Erdogan Quiet About U.S. on Campaign Trail, Giving Markets Relief

(Bloomberg) -- Turkey's President Recep Tayyip Erdogan is keeping uncharacteristically quiet these days.

Erdogan, known for his agitated speaking style, had nothing to say at four campaign stops Tuesday about President Donald Trump's decision to strip some Turkish exporters of their preferential trade status. He also kept mum about U.S. pressure to halt Turkey's purchase of a Russian missile defense system and install a multinational force in a planned Syria safe zone, over Ankara's objections.

Trump's Trade Step Shows U.S. Can Hit Turkey Where It Hurts

With municipal elections in the offing this month, the last thing Erdogan wants is a new political crisis that would send markets crashing, as happened over the summer when Ankara and Washington got into a standoff. The lira has already depreciated against the dollar for four straight weeks, losing about 3 percent as it remains vulnerable to political tremors and economic policy missteps.

The most pointed retort to the U.S. came from Foreign Minister Mevlut Cavusoglu.

“If we are NATO allies and if we are supposed to deepen our solidarity, then you will sell it when Turkey asks for it,” Cavusoglu said, according to state-run Anadolu Agency. “If you don't want to give it, then don't interfere with Turkey's purchase from another country outside NATO.”

But while Erdogan tries to buy time on critical issues dividing the NATO allies at least until after the elections, the stakes are getting higher.

The U.S. is warning it could sanction Turkey if it goes ahead with a plan to buy Russia's S-400 surface-to-air missile defense system. The sale could also block Turkey's planned purchase of the next-generation F-35 jet it's helping to build.

“We've clearly warned Turkey that its potential acquisition of the S-400 will result in a reassessment of Turkey's participation in the F-35 program and risk other potential future arm transfers to Turkey, as well as lead to potential sanctions,” U.S. State Department Deputy spokesman Robert Palladino told a briefing in Washington on Tuesday. Penalties would be applied to any government entities, private businesses or individuals involved in such a transaction.

The U.S. doesn't want Turkey to buy the Russian missile system, which is expected to be delivered from July, because it could compromise NATO technology. Washington is also unhappy with Moscow's growing footprint in the Middle East.

F-35 Role for Turkey Is at Risk on Russia Arms Deal, U.S. Warns

Turkish-American ties remained strained over a number of other disputes, even after Turkey defused the last showdown by freeing long-held U.S. pastor Andrew Brunson in October. Chief among them are Washington's support for a Syrian Kurdish force that Ankara regards as a mortal enemy, Turkey's demand that the U.S. extradite a preacher it accuses of instigating the failed coup attempt in 2016, and the conviction in the U.S. of a Turkish banker on Iran sanctions violations charges.

Turkey also wants to secure any Syria safe zone along its border rather see that job done by a multinational force, to keep the Kurdish fighters away from its frontier. Washington allied with the Kurdish YPG in the battle against Islamic State, and wants an international armed presence stationed in a future safe zone to protect them from Turkey.

Top officials from both countries met in Ankara on Tuesday to try to bridge gaps but no breakthroughs were reported.

To contact the reporter on this story: Selcan Hacaoglu in Ankara at shacaoglu@bloomberg.net

To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, Amy Teibel, Paul Abelsky

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