Vote for military action casts shadow over Turkish markets

By bne IntelliNews October 22, 2007

Bernard Kennedy in Ankara -

The parliamentary vote on Wednesday, October 17 authorising the government to send the armed forces into northern Iraq will weigh on financial markets and increase country risk perceptions, even - or perhaps especially - if no immediate incursion takes place.

For a period of one year, the government will be entitled to use military force against positions held by the Kurdish nationalist PKK organisation in "northern Iraq and adjacent areas." The PKK has been using the area as a base in its long-running guerrilla war in adjacent southeast Turkey, which - like northern Iraq - has a mainly Kurdish-speaking population.

The General Staff has been demanding permission to stage cross-border operations for months. During the election campaign in July, the semi-Islamist Justice and Development Party (AKP) government, which had been discussing the issue with the US and the Iraqi leadership, was frequently accused by its secularist opponents of being soft on the PKK. The AKP's re-election appeared to reduce the likelihood that the secularist military would have its way. But the PKK has been inflicting more and more casualties, including civilians. After an officer and 12 conscripts were killed in a single incident in the border province of Sirnak on October 7, public outrage became irresistible.

Prime Minister Recep Tayyip Erdogan, the AKP leader, was obliged to turn to Parliament, notwithstanding last-minute attempts by Turkey's western allies and regional partners - including high-level visits from Washington and Baghdad - to stay his hand. Parliament voted for the motion by a majority of 507 to 19. The only opposition came from the the group of Kurdish nationalist candidates who were elected to parliament this year after a decade-long absence.


There are fears that Turkey will be drawn into a quagmire in northern Iraq, where it could find itself confronting the local Kurdish leadership, the US' strongest ally in the war-torn country. President Bush has already said that operations in northern Iraq would not be in Turkey's interests. A weaker relationship with the US could affect the attitudes of international financial institutions. European opponents of Turkey's EU membership bid are also expected to latch onto the issue, while the prospects of attracting more petrodollars may be dented if the Arab world sees Turkey's stance as an infringement of Iraqi territorial integrity.

For reasons such as these, the financial markets, which normally ignore the conflict, may react sharply to any news of further PKK attacks likely to precipitate a military incursion. In an early response to the parliamentary vote, rating agency Standard & Poor's said that there would be no immediate impact on Turkey's sovereign rating, but warned that an incursion into Northern Iraq could trigger a temporary crisis of confidence on the financial markets, particularly in the context of already strained US-Turkish relations, as Turkey's large external imbalances leave the country's financial markets vulnerable to swings in investor confidence.

In practice, any raids into northern Iraq - whether airborne or terrestrial - are likely to be as precisely targeted as possible. Meanwhile, the West is in no position to turn its back on a strategically-located Muslim country with a Western-style democratic system, an open economy and a free-marketeering, pro-EU government. The recent decline in support for an Armenian genocide resolution due to be debated in the US House of Representatives in November points to a measure of recognition for Ankara's relations in Washington.

No long-term solution

What military incursions will not solve is the Kurdish question. On the military front, the army is well aware both that Iraq-based PKK leaders and fighters are likely to melt into the local population if and when attacked. It also knows that the PKK, while it may be sustained in part by international sympathy and funding, also derives considerable logistical support from within disaffected and disadvantaged sections of Turkey's own Kurdish population.

On the political and cultural front, the debate on intervention in northern Iraq has reinforced the Turkish-Kurdish divide inside Turkey at a time when the election of the Kurdish nationalist deputies and/or the prospects for an extension of AKP patronage to the region appeared to hold out some hope of reconciliation. Kurdish affairs look set to go on tarnishing Turkey's image, wounding its democracy, undermining its unity and draining its resources for the foreseeable future.

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