Turkey relations with US and NATO

Vladimir79 wrote:I don't really see how Turkey can survive US sanctions if they go Iranian style.  No European bank will touch them and they would be left to rely on China, which they have already begged and received $3.6 billion in loans for the power sector which they have no prayer of paying back.  It looks like Turkey is headed down the same path as Venezuela and Turks don't have oil.  

Very simplistic way of looking at things.

First off, world economy doesn't mean that if you have no oil, you cant survive. Second, you don't need US or EU to survive. Turkey is one of those nations that rely heavily on domestic consumption as well as self employment. While there are going to be issues, in the end, doesn't mean they wont have a market at all. Asia is the future, regardless what you or others may think.

And yes, they can switch to China. On Chinese terms of course. But it was no different than on US or EU terms.

miketheterrible wrote:

Very simplistic way of looking at things.

First off, world economy doesn't mean that if you have no oil, you cant survive.  Second, you don't need US or EU to survive.  Turkey is one of those nations that rely heavily on domestic consumption as well as self employment.  While there are going to be issues, in the end, doesn't mean they wont have a market at all.  Asia is the future, regardless what you or others may think.

And yes, they can switch to China.  On Chinese terms of course.  But it was no different than on US or EU terms.

Turkey needs foreign capital if they want to continue growing, it is the only way to balance their capital accounts deficit.  The Turkish farmer is heavily subsidised because they can't compete with import prices and even then their agricultural production has collapsed.  Produce is left rotting in the fields because they can't sell it at the prices they need to get for it.  It is foreign investment that has led the Turkish economy out of their last economic crisis and they have grown addicted to it.  With this unstable regime that money is drying up.  The fact that they rely on consumption is another negative to the economy as they are reliant on importing goods more than they export also exacerbating the current accounts deficit.  If Turkey had oil they would have more than enough revenue to close their current accounts deficit, but alas they do not.

They can borrow money from China but it doesn't do anything to fix their deficits, it is just trading one lender for another who still expects to be repaid. It is not like they can trade oil for cash like Venezuela.

Then they will have to learn to adapt. Consumption based nations survive entirely upon self sufficiency in producing what's needed for their citizens, and then slowly add inflation to increase money supply. England did just that well over 2 decades ago. It's up to the state also to invest, something Russia could have done long ago but relied upon foreigners for investing in themselves.

Nations survived as Autarkys before, doesn't mean it can't be done now.

Subsidies suck as it just makes people dependent. Good as a starter to get off the ground, but after that, no.

Turkey has various countries to work with - Iran, Caucases countries, Asian, etc. But you are right, major issue is their efficiency and costs.

But nations like India and USA rarely if ever had a positive account balance, ever.

miketheterrible wrote:Then they will have to learn to adapt. Consumption based nations survive entirely upon self sufficiency in producing what's needed for their citizens, and then slowly add inflation to increase money supply. England did just that well over 2 decades ago.  It's up to the state also to invest, something Russia could have done long ago but relied upon foreigners for investing in themselves.

Nations survived as Autarkys before, doesn't mean it can't be done now.

Subsidies suck as it just makes people dependent. Good as a starter to get off the ground, but after that, no.

Turkey has various countries to work with - Iran, Caucases countries, Asian, etc. But you are right, major issue is their efficiency and costs.

But nations like India and USA rarely if ever had a positive account balance, ever.

Consumption based economies rely on credit, not self sufficiency. As long as they can get what they need from someone else and sell something of equal value to another, they can maintain their current accounts. The US current account runs around a 2% deficit which is about as fast as their national debt grows. They have avoided collapse by maintaining nominal economic growth which dilutes the negative effects of their deficit, that and they are the world's reserve currency. At some point they will have to close their account deficit which is something their president is striving hard to do. The Turkish current accounts deficit is over 6% and they are no reserve currency so you are seeing a sell off. The inflation rate in Turkey is starting to get out of control, they report 15% but independent analysis indicates closer to 25%. Developed countries want a slow and steady inflation rate so their producer prices can see a steady rise for them to make a profit. If it goes into deflation the producers are losing money but the consumers are getting more for less.

