Month: July 2018

Europeans are coping with scorching heat, with temperatures rising still Thursday and Friday. Deadly fires have devastated coastal villages in Greece and claimed more than 80 lives. Even northern countries such as Sweden and Latvia are fighting forest fires. VOA’s Zlatica Hoke reports some European capitals are experiencing a hotter July than what they are accustomed to.
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Leaders of five major emerging economies, known as the BRICS nations, have sounded the alarm over what South Africa’s president described as threats to multilateralism and sustainable global growth, a reference to a trade war between the U.S. and China. This year’s three-day summit between Brazil, Russia, India, China and South Africa, which began Wednesday in South Africa, could usher in a new era of global cooperation, without some of the traditional power players. VOA’s Anita Powell reports
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The European Union’s top court ruled Wednesday that food produced by a series of new biotechnology breeding techniques should be considered genetically modified organisms, thus falling under the EU’s strict regulations of the products.

The ruling, which will see the foods face special safety checks and labeling restrictions, was seen as a major victory for environmentalists at the expense of the biotech industry.

Biotech companies have been working on a new generation of technologies to change genetic material in plants or animals, and it had long been debated whether they need to match the EU’s rules limiting genetic modification, which are much stricter than in the United States.

In Wednesday’s ruling, the European Court of Justice said that the organisms created by the new breeding techniques “come, in principle, within the scope of the GMO Directive and are subject to the obligations laid down by that directive.”

The biotech industry says that the new techniques make it easier to create organisms that are drought and disease resistant while providing higher nutrition yields. They say that locking them in to the strict EU GMO regulations would stifle their development. Others say that their unchecked and unbridled development would put nature and human health at risk.

German Environment Minister Svenja Schulze welcomed the ruling, calling it “good news for the environment and consumer protection. The verdict is also a clear commitment to the precautionary principle in Europe.”

“Now we finally have the necessary legal certainty and transparency for consumers, researchers and industry,” she said.

“Protecting the environment and health are our top priority with new genetic technology as well,” Schulze added.

Mute Schimpf of Friends of the Earth Europe welcomed Wednesday’s ruling at the European Court of Justice, saying that under it the new techniques “must be fully tested before they are let out in the countryside and in our food.”

 
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On Monday, U.S. Special Representative for Ukraine Negotiations Kurt Volker sat down with VOA to discuss the recent U.S.-Russia summit in Helsinki, Finland, and upcoming Normandy Format discussions about securing peace in Ukraine. The talks, involving political directors of Germany, Russia, Ukraine and France, are slated for July 26 in Berlin.

Question: Thank so much for coming today. Political directors of Germany, Russia, Ukraine and France, the four nations tasked with resolving the war in Eastern Ukraine, are meeting in Berlin on Thursday. You’ve kept close contact with these representatives. What’s on the agenda, and what can Ukrainians expect?

Ambassador Volker: This particular meeting, they’re going to be talking about what a UN-mandated peacekeeping operation might look like. And that’s something that’s been on the table for a long time. Russia proposed that there be a UN protection force for the OSCE monitors, but the rest of us who have looked at this—whether it’s France, Germany or the U.S. and, frankly, the Ukrainians—have all seen that you need to have a genuine peacekeeping operation to provide broad area security. And what we’re hoping to be able to do is talk about how you build up to that kind of peacekeeping operation. I’ve been in very close touch with my French and German counterparts both in the last week, as well as throughout the last year. And so we are very much in sync on this. They are going to be meeting with Ukrainian and Russian counterparts on Thursday, as you indicated. I’ll also be reaching out to my Russian counterparts soon to convey the same information.

Q: A representative of Russia’s Foreign Ministry told media outlets that they’re planning to renew talks on a possible referendum on occupied territories in Eastern Ukraine, a claim the White House quickly rejected. Are there any grounds to believe there may be renewed talks on a referendum?

