“Under the pillow’’ - that’s where Turks can find the weapons to fight back against American sanctions, according to their president.
The local idiom describes where Turkish savers supposedly stash their foreign currency. On Friday, two days after the US imposed unprecedented penalties on its Nato ally, President Recep Tayyip Erdogan urged the public to deploy all that money in defence of the country.
“Bring out the dollars, the euros and the gold,’’ he said. “Turn them into liras. Show your local and national resistance against the entire world.’’
Mr Erdogan knows where his economy, heavily reliant on foreign financing, is most vulnerable. But it’s not clear what he can do to shield it from the wrath of US President Donald Trump.
Enraged by Turkey’s detention of an American pastor on terrorism and espionage charges, the US president imposed sanctions Wednesday on two of Mr Erdogan’s cabinet ministers. Even that largely symbolic step was enough to send investors fleeing for the exit. There’s a widespread expectation that tougher measures are on the way. On Saturday, Turkey responded by freezing the assets of two US cabinet secretaries.
It’s all happening to an economy that was already in the high-risk category, after running hot for years. The lira had plunged more than 20 per cent even before Mr Trump’s sanctions. Companies that gorged on dollar borrowing are struggling to repay their debts. Inflation is getting out of control.
Absent of a diplomatic breakthrough that results in the release of pastor Andrew Brunson, analysts expect further American actions that could impose more direct economic costs.
The US could follow the pattern it applied in Russia, and blacklist “major industrialists who are supporting Erdogan", according to Richard Nephew, an expert on energy sanctions at Columbia University in New York.
Likely targets would include some of the builders of Mr Erdogan’s “crazy projects’’ -– more than $200 billion of investment in airports, bridges and a new shipping canal, which the president is relying on to sustain growth. They could find themselves frozen out of international markets.
Turkey’s plan to buy missile-defence systems from Russia is set to incur a separate raft of American sanctions. Then there’s state-owned lender Halkbank, which faces penalties after one of its executives was jailed in the US for busting Iran sanctions.
“A fine in line with previous violations could be billions of dollars,’’ enough to trigger a run on the lira, said Max Hoffman, an associate director at the Centre for American Progress.
In other circumstances, “the Turkish government likely would have swallowed its pride and paid the fine, to maintain access to US financial markets", he said. “In the context of the Brunson sanctions, that calculus may change.’’
Mr Erdogan and his ministers insist they’ll never bow to Mr Trump’s pressure. In a speech on Saturday in Ankara, Mr Erdogan said that he gave instructions to freeze all assets of the US justice and interior ministers in Turkey, “if they have any”. Turkey’s Ministry of the Interior is responsible for protection of the homeland and public order. The US equivalent is the Department of Homeland Security.
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In the same speech, he urged the US not to let its political issues infect the economy. "We do not want to play a lose-lose game. To extend political and judicial issues to the economic dimension damages both sides," Mr Erdogan said after calling the US sanctions "absurd". A few hours earlier, US Secretary of State Michael Pompeo had said he’s hopeful that Turkey will release Mr Brunson in the coming days.
“The real danger lies in the mentality of both leaders, who have strongman tendencies,’’ said Brian O’Toole, a nonresident senior fellow at the Atlantic Council in Washington. “Belligerent actions by one could quickly escalate with the other.’’
Watching nervously for signs of escalation will be Turkey’s central bank. Governor Murat Cetinkaya has already delivered 500 basis points of tightening this year to shore up the lira. But he shocked investors last month by deciding no further hikes were needed.
Mr Erdogan, who vowed to take more direct control over monetary policy after his re-election in June, is a fierce opponent of high rates. But with the American sanctions, “the lira is likely to fall further, strengthening the case for interest-rate hikes,’’ according to Jason Tuvey, an economist at Capital Economics in London. “Given the context of Turkey’s large current-account deficit and dependence on foreign capital inflows, there is a real risk of more severe macro stress.’’
Consumers wouldn’t be the only casualty of a disorderly depreciation. Several major industrial groups have already applied to restructure debt worth tens of billions of dollars, prompting banks to come up with a rule book for similar requests in the future.
Turkish banks themselves have about $100bn of foreign debt coming due in the next 12 months, according to Inan Demir, an economist at Nomura International in London. They’d normally be expected to roll those obligations over, he said. But in a scenario where Halkbank gets a huge fine, and the government resists paying it, “the rollover ratio will be much lower".
America’s ability to inflict more economic pain is so evident, and Mr Erdogan’s domestic position is so secure, that the Turkish leader may prefer to back down, according to Mr Hoffman. “It’s very possible he will try to make a quiet deal, in which he promises to release Brunson at the next hearing in exchange for relief from further sanctions,’’ he said.
Mr Demir said it may be too late. Sanctions imposed by the US last week were at the mild end of the spectrum - but still, in the market’s view, “a critical threshold was passed". And even if there’s no further diplomatic deterioration, the lira’s current level and the balance-sheet problems it creates could keep investors away.
It’s “not a foregone conclusion” that Turkey’s market woes will morph into an economic crisis, he said. But it’s “a big risk".
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Dhadak
Director: Shashank Khaitan
Starring: Janhvi Kapoor, Ishaan Khattar, Ashutosh Rana
Stars: 3
Killing of Qassem Suleimani
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The biog
Born: near Sialkot, Pakistan, 1981
Profession: Driver
Family: wife, son (11), daughter (8)
Favourite drink: chai karak
Favourite place in Dubai: The neighbourhood of Khawaneej. “When I see the old houses over there, near the date palms, I can be reminded of my old times. If I don’t go down I cannot recall my old times.”
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
How much of your income do you need to save?
The more you save, the sooner you can retire. Tuan Phan, a board member of SimplyFI.com, says if you save just 5 per cent of your salary, you can expect to work for another 66 years before you are able to retire without too large a drop in income.
In other words, you will not save enough to retire comfortably. If you save 15 per cent, you can forward to another 43 working years. Up that to 40 per cent of your income, and your remaining working life drops to just 22 years. (see table)
Obviously, this is only a rough guide. How much you save will depend on variables, not least your salary and how much you already have in your pension pot. But it shows what you need to do to achieve financial independence.
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
'Brazen'
Director: Monika Mitchell
Starring: Alyssa Milano, Sam Page, Colleen Wheeler
Rating: 3/5