We had state led investment, that is called central planning and it is an inefficient use of capital. Only in the case of strategic areas does the state need to decide that. The markets are far more efficient at determining where capital allocation needs to take place and letting the system flush out the failures instead of propping up zombie companies. This is another area the Turkish state is failing as they confiscate private assets for their alleged links to the Gulen movement and start nationalising the banking system. Over 50% of GDP is tied up in foreign loans that need to be repaid in a failing currency, their entire economy is at risk if they can't get these loans paid off. We are able to shrug off most of the negative side effects because we export huge amounts of fossil fuels and raw materials that easily pay for our imports, Turkey has no such luxury.

Yet fossil fuels account for less than a quarter of Russia's economic activity. Purpose of import substitution is that the private market in Russia still has access to the necessary goods without having to import it. And that is increasing substantially in last couple of years. Turkey may not be same as of course there was mismanagement, but doesn't need the US as much as we like to think.

As well, US growth entirely correlates to their quantitative easing they did over the years. This year, set to increase debt even more.

But I digress. We are to be talking of Turkey. And we'll, we will see where it goes. Nations have survived and developed without the necessary access to the west. I understand modern economics state so currently, but that will change thanks to US actions worldwide.

miketheterrible wrote:Yet fossil fuels account for less than a quarter of Russia's economic activity. Purpose of import substitution is that the private market in Russia still has access to the necessary goods without having to import it.  And that is increasing substantially in last couple of years. Turkey may not be same as of course there was mismanagement, but doesn't need the US as much as we like to think.

As well, US growth entirely correlates to their quantitative easing they did over the years. This year, set to increase debt even more.

But I digress. We are to be talking of Turkey. And we'll, we will see where it goes. Nations have survived and developed without the necessary access to the west. I understand modern economics state so currently, but that will change thanks to US actions worldwide.

The vast majority of things we buy are not Russian. You can't even get a Russian car anymore, Lada is now a subsidiary of Renault. All of these foreign goods we are buying are paid for with our commodities exports. We could not balance our accounts without them as we do not export enough finished goods to cover it. We are suffering the same globalisation reliance problem as Turkey, the only difference is we have the commodities to make up the difference.

Turkey does not need the US at all, they do need the EU and if the US tells them to stop taking Turkish lira, you will see their banks come to heel. Turkey can survive like Venezuela, but even Turkey has greater domestic problems with the Kurds that when social order is lost, they will have a civil war they can't control with no bankroll to pay for internal security.

Vladimir79 wrote:

miketheterrible wrote:Yet fossil fuels account for less than a quarter of Russia's economic activity. Purpose of import substitution is that the private market in Russia still has access to the necessary goods without having to import it.  And that is increasing substantially in last couple of years. Turkey may not be same as of course there was mismanagement, but doesn't need the US as much as we like to think.

As well, US growth entirely correlates to their quantitative easing they did over the years. This year, set to increase debt even more.

But I digress. We are to be talking of Turkey. And we'll, we will see where it goes. Nations have survived and developed without the necessary access to the west. I understand modern economics state so currently, but that will change thanks to US actions worldwide.

The vast majority of things we buy are not Russian.  You can't even get a Russian car anymore, Lada is now a subsidiary of Renault.  All of these foreign goods we are buying are paid for with our commodities exports.  We could not balance our accounts without them as we do not export enough finished goods to cover it.  We are suffering the same globalisation reliance problem as Turkey, the only difference is we have the commodities to make up the difference.      

Turkey does not need the US at all, they do need the EU and if the US tells them to stop taking Turkish lira, you will see their banks come to heel.  Turkey can survive like Venezuela, but even Turkey has greater domestic problems with the Kurds that when social order is lost, they will have a civil war they can't control with no bankroll to pay for internal security.  

Ownership is totally different than foreign made. Ladas are still made in Russia. Majority of parts are still too.

miketheterrible wrote:Yet fossil fuels account for less than a quarter of Russia's economic activity. Purpose of import substitution is that the private market in Russia still has access to the necessary goods without having to import it.  And that is increasing substantially in last couple of years.

Fossil fuels account for less than 8% of Russia's GDP and 17% of consolidated tax revenue. People need to update their knowledge instead
of swallowing NATO propaganda.

https://www.awaragroup.com/blog/russian-economy-2014-2016-the-years-of-sanctions-warfare/

(note that 10% includes all mining activity in Russia so by definition oil and gas are less than 10% and the amount of mining in
Russia is substantial.)

Exactly.

