Turkey’s Drive To Restore Ottoman Era Influence

Via Disobedient Media

After nearly a century of being relegated to a smaller regional power acting alongside the Israeli-Saudi nexus, Turkey"s new leadership stands prepared to significantly increase its political power and prestige. Taking advantage of various conflicts around their borders, Turkey has embarked on a bit to expand their influence not just in the Middle East, but also on the borders of an increasingly volatile European Union. These actions, along with consolidation domestically and an increased focus on militarization mean that Turkey"s profile stands a good chance of rising over the next decade.

I. Expansion In The Middle East

Turkey has taken an active role in Syrian territories which were historically part of the Ottoman Eyalet (Province) of ?am by deploying military assets which they claim are part of their efforts to help bring an end to the Syrian Civil War. However, Turkey"s intervention came only after they used their control of Syria"s northern border to fracture rebel groups who might have opposed them. Wikileaks" Berat"s Box release has revealed that organizations tied to government officials such as Powertrans were directly implicated in the facilitation of ISIS oil imports. Leaked German government documents published by public broadcaster Arbeitsgemeinschaft der öffentlich-rechtlichen Rundfunkanstalten der Bundesrepublik Deutschland (ARD) also show that Turkey supported a number of other jihadist groups in Syria in addition to Palestine"s Hamas and Egypt"s Muslim Brotherhood. This strategy of supporting various jihadist groups in Syria created a rebel coalition that was prone to infighting, unable to effectively mount concerted resistance to ISIS and created a need for Turkish assistance which began when troops entered Syria in August 2016. Russian new source Sputnik reported that since intervening, Turkey had established military bases in the Aktarin district north of Aleppo and the city of al-Bab which was previously held by ISIS.

With a firm presence in northern Syria, Turkey has now begun a diplomatic dance of name calling and accusations with the United States over disagreements about support for Kurdish YPG rebel groups operating in Syria. Turkey opposes arming the Kurdish YPG due to their close relationship with the Turkey Partiya Karkerên Kurdistanê (PKK), a Turkish communist political party and rebel group which maintains military assets in northern Iraq. On July 19th, 2017, the Turkish state-run Anadolu Agency leaked the precise locations of a number of U.S. military bases in Syria in a move that understandably caused considerable anger to American officials. The revelation was likely in response to Turkish anger at President Donald Trump"s decision in May 2017 to arm the YPG. Erdogan has recently threatened to attack U.S. troop positions should they stand in the way of future operations against the YPG according to Turkish media.

Map published by Turkey"s Anadolu Agency showing locations of U.S. bases in northern Syria

Turkey has also sought out diplomatic confrontation with regional power Saudi Arabia in the Kingdom"s conflict with Qatar where it has deployed troops to the Gulf state. Disobedient Media has previously reported that the move is part of efforts by Turkey and Iran to position themselves as political opponents and replacements to Saudi Arabia, which has for many years acted as the Middle East"s dominant regional player alongside Israel in a power sharing dynamic referred to as the Israeli-Saudi nexus. With Saudi Arabia likely to experience an internal conflict between factions of the royal family, Turkey hopes to be able to marginalize the Kingdom and promote itself as a regional alternative.

II. Expansion In East/West Europe

Finally, Turkey has also sought confrontation with the European Union, using Greece as a flash point. Traditionally a territory of the Ottoman Empire, Greece has historically had a hostile relation with its Aegean neighbor. But relations have taken a particularly sour turn over the past year. In January 2017, Al Jazeera reported that Turkey had threatened to end its migration deal with Greece after a Greek court refused to return eight soldiers who had sought asylum in the aftermath of the failed 2016 coup d"état. The escalation came after a year of competition in the fishing industry, where Greek fisherman claimed the Turkish government had created conditions which unfairly benefitted Turkish fishing enterprises. Tensions reached a new height after reports in July 2017 that the Greek Coast Guard had fired on a Turkish freighter in the Aegean Sea which authorities claimed was carrying narcotics. Turkey has also threatened retaliation against Greece for engaging in oil exploration in Cyprus, which has been partitioned between the two countries since a military invasion in 1974.

Arab American news source Al-Monitor has noted that the escalation in the Aegean is less about historical differences than it is Turkey"s relationship with the European Union. This confrontation has lead to a breakdown in military cooperation between Turkey and European powers such as Germany. Unchecked, these disagreements could lead to a devolution in cooperation ending with Turkey"s withdrawal from NATO and and end to it"s bid to join the EU.

