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Turkey's Erdogan fires central bank chief as policy rifts deepen
July 6, 2019
Orhan Coskun, Ece Toksabay

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FILE PHOTO: Turkey's new central bank governor Murat Cetinkaya speaks during a brief ceremony at which he officially took over from outgoing governor Erdem Basci in Ankara, Turkey, April 19, 2016. REUTERS/Umit Bektas/File Photo

ANKARA (Reuters) - Turkish President Tayyip Erdogan sacked the governor of the central bank on Saturday as differences between them deepened over the timing of interest rate cuts to revive the recession-hit economy.

Governor Murat Cetinkaya, whose four-year term was due to run until 2020, will be replaced by his deputy Murat Uysal, a presidential decree published early on Saturday in the official gazette showed.

No official reason was given for the sacking, but government sources cited Erdogan’s frustration that the bank has kept its benchmark interest rate at 24% since last September to support the ailing lira currency.

The Turkish economy shrank sharply for the second straight quarter in early 2019 as a punishing currency crisis, persistent double-digit inflation and high interest rates took a toll on overall output.

Erdogan wants lower rates to kick-start the economy.

“President Erdogan was unhappy about the interest rate and he expressed his discontent at every chance. The bank’s decision in June to keep rates constant added to the problem with Cetinkaya,” a senior government official told Reuters, speaking on condition of anonymity.

“Erdogan remains determined to improve the economy, and for that he made the decision to remove Cetinkaya,” the official added.

Analysts think the central bank could start easing monetary policy at a July 25 meeting.

However, Cetinkaya’s sacking comes just days before Turkey is expected to take delivery of Russian air defense systems, triggering likely U.S. sanctions which could put the lira under renewed pressure.

Two other government sources told Reuters disagreement between the government and the governor over monetary policy has intensified in the past few months.

Cetinkaya hiked the benchmark interest rate by a total of 11.25 percentage points last year to support the lira, pushing it to the current 24%.

CENBANK SAYS TO STAY INDEPENDENT

Erdogan, whose son-in-law is the finance and treasury minister, repeatedly criticized the central bank for keeping rates high.

“The president and the finance minister demanded his resignation, but Cetinkaya reminded them of the bank’s independence and declined to resign,” one of the government sources said.

In a statement on Saturday, the central bank said it will continue to operate independently and that the new governor will make maintaining price stability the key goal.

“In his first remarks, Murat Uysal, said the communication channels would be used at the highest level in line with the price and financial stability goals,” the bank said, adding that Uysal would hold a news conference in the coming days.

Data earlier in the week showed Turkey’s consumer inflation slowed to its lowest level in a year in June, mainly due to a high base effect from the prior year and a drop in food prices, potentially paving the way for the country’s first interest rate cut since last year’s currency crisis.

Annual inflation hit a 15-year high in October above 25%, but later dipped and is currently running just over 15.5%.

The lira is down about 5% this year after having plummeted 30% last year during the currency crisis.

‘CAPTIVE IN THE PALACE’
While the central bank emphasized its independence, a senior banker who did not want to be named due to the sensitivity of the issue, said the sacking raised questions regarding the bank’s authority.

“The removal of the governor from duty creates doubt regarding the job security of the head banker and the bank’s independence. We will be watching the bank closely in the coming period,” the Istanbul-based banker told Reuters.

The main opposition party also pointed to concerns that the move could undermine the bank’s credibility.

“Those who removed the central bank governor overnight have lost the right to demand confidence in the country’s economy. The central bank is a captive being kept in the palace,” said the main opposition party spokesman Faik Oztrak, referring to Erdogan’s office.

“The assumption is the new guy was hired because he will cut rates on demand from the presidential palace,” said Tim Ash, senior emerging markets strategist at BlueBay Asset Management.

“Ironically Uysal’s hiring likely makes it more difficult for the (central bank) to cut rates as the risk now is that the market reacts badly to this HR change at the central bank.”

Additional reporting by Nevzat Devranoglu; Writing by Ece Toksabay; Editing by Shri Navaratnam and Helen Popper


 

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India targets Turkish shipyard over ties with Pakistan
04 Oct 2019

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Hindustan Shipyard, shown, chose Anadolu Shipyard of Turkey as a technology partner. (Adityamadhav83/Wikimedia Commons)


NEW DELHI — For the first time, India is taking punitive action against an overseas defense company that could see Turkish firm Anadolu Shipyard banned from doing defense-related business in India.

The Turkish company’s defense ties with Indian rival Pakistan have grown recently, and the latest move could impact the Indian Navy’s $2 billion fleet support ships program, for which state-owned Hindustan Shipyard Limited has chosen Anadolu Shipyard as its technology partner.

An Indian Ministry of Defence official said the punitive action would bar Anadolu from carrying out any business with Hindustan because such a partnership could have grave consequences for India’s security.

Last week Anadolu launched the first of four anti-submarine corvettes for the Pakistan Navy, and the shipyard is expected to officially ink a partnership agreement with Hindustan under which would be built five fleet support ships for the Indian Navy.

“Involvement of [the] Turkish defense company will include overseeing construction, detailed manufacturing, engineering, selecting equipment, quality assurance, etc. This would mean a permanent presence of Turkish people at HSL yard. That is a big security risk,” a senior Indian Navy official said.

India’s Navy will direct Hindustan to immediately end ties with Anadolu, the official added.

Diplomats at the Pakistani Embassy in India were unavailable for comment, and Anadolu Shipyard executives declined to discuss the subject.

Anadolu was selected by Hindustan in January to provide the design and other technical assistance for building five fleet support ships. Hyundai Heavy Industries of South Korea was not selected because it reportedly refused to guarantee the ships would be built in India, a Hindustan executive explained.

The 45,000-ton fleet support ship’s would carry armaments, stores and other essential equipment to support other warships in naval operations, and therefore the designer would possess sensitive details of what the ship would carry, another Indian Navy official said.

Said a Ministry of External Affairs official: “India is cautious with any kind of [strategic] alliance with Turkey because [the latter] has very close ties with Pakistan."

India has not formalized defense cooperation with Turkey despite more than 70 years of diplomatic ties.
 

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Israeli Drones to Help Monitor Turkish "Encroachment" of Cypriot EEZ
October 11, 2019

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Aerostar Tactical TUAS (image: Aeronautics)

Israeli UAV manufacturer Aeronautics has sold 4 Aerostar tactical UAVs to the Cyprus' defense ministry to monitor Turkey’s exploration for oil and gas in the Eastern Mediterranean sea.

The deal valued at $13 million for four Aerostar Tactical UAS (TUAS) drones, which have a wingspan of 8.7 meters, will be used to control the country's offshore exclusive economic zone (EEZ) amid concerns that Turkey is “encroaching” on Cypriot territory in search of gas and oil.

The deal was reported by the Cyprus media but not confirmed by the Israeli company.

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Turkish drilling vessel Yavuz in the Mediterranean Sea (image tweeted by Fatih Dönmez, Minister of Energy and Natural Resources of Turkey)

The Aerostar TUAS can climb at a rate of 304m/min. The maximum and cruise speeds of the UAV are 203km/h and 114km/h respectively. The stall speed is 90km/h and the range is 200km. The UAV can loiter in air for a maximum of 12 hours.

The UAV features a robust airframe, an automatic identification system, a ship identification system, VHF radios, a hands-on throttle and stick control system, and vertical stabilisers. It is also equipped with a UMAS digital flight control system, directional antennae and a multi-channel data link system built by Commtact.

The drone is equipped with a large payload bay, and carries several types of payloads, including advanced, stabilized EO/IR sensors, Laser designation, Synthetic Aperture Radars (SAR)\GMTI, various electronic intelligence sensors (COMINT, ELIINT) and other advanced payloads.

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Turkish drilling vessel Yavuz in the Mediterranean Sea (image tweeted by Fatih Dönmez, Minister of Energy and Natural Resources of Turkey)

In July 1974, Turkey invaded Cyprus in order to crush a military coup backed by Greece. Ever since then, Ankara continues to lay claim to the breakaway Turkish Republic of Northern Cyprus, a de facto state situated in the north-eastern portion of the island.

According to the UN Law of the Sea Convention, a country’s EEZ (where it can claim fishing, mining and drilling rights) can stretch upto 200 miles out to the sea. In cases where maritime distance between two countries is less than 424 miles, the parties involved must determine an agreed dividing line between their EEZs.

Turkey has not signed up to the convention because the document grants significant rights to island territories. Ankara asserts right to the area stating that its continental shelf extends to the median line with Egypt. This in part overlaps with Cyprus’ blocks (including Block 7) in the EEZ.
Turkey does not recognise Cypriot EEZ; and demands authority over and a share of revenue generating from the oil and gas reserves for the Turkish Cypriots.

This July, the Cyprus government granted a licence to a consortium of France’s Total and Italy's Eni to explore for hydrocarbons in Block 7. In the same month, Turkish minister for energy and natural resources Fatih Donmez tweeted that the Oruc Reis seismic vessel would soon join a trio of Turkish Petroleum (TPAO) vessels in the Eastern Mediterranean.

On October 8, Turkey deployed two drilling vessels-Fatih and Yavuz, in the waters around Cyprus; with the Yavuz being assigned to drill in Block 7.
Ankara says its activities are legitimate since the licenses for TPAO’s exploration were granted by the Turkish Republic of Northern Cyprus and that it is merely defending the rights of Cypriot Turks. Both the Cypriot Government and the UN have condemned Turkey’s actions as illegal and provocative.
 

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Turkish state bank funneled billions to Iran, U.S. charges say
OCT. 16, 2019
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The charges say Halkbank was involved in a multi-layered scheme to cover up transactions that violate U.S. sanctions against Iran. File Photo by Sedat Suna/EPA-EFE

Oct. 16 (UPI) -- Federal prosecutors have charged a Turkish state-run bank with funneling billions of dollars to Iran, a violation of U.S. sanctions.

The Justice Department said Tuesday Halkbank has been indicted on six charges, including conspiracy, bank fraud and money laundering.
Prosecutors said the bank conspired to undermine U.S. sanctions against Tehran by illegally giving Iran access to billions while "deceiving U.S. regulators."

"This is one of the most serious Iran sanctions violations we have seen, and no business should profit from evading our laws or risking our national security," Assistant Attorney General for National Security John Demers said in a statement.

The department said the scheme also involved Turkish government officials so the bank could use money service businesses and front companies in Iran and the United Arab Emirates to cover up proceeds from the sales of Iranian oil and gas.

In some cases, the charges say, transactions were fraudulently designed to appear as food and medicine purchases -- so they'd be allowed under a "humanitarian exception" in the sanctions.

Halkbank illegally transferred $20 billion worth of restricted Iranian funds, prosecutors said.

"The bank's audacious conduct was supported and protected by high-ranking Turkish government officials, some of whom received millions of dollars in bribes to promote and protect the scheme," U.S. Attorney Geoffrey Berman said. "Halkbank will now have to answer for its conduct in an American court."

The indictment stems from the arrest of a Turkish banker in 2016 for evading U.S. sanctions. The banker agreed to a deal with prosecutors to cooperate with investigators. Turkish President Recep Tayyip Erdogan subsequently asked both the Obama and Trump administrations, unsuccessfully, to drop the case.
 

Khafee

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India targets Turkish shipyard over ties with Pakistan
04 Oct 2019

View attachment 10543
Hindustan Shipyard, shown, chose Anadolu Shipyard of Turkey as a technology partner. (Adityamadhav83/Wikimedia Commons)


NEW DELHI — For the first time, India is taking punitive action against an overseas defense company that could see Turkish firm Anadolu Shipyard banned from doing defense-related business in India.

The Turkish company’s defense ties with Indian rival Pakistan have grown recently, and the latest move could impact the Indian Navy’s $2 billion fleet support ships program, for which state-owned Hindustan Shipyard Limited has chosen Anadolu Shipyard as its technology partner.

An Indian Ministry of Defence official said the punitive action would bar Anadolu from carrying out any business with Hindustan because such a partnership could have grave consequences for India’s security.

Last week Anadolu launched the first of four anti-submarine corvettes for the Pakistan Navy, and the shipyard is expected to officially ink a partnership agreement with Hindustan under which would be built five fleet support ships for the Indian Navy.

“Involvement of [the] Turkish defense company will include overseeing construction, detailed manufacturing, engineering, selecting equipment, quality assurance, etc. This would mean a permanent presence of Turkish people at HSL yard. That is a big security risk,” a senior Indian Navy official said.

India’s Navy will direct Hindustan to immediately end ties with Anadolu, the official added.

Diplomats at the Pakistani Embassy in India were unavailable for comment, and Anadolu Shipyard executives declined to discuss the subject.

Anadolu was selected by Hindustan in January to provide the design and other technical assistance for building five fleet support ships. Hyundai Heavy Industries of South Korea was not selected because it reportedly refused to guarantee the ships would be built in India, a Hindustan executive explained.

The 45,000-ton fleet support ship’s would carry armaments, stores and other essential equipment to support other warships in naval operations, and therefore the designer would possess sensitive details of what the ship would carry, another Indian Navy official said.

Said a Ministry of External Affairs official: “India is cautious with any kind of [strategic] alliance with Turkey because [the latter] has very close ties with Pakistan."

India has not formalized defense cooperation with Turkey despite more than 70 years of diplomatic ties.
Indian MoD defers venture project between Indian and Turkish shipyards
18 October 2019
turkeys-tais-picked-for-indian-navy-fleet-support-ship-design-768x504 - Copy.jpg

India’s Ministry of Defence (MoD) has deferred concluding a collaborative venture with a consortium of Turkish shipbuilders to indigenously design and build five 45,000-tonne fleet support vessels (FSVs) for the Indian Navy (IN).

Official sources said on condition of anonymity that postponing the signing of the INR160 billion (USD2.24 billion) FSV contract, which was originally scheduled to be signed in June between India’s state-owned Hindustan Shipyard Limited (HSL) and TAIS – a group of five Turkish shipyards – comes amid fears of the latter’s close links with the Pakistan Navy (PN).

Indian security officials had expressed concern over some of TAIS’ associates being involved in on-going warship building projects for the PN and said that the issue was “under discussion” in the MoD before any future course of action is decided upon, according to the sources.
 

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