Red-Hot Power Struggle In Turkey

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Executive Report with Southern Pulse, via Oil & Energy Insider, a premium publication that gives subscribers an information advantage when investing, trading, or doing business in the energy sectors. 

This is a special issue of Oil & Energy Insider’s Executive Report on Turkey, based on intelligence from OP Tactical, which has an entrenched HUMINT network on the ground and is providing us with continual updates. While OP Tactical operates confidentially for specific clients with a broad base of energy, construction, real estate and other business interests in Turkey and cannot reveal certain information under strict non-disclosure agreements, Oil & Energy Insider is privy to the broader intelligence of these operations, where it does not infringe on client privilege.

Letter from OP Tactical

Our HUMINT has spent the last week in discreet talks with high-level members of some of Turkey’s leading family dynasties and other well-placed figures to determine how Turkish Prime Minister Recep Tayyip Erdogan might emerge from the intensifying power struggle, and how the fate of certain dynasties might be determined by this.

By way of background:

Turkish Prime Minister Recep Tayyip Erdogan, the ruling Justice and Development Party (AKP) and the business elite attached to them have become targets of a very focused corruption scandal as of mid-December. This probe has been accompanied by a series of raids and scores of arrests.  The scandal is the culmination of a two-year investigation into bribery, corruption and gold-smuggling.

Three ministers resigned on Christmas Day after their three sons were arrested in the probe.  The three sons of ministers were questioned regarding alleged illicit money transfers to Iran and bribery related to construction projects, a sector the AKP has its hands in quite deeply. Two of them were later arrested on bribery charges.

The resigned ministers include Economy Minister Zafer Caglayan, Interior Minister Muammer Gular and Urbanization and Environment Minister Erdogan Bayraktar. Bayraktar’s resignation was the most dramatic. A long-time ally of Erdogan, Bayraktar made it clear he wasn’t going to go down alone and resented what he claimed was the prime minister’s attempt to get him to make a statement acquitting Erdogan of any involvement when he stepped down. Instead, he called on Erdogan to resign as well. This would normally indicate a dangerous fracturing  the AKP ranks, but that is not happening.

Two weeks later, Erdogan has regained control of the situation in large part. A day after the raids and arrests Erdogan reshuffled his Cabinet, replacing 10 ministers. Erdogan’s reshuffle has fueled the fires—similar to those that burned all last summer in the form of the Gezi Park protests—with the opposition accusing him of trying to create a secret “deep state” of authoritarian rule. However, he does not appear to have lost much support from his traditional electoral base. He is now going after the Gulenists for retribution, and Gulenist company stocks have taken a hit.

From the OP Tactical Network on the Ground:

The overriding assessment of our network on the ground in Turkey is that Erdogan will weather the corruption probe, which is the most significant challenge of this nature to the power base of the Justice and Development Party (AKP) since it took power in 2002. However, our sources believe he risks emerging from this power struggle significantly weakened without his alliance with the Gulenists. Erdogan’s reshuffling of the Cabinet and near-complete re-organization of the security institutions has effectively neutralized the Gulenist prosecutors.

The Supreme Board of Prosecutors and Judges (HSYK) has criticized government intervention in judicial matters and Turkey’s Council of State annulled a new controversial regulation imposed by the government on judicial police, obliging those carrying out investigations to inform superiors. However, this appears to be only a temporary setback for Erdogan, who is attempting to subject the judiciary to an all-powerful executive branch. Erdogan’s new “war cabinet”, full of unqualified but strictly loyal ministers, will work to realize his ambitions.

Although several pro-government figures, including the sons of three ministers, remain behind bars due to three corruption investigations launched by the Gulenists, Erdogan’s decision to distance himself from these figures almost immediately has worked to protect his public image in the eyes of his core electorate. Even the publication of photographs showing his son Bilal sitting with Yasin al-Qadi failed to produce any significant effect (among his traditional constituents). Under his firmer control of the state institutions, it will be increasingly difficult for the Gulenists to harm Erdogan through new investigations or leaks to the media.

Barring any game-changing developments at this point (i.e. graphic evidence that directly links Erdogan to corruption, which has a low probability but is not impossible), the number of votes the AKP will lose in local elections on 30 March will be limited (anything higher than 35% will be acceptable to most AKP members and around 50% will be considered as a landmark victory).

There are two scenarios for early general elections (which are scheduled for 2015): 1) If Gulenists can keep increasing the pressure on Erdogan, he might opt to call for early elections to justify a more widespread witch-hunt, which could go beyond the Gulenists in the state structures; 2) If Erdogan performs better than he expects in local elections in March and is sure that he can’t get the all-powerful presidency he covets, he may prefer to call for early elections. In this situation he may use the extraordinary situation to justify his decision to break an earlier promise not to run for more than three terms.

Our deeper investigation of the corruption probe have shown that some other dynasties than those originally reflected have been targeted as well—both directly and indirectly. This has forced some powerful families who have been straddling the Erdogan-Gulenist communities to definitively take sides.

In terms of energy, this is a significant gamble, and analyzing the developments on the ground—which remain highly dynamic—would suggest that those siding with Erdogan will emerge unscathed, particularly since Erdogan appears to have now gained a fair amount of control over the corruption investigation. This will become clearer once certain indictments are issued and when we see whose names are on those indictments and whose are not. If those in the Erdogan camp who have been accused do not show up on the official indictments, a clearer picture will emerge.

Those dynasties who are strictly Gulenist are likely to take a hit—not only with regard to their stocks, but in terms of future government contracts. In the energy sector, those who have remained on the political sidelines throughout—such as Kibar Group—are likely to meet with minimum risk. By Executive Report with Southern Pulse, via Oil & Energy Insider. 

Erdogan, the AKP, and the business elite attached to them have become targets of a focused corruption scandal that shake investor confidence to its core. Read…. Make No Mistake About It: The Storm Has Hit in Turkey

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