While Greece represents a major financial liability to the European Union, it is an excellent opportunity for Turkey to make a power play and distract European states from other issues. Disobedient Media has previously outlined the EU"s campaign to consolidate control over Greece by imposing harsh austerity measures after playing political and financial allies of German Chancellor Angela Merkel. Despite the political control it now enjoys, Europe is stuck attempting to run a country which consistently requires financial support and struggles to maintain adequate military deterrents in the face of Turkish military spending.

The focus on Greece distracts from other problems such as alarming threats by Turkish President Recep Tayyip Erdo?an to weaponize Turkish and Middle Eastern migrant populations against Europe. In March 2017, Erdo?an told European officials they would "pay the price" after the Netherlands and provinces in Germany blocked Turkish officials from engaging in political campaigns among Turkish migrants living abroad. The New York Times reported that Erdo?an alarmingly exhorted Turks to ethnically replace Europeans by outbreeding them. Sources estimate that there are between 5 to 10 million Turks living throughout the European Union, primarily in Germany. Politico has accused Erdo?an of using the European migrant crisis to further his own political agenda. In 2016, Erdo?an threatened to unleash millions of refugees and migrants into Europe after politicians moved to suspend talks to include Turkey in the European Union.

Voice of America has also noted that Turkey is currently engaged in a global drive to build 18 mosques internationally in locations such as Cuba, the United States, Russia, Kyrgyzstan, the Philippines, Palestine, the United Kingdom and Albania. In 1998, Erdo?an was jailed for four months after penning a poem where he referred to mosques as "our barracks."

III. Domestic Consolidation Of Power And Militarization

After weathering the July 2016 coup against the Turkish government, Erdo?an used the incident to not only purge political opponents, but to sell Turks propaganda promising a new geopolitical vision. In October, just a few months after the coup, Foreign Policy noted that maps displayed on Turkish TV showed the country with its borders extended into the Aegean as well as into Syria and Northern Iraq. The message has resonated with Turkish citizens, who in April 2017 voted in a sweeping constitutional referendum which strengthened the office of the president, weakened Turkey"s legislature and allowed for more political appointees in the judiciary branch.

Map shown on Turkish TV with borders slightly expanded

Pro-peace organization PAX has detailed Turkey"s place as the sixth largest arms importer worldwide, seeking to be self sufficient by 2023. The Turkish military has evolved over the years as well, upgrading its existing stockpiles of equipment and integrating new types of platforms such as drones. Erdo?an also pledged in early July 2017 to commit towards the construction of Turkish aircraft carriers starting in 2021. Figures close to the Turkish leader have urged even more extreme defense measures. On March 16, 2017, The Express reported that a cleric close to Erdo?an"s AK Party urged Turkey to develop its own nuclear weapons. Both mainstream media sources and public figures have expressed concerns that other Middle Eastern states such as Saudi Arabia and Qatar may have already developed their own weapons of mass destruction.

With the dramatic shifts in the geopolitical balance of the Middle East and the European Union facing a number of issues stemming from unrest and terrorism stemming from the migrant crisis, ongoing conflict with Russia and growing disagreements with Eastern Europe, Turkey is well positioned to increase its stature in the region. Should Erdogan avoid further internal destabilization in the form of coups and unrest from neighboring countries, it is more than likely that Turkey will once again experience a glimmer of the prestige it once enjoyed under the Ottoman Empire.

EU Parliament Suspends Turkey Accession Talks

In the latest diplomatic escalation between the EU and Turkey, on Thursday the European Parliament voted to suspend Turkey"s EU accession talks, which as a reminder have been dragging on for decades, if Ankara proceeds with its tplanned constitutional reform which grants sweeping powers to President Recep Erdogan. The resolution passed by the parliament in Strasbourg calls for the “ Commission and the member states, in accordance with the Negotiating Framework, to formally suspend the accession negotiations with Turkey without delay if the constitutional reform package is implemented unchanged."

"The current strategy of the European Commission and EU leaders seems to wait silently for things to improve in Turkey," said the European Parliament"s lead negotiator on Turkey, Kati Piri, criticizing a stance which she said was "feeding President Erdogan’s authoritarianism."

