The US-Turkey dispute, a play in three parts, has taught us that there is no rule of law in Turkey – there is only Erdogan's law

There is a saying in the United States, “when in a hole stop digging”. It seems in the latest phase of the diplomatic crisis between the US and Turkey, both sides are insisting on digging deeper and escalating their brinksmanship.

Crises between allies, even among Nato members, are not uncommon but they are almost never this public or this nasty. Turkish President Recep Tayyip Erdogan has argued that the US is at war with Turkey and that he will retaliate – in fact he has asked Turks to boycott American-made products such as the iPhone – and has, with the help of his submissive press, unleashed torrents of accusations.

He has also threatened to search for alternative allies or alliances. President Donald Trump, on the other hand, has promised more sanctions on top of those announced on steel and aluminum imports, if the detained American pastor Andrew Brunson is not sent home.

In the meantime, the Turkish lira, already battered by poor economic performance, experienced some of its worst days as it sank dramatically, putting at dire risk large segments of the Turkish private sector.

This really is like a play in three interconnected and yet discordant acts. It begins on the night of July 15, 2016 when elements of the Turkish military tried and failed to overthrow the government. The coup failed in part because the authorities had got wind of it; they blamed Mr Erdogan’s former ally, the Pennsylvania-based cleric Fethullah Gulen, for masterminding it. Nonetheless, Mr Erdogan used the coup attempt to construct a new narrative that would help him take control of the Turkish state.

Takeover he did, as he purged the military, judiciary, bureaucracy, universities and civil society organisations and staged a disputed referendum on a new presidential system that effectively put an end to the separation of powers; the legislature, the judiciary and other institutions such as the central bank.

Mr Erdogan’s post-coup narrative became decidedly anti-American – some say he was disappointed by then President Barack Obama’s torpid support at the time of the coup. But Turkish authorities had welcomed Mr Trump’s arrival.

Yet it is after Mr Trump was inaugurated on January 21, 2017, that Brunson was arrested and accused of undermining the Turkish state, collaborating with Mr Gulen and the Kurdistan Workers’ Party, the PKK. This was followed by the arrest of three long-standing local American consular officials. These officials, who are Turkish nationals and are critical components of the diplomatic service, were also accused of trying to overthrow the state.

These allegations were construed of fantastic, conspiracy-laden and preposterous allegations. But Mr Gulen’s presence in the US has provided the fuel for such an anti-American campaign.

Independently from US-Turkish relations, the second act has to do with the weakening of the Turkish economy. As the memory of the 2008 global financial crisis faded, international measures such as quantitative easing came to end; US interest rates increased and the dollar gained almost five per cent in value against all currencies in 2018.

These developments destabilised Turkey’s high-growth economic phenomenon. It had rested on two pillars: massive infrastructure spending and relatively cheap foreign exchange loans. Turkish inflation shot up. This is where the one-person rule of Mr Erdogan became determinative.

The Turkish president refuses to countenance orthodox economic theory, which maintains the way to combat inflation is by increasing interest rates. He assiduously believes in the opposite, that high interest rates cause inflation. As a result, a non-independent Turkish Central Bank has been prevented from increasing interest rates, further undermining international confidence in the Turkish economy and its currency.

Worse, with the consolidation of all power in the presidential palace, Mr Erdogan also elevated his son-in-law, Berat Albayrak, to finance minister. Mr Albayrak, unlike previous stewards of the economy, has neither the requisite experience nor the international standing to succeed.

Moving forward, Mr Erdogan is trapped. The buck effectively stops with him because he has no one to blame for poor economic performance. Instead, his government chose to mount a wall-to-wall campaign blaming currency fluctuations on sinister hands who are intent on destabilising the new Turkey. Initially the blame was ascribed to Jews by the press, then to a Zionist-evangelical cabal by Mr Erdogan and now the government has finally settled on Washington.

America’s behaviour constitutes this play’s third act. The Trump administration was surprisingly silent over the detention of pastor Brunson and its consular employees, as well as to dual Turkish-American citizens who have also been charged with coup plotting. The Turkish-American bilateral relationship was already burdened by significant differences.

The most important among them was the US decision to partner with the Kurdish People’s Protection Units, or YPG, in northeastern Syria against ISIS. The YPG’s close connections to the PKK enraged the Turks and contributed to the deterioration of relations. Ankara’s decision to purchase Russian S-400 missiles that would potentially enable the Russians to glean sensitive information from the brand new F35 fighters, in turn, caused enormous concern in Washington, especially in Congress. The jailing of a Turkish state-owned bank’s employee in New York on sanction-avoidance accusations did not help matters.

Amidst all these issues, the downplaying of the Brunson affair and other detainees in Turkey was a mistake. It allowed Mr Erdogan, for whom the detainees were bargaining chips, to think that he could hold them for as long as he wanted. To the Turks’ great surprise, Brunson and the others jumped the queue to become the White House’s number one priority.

It is Vice President Mike Pence’s close ties to the evangelical community that finally brought the issue to the surface, coinciding with the rising unease with Turkey not just over the S-400 purchase but also with the detention of the consular officials.

The sudden interest led to negotiations between Mr Erdogan and Mr Trump at the Nato Summit that seemed to produce results. Mr Trump even convinced Benjamin Netanyahu to release a Turkish Hamas sympathiser from jail. Whereas Mr Trump thought he had a deal to have Brunson sent home, Mr Erdogan remanded him to house arrest.

Whether this was a misunderstanding between the two mercurial leaders or a ploy by the Turks to get more in exchange is unclear.

Suffice to say, feeling abandoned at the altar, Mr Trump reacted with fury by doubling tariffs on imported Turkish steel and aluminium. This was followed by the characteristic acerbic tweets that attacked the Turkish economy. The result was a perfect storm; the Turkish lira suffered its worst losses ever in a matter of days eliminating all confidence in the Turkish economy.

At this stage even if the US and Turkey manage to bury the hatchet, the Turkish economy, already burdened by poor stewardship, will suffer the consequences for some time to come. There is no easy way out of this crisis. The economy will contract much more than anticipated as private sector firms with large exposures for foreign exchange-denominated loans will struggle to make their payments and the inflation rate increases.

Paradoxically, of all the issues that separated the two countries, the prisoner problem was the easiest to resolve. This particular crisis did not need to happen. The Turkish miscalculation was that these prisoners did not matter to the US; Washington certainly contributed to that impression by not forcefully advocating for their release earlier. What Mr Erdogan failed to understand was that the jailing of Brunson and the others under preposterous charges refuted the notion of an independent Turkish judiciary.

In the end, the case of prisoners highlighted the very essence of the new Turkish state for everyone to see: that there is no rule of law in Turkey, there is only Mr Erdogan’s law. Investing under such circumstances is of course possible, but there will always be a premium to pay.

 Henri Barkey is the Cohen Professor of international relations at Lehigh University and a Senior Fellow for the Middle East at the Council on Foreign Relations