VOLKER: No, I really don’t think so. First off, as you mentioned, the White House put out a very strong statement on Friday saying that they do not believe that any such referendum could or should be held, and that it would not be legitimate if it were held. And that’s because you can’t really hold a referendum in a part of Ukraine where the Ukrainian government is not in control. [The Donbas is] under conditions of terrible hardship for the population—lack of freedom of movement, a million-and-a-half displaced persons—so there’s no way that this could be a fair vote. Moreover, there’s no basis for doing it because this is really the result of foreign intervention and occupation of the territory, not the result of an indigenous uprising in Ukraine, as is often said. Certainly the wishes of the local population need to be respected in terms of their ability to vote for local governance. That’s something they have not been able to do since the conflict began, and it’s what the Minsk agreement actually calls for: an opportunity for the local population to participate in local elections, after which the territory would be restored to Ukrainian control, Ukrainian sovereignty. The Minsk agreements are the framework for addressing these things, not some separate idea of outside referendums.

Any kind of referendum is not a part of the Minsk agreement. There is no basis for it. It would not have any legitimacy if it were to take place, so it shouldn’t happen.

Q: A very unpopular law on the special procedure of self-government in certain districts of the Donetsk and Luhansk is soon to expire, and there’s not much support to extend it. How would you see the situation developing if this law is not extended?

VOLKER: First off, let me say I understand the frustration of Ukrainian lawmakers and the Ukrainian public, that they’ve taken steps such as passing the special status law passing an amnesty law, and Russia has done absolutely nothing to help end the conflict, to bring about security, withdraw its forces, and so forth. That being said, the law is passed but it doesn’t have any application today. There is no special status as of today. It only kicks in when there is an agreement, when Russia withdraws its forces, when there are local elections. And so I don’t see any harm in extending it. The situation from today would be no different the day after an extension was passed; it would be exactly the same. So I actually think there’s no harm done. And then the flip side is that Russia will use this as an excuse to complain about Ukraine saying, “it’s not doing its share to implement the Minsk agreement.” So I would just take that argument off the table. Don’t give Russia that argument. It doesn’t change anything anyway. Let the special status be extended.

Q: There were a lot of rumors leading up to Helsinki about a U.S.-Russia deal on Ukraine that wouldn’t involve Kyiv. Now Trump says Putin is coming to Washington in September. What can Ukrainians expect from upcoming meeting, and should they be concerned about what appears to be a new status between the U.S. and Russia following Helsinki?

VOLKER: Well, first thing I would do is call everyone’s attention to the Helsinki meeting itself. There was no move towards recognition of Russia’s claimed annexation of Crimea. No support for a referendum. No movement toward Russia’s position on a protection force for the monitors that would effectively divide the country. A lot of things that people were worried about or had predicted might happen, did not happen, so I don’t think there’s really any basis to be worried here. In fact, this administration has continued to maintain sanctions on Russia and worked with our European allies very carefully. They’ve kept sanctions in place as well. We’ve lifted the arms embargo on Ukraine, so Javelins [anti-tank missiles] have been provided and other systems have been sold, such as anti-sniper systems. Just last week the Pentagon announced that there will be a new foreign military financing package available to Ukraine. So I think Ukrainians should have some confidence that the United States is doing all of the right things here. And in that context, the U.S. and Russia talking about trying to resolve this conflict is probably a good thing.

Q: Still, Ukrainian and U.S. lawmakers expressed dissatisfaction that President Trump didn’t mention the illegal occupation of Crimea, aggression in Eastern Ukraine during the press conference. It seems that Russia is still controlling the post-Helsinki narrative on what transpired behind closed doors. Can you provide us with some more information about what really happened, as I know you were briefed on the extended meetings held in Helsinki?

VOLKER: Let me just say this, that on all of the issues that Ukrainians would care about, nothing was given away. No handing over of gifts to Russia at Ukraine’s expense.

