Turkish President Recep Tayyip Erdogan on October 12 targeted the US with another tirade over the freezing of visa services at the American embassy in Ankara as a response to the arresting of an employee. The latest friction caused the Turkish lira (TRY) to devalue from slightly off 3.63 against the USD to 3.6685 during morning trading, while by 17:40 local time it was selling at 3.6586.

“If the US foreign minister and president defend this [visa services] decision, then excuse us, but we’re behind the decision we’ve taken [to reciprocate in freezing such services] to the end,” Erdogan said during a live-streamed speech in the Turkish capital.

In a note to investors, Timothy Ash, senior sovereign strategist at BlueBay Asset Management, responded to the defiant Turkish leader’s new intervention by commenting: “Erdogan's guns [are] blazing. He seems to be enjoying this.”

Turning to how Erdogan has singled out US ambassador to Turkey John Bass as being to blame for the spat, Ash added: “Silence from the rest of the US administration as Bass is being used as the fall guy all around. He certainly has a lot of support though in the DC establishment—and I think they are figuring out how best to make it clear to Erdogan that clear red lines have been crossed. Not sure Erdogan got the memo though.”

Opening a new front in the row, in his Ankara address Erdogan, who ‘palled up’ with Donald Trump during his September visit to New York, suggested that it was officials left over from the Barack Obama administration that were trying to rattle the Turkey-US relationship.

Lawyer given access
Meanwhile, some Turkish government officials made attempts to defuse the tension in bilateral relations. Justice Minister Abdulhamit Gul announced that prosecutors had given the green light to the lawyer of the arrested employee, Turkish national Metin Topuz, to visit his client on October 13. Erdogan’s spokesman Ibrahim Kalin observed that the government had received requests from the US to solve the visa row and would now make an evaluation of where things stand. On October 11, Turkish Foreign Minister Mevlut Cavusoglu had a phone discussion with US Secretary of State Rex Tillerson.

On the markets, Turkey’s 2-year government bond benchmark yield declined further to 12.13% on October 12 from 12.22% on October 11. The benchmark BIST-100 stock market index gained 1.45% to 105,326, pushing back against the negative sentiment generated by the standoff and wider concerns that storm clouds are gathering over the Turkish economy.

The case of Topuz is not the only problem between Washington and Ankara that remains unsolved. During his speech on October 12, Erdogan also hit Washington with harsh rhetoric over US pastor Andrew Brunson, who is detained in Turkey, and Mehmet Hakan Atilla, deputy general manager of Turkish state-owned lender Halkbank, who is in detention in the US on charges of infringing sanctions against Iran. Erdogan added that Turkish police would no longer use US-made Sig Sauer weapons given that Washington moved last month to cancel weapon sales to Erdogan’s bodyguards, 12 of whom have been indicted following a brawl with protestors during the Turkish president’s visit to Washington, DC in May.

On October 11, the TRY and Turkish bond yields responded positively after ambassador Bass said both sides were in talks to resolve the spat over the arresting of Topuz. He was detained over his alleged links to US-based self-exiled cleric Fethullah Gulen–blamed for the failed coup of last year–and on charges of espionage.

A second US consulate employee has been summoned to testify as a suspect. Some media reports have said he is hiding in the US embassy.