Still, the vote was largely symbolic: the EU Parliament has limited influence on Turkey"s decades-old pursuit of EU membership, now in limbo after bitter exchanges between Ankara and some European countries, but the decision does highlight the gulf which has grown between the two sides.

In response to the decision, Turkey"s EU affairs minister, Omer Celik did what Turkey has always done best: ignored the decision, and announced that Ankara does not accept the EU Parliament report. Quoted by Reuters, Celik said Ankara regarded Thursday"s vote in Strasbourg as invalid, while the foreign ministry was similarly dismissive.

"This decision, which is based on false claims and allegations, is trampling the reputation of the institution in question," the ministry said in a statement, referring to the European Parliament. "This decision is of no value for us." He added that Turkey "rejects with the back of our hand any proposals that there should be strong cooperation between Turkey and the EU in other areas instead of accession talks."

"The European Parliament has failed in its solidarity with Turkey following the coup attempt. We had expected strong support, but the call to end membership talks instead is wrong," Celik blasted.

The vote came one day after Turkey’s deputy prime minister, Numan Kurtulmus, told Reuters that Ankara was not responsible for the escalation of tensions with Brussels. "Europe displaying inappropriate behavior towards Turkey is not a situation we can accept. Being against our President Erdogan is also not a rational stance from Europe. Europe must decide… do they really want to enlarge?" Kurtulmus said.

While EU leaders have been critical of Erdogan and his behavior toward opponents, both before and after an abortive military coup against him last July, relations deteriorated following last April"s referendum which will grant President Erdogan power to become the sole executive head of state, with authority to choose his own cabinet ministers, enact laws, call elections and declare states of emergency. It topped a year-long crackdown since the failed "coup" last June.

Erdogan has claimed that both the crackdown and the increased presidential powers are needed to help tackle serious challenges to Turkey"s security both at home and beyond its borders.

Turkey"s president has wasted little time, and some constitutional changes approved in April have already been implemented: Erdogan has been able to return to lead the ruling AK Party, and members of a top judicial body have been changed. Other steps, such as scrapping the post of prime minister, are due to take place within two years. Opposition parties and human rights groups say the changes threaten judicial independence and push Turkey toward one-man rule. The EU has also expressed concern, although many in the European Parliament believe the bloc has not gone far enough.

Finally, addressing the EU Parl decision, Turkish Prime Minister Binali Yildirim said that Turkey still wants to join the EU but the "bloc is confused and this needs to be fixed" and added that the parliament"s decision had no value for Turkey and that it did not represent the views of higher European Union bodies.

The question is what will Erdogan"s reaction be if, indeed, the decision does represent the views of all EU bodies.

Turkish Referendum Full Preview

This Sunday, Turkey will vote in a hotly contested referendum on the presidential
system, whose outcome could place sweeping new powers in the
hands of President Tayyip Erdogan and herald the most radical change to
the country"s political system in its modern history.

The package of 18 amendments would abolish the office of prime minister and give the president the authority to draft the budget, declare a state of emergency and issue decrees overseeing ministries without parliamentary approval.

Opinion polls have given a narrow lead for a "Yes" vote, which would replace Turkey"s parliamentary democracy with an all-powerful presidency and may see Erdogan in office until at least 2029.  The outcome will also shape Turkey"s strained relations with the European Union. The NATO member state has curbed the flow of migrants - mainly refugees from wars in Syria and Iraq - into the bloc but Erdogan says he may review the deal after the vote. Some 55 million people are eligible to vote at 167,140 polling stations across the nation, which open at 7.00 am (0400 GMT) in the east of the country and close at 5 pm (1400 GMT). Turkish voters abroad have already cast their ballots.

The referendum has bitterly divided a nation which has already seen extensive political fracture over the past year, including one "failed coup" attempt last summer. Erdogan and his supporters say the changes are needed to amend the current constitution, written by generals following a 1980 military coup, confront the security and political challenges Turkey faces, and avoid the fragile coalition governments of the past. Opponents say it is a step towards greater authoritarianism in a country where around 40,000 people have been arrested and 120,000 sacked or suspended from their jobs in a crackdown following last July"s failed coup, drawing criticism from Turkey"s Western allies and rights groups, and resulting in the worst diplomatic relations between Turkey and Europe in recent history. Relations between Turkey and Europe hit a low during the referendum campaign when EU countries, including Germany and the Netherlands, barred Turkish ministers from holding rallies in support of the changes. Erdogan called the moves "Nazi acts" and said Turkey could reconsider ties with the European Union after many years of seeking EU membership.

