May 23 2019

Lira drops on report Turkey given two-week deadline to cancel S-400s

Turkey’s lira fell against the dollar on Thursday, approaching the lowest levels since September, after CNBC reported that Ankara has a little over two weeks to cancel plans to buy Russian S-400 missiles or face severe penalties.

The lira fell to as low as 6.15 against the dollar and was down 0.6 percent at 6.13 as of 2:21 p.m. local time in Istanbul.

Turkey must abandon the multi-billion-dollar deal by the end of the first week of June and buy a Patriot missile defence system instead. Otherwise it will face removal from the F-35 stealth fighter programme, forfeiture of 100 of the jets and imposition of U.S. sanctions, CNBC said citing multiple people familiar with the matter.

Turkish Deputy Foreign Minister Yavuz Selim Kiran denied that the U.S. had set a deadline, the pro-government A-Haber television said.

Turkey is in the middle of a political crisis with the United States and its NATO allies over the plans to take delivery of Russian weapons as early as July. Western politicians and analysts see the deal as threatening NATO unity and a sign of Turkey’s estrangement from the West under the increasingly authoritarian rule of President Recep Tayyip Erdoğan.

Erdoğan, who has developed close political relations with Russian President Vladimir Putin over the past three years, has insisted several times this month that the plan to buy S-400s is a done deal and won't be reversed. 

The crisis with the United States is having a knock-on effect on the economy, which entered a recession in the second half of last year. The central bank reported this week that consumer confidence in the country fell to the lowest levels since records began in 2003. The volatility is prompting Turks to buy foreign currency to protect their savings.

Erdoğan's political clashes with the United States, including a crisis over Turkey's detention of a U.S. pastor last year, may have lost him friends in the West, but his stance has won support among many Turks and Muslims in the wider Middle East who oppose American power.