Two headlines form the U.S. have me puzzled over where relations with Turkey are going in the near future.

Assistant Secretary of State for European and Eurasian Affairs Wess Mitchell is calling for sanctions over Turkey’s deal with Russia to buy S-400 missile defense systems.  This sale is a clear rebuke of both U.S. policy in Syria and of the technology itself.

At the same time President Trump called newly re-elected President Recep Tayyip Erdogan to congratulate him on his victory and the two reaffirmed the importance of security ties according to a news stub from RT.

Add to this that Erdogan will be at the July 11-12th NATO Summit, since Turkey is still, for now, a member of the organization.  Remember, this is an organization that Trump just told Sweden that maybe the U.S. too should be like them, a non-member who goes along with their policy trajectory.

Now Mitchell is a classic Swamp Dweller, schooled in all of the standard U.S. exceptionalist foreign policy nonsense, a proverbial grown-up on foreign affairs.

From his State Dept. Bio:

From 2013 to 2016, Dr. Mitchell chaired the Europe Working Group for the John Hay Initiative. He also served on advisory boards for several U.S. and European institutes, including the Zbigniew Brzezinski Institute for Geostrategy, the Slovak Atlantic Commission, the Prague Center for Transatlantic Relations, Atlantic Initiative Berlin and the Alexander Hamilton Society.

So, I’m not shocked to see him trying to push Trump harder on punishment for Turkey especially with John Bolton currently in Moscow talking with Russian President Vladimir Putin laying the groundwork for an upcoming summit between Putin and Trump, at Trump’s behest.

Keeping Turkey in NATO is a high priority.  It is one geopolitical battle that the U.S. cannot lose if it has any hope of maintaining any semblance of a position in the Middle East and broker a peace deal which doesn’t leave Israel out to dry.

So, Trump and Erdogan will have a long talk at the NATO Summit.  Erdogan has all but accused the U.S. of trying to topple his regime first through 2016’s failed coup and recently through the attack on the lira and the country’s bond markets.

That meeting will be tense.

And since I feel strongly that Trump and Putin should forge a plan for Syria at this summit and leave all the other issues to the future, it makes sense for Turkey to become a main bargaining chip.

Putin would love to cleave Turkey from NATO and have it join the SCO.  In the long run that may be inevitable.  But, at the same time he also can see that as creating too much of an imbalance to forge any kind of peace in the near term.

In effect, keeping Turkey in NATO while allowing it some independence – buy S-400s, Iranian oil, a presence in Northern Syria, etc. — could be something Putin offers up to Trump for a wider-scale deescalation of the Syrian situation, which sees the U.S. pull out of Al-Tanf as well as Deir Ezzor.

Trump has already signaled that Assad and Putin can re-take Dara’a up to the Golan Heights without his interference.

Turkey-Russia-China Power Reality

Turkey and Russia have a number of major energy projects in process, including both nuclear power and natural gas pipelines. These projects have been in process since Trump was a candidate.

They grew out of Putin’s support of Erdogan during the coup attempt and U.S. opposition to the South Stream pipeline that originally was to go to Bulgaria.

Has anyone else noted how different the Trump administration treats the Turkish Stream Pipeline than Nordstream 2?

Turkish Stream will wind up being bigger than Nordstream 2 with four 17.5bcm trains supplying Turkey and Southern and Eastern Europe.  And yet, I don’t see one peep out of the U.S. about it.  There’s no ‘full government approach’ to stopping Turkish Stream.

There’s no political wrangling over permits and hand wringing over it bringing gas to Hungary, Italy, Greece, Austria etc.  But, Nordstream 2 is about Germany, Poland and the Netherlands.  It’s about Ukraine and a policy that, like Syria, has killed and displaced millions for the worst kind of nest-feathering of entrenched corporatist powers.

The S-400 sales grew out of the strengthening relationship between Russia and Turkey and Ankara’s eventual support of Russia’s military support of Assad.

Erdogan is a better political cockroach than German Chancellor Angela Merkel. And he smelled the shift in the political winds accurately.   He’s more adept at playing all sides against one another to get what he wants.  And right now he’s got everyone coming to his door because of Turkey’s geographic importance.

And at this point for the Trump administration to finally wake up to the problems left by the Obama administration and bully Turkey back into submission within NATO is foolhardy.

Especially when China is so important to Turkey’s economy.

I’ve got an article up on Seeking Alpha right now going over many of the factors governing Turkey and its financial position.

Turkey, being a net energy importer will, I think, coordinate with Iran to buy their oil in Chinese yuan (CYB) on the Shanghai exchange. Turkey runs a big trade deficit with China, as China is the biggest importer into Turkey ($23.4 billion, 11% of the total) that can be a major source of dollars and/or yuan, if necessary.

China Turkey Trade
Turkey’s Imports by Country (H/T Trading Economics)

And that means there’s a wide open path to ensure the flow of dollars into Turkey. This serves a number of purposes.

It keeps the demand for Iranian oil high even as it loses customers in Japan and South Korea. It assists the central bank in swapping out the dollar-denominated debt into local currency or yuan, similar to how China supported Russia in 2015. It ultimately erodes the ability of the U.S. to cut countries out of the world economy. And it empowers the yuan as a broader trade-settlement currency for Asia.

The Turkish Takeaway

The NATO Summit could go a number of different ways.  Trump could do something unprecedented there, withdrawing U.S. support further and isolating Germany within the bloc.

He’s going to try and pull back on the U.S.’s commitments to NATO while simultaneously maintaining control over it through other political means.  He wants a better deal between the U.S. and Europe and for Germany to be taken down a peg.

Turkey could easily win major concessions from Trump to stay in the group.  We’ve tolerated Turkey for decades because of where they are, bet on that continuing, especially with an ascendant Russia pressuring everyone with smart energy diplomacy.

We’ll have a clearer picture in the aftermath of Bolton’s visit to Putin.  But, I would bet on Turkish Stream not being affected, S-400 sales going through and Turkey gaining a de facto exemption from Iran sanctions.

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