First the Turkey Coup, Now the Economic Crash

Turkey’s currency exchange rate suffered a 4.6 percent crash versus the U.S. dollar, as international investors interpreted the failed military coup and retaliatory political purge as the end of strong growth and beginning of a period of protracted economic instability in the NATO ally.

The July 15 attempted coup d’etat rocked the capital city of Ankara with gun battles, explosions and an F-16 shooting down a helicopter at the Parliament building. But with President Recep Tayyip Erdogan back in control, he promised cheering throngs that he would punish those behind the takeover attempt.

At least 265 people are dead in the failed Army putsch, led by what government sources referred to as the FETÖ terror organization,” headed by a Saylorsburg, Pennsylvania-based Imam preacher Fethullah Gülen. In a sign of the depth of the coup’s support, NTV television said 34 generals of various grades and at least 3,000 troops had been arrested so far. They include senior figures like Erdal Ozturk, commander of the third army, and the commander of the Malatya-based second army, Adem Huduti.

The Obama Administration has long been rumored to have a deep involvement with Fethullah Gülen, who in the U.S. controls the Concept Schools and the Accord Institute for Educational Research. These Gülen entities hold lucrative administrative contracts to operate 146 publically-funded K-12 charter schools in 26 states and the District of Columbia, plus 9 privately-funded schools. California is host to a key charter schools operation under the names Magnolia Science Academy and the Bay Area Technology Schools.

Erdogan has pushed to for the Obama Administration to extradite Fethullah Gülen back to Turkey since the November 2014 NATO Summit. He complains the Islamic cleric and his supporters have used their influence within the Turkish judiciary, police and state bureaucracy to plot against the Erdogan Administration and its allies.

Now that Erdogan has fought off the coup, he is purging society through the Turkish Supreme Board of Judges and Prosecutors, which ordered 2,745 judges detained, plus the arrest of 11 prosecutors, 10 Court of Appeals members and 140 other people.

While Europe and the U.S. have wallowed in slow growth over the last few years, Turkey’s economy has been booming with year-on-year economic growth at a five-year high of 5.7 percent last year and running at a strong 4.8 percent this year.

Although Turkey is classified as an emerging market economy, it is already one of the world’s biggest producers of agricultural products; textiles; motor vehicles, ships and other transportation equipment; construction materials; consumer electronics; and home appliances. Turkey’s red hot stock market index has almost tripled since 2009.

Construction has sizzled across Turkey as speculators bet that the NATO member would join the European Union by 2020. In the major cities of Istanbul and Ankara, a number of one million plus square feet commercial towers are rising, and factory space has also been expanding fast, as EU membership would eliminate a large number tariffs erected by EU members against Turkey’s cheap labor advantage.

But with the combination of the Brexit tearing the EU apart internally, and the coup demonstrating that Turkey’s internal political and economic situation is imploding fast, the probability of Islamic Turkey being offered membership in the free-trade and free-transit EU seem slim.

Erdogan is now demanding that Gülen be surrendered to Turkey immediately. In an action that smacks of suspicion that the Obama Administration had some hand in the coup, Turkey has cut off power and suspended U.S. Air Force operations at Turkey’s huge Incirlik Air Base, which serves as the main American F-16 launching platform for the round-the-clock bombing campaign against ISIS in Syria and Iraq.

Pentagon Press Secretary Peter Cook responded in a statement to the closure of Turkey air space to their NATO military ally that the U.S. military was still seeking a full accounting of all personnel and dependents in Turkey: “All indications at this time are that everyone is safe and secure.” He added, “We will continue to take the necessary steps to ensure the safety and security of our service members, our civilians, their families and our facilities.”

Incirlik also serves as one of the U.S. Strategic Air Command’s six front-line bases, which was upgraded during the Ukraine face-off with the Russians to stock 50 modernized B61 nuclear bombs in 21 hardened aircraft shelter-vault complexes.

As economic retaliation, Stratfor is reporting the U.S. has just banned all airlines from flying from Turkey to the United States due to “diminished security,” even via third countries. Given that Istanbul’s Ataturk Airport is the third-busiest in Europe, the U.S. sanctions will slam tens of thousands of passengers and hundreds of flights each week.

Turkey has been seen as among the most stable governments and economies in the Middle East. Both of those assessments have drastically changed.