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Another Black Swan? Turkey Holds Snap Elections Amid NATO-Backed Civil War

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

There’s a potential black swan event taking place in Turkey on Sunday and no one seems to care. That is, the media isn’t devoting nearly enough coverage to Turkish elections considering the impact the outcome will invariably have on the situation in Syria, on the fate of the lira, and on the Pentagon’s strategy with regard to embedding spec ops with the YPG.

As a reminder, Turkey held elections back in June and the outcome did not please President Recep Tayyip Erdogan.

AKP lost its absolute majority in parliament thanks in no small part to a relatively strong showing by the pro-Kurdish HDP and that meant that Erdogan couldn’t move forward with plans to consolidate his power by amending the constitution. Well, if you know anything about Erdogan, you know that he isn’t exactly the type to take these kinds of things lying down, and so, he decided to trade NATO access to Incirlik for Western acquiescence to a crackdown on the PKK.

Of course that’s not how it was pitched to the media.

The official line was that after a suicide bombing in Suruc claimed by ISIS, Ankara decided it was time to go after Islamic State. Not to put too fine a point on it, but that’s a joke. The PKK and many other observers have long contended that Turkey is complicit in allowing money, guns, and personnel to flow across the border into Syria so that ISIS can continue to destabilize the Assad regime which Ankara opposes. In other words, Erdogan has no interest whatsoever in fighting ISIS. What he does have an interest in is starting a new war with the PKK in order to convince voters that the security situation in Turkey is such that only a dictator can get the situation under control – that’s the whole gambit.

So what Erdogan did was this: he obstructed the coalition building process in the wake of June’s elections, started a civil war in order to try and convince voters that supporting HDP was a mistake, then called for new elections in November which he hopes will restore AKP’s absolute majority and allow him to change the constitution. It’s deplorable to the point of absurdity (especially given the recent suicide attack in Ankara) and underscores the extent to which ISIS has now become a catch-all smokescreen that can be cited whenever a government wants to do something that would otherwise come across as insane. 

So that’s the backdrop for Sunday’s elections in Turkey. Here’s a bit of color from Barclays which is useful from a technical perspective, but please remember that this is all about the push and pull between Erdogan and a powerful Kurdish militia. In other words: attempts to analyze this rationally will everywhere and always miss the point but we would note that Barclays does a nice job of taking into account the realities of the situation on the ground and indeed, the bank’s analysts believe the market is mispricing the risk of a geopolitical mishap.

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From Barclays

Four months after the June parliamentary elections and the party negotiations failed to produce a new government, Turks are asked to go to the polls again this Sunday (1 November). Market pricing in recent weeks suggests investor optimism that these elections will lead to a swift formation of a new government, possibly in the form of an AKP-CHP coalition.

We are less sure about such an outcome: the polls do not suggest any significant change in the allocation of votes, nor do we see meaningful changes in party leaders’ attitudes that would imply a greater probability of building a coalition government. In fact, in our view, the political backdrop has become increasingly polarised and fractious.We therefore think the market could become nervous in the absence of signals of tangible progress on coalition talks in a relatively short time, especially given the upcoming Moody’s review on 4 December. 

The likelihood of a third election is higher than market expectations, in our view. In particular, the probability of a third election would be re-priced higher if the AKP manages to increase its share of the vote in November (ie, towards 43%). In the event of a third election, we see significant risk of a negative rating action, particularly from Moody’s.

The polarisation in Turkey has deepened further, across political and ethnic lines, as a result of the renewed terror attacks, inflamed political rhetoric and negative repercussions of the Syria issue domestically (particularly among Kurds). The tragic bombing attack in Ankara, which was the worst terror event in the history of the country, not only showed the extent of the polarisation but also highlights equally important problems besetting Turkey. The first is the idea of, ‘adaptive reality’; whereby different factions have moulded events to reach a different perceived reality. A related concept is that of ‘alienation of other’, whereby existing divisions are further deepened by the creation of an environment of mistrust and recrimination.

The act of “alienation of other” is not something new to Turkey, and has been widely used by political parties at times to consolidate voter base. The side-effects can be toxic and long-lasting, however. It not only makes facilitation of dialogue between political parties nearly impossible (eg, MHP’s isolation of HDP as a party) but can also spread to the general population. A recent example to this was when fans of the national football team protested the moment of silence for the victims of Ankara bombings during Turkey’s football match in Konya, a stronghold for the AKP. There is also evidence of a growing perception among opposition groups that the government has failed to ensure appropriate security during opposition rallies.

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Right. The government has no desire to de-escalate here. This is all about convincing the populace that supporting the Kurds leads to an increased incidence of terrorist attacks. 

But to be clear, no one believes this anymore. This is just as much of an international joke as the idea that Washington, Riyadh, and Doha want to “fight terrorism.” 

But bear in mind, the results aren’t in question. That is, as Barclays suggests, Erdogan is going to simply undermine the coalition building process on the way to calling for snap elections until he eventually wins. Sadly, this willing usurpation of the democratic process will continue until the President eventually gets his way and the lira will likely collapse until at some point, voters simply give up on democracy and give Erdogan his majority back. 

Additionally, it’s important to note that this election comes just hours before the US intends to deploy spec ops with Kurdish forces in Syria. As we discussed earlier today, Washington intends to support those toops with sorties flown from Incirlik. If Erodgan doesn’t get the outcome he wants on Sunday and he believes the PKK is responsible, Ankara could begin to re-evaluate its partnership with Washington…

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