And even if the businesses are foreign owned, the factories can be taken over in worst case scenario. What matters is that production is at home

miketheterrible wrote:

Ownership is totally different than foreign made. Ladas are still made in Russia. Majority of parts are still too.

They are framed and assembled in Togliatti that had 120,000 employees making every part of the cars. Now that the French have reduced the numbers to 38,000 there are few parts made in Russia. Such was not the case in 2014 but they had so many defects in the parts they began outsourcing commonality of parts with Renault and Nissan models also made there.

kvs wrote:

miketheterrible wrote:Yet fossil fuels account for less than a quarter of Russia's economic activity. Purpose of import substitution is that the private market in Russia still has access to the necessary goods without having to import it.  And that is increasing substantially in last couple of years.

Fossil fuels account for less than 8% of Russia's GDP and 17% of consolidated tax revenue.    People need to update their knowledge instead
of swallowing NATO propaganda.

https://www.awaragroup.com/blog/russian-economy-2014-2016-the-years-of-sanctions-warfare/

(note that 10% includes all mining activity in Russia so by definition oil and gas are less than 10% and the amount of mining in
Russia is substantial.)

It doesn't matter what % of GDP it is as internal activity has nothing to do with the current account.  What matters is the percentage of exports and commodities are over 70%.

Vladimir79 wrote:

miketheterrible wrote:

Ownership is totally different than foreign made. Ladas are still made in Russia. Majority of parts are still too.

They are framed and assembled in Togliatti that had 120,000 employees making every part of the cars.  Now that the French have reduced the numbers to 38,000 there are few parts made in Russia.  Such was not the case in 2014 but they had so many defects in the parts they began outsourcing commonality of parts with Renault and Nissan models also made there.  

Then exactly how much of it is imported parts vs none?  I have seen various numbers but I am curious what you state. What I heard/read was 67% roughly of localization of parts. Ford produces 50% or close to. I doubt Lada vehicles would have less.

Vladimir79 wrote:

kvs wrote:

miketheterrible wrote:Yet fossil fuels account for less than a quarter of Russia's economic activity. Purpose of import substitution is that the private market in Russia still has access to the necessary goods without having to import it.  And that is increasing substantially in last couple of years.

Fossil fuels account for less than 8% of Russia's GDP and 17% of consolidated tax revenue.    People need to update their knowledge instead
of swallowing NATO propaganda.

https://www.awaragroup.com/blog/russian-economy-2014-2016-the-years-of-sanctions-warfare/

(note that 10% includes all mining activity in Russia so by definition oil and gas are less than 10% and the amount of mining in
Russia is substantial.)

It doesn't matter what % of GDP it is as internal activity has nothing to do with the current account.  What matters is the percentage of exports and commodities are over 70%.

That doesn't matter.  Believe me, coming from a country that produces way less than Russia does and has a deficit in current account for a very long time.  Economic activity in Russia Turkey or anywhere can be adjusted with no export at all too.  It isn't be all end all.

miketheterrible wrote:Then exactly how much of it is imported parts vs none?  I have seen various numbers but I am curious what you state.  What I heard/read was 67% roughly of localization of parts.  Ford produces 50% or close to.  I doubt Lada vehicles would have less.

The body and frame are fabricated locally, the fasteners are local, the steel is local. They fabricate the pistons and case on one of the engine models but that is a recent thing.  The breaks used to be local but they cancelled that after high failure rates.  I can't remember if they closed the upholstery line.  They fired the vast majority of people that worked there.

That doesn't matter.  Believe me, coming from a country that produces way less than Russia does and has a deficit in current account for a very long time.  Economic activity in Russia Turkey or anywhere can be adjusted with no export at all too.  It isn't be all end all.

It matters for us because our exports are not diversified; it is commodities, equipment associated with commodities and weapons.  If China has an economic crisis it will effect our current accounts greatly.  I see where you are from, you have a similar situation but you have vast resources to close your current accounts and far more diversified than us... Turkey does not.

We are nowhere near diversified as you guys.  Can you name me a Canadian product? We don't even make much for weapons anymore other than LavIII and AR-15 style rifles.  Our exports consist of automobiles (US made ones) and minerals.

You guys sell more in terms of other end goods than us.  Energy based ones, high tech, machinery, agriculture (for crying out loud, Rostelsmash owns our only tractor company), etc.

So no, actually you guys are more diversified than us.  I know this cause the fact we have to import train components for public transit, from Spain.  I was lucky to have family in government that deals with this kind of crap.  80% of our exports goes to 1 nation - USA.  And we give them oil at cost of $35 per bbl, and we end up buying back petrol from them at cost plus - that cost being oil prices on global market.  So we are losing billions per year to the Americans in our oil sales.  And we still import oil off of Newfoundland from Saudi Arabia.  Can you believe that?  It is stupid. But, like Russia, Canada doesn't rely on its current account (export) on its economic prosperity. Russia just has good current account but it only accounts for small portion of its total economy. That will continue to shrink when service sector increases and further self sufficiency. Turkey is working on that path too. It isn't easy, and it will continue to be hard. But they will get over it. They have no choice, as you pointed it out.

Edit: as well, it seems that localization of parts for Ford is around 60%, not 50%.  So I assume that Ladas would be much more than that, than ford.

https://sdelanounas.ru/blogs/101371/

miketheterrible wrote:We are nowhere near diversified as you guys.  Can you name me a Canadian product? We don't even make much for weapons anymore other than LavIII and AR-15 style rifles.  Our exports consist of automobiles (US made ones) and minerals.

You guys sell more in terms of other end goods than us.  Energy based ones, high tech, machinery, agriculture (for crying out loud, Rostelsmash owns our only tractor company), etc.

So no, actually you guys are more diversified than us.  I know this cause the fact we have to import train components for public transit, from Spain.  I was lucky to have family in government that deals with this kind of crap.  80% of our exports goes to 1 nation - USA.  And we give them oil at cost of $35 per bbl, and we end up buying back petrol from them at cost plus - that cost being oil prices on global market.  So we are losing billions per year to the Americans in our oil sales.  And we still import oil off of Newfoundland from Saudi Arabia.  Can you believe that?  It is stupid.

Edit: as well, it seems that localization of parts for Ford is around 60%, not 50%.  So I assume that Ladas would be much more than that, than ford.

https://sdelanounas.ru/blogs/101371/

Your exports are more diversified than ours...

http://www.worldstopexports.com/canadas-top-exports/
http://www.worldstopexports.com/russias-top-10-exports/

The measure of localisation of parts is based on the number of parts, not the value.

I'll question that greatly,, especially since we know exactly what's made here. And who owns what. We can contest this but KVS can agree to it too since he is also Canadian. Don't believe everything being read. Those machine parts and automotives? Who makes them? Who owns them? Etc.

Aircraft and space parts?  were is Russia's military sales in that one?  Bombardier isn't even ours anymore, its airbus and most has moved production cause Bombardiers performance was garbage.  Same with their production of train carts for crying out loud.  I guarantee you that listing is grossly incomplete.

Its sad that we have to discuss this.  Russia, which produces 6 of the modules for space while Canada produces a robotic arm, Russia with a growing civil airplane sales, with a growing fabrication plant for IC production while Canada lost ours after ATI was sold off to AMD, etc.

Edit: Anyway, I don't care much about exporting as it doesn't actually talk about full health of the economy.  Look at total contribution of exports to Russias overall economy and then you get the picture.  Autarkys have existed and will continue to exist in future because of the fact you open yourself up to devastation with relying on exports.  I would love to obtain various Russian technologies and goods in Canada here, but that will never happen cause Russians are not the greatest in marketing, and due to politics, it wont make it out west.  Guarantee you the Lada Vesta or Xray runs thousands times better than my POS Dodge Journey made in Canada which has so many issues now, it wont pass next inspection.

Also, I want to apologize that I have gone off topic as well.

Your machine and automobiles are probably owned by the Americans but have operations in Canada that export to the US as your major trading partner. Your industry is also tied to the American MIC so you get to export for their defence and space programme. The French masterfully stole Bombardier from you based on the threat of US tariffs which never would have come according to the court ruling. You do have a more diversified export sector but it is dependent on the Americans and subject to their trade policies.

We export rockets to the French for use at their Space Port in S. America but that is the majority of our space exports, aside from helping India's new space programme. Our aerospace industry is subject to the French participation in the SSJ100 and they control our automobile production.

