Yahya Madra
Mar 06 2018

Erdoğan’s very own military-energy-industrial complex

At the very centre of Turkey’s political economy is a conjunctural and contradictory alliance between the state and finance. These two institutions with varying degrees of influence and involvement organise their alliance around three central industries: construction, energy and armaments. It is worth exploring why these industries but not others ended up being central and what new contradictions these industries are creating for the state-finance alliance.

Construction is a field of investment, employment and a conduit for financialisation. President Recep Tayyip Erdoğan depends on finance for reproducing growth in the construction sector. At the housing end of the sector, finance serves both the construction companies and households seeking to buy homes through mortgages. At the infrastructure end of the sector, the alliance between finance and state becomes more explicit. Here, the state is not only the agency that creates projects - bridges, airports, tunnels, highways, stadiums, city hospitals and the like - it is also the institution that provides Treasury guarantees to the consortia, including for some of the more impossible, bridge-to-nowhere type of mega projects, in return for a minimum guaranteed revenue for a set number of years.

The dependence of growth on continued capital inflows, however, makes Turkey’s economy even more exposed to currency devaluation risk. With increasing political risks, finance does not stop coming but does so for increasingly short-term instruments and for higher risk premia. This is where the state-finance alliance turns sour.

A different mechanism can be identified in the energy sector. Here, the problem is the trade deficit and energy imports as its main driver. The state pushes for a very aggressive and, in many ways, irrational policy to extract and exploit domestic sources of fossil and hydro energy. In fact, in some of the hydroelectric power plant projects, the goal seems to be less solving the energy deficit than creating an outlet for contracting companies to do business.    

If one considers the fact that there is oil and gas in Azerbaijan, Iran, Iraq, Syria and now off Cyprus, Turkey’s energy deficit ends up being even more tantalising for the irredentist coalition that Erdoğan concocted out of his own conservative Sunni base and the ultra-nationalists. But even if Turkey does not have its own oil or gas, there is still money to be made through pipelines, ports and refineries. And given its strategic location between Europe, the second largest consumer of energy in the world, and the Caucuses and West Asian energy basin, there are still lucrative business opportunities in this sector.

Yet these opportunities, because they are fully embedded in the global geopolitical matrix of resource wars, can only be realised by state-like actors who can mobilise war machines, extend their sovereignty beyond their own territories, and provide guarantees for finance to be able to fund such mega projects. In other words, these types of energy projects require capacities that go well beyond the limits of capitalist corporations (even if they are multinational conglomerates). Recognition of such sub-imperialist aspirations of Erdoğan’s corporate sovereign vision may also help us make better sense of Turkey’s curious Sovereign Wealth Fund as a collateral aggregation mechanism that operates outside the purview of the regulatory agencies and the Treasury budget.

Noticeably, this aspect of the energy sector is very much entangled with the war in Syria at every stage. Most recently, right before it began its attack on Afrin, Turkey signed an agreement with Gazprom of Russia on the Turkish Stream gas pipeline. But the attentive reader may remember that, only a couple of years ago, in December 2015, Russia was presenting what it claimed to be proof of Turkey’s role in the Islamic State’s oil trade. It is clear that after the Syrian Democratic Forces, working with the Coalition Forces, took control of the east of the Euphrates and the oil fields to the south of Raqqa, Turkey’s capacity to organise the flow of Syrian oil through its own pipelines, refineries and ports was dramatically reduced.

Surely, the war in Afrin is not simply a “resource war”, it is a war through which Turkey externalises and projects its own internal contradictions onto a predominantly Kurdish territory that successfully kept itself out of the devastating civil war in Syria, and for that reason became a safe haven for some 300,000 Syrians fleeing the war.

Yet it is also a resource war, or at least the only way in which Turkey is able to insert itself into the global resource war.

Erdoğan’s Military-Energy-Industrial Complex emerges in response to this geopolitical context. It is indeed Erdoğan’s very own Military-Energy-Industrial Complex. His son-in-law, Berat Albayrak, is the minister of energy and natural resources. Another son-in-law, Selçuk Bayraktar, is the director of a drone company whose main customer is the Turkish Armed Forces. And another businessman, Ethem Sancak, most famous for announcing that he is in love with Erdoğan, produces armoured personnel carriers.