global markets. On Tuesday, the Indian rupee hit a record low as a result of the economic issues in Turkey.
Analysts say the financial crisis has been a long time coming and reflects Turkey’s refusal to raise interest rates to curb double-digit inflation and cool an overheated economy. Disputes with NATO ally the US have also contributed to the lira’s plunge.
“Unfortunately I think Erdogan is the extreme example of a policy-maker who is totally deluded,” Aly-Khan Satchu, CEO Rich Management, told Al Jazeera.
“It’s a losing battle. He is going to have to raise interest rates to bring the situation under control,” he added.
“He’s making it much worse.”
Russian Foreign Minister Sergei Lavrov said the events are a sign the dollar is becoming obsolete as the global trade currency.
“I’m confident that the grave abuse of the role of the US dollar as a global reserve currency will result over time in the weakening and demise of its role,” Lavror said at a news conference in the Turkish capital Ankara.
Lavrov added that Russia is aiming towards using national currencies to settle bilateral trade deals with Turkey and other countries.
Erdogan, rejecting economic fundamentals as the cause of lira weakness, said Turkey was the target of an economic war and has made repeated calls on Turks to sell their dollars and euros to shore up the national currency. He also urged manufacturers not to rush to buy dollars.
He also accused the US of stabbing Turkey “in the back”. Erdogan announced on Tuesday his country will boycott US electronic goods.
“Trump is wielding something much more powerful than a nuclear weapon now. He is basically kneecapping countries, and Turkey is the first one to be kneecapped,” Satchu said.
“He is reducing the amount of dollars into the financial market,” he said.
“The one big thing that is in our favour, is that this these populists have put themselves up on a pedestal and now there is one person that can be pointed to, wether it’s Erdogan, Maduro or Rouhani,” he added.
Soner Cagaptay, director of Turkish research programme at the Washington Institute, said the confrontation has now become between the leaders of the two countries, particularly over detained American pastor Andrew Brunson.
“This is no longer a dispute between the bureaucracies of the two countries. This is a fight between the two presidents now,” he said.
Cagaptay said Washington had an “arsenal of economic sanctions” ready to deploy against Turkey, which he believed US President Donald Trump would escalate until Brunson is released. “And such a move will further feed Erdogan’s narrative that ‘The West is attacking us’.”
Turkish businesses have called for a tighter economic policy to ensure the country minimises the potential fallout from the currency collapse. Businesses issued a joint statement asking for “a concrete roadmap” to be prepared “to lower inflation permanently”, the newspaper Hurriyet reported.
The Turkish central bank vowed on Monday to provide banks with “all the liquidity they need”.
Traders said news that Finance Minister Berat Albayrak will hold a conference call with up to 1,000 investors to discuss the economy might also have helped support the currency.
“I think the investor call Albayrak has scheduled has helped lira firm,” said TEB Investment strategist Isik Okte. “I believe the new and important topics will be discussed in this call, otherwise there would not be such an attempt.”
He had been in jail for almost 20 months when a court in July ordered him moved to house arrest. Since then, Trump and Vice President Mike Pence have demanded his immediate release. Ankara says the decision is up to the courts.
On Monday, US National Security Adviser John Bolton met Turkish ambassador Serdar Kilic at the White House to discuss relations.
Worryingly, the lira’s weakness is starting to affect the rest of the world as well.