On the eve of the vote, Erdogan held four separate rallies in Istanbul, urging supporters to turn out in large numbers. "April 16 will be a turning point for Turkey"s political history... Every vote you cast tomorrow will be a cornerstone of our revival," he told a crowd of flag-waving supporters. "There are only hours left now. Call all your friends, family members, acquaintances, and head to the polls," he said.

Erdogan and the ruling AK Party, led by Prime Minister Binali Yildirim, have enjoyed a disproportionate share of media coverage in the buildup to the vote, overshadowing the secular main opposition Republican People"s Party (CHP) and pro-Kurdish People"s Democratic Party (HDP). Erdogan has sought to ridicule CHP leader Kemal Kilicdaroglu, playing videos of his gaffes during rallies, and has associated the "No" vote with support for terrorism.

Kilicdaroglu has accused Erdogan of seeking a "one-man regime", and said the proposed changes would put the country in danger. "This is not about right or left... this is a national issue... We will make our choices with our children and future in mind," he said during his final rally in the capital Ankara.

The government says Turkey, faced with conflict to the south in Syria and Iraq, and a security threat from Islamic State and Kurdish PKK militants, needs strong and clear leadership to combat terrorism.

While recent polls suggest a pick-up in momentum for “yes”, they remain close, and the large share of “undecided” voters is adding to the uncertainty. According to Wall Street banks like Barclays, a “yes” outcome will likely result in a broad-based, yet potentially short-lived, relief rally driven by a reduction in near-term political uncertainty. In the event of a less-expected “no” outcome, Barclays expect a negative market reaction and positioning for this looks most attractive via FX options.

Below is a full preview of the Turkish referendum, whose outcome should be known sometime on Sunday night, courtesy of Barclays.

Referendum countdown

Turkey is heading for a public referendum on the presidential system on 16 April, this Sunday. The recent polls suggest a pick-up in momentum in favor of “yes” (Figure 1) and this is also evident in the latest surveys of pollsters such as Metropoll and Gezici, which show “yes” at around 53% as opposed to earlier surveys of below 50%. The “yes” and “no” outcomes still appear to be close on average, however, and the associated margin of error (2-3% according to pollsters) along with the large share of “undecided” voters underscores the binary nature of the referendum outcome.

Achieving 50%+ support for the “yes” campaign (AKP-MHP) might look relatively straightforward at first sight, given a combined voter base of 61% (November 2015 election results) and the almost perfectly aligned rhetoric and policies of the parties. Recall that the transformation of the political landscape before and in the aftermath of the November 2015 elections led to a firm macro-level consolidation of Turkish politics along two lines: the “nationalist front” (mostly AKP and MHP voters) and the “social democrat front” (mostly CHP and HDP voters).

However, polls suggest a less comfortable race for the “yes” campaign: i) a large number of MHP voters seem to still be unconvinced by the “yes” campaign, and ii) the true color of the “undecided voters” is hard to decipher: pollsters say voters are increasingly refraining from revealing their preference due to the mood created by the extraordinary state of affairs, and “undecided” voters could be skewed towards “no”. Metropoll argued that more than 75% of undecided need to vote “no” for it to win; while historically, undecided voters have tended to either vote for the status quo or not participate in elections. The low polling response rate due various factors (such as peer pressure in the South East and the Black Sea regions according to some pollsters) is yet another complication that could potentially be distorting the poll results.

Nevertheless, momentum has picked up in favor of “yes” based on the most recent polls, and this has also been echoed by the political expert media commentary. Among the key catalysts, experts note the following.

1. The effectiveness of President Erdogan’s campaign to push the “yes” votes of the AKP electorate higher (from the 80% level to the 90% level), as well as its impact on convincing more of the MHP electorate to vote “yes”.


2. The tailwind provided by escalating tensions with the Netherlands and the EU, which is likely to help consolidate the nationalist vote.


3. The positive impact of the improving economic sentiment recently on the “yes” campaign (Figures 2 and 3).


4. The tactical missteps of the main opposition party CHP (i.e. comments by party officials) influencing undecided AKP voters in favor of “yes”.