Q: So far…

VOLKER: No, none. And in addition to that, Ukraine was not even a principal topic. I think Syria was the topic that was most prominently discussed, Ukraine rather little. And I think that’s largely because we recognize that we just simply disagree with Russia on this and there isn’t a whole lot of point of delving deeply into that. I do think it is useful for the presidents to get together. A situation where the United States and Russia are in the worst relationship that they have been in since the end of the Cold War is a potentially dangerous situation for lots of people. So it’s better to be talking. We just need to be clear about the substance of what we’re talking about as well. And in this case I think that Ukraine came out quite well.

Q: Was it enough that Poroshenko met with Trump before the meeting in Helsinki? Can the Ukrainian government do more in this situation? 

VOLKER: Well, I think the Ukrainian government has done a lot. Let’s give enough credit to reforms that have taken place over the last four years, since the Maidan. Everything from pensions to, last week, the national security reform, the anti-corruption court reform, the education system as well. There’s quite a lot that’s been done. Nonetheless, there is still more to do to create an attractive business climate for investment in Ukraine, to build up greater growth and to genuinely fight corruption so that people, both inside Ukraine and from outside Ukraine, feel that things are fair. So there’s a long way to go. And that’s where I think the government should be focusing its efforts—on making Ukraine as successful and prosperous a democracy and market economy as it can possibly be.

And another area I would mention—I always mention this—is that I think the government needs to do everything it can to reach out to the population in the Donbas. The people that live there are suffering tremendously—everything from questionable water supplies to power shut-offs, cell phone shut-offs, lack of freedom of movement, physical insecurity, disease, and they need as much support from their government as they can possibly get. And I know that the Ukrainian government wants to help them, but it needs to be as proactive as possible in demonstrating that.

Q: Speaking of Eastern Ukraine, the OSCE remains the only monitoring in the region, and that group was recently compromised by Russia. Ukrainian Foreign Minister Pavlo Klimkin recently said all Russians in OSCE are spies. There are calls to exclude Russian representatives from the OSCE mission, as it was during the Balkan war. Is this now a possibility, that Russia could be excluded from the OSCE’s Special Monitoring Mission (SMM)?

VOLKER: I would say I think it’s too late for that now. I think that Russia has been in the SMM from the beginning. No one should be surprised that information is being passed back to governments who have seconded people into the SMM. I’m sure lots of governments in addition to Russia are getting information from their people in the SMM. It shouldn’t be a surprise to anybody. What is maybe more surprising is that is so clearly demonstrated recently and so clearly talked about, and I don’t think there’s anything terribly secret that the SMM is coming across that isn’t already more widely known. So I think it’s not something to spend too much time worrying about. If Russia were to be excluded from the SMM—which, again, I believe would be impossible at this point, since they are part of the OSCE, but even if that were the case—it would probably hurt the effectiveness of the SMM in operating in the occupied territories, which is where they’re most needed.

Q: Ukrainian officials have reported 15 attacks on Ukrainian Army positions in Donbass in the last 24 hours. This is almost a daily routine in the war zone. And I know we’ve mentioned the prospects of a peacekeeping mission. But are we now any closer to a tangible solution for stopping this warfare?

VOLKER: Honestly, no, I don’t think we’re any closer. These are the same issues that have been on the table since 2014, and the Normandy group has tried to convene people. They’ve put all kinds of creative ideas on the table to inspire implementation of the Minsk agreement. The Russians continue to deny any responsibility for it, they continue to deny their presence there. They have not implemented a cease fire. There’s been no effective withdrawal of heavy weapons. That’s why we believe the idea of a UN-mandated peacekeeping operation is a constructive one. Because it would be a way to create security, replace the Russian forces, and create a period of time in which you can then see political steps under Minsk implemented as well, and break this logjam in implementation. But as it is, there has been no movement on the security side or, as a result of that, on the political side.

Q: When was the last time you had contact with your Russian counterpart, Vladislav Surkov? 

VOLKER: We exchanged some notes, I believe it was in May, might have been June even. It was after he was reconfirmed in his position by President Putin. Prior to that it had been January.

Q: Any plans for one-on-one conversations on the horizon?

VOLKER: I intend to reach out soon. My desire is to make sure that we are well-coordinated with our French and German colleagues first. They’re having a meeting with the Russians and Ukrainians, of course, on Thursday, so I want to make sure we’re all linked up, and then I’ll be reaching back out again later.

Q: Are you planning to do that before the Putin-Trump meeting here in Washington, assuming it happens?

VOLKER: We don’t have dates for that yet, so we’ll see how that plays out. But I don’t intend to wait. In fact, I’d like to be able to reach out and see whether we can test Russia’s willingness to genuinely resolve the conflict in advance. That would be ideal.

Q: Again, to make a go of the peacekeeping mission, what needs to happen?

VOLKER: Russia needs to decide. That’s the fundamental thing. Russia needs to decide that it wants to end the conflict and withdraw its forces. If Russia is willing to do that, and the international community is ready to step forward to create security for all of the citizens—all the inhabitants that are there, to create the conditions where the Minsk agreements can genuinely be implemented, and to see the territory then restored to Ukrainian control—if Russia is willing to do that, which is what it has signed up for in the Minsk agreement, then we can get it done.

Q: And so far they haven’t shown the will to do that, and some observers speculate they won’t until after next year’s elections in Ukraine. Do you foresee any possibility it could happen sooner?

VOLKER: Well, any possibility? There’s always a possibility, right? It’s just a question of people making the necessary decisions. I don’t think it’s likely. I think, based on four years of experience, watching how this has played out, I don’t see Russia really changing what it’s doing right now. But we have to keep open the possibility; we have to keep up the hope. We have to keep offers on the table as to how it can get done, so that if there is any chance at all, we’re ready to take that chance.

Q: Are you regularly in touch with Trump’s National Security Adviser? Do you have regular conversations with them about this situation?

VOLKER: Yes, both with National Security Adviser John Bolton and Secretary of State Mike Pompeo. Yes, we’re in regular contact. 

Q: Thank you so much.

VOLKER: Thank you.

This story originated in VOA’s Ukrainian Service.
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For the record, in both Washington and Moscow, a key exchange at last week’s joint news conference between U.S. President Donald Trump and Russian President Vladimir Putin never occurred.

As they stood alongside each other after their summit in Helsinki, Trump and Putin answered questions from U.S. and Russian reporters, with one of the most pointed coming from Reuters reporter Jeff Mason, related to the ongoing controversy whether Putin wanted Trump to win the 2016 U.S. presidential election and interfered to help him claim the White House.

The U.S. reporter asked the Russian leader, “President Putin, did you want President Trump to win the election and did you direct any of your officials to help him do that?”

Putin responded, “Yes, I did. Yes, I did. Because he talked about bringing the U.S.-Russia relationship back to normal.”

But the Kremlin has excised the entire exchange from its transcript of the news conference and the White House eliminated the first key portion of Mason’s question, whether Putin wanted Trump to win over his Democratic challenger, Hillary Clinton.

Trump has only reluctantly acknowledged that Russia meddled in the election, while also calling it a “big hoax.” He has adamantly rejected any contention that his campaign colluded with Russia, the subject in the U.S. of special counsel Robert Mueller’s ongoing criminal investigation and whether Trump obstructed justice to thwart the probe.

On Tuesday, Trump contended, without offering any evidence, that Russia is intervening in the upcoming November congressional elections in the U.S., but supporting opposition Democratic lawmakers, not the Republican candidates Trump favors.
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The top U.S. official for Ukraine negotiations doubled down on recent assurances from the State Department and White House that President Donald Trump did not reach any agreements on Ukraine during last week’s two-hour private meeting with his Russian counterpart in Helsinki, Finland.

Russian President Vladimir Putin last week told a gathering of diplomats in Moscow that he and Trump discussed the possibility of an internationally supervised referendum in pro-Russian separatist regions of eastern Ukraine, a claim later reiterated by the Kremlin’s ambassador to the U.S.