To get back on topic is getting to the current accounts and it's importance to fiscal health. If you don't have a balanced current account your country is in a debt spiral, the Americans can make it last for decades as the reserve currency, Canada and Russia have vast natural resources to balance the current account. Turkey has nothing to balance theirs accept a healthy tourism industry that brings in much needed foreign currency. The more unstable their regime and unfriendly attitude to tourist nations the harder it will be for them to get those tourists with the foreign currency they need. They are getting more tourists now as their currency falls but those tourists are spending less per person and has been that way ever since the lira started its long decline a decade ago.

The lira is sitting at 6 to the dollar...

Trump says US 'relations with Turkey are not good at this time'

U.S. President Donald Trump said on Aug. 10 he had authorized higher tariffs on imports from Turkey, imposing a 20 percent duty on aluminum and 50 percent one on steel, as tensions mount between the two NATO allies over Ankara's imprisonment of an evangelical pastor and other diplomatic issues.

"I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar!" Trump said in an early morning post on Twitter. "Aluminum will now be 20 percent and Steel 50 percent. Our relations with Turkey are not good at this time!"

http://www.hurriyetdailynews.com/trump-says-us-relations-with-turkey-are-not-good-at-this-time-135672

Our economy is getting worse and worse day by day. it has nothing to do with Trump or his sanctions to Turkey or imprisonment of Pastor Brunson. These are small reasons that accelerate economic collapse in Turkey. Our economy began to weaken in 2013, when FED took decision to increase interest rates and stop pumping dollars in the markets. The countries most affected by the FED's decision are developing countries like Turkey and Argentina. Argentina's economy is a little bit stabilized in now a days. However, In 2013, Our goverment dıdnt take any take steps about incoming economic collapse that comes after the FED's decision. Only thing that our goverment did between 2013 and 2018 is building Apartments, Bridges, Roads and Airports. They also killed the agricultural and livestock industries in Turkey and now we are buying livestocks from Balkans and wheat from Russia. Now, Turkey is a country that doesn't produce anything but consuming like crazy.

Airman wrote:Our economy is getting worse and worse day by day. it has nothing to do with Trump or his sanctions to Turkey or imprisonment of Pastor Brunson. These are small reasons that accelerate economic collapse in Turkey. Our economy began to weaken in 2013, when FED took decision to increase interest rates and stop pumping dollars in the markets. The countries most affected by the FED's decision are developing countries like Turkey and Argentina. Argentina's economy is a little bit stabilized in now a days. However, In 2013, Our goverment dıdnt take any take steps about incoming economic collapse that comes after the FED's decision. Only thing that our goverment did between 2013 and 2018 is building Apartments, Bridges, Roads and Airports. They also killed the agricultural and livestock industries in Turkey and now we are buying livestocks from Balkans and wheat from Russia. Now, Turkey is a country that doesn't produce anything but consuming like crazy.

The fundamentals of your economy are weak, high external debt, low FX reserves, high current accounts deficit. If Erdogan doesn't do something he will find himself on his knees in a month or so. If he doesn't release the pastor the US will block an IMF bailout. The only other place to turn is China. We have some money but not enough to bailout Turkey. Even a bailout isn't a solution that will fix your structural problems. Argentina raised interest rates to 40% which helped stabalise their currency. Erdogan has some half baked economic policy where he thinks low interest rates mean low inflation. When he said that on Bloomberg was when the lira really started its decline and the more he showed he actually believed it was when investors started the collapse of the lira.

Your housing bubble has definitely burst, more like blown up in Erdogan's face. What gets me is your reliance on imported food when you have crops rotting in the fields. Your subsidy system for agriculture is messed up. To get out from under foreign influence you must pay back over 50% of GDP to foreign creditors. As long as you are reliant on foreign financing you can never truly have your own sovereignty.

Economic war has been declared on Turkey. It is useless to blame Erdogan and start arguing how the markets would react differently to different economic policies. Fact is pals are treated magnanimously by the establishment while foes are crushed, and the agenda now is to get Turkey on its knees.

LMFS wrote:Economic war has been declared on Turkey. It is useless to blame Erdogan and start arguing how the markets would react differently to different economic policies. Fact is pals are treated magnanimously by the establishment while foes are crushed, and the agenda now is to get Turkey on its knees.

Erdogan created the current economic model reliant on foreign capital, there is no one else to blame but him. It is not useless to talk about how he created this problem as fixing it is the only way to bring Turkey back to fiscal solvency.