The Turkish Armed Forces launched its operation on Wednesday with air and artillery strikes on Syrian border towns.
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Having drawn sharp criticism from Democrats and members of his own party for deciding to withdraw US forces from northeastern Syria, paving the way for Turkish forces to enter the Kurdish-controlled region, President Donald Trump on Monday said he would “obliterate” Turkey’s economy if Ankara took any action he considered “off-limits”.
When asked by a reporter on Wednesday if he was concerned that Erdogan would wipe out the Kurds, Trump replied, “I will wipe out his economy if that happens”.
Republican Senator Lindsey Graham, usually one of Trump’s staunchest supporters, tweeted on Wednesday that he would lead an effort in Congress to punish Turkey and “make [Turkish President Recep Tayyip] Erdogan pay a heavy price”.
On Tuesday, Graham threatened via Twitter to impose “sanctions from hell” on Turkey if it moved into Northern Syria, saying there is bipartisan support among US politicians for such a move.
News of Wednesday’s military action sent the Turkish lira to a near four-month low against the US dollar.
Last year, Turkey’s currency lost some 30 percent of its value against the US dollar – a plunge that was exacerbated by souring relations with Washington.
Last year’s lira rout deeply wounded Turkish businesses that had taken out loans denominated in dollars, and forced to the central bank to dramatically raise borrowing costs, pushing the country into recession.
‘This is nothing new for us’
Despite the market reaction to Wednesday’s incursion and the fragile state of Turkey’s economy, some residents of Ankara appeared unphased by the threats emanating from Washington.
“This is nothing new for us,” Duygu Alptekin, a 42-year-old florist, told Al Jazeera. “America is always threatening sanctions for something or other and nothing happens. Even if it did, we would manage. Perhaps we could do more trade with Iran or Russia if America wants to hurt us.”
Pensioner Oktay Sahin, 68, was also dismissive of the tough talk from Washington. “Let them put us under their sanctions,” he told Al Jazeera. “We already have enough problems with inflation and unemployment, what more harm could they do?”
Turkey already has two long-standing financial threats from the US looming over its economy.
State-owned lender Halkbank could face a multibillion-dollar fine after one of its executives was convicted in a US court last year of breaking sanctions on Iran.
The White House has also been mulling over imposing sanctions on Turkey for purchasing Russian-made S-400 missiles.
The country’s inflation rate dropped to single digits in September for the first time in more than two years, with government critics claiming that the offiicial figure masks a truly higher rate.
Timothy Ash, an emerging markets analyst at BlueBay Asset Management in London, said US sanctions are a “growing concern” for Turkey.
Ash and other economists suggest that the impeachment inquiry in Congress is likely to influence Trump’s response to Turkey’s military operation in Northern Syria.
“Trump is fighting for his political survival and his flip-flopping on Syria just seems to have made his problems over impeachment that much more difficult,” Ash wrote in a note to clients.
Can Selcuki, general manager of Istanbul Economics Research, said the president could now face pressure from Congress to implement sanctions on Turkey over its Russian-made S-400 missile purchase.
“President Trump has been holding off,” Selcuki told Al Jazeera. “But now is not the best time for him to be going against Congress.”
He added that the greatest worry for Turkey is how foreign investors could react to growing uncertainty surrounding Ankara’s relationship with Washington.
“The incursion and how it impacts on Turkey’s relations with the US will be the biggest concern,” he said.
Ahmet Evin, a senior scholar at Sabanci University’s Istanbul Policy Center, said he expects a “very serious reaction from the US” in the event of a Syria operation.
“Trump doesn’t have much room to manoeuvre any more,” he said. “It seems he is making a series of knee-jerk reactions. There are other pressures and the domestic US situation is exacerbating the feelings of Congress against the White House.”
Resettlement plan and the Turkish economy
Turkey’s military operation in northeast Syria aims to drive the Syrian Democratic Forces from its southern border. The group is spearheaded by Kurdish fighters that Ankara considers “terrorists” due to their ties to the Kurdistan Workers’ Party (PKK), which has waged a 35-year armed campaign inside Turkey.
Turkish President Erdogan has also revealed plans to settle up to two million Syrian refugees inside a 30-kilometre-deep “safe zone” on the Syrian side of the border between the Euphrates River and the Iraq frontier.
There are an estimated 3.6 million Syrians in Turkey, and Ankara is seeking international support for a $27bn project to provide housing, health services, schools and roads for a resettlement plan.
Such a scheme could also benefit Turkish companies.
News of the project saw shares in Mardin Cimento and Adana Cimento, two Turkish cement producers located near the Syrian border, leap as much as 44 percent this week.
Turkey has already resettled 370,000 Syrians in areas of northern Aleppo province that are under its control, and a larger scheme in the northeast could be a boon for Turkey’s construction industry, which was hammered as the country slid into recession at the end of last year.
“With the Turkish economy on the floor, Syrian refugees competing with the local population in a challenged job market is causing rising tensions,” said Ash.
However, one economist, who asked Al Jazeera to withhold his name, did not anticipate the project coming to fruition.
“There will be an understanding with the US as to the limit of the operation,” he said, “so I don’t think it will reach the point of refugee resettlement.”