Overall, it is hard to simplify the referendum to a probability exercise of an early election under yes/no outcomes, given that it is far more complex and the implications are unclear (both scenarios entail an early election possibility, in our view). While markets will likely perceive near-term political risks (i.e. an early election) to be lower in the scenario of a “yes” outcome, medium-term concerns about policy uncertainty and institutional strength are likely to remain; the Venice Commission opined that constitutional changes will remove checks and balances, leading to weaker institutions. The influence of presidential advisors on policymaking and the transformation to a “new economic model” would likely be solidified under a presidential system accompanied by an accommodative monetary policy bias, a potentially looser fiscal stance and an increase in quasi-fiscal spending focused on infrastructure projects via the sovereign wealth fund (SWF). We believe that, even in the event of a “yes” outcome, the likelihood of an early election in Q4 2017/Q1 2018 is still non-negligible as President Erdogan may choose to bring forward presidential elections (from August 2019).

* * *

Market implications for FX, local rates and sovereign credit

The market appears largely positioned for an outcome consistent with polls that suggest a “yes” result is most likely. In FX option markets, for example, the volatility-adjusted premium for USDTRY calls versus puts has recently dropped to multi-year lows and below-average kurtosis suggests little demand for negative tail-event protection (Figure 4). In bonds, TurkGB risk premia remain extremely low and currently offer less return than USTs on a hedged basis (Figure 5). Finally, in EM credit, Turkey YTD has outperformed the broader Bloomberg Barclays USD EM sovereign index, partially reversing the c.10% underperformance in 2016 (in total return terms).

YES: A “yes” outcome would likely result in a broad-based, yet potentially short-lived, relief rally

Despite the market’s anticipation of a “yes” outcome, we think the associated reduction in near-term political uncertainty would likely still deliver some relief rally, allowing a temporary reprieve for the TRY and a steeper curve in anticipation of a “gradual” unwinding of tight liquidity policy.

In FX, still-large TRY political risk premia and undervaluation suggest room for appreciation following a “yes” outcome. While our estimate of the lira’s political risk premia has reduced from 15pp at the end of January, it remains relatively large at 8pp (Figure 6). Furthermore, our short-term Financial Fair Value (FFV) model suggests a 4% undervalued TRY against the USD (Figure 7).

We believe risk-reward argues for being long TRYZAR targeting January highs of 3.90 with a stop-loss at 3.67 for a reward to risk ratio of 3:1 (spot reference: 3.73). We prefer this to short USDTRY as South Africa’s similarly low risk-adjusted real interest rate differentials and heightened political risk should provide a degree of protection in the event of a “no” outcome. The trade also remains positive carry.

In rates, very low bond risk premia suggest a rates rally following a “yes” is likely to be concentrated at the front end of the yield curve as market participants will likely price a gradual unwinding of the CBT’s liquidity tightening measures. As such, we reiterate our existing trade recommendation of paying the 1s5s TRY cross-currency swap spread targeting -30bp with a stop-loss of -100bp.

For Turkey sovereign credit, we maintain our Market Weight rating. This balances our concerns about a likely medium-term deterioration of Turkey’s credit metrics in a presidential system on the one hand with relatively attractive valuations and likely reduced near-term political uncertainty in a “yes” vote on the other hand. In the near term, we see potential for further spread compression of Turkey against South Africa, especially in the 5y sector of the curve (Turkey ‘22s vs SOAF ‘22s), with South Africa remaining vulnerable to adverse developments.

In the corporate credit space, we also have a Market Weight rating on Turkish banks and corporates. In the case of a “yes” vote, we would expect bank seniors to benefit more than corporates given the more significant spread pick-up relative to the sovereign. Higher beta seniors trading at a discount of over 100bp to the sovereign as well as new-style Tier 2s yielding over 7% are likely best positioned to benefit, in our opinion, although this could be met with more Tier 2 supply. We would expect the opposite reaction to a “no” vote, with IG-rated corporates and more expensive bank seniors as well as old-style Tier 2s to be less vulnerable in any sell-off.

NO: Positioning for a “no” outcome looks most compelling via FX options

The less-expected “no” outcome will likely result in larger market movements as a higher risk of an early election would increase risk premia in the local bond curve, weigh on the lira and increase FX implied volatility, in our view.

If An Electorate Falls In The Forest, Is Their Voice Heard?

Authored by Danielle DiMartino Booth,

Quizzically-inclined quantum physicists quench their intellectuality by quoting philosophers first, then their fellow scientists.

It is in fact questionable whether quantum physics would have come into being if not for George Berkeley’s 1710, “A Treatise Concerning the Principles of Human Knowledge.” Berkeley’s most famous saying is, ‘esse est percipi,’ or, ‘to be is to be perceived.’ He elaborated using the following examples:

“The objects of sense exist only when they are perceived: the trees therefore are in the garden, or the chairs in the parlour, no longer than while there is some body by to perceive them.” So matters of matter exist only in our mind. It is critical to note that Berkeley never posed a question but rather he made a statement of the world view through his metaphysical personal prism.

It was not until the June 1883 publication of the magazine The Chautauquan that the question was put as such: “If a tree were to fall on an island where there were no human beings would there be any sound?” Rather than pause to ponder, the answer followed that, “No. Sound is the sensation excited in the ear when the air or other medium is set in motion.”

A vexatious debate has ensued ever since, one that eventually stumped the great Albert Einstein who finally declared “God does not play dice.” In recognizing this, Einstein also resolved himself to the quantum physics conclusion, that there is no way to precisely predict where individual electrons can be found – unless, that is, you’re Divine.

Odds are high that the establishment, which looks to ride away with upcoming European elections, is emboldened by quantum physics. The entrenched parties appear set to retain their power holds, in some cases by the thinnest of margins. What is it the French say about la plus ca change? Is it truly the case that the more things change the more they stay the same?

Is this state of stasis sustainable, you might be asking? Clearly the cushy assumption is that the voices of those whose votes will not result in change will be as good as uncast, unheard and unremarkable.

Except…and this is a big ‘except’ – time is on the side of the castigated and for one simple reason – they are young. Consider Great Britain’s majority decision to leave the European Union (EU). An un-astonishing 59 percent of pensioners voted to leave the EU while only 19 percent of those between the ages of 18 and 24 supported Brexit. The aged see the EU as a cash drain at just the wrong time, and for good reason while the young view those 28 member states as the land(s) of opportunities.

With the caveat that polling has been revealed to be anything but reliable, young voters in France see things a might bit differently. Nearly half of surveyed French youth say they will vote for far-right candidate Marie Le Pen. At the opposite end of the spectrum, the dark horse far-left candidate, Jean-Luc Melechon, has enjoyed a late-stage surge in the polls by vowing to increase wages and shorten workweeks. Both insurgent camps view the lead contender, former banker Emmanuel Macron as the epitome of elitism, their ‘Hillary.’

Polls show the initial round of voting, which takes place on April 23rd, will make Macron sweat, but that he will survive to stand as the strongest contender in the second round. The status quo thus prevails, which for many represents continued economic stagnation and evasion of fiscal reforms.

Now factor in the rising recognition of the fallibility and limitations of central bankers. Mario Draghi, encouraged shall we say by the Germans, looks set to begin tapping the brakes on Europe’s answer to quantitative easing. Let’s be clear. Draghi has made it plain that he won’t go down without a fight. Nonetheless, it appears monetary policy will slowly become less accommodating, dragging on growth in the peripheral countries.

And then there is the matter of the refugee crisis, the cost of which few in the United States fully appreciate. Faced with impossible living conditions and no access to work in Jordan, Turkey and Lebanon, hundreds of thousands have opted to risk the journey to Europe. In 2015, 1.3 million asylum seekers landed in Europe, half of whom traced their origins to Syria, Afghanistan and Iraq. That number plunged in 2016 to 364,000 owing mainly to a deal between the EU and Turkey which blocks the flow of migrants to Europe.

The cost, not surprisingly, is enormous. Europeans spend at least $30,000 for every refugee who lands on her shores. By some estimates, the cost would have been one-tenth that, as in $3,000 per refugee, had the journey to Europe NOT been made in the first place.

Of course, aid money helps cover the cost of the crisis. Some $15.4 billion, about 10 percent of global aid monies raised in 2016, was directed to hosting and processing migrants in developed countries last year. While charity lessens the burden, it can’t staunch anger at headline-grabbing statistics claiming that Chancