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ANALYSIS: Nullifying Istanbul elections and its aftermath!

6 May 2019

President Erdogan’s immense pressures proved fruitful yet again and Turkey’s High Election Board (YSK) ruled for a rerun of local elections in Istanbul scheduled for June 23.

Thus, the Pandora’s Box is now open.

A repeat of the post June 7, 2015 general elections can be stimulated.  That was four years ago when the AKP had lost its Parliamentary majority as the Kurdish HDP had advanced to 13% of the votes.  Rejecting a coalition government with the main opposition CHP, the AKP had then called early elections for November 1 with support from minority nationalistic MHP.  The result was AKP’s victory as a single party government as Turkey faced four months of bloodbath with terrorist attacks pulling the HDP’s votes down in favor of the governing AKP and part of the nationalist votes consolidated under the AKP.

Thus, the loss of Istanbul mayorship has been the second biggest blow to the AKP government; which is simply President Erdogan himself.  Apart from a political defeat for the President, losing Istanbul after 25 years of AKP ruling has a meaning beyond losing one huge majorship.  The cash generated in such a worldwide metropole Istanbul, the construction permits granted through Istanbul administration to firms close to the AKP and the transfer payments to religious foundations which have been fed through the Istanbul resources were all gone overnight with the change of control in Istanbul.

Now on the run up to the June 23 Istanbul local elections, possible stances of each political party should be evaluated.

People’s Alliance: AKP + MHP

– Erdogan got what he wanted and with a legal decision that would perfectly serve the AKP ranks. That is, even though votes for the Istanbul Metropolitan Municipality and its districts were collected in a single envelope at the polls, only Istanbul’s result was contested and was annulled by the YSK.  YSK has canceled the election of Istanbul Metropolitan Municipality on the grounds that the electoral boards have been formed incorrectly.  Thus, the polling boards will be reshaped perhaps with names close to the government. This was what the Deputy AKP leader Yavuz said on last week; days before the YSK decision was out on late Monday, May 6.

As for the AKP, whether its Istanbul candidate Binali Yildirim will keep his post or will be replaced by another candidate is to be seen. Among his replacements, interior minister Suleyman Soylu is speculated yet when asked, Soylu strictly stressed that Yildirim would remain to be the AKP candidate at the June 23 Istanbul local elections.

– Nationalist MHP will surely stand along with the AKP. Right after the March 31 polls, President Erdogan’s calls for a “grand unity” was rejected by the CHP ranks as the CHP was insistent on keeping the presidency system yet increasing the powers of the parliament.  With refusal from the CHP, AKP leader Erdogan had to stick back with its minority partner –MHP leader- Bahceli who has managed to gain a serious share of support at the local polls to a tune of 19%.

– In fact, as many stress Erdogan is unlikely to “restart” a game which he would lose. Thus, this time around he is not expected to get caught off guard like it was the case in the March 31 polls where the AKP was sure about a victory.  This time around, both the MHP and the AKP teams on the ground will fiercely guard the voters to raise support for the AKP.

Nation’s Alliance: CHP + IYI Party

As for the opposition CHP, there are speculations that they could boycott the parliament or the repeat of the Istanbul elections. That seems very unlikely.  In fact, the probable outcome is for the CHP to stick with its candidate Ekrem Imamoglu who won Istanbul at the March 31 local polls. In fact, Imamoglu, Turkey’s new rising political persona, is likely to go for “force majeure” on the way up to the June 23 Istanbul-only local polls.

Nationalist IYI Parti is expected to stay with the CHP ranks yet work more actively on the ground on the run up to the June 23 local polls for Istanbul.

Minority religious wing Saadet Party is also to stand with the CHP. Other minority parties such as TKP are also to remain committed to the CHP ranks.

Kurds will be the game changer-again! 

Yet the game changer for Imamoglu’s re-election at Istanbul at June 23 elections will be the HDP- pro-Kurdish party in Turkey as was the case on March 31 polls.  HDP’s jailed leader Demirtas had called for the Kurds to support the CHP candidate in Istanbul which had carried Imamoglu’s support above to that of the AKP’s candidate Yildirim.

Yet, this time around, pro-Kurdish HDP’s commitment to CHP’s Istanbul mayoral candidate Imamoglu is to be tested.  The AKP will try very hard to break the HDP’s support for Imamoglu. Thus, curious events are likely to take place.

The start of PKK’s terrorist attacks to Turkish soldiers or such attacks making the headlines again, the frequency of such attacks on the run up to the June 23 polls and their effects on the electorate should be closely monitored. 

Such events in fact began as of May 6.  After months of silence, the jailed leader of the outlawed Kurdistan Workers Party (PKK) leader Ocalan was permitted to contact with his lawyers and he made an indirect press release.  Ocalan called on the Kurdish-led Syrian Democratic Forces to resolve problems in Syria without conflict; within the framework of Syria’s territorial integrity.  Ocalan also said Turkish sensitivities should be taken into consideration in any work toward a solution in Syria.

The SDF is spearheaded by the People’s Protection Units (YPG) fighters, and backed by the United States. Ankara considers the YPG and its political wing, the Kurdish Democratic Union Party (PYD), “terrorist groups” with ties to the outlawed PKK.

Thus, Ocalan’s comments could as well be read as a support to President Erdogan’s stance when it comes to Syrian Kurds. There are speculations in the media that Ocalan’s next move would be to come up with an HDP candidate to enter the June 23 Istanbul election which will surely serve to weaken Imamoglu’s support and thus pave the path for AKP’s victory.  Such speculations, to the extent of an HDP candidate to divide Imamoglu’s votes seems unlikely at this point; yet Ocalan’s voice being hear after eight years could as well be no coincidence.  The HDP ranks are not expected to play along with the AKP at the June 23 Istanbul-only local elections; thus it would be safe to assume HDP’s support for the CHP candidate remaining intact. 

Moreover, closer ties between AKP-HDP  would pull down the nationalist MHP votes for the AKP’s candidate Yildirim; which cannot be afforded by President Erdogan.

All in all, just as the Kurdish votes at Istanbul had set the fate of the Istanbul results back at the March 31 polls, no doubt they will remain the key for the June 23 Istanbul-only local elections.

And Turkey’s economy?

Well, Turkey will remain under the spotlights in the emerging market class for some time to come.  The AKP’s pre-election spending throughout 1Q19 will no doubt will be repeated on the run up to the June 23 elections.  That would translate into a much wider than expected fiscal deficit by the end of 2019 to a tune of circa 4%.

As the borrowing requirement remains high for the AKP government, the Treasury yields will remain elevated crowing out real sector investments.  Such a picture would translate into deeper economic contraction set for the remainder of 2019; more external debt repayment problems and higher bankruptcies which will put the Turkish banks under close watch.

No need to say, the Turkish lira will keep weakening with its direct implications on inflation getting tangible immediately.   The room for the Turkish central bank to fund public banks with fx cash and the public banks in return selling hard currency to keep the lira “stable” has already turned into a Ponzi Scheme where the market is closely following the bank’s net fx reserves which had almost hit the minimum tolerable threshold.  More lira weakness against the dollar to and perhaps above to 7.00 will feed Turkey’s CPI inflation which is currently at 19.7%.  Thus, it is unlikely for the CPI inflation to ease below 18% by year-end; if it does not edge up higher given the new bout of lira weakness.

G.A.

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