U.S. Sanctions on Turkish Ministers Draw Vows of Retaliation

(Bloomberg) -- Turkey vowed retaliation for U.S. sanctions over its continued detention of an American pastor, as the multiplying divisions separating the NATO allies overshadowed their longtime strategic ties.

“There is no doubt that the decision, which disrespectfully meddles in our judicial system, violates the essence of our relations and will seriously damage the constructive efforts made to resolve problems between the two countries,” the Turkish Foreign Ministry said. “An equivalent response to this aggressive attitude will be given without delay,” it added, without elaborating.

The sanctions target Turkey's Minister of Justice Abdulhamit Gul and Minister of Interior Suleyman Soylu, who “played leading roles in the organizations responsible for the arrest and detention of Pastor Andrew Brunson,” the U.S. Treasury Department said in a statement Wednesday. While limited in their direct effect, the penalties added to the winds already buffeting investors and sent markets reeling.

The move against President Recep Tayyip Erdogan's government also highlights the disconnect between Turkey and the U.S. as they fail to negotiate their way out of an array of conflicts. Relations used to be based on strategic interests, but more recently, they've been dominated by discord over alliances in Syria's civil war, Ankara's strengthening ties with Moscow, and its uneasy position within NATO.

The sanctions -- the first serious move since President Donald Trump hinted at the penalties last week -- drew a public rebuke from Turkey and are likely to deepen the feud.

“We've seen no evidence that Pastor Brunson has done anything wrong and we believe he is a victim of unfair and unjust detention by the government of Turkey,” White House press secretary Sarah Huckabee Sanders said Wednesday. The sanctions were imposed “at the president's direction,” she said.

Read a QuickTake on the widening rift between Turkey and the U.S.

The lira slumped to a record low Wednesday as the U.S. imposed the penalties, then fell further on Thursday, to trade 1.8 percent lower at 5.0869 per dollar at 12:51 p.m. in Istanbul. The yield on 10-year debt bonds jumped 72 basis points an all-time high of 19.31 percent, and the benchmark share index dropped 3.1 percent.

The penalties were issued under the Global Magnitsky Act of 2016, which allows the U.S. government to target individuals, companies or other entities involved in corruption or human-rights abuses anywhere in the world. All assets in the U.S. belonging to the two ministers will be blocked, and U.S. entities are prohibited from doing business with them.

Justice Minister Gul said he didn't own anything in the U.S. Soylu, the interior minister, said the only thing he needs to get back from the U.S. is Fethullah Gulen -- a Pennsylvania-based cleric whom the Turkish government holds responsible for a 2016 military coup attempt against Erdogan.

While the U.S. refuses to extradite Gulen due to judicial standards observed to decide whether the cleric is guilty, it fails to show the same respect to the judicial procedure Brunson is involved in, Turkey has said.

Brunson, who was first detained in 2016, was moved into house arrest last month. He faces trial on charges of involvement in the coup attempt against Erdogan's government.

“The United States will impose large sanctions on Turkey for their longtime detainment of Pastor Andrew Brunson, a great Christian, family man and wonderful human being,” Trump tweeted on July 26. “He is suffering greatly. This innocent man of faith should be released immediately!”

U.S. ‘Hostages'

Within the State Department, Brunson and other prisoners including NASA scientist Serkan Golge and three Turkish employees of the U.S. mission to Turkey are referred to as “hostages.” The U.S. says they're innocent and being held by Turkey for the sole purpose of extracting concessions on other points of tension in the U.S. relationship.

The two countries have quarreled over a panoply of foreign policy issues that have driven the NATO allies to outright hostility. Foremost among them are differences over policy in Syria and Iran, Turkish suspicions about the U.S. response to the coup effort, and the Turkish leader's budding friendship with Russian President Vladimir Putin.

The U.S. is also considering a hefty fine on state-run lender Turkiye Halk Bankasi AS for its role in evading U.S. sanctions targeting Iran's nuclear program, and it would impose sanctions on Turkey when it receives delivery of a missile defense system from Russia, expected in 2019.

From Turkey's side, the U.S. has done little to extradite Gulen.

As of last week, the Americans thought they had a deal that would bring Brunson home, according to accounts by officials on both sides of the matter. In return for the release of the evangelical pastor, the U.S. administration would recommend a lenient fine on Halkbank. The U.S. also offered to send Mehmet Hakan Atilla, a former executive at the bank who's been jailed in the U.S., back to Turkey to serve out the rest of his term.

To contact the reporters on this story: Toluse Olorunnipa in Washington at tolorunnipa@bloomberg.net;Benjamin Harvey in Istanbul at bharvey11@bloomberg.net;Onur Ant in Ankara at oant@bloomberg.net

To contact the editors responsible for this story: Kevin Whitelaw at kwhitelaw@bloomberg.net, Amy Teibel, Mark Williams