In an exclusive interview with VOA’s Ukrainian service, Kurt Volker, U.S. special representative for Ukraine negotiations, said that Kremlin remarks about the referendum were not only misleading but also blatantly implausible.

“There was no move toward recognition of Russia’s claimed annexation of Crimea. No support for a referendum. No movement toward Russia’s position on a protection force for [Organization for Security and Cooperation in Europe] monitors that would effectively divide the country,” said Volker, referring to Russia’s controversial September 2017 U.N. proposal.

Because referendums aren’t part of the 2015 Minsk agreement, which aims to end the conflict, secure a cease-fire and pave the way for regional elections, Volker said any direct vote on secession from Kyiv would lack the necessary legal framework.

“So, a lot of things that people were worried about or had predicted might happen [in Helsinki] did not happen. So, I don’t think there’s really any basis to be worried here,” he said, noting that the administration has continued to maintain sanctions on Russia in concert with European allies and approved weapons sales to Kyiv.

The Pentagon, he added, recently unveiled plans for a new military financing package for the occupied Eastern European country.

“Let me just say this — that on all of the issues that Ukrainians would care about, nothing was given away,” he said. “No handing over of gifts to Russia at Ukraine’s expense.”

Volker’s comments supplemented initial reactions by Garrett Marquis, U.S. National Security Council spokesman, who said the White House was “not considering” supporting a referendum in eastern Ukraine, and a statement by U.S. State Department spokeswoman Heather Nauert, who said an eastern Ukraine referendum “would have no legitimacy.”

The comments by the trio of U.S. officials followed days of speculation about what was discussed at the rare one-on-one meeting between the U.S. and Russian leaders with only their translators present.

Trump has been on the defensive over the summit since returning from Helsinki, especially during a key moment when he was asked about Russian meddling in the 2016 U.S. presidential election as Putin stood beside him.

This story originated in VOA’s Ukrainian service.
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Russian President Vladimir Putin, accused of interfering in U.S. elections, will not be invited to address Congress or visit the Capitol if he accepts President Donald Trump’s invitation to come to Washington, Republican congressional leaders said on Tuesday.

The comments by House of Representatives Speaker Paul Ryan and Senate Majority Leader Mitch McConnell reflect the unease among U.S. lawmakers, including Trump’s fellow Republicans, about the president’s outreach to Putin after their July 16 summit in Helsinki.

Ryan and McConnell rejected the idea of Putin being asked to address a joint session of Congress, typically considered an honor for visiting foreign leaders.

“We would certainly not be giving him an invitation to do a joint session,” Ryan added. “That’s something we reserve for allies.”

“The speaker and I have made it clear that Putin will not be welcome up here at the Capitol,” McConnell said later.

The U.S. intelligence community has concluded that Russia used a campaign of propaganda and hacking to interfere in the 2016 U.S. presidential election to aid Trump’s candidacy, and has warned that Moscow is working to meddle in the November congressional elections.

“The Russians better quit messing around in our elections,” McConnell told reporters, adding that he was open to legislation to put pressure on Moscow. “They did it the last time. They better not do it again.”

Ryan said he did not have a problem with Trump sitting down with foreign leaders like Putin, as long as he was delivering the right message.

“If the message is, ‘Stop meddling in our country, stop violating our sovereignty,’ then I support that. But it’s the message that counts,” Ryan told reporters.

Trump faced bipartisan criticism after a news conference with Putin in Helsinki where he gave credence to Putin’s denials of Russian interference in the 2016 election despite the findings of the U.S. intelligence community. Putin acknowledged at the news conference he wanted Trump to win the election against Democratic candidate Hillary Clinton but has denied election meddling.

Trump has called the summit a success and invited Putin to

visit Washington in the autumn.

Some Republicans expressed fresh skepticism about a Putin visit. Representative Mac Thornberry, chairman of the House Armed Services Committee, said, “I’m suspicious of everything Putin does.”

Trump faced withering criticism after the Putin summit, including from former CIA Director John Brennan, who described the president’s performance as “nothing short of treasonous.”

The White House said on Monday Trump was looking at revoking the security clearances of Brennan and five other former officials who have been critical of the president.

Ryan downplayed Trump’s threat.

“I think he’s trolling people, honestly,” Ryan said.
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Britain and the European Union formally filed for divorce at the World Trade Organization on Tuesday, following many months of diplomatic preparations to smooth the way for the historic move.

The WTO circulated two confidential draft membership agreements among the Geneva trade club’s 164 members, separating Britain’s rights and obligations in merchandise trade from the EU’s for the first time in the WTO’s 23-year history. A separate split of services trade is expected to follow.

“It seeks to replicate the concessions and commitments applicable to the U.K. as part of the EU today. An important milestone as we prepare for our departure from the EU,” British Ambassador Julian Braithwaite wrote in a tweet.

Britain’s draft document, officially known as its “schedule,” is 719 pages long.

“WTO members will have three months to review the schedule, which will be considered to be approved if there are no objections from other members,” the WTO said in a statement.

Until now the EU has represented Britain at the WTO, and Britain’s membership rights were not set out distinctly, even though Britain was always a WTO member in its own right. Its June 2016 decision to leave the EU meant disentangling their trade rules to allow Britain to act independently.

Britain’s government says that only minimal changes will be needed in the text and it does not expect any difficulties, apart from potentially in agriculture.

Seven agricultural suppliers – including the United States, Canada and Australia -have already said they disapprove of the terms of the divorce, since they will lose flexibility to switch exports between Britain and the rest of the EU.

Their objections are likely to force Britain into a wider negotiation, said David Henig, a former British trade official who now leads the UK Trade Policy Project at the European Center for International Political Economy (ECIPE).

“As the U.K.’s first serious trade negotiation in years, many will be watching to see how the UK government performs in negotiating at the WTO, and how they handle the debate domestically,” he wrote in a report.

“At this stage we see a stuttering start, but this could ironically be the opportunity needed to get on the right track and set a positive path for our future trade policy.”

Britain has been laying the groundwork for this step for more than a year, and it sent an informal proposal in October, followed by a proposal for services trade in February.
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A former senior security aide for French President Emmanuel Macron is insisting he was trying to help police when he was caught on video assaulting a protester at a May Day demonstration.

The outcry sparked by the video is the most damaging scandal to hit Macron since he took office last year.

The former security aide, Alexandre Benalla, who was fired by Macron on Friday, said Monday his action was “vigorous but without violence and caused no injury,” according to a statement released by his lawyers.

“This personal initiative … is obviously being used to tarnish the president in circumstances that defy comprehension,” the statement read.

Benalla, along with another member of Macron’s ruling party, Vincent Crase, were charged Sunday with violence, interfering in the exercise of public office and the unauthorized public display of official insignia.

The video made public by Le Monde newspaper last week shows Benalla, who is not a police officer, wearing a police helmet with visor as well as a police armband while dragging a woman away from the crowd and later beating a male protester as riot police looked on while breaking up a May Day protest in Paris.

Benalla said in the statement issued by his lawyers Monday that the man and woman he was filmed scuffling with were “particularly virulent individuals” whom he had been trying to “bring under control” while “lending a hand” to police.

On Monday, Interior Minister Gerard Collomb told lawmakers he took no action against Benalla after the presidency assured him in early May that Benalla would be punished.

Three high-ranking police officers have been charged with misappropriation of the images and violating professional secrecy for illegally giving Benalla video surveillance footage of the incidents to help him try to clear his name. They have been suspended from their jobs.

Benalla, 26, handled Macron’s campaign security and has remained close to the president.
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President Donald Trump continues to defend his recent summit with Russian President Vladimir Putin. Trump said Monday that he gave up nothing to Putin in their meeting last week. But the president’s performance got a negative review in the latest Washington Post-ABC News poll, which found that 50 percent of Americans disapproved of Trump’s handling of the summit, compared to 33 percent who approved. VOA National correspondent Jim Malone has more on the domestic fallout.
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International investors are looking to Tuesday’s meeting of the Turkish central bank as a critical test of whether the bank can remain independent of President Recep Tayyip Erdogan, his increasing powers, and what some criticize as his Islamist agenda.

The Turkish currency has fallen sharply as concerns mount on whether he will impose unorthodox economic policies on the bank.

Erdogan, who has called for Islamic banks to make up a quarter of the country’s banking sector, strongly opposes interest rates and has described them as “the mother and father of all evil.” The president rejects economic orthodoxy that increasing rates reduces inflation.

Investors are looking to the Turkish central bank meeting to hike rates to rein in rampant inflation, currently running at over 15 percent — among the highest in the developed world.

“If the central bank cannot find the opportunity to hike, then the markets will take it very negatively,” economist Inan Demir of Nomura Securities said. “If it can hike then the market will see this as the first market-friendly action by the new administration.”

Investors’ concerns saw the Turkish lira plunge about 30 percent since the start of the year. Adding to the unease is Erdogan’s move to assume sweeping executive powers after last month’s presidential elections.

During his campaign, Erdogan pledged to take greater control over the economy, including the independent central bank. The appointment of his son-in-law, Berat Albayrak, as Turkey’s finance minister has further raised international investor concerns.

In the past, Albayrak voiced support for Erdogan’s stance on interest rates. The new cabinet announced earlier this month saw the removal of Mehmet Simsek and Naci Agbal, who investors saw as strong advocates of orthodox economic policies.

Uncertainty over the outcome of Tuesday’s central bank meeting is fueling investors’ fears that Ankara could adopt radical new measures to prevent capital from leaving the country.

“Investors are starting to ask if capital controls will be imposed,” Demir said. “If there is no monetary policy to counter the lira depreciation by the central bank, then investors will start to assume worst case scenario, the capital control scenario.”

“Such a fear,” he continued, “will mean an acceleration of capital outflows out of the country, which would bring capital inflows to the fore, so there is the risk of a self-fulfilling prophecy.”

Analysts warn capital controls would be tantamount to economic suicide, killing Turkey’s credit rating and thus its ability to borrow the $5 billion a month it needs to cover the shortfall of its current account deficit, or the difference between what it imports and exports.

In the past few days, Albayrak has sought to ease investor concerns by stating support for the central bank.

“We aim for an effective central bank. The central bank sees and builds the fiscal life in a correct way. Turkey will never again be this attractive for foreign investors,” he said Sunday.

Albayrak, accompanied by internationally respected economic experts, met Monday with his counterparts from countries at the G20 meeting of finance ministers in Buenos Aires, where he underscored his message that Turkey remains market-friendly.

Erdogan has also refrained from visibly advocating his opposition to interest rates, a move seen as helping investor sentiment. But analysts warn actions, not words, will determine how financial markets will ultimately react towards Turkey.

If the central bank does hike rates it could enhance Albayrak’s reputation among international investors, some analysts say.

“He can correct his own image going forward,” said Demir.

On the other hand, with Turkish interest rates already among the highest in the developed world at over 17 percent, a further hike will likely bring problems.

“[Turkish] private banks are already not adding to their loans because they realize at these rates, repaying will be very difficult,” political analyst Atilla Yesilada of Global Source Partners said. “That is going to hit economic growth.”

Both Turkish consumers and companies are already heavily indebted and economists predict a severe economic slowdown — if not a recession — by the end of the year.

Analysts warn even if the bank were to raise interest rates Tuesday and Erdogan were to abandon his unorthodox economic policies, investors would be looking for Ankara to do more to rein in public spending and avert a dramatic slide.

“The problem now is discretionary spending on mega projects, welfare projects which are simply not bearable, this needs to be corrected,” Yesilada said.
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