ISTANBUL (Reuters) - Turkish authorities have scrambled to stem a fall in the lira, precipitated by President Tayyip Erdogan’s criticism of a U.S. decision last week to declare Israeli sovereignty over the occupied Golan Heights.
The lira weakness underscored a lack of confidence in the currency among Turks, and highlighted the risk of a further selloff if diplomatic ties between the United States and Turkey deteriorate on any of a number of fronts:
Washington is concerned about Turkey’s decision to buy Russian S-400 surface-to-air missile batteries, which are not compatible with NATO defenses. It has offered U.S. Patriot missiles instead, with an end-March deadline for Ankara to decide. The S-400s are due to be delivered in July.
U.S. officials have also said that if Turkey goes ahead with the S-400 deal it would jeopardize Ankara’s purchase of F-35 fighter jets and possibly result in the U.S. imposing sanctions.
U.S. support in Syria for the Kurdish YPG militia, which Ankara sees as a terrorist organization, infuriated Turkey. Turkey wants to set up a safe zone on its southern border to ensure that when and if U.S. troops withdraw from northeast Syria, no YPG fighters remain near Turkish territory.
The United States wants guarantees that the U.S.-backed YPG forces which defeated Islamic State will not be harmed.
The United States reimposed sanctions on Iran last year, barring countries from importing oil from Tehran. It has issued waivers to some countries including Turkey, but wants pledges from those countries to continue reducing imports.
Turkey is dependent on imports for almost all of its energy needs and Iran is a key gas and oil supplier.
An Istanbul court on Thursday ruled that Metin Topuz, a translator and fixer for U.S. consulate in Istanbul, should remain in detention until his trial on espionage charges resumes in May.
His arrest in October 2017 led to a diplomatic dispute and suspension of visa services by both countries.
Another consular employee is under house arrest while a third consular employee, in the southern city of Adana, was convicted in February of membership of an armed terrorist organization and jailed for four years. He was freed due to time served.
Erdogan has bitterly criticized U.S. support for Israel. He said its decision to recognize Jerusalem as Israel’s capital meant Washington had forfeited its role as a mediator in the region, while President Donald Trump’s support for Israeli sovereignty over the Golan Heights, captured from Syria in a 1967 war, could trigger a crisis.
The Golan Heights have “nothing even remotely to do with Israel...Trump is a bully,” Erdogan said.
When Trump gave his public backing to Venezuelan opposition leader Juan Guaido two months ago, Erdogan said he was shocked by the U.S. president’s move, and responded by calling President Nicolas Maduro to tell him: “Stand tall.”
Last year a U.S. court sentenced Mehmet Hakan Atilla, a Turkish citizen and banker at Turkey’s state-controlled Halkbank, to 32 months in prison after he was convicted of taking part in a scheme to help Iran evade U.S. sanctions.
Washington is also considering a fine against Halkbank.
Federal prosecutors accused Atilla of conspiring with gold trader Reza Zarrab and others to elude U.S. sanctions using fraudulent gold and food transactions. Zarrab pleaded guilty and testified for the prosecutors.
Zarrab described a scheme that he said included bribes to Turkish government officials and that was carried out with the blessing of Erdogan. Erdogan has condemned the case as a political attack on his government.
Turkey demands that the United States extradite Islamic cleric Fethullah Gulen, who Ankara has said orchestrated a failed 2016 military coup against Erdogan.
U.S. officials have said the courts would require sufficient evidence to extradite the elderly Gulen, who has denied any involvement in the coup.
Editing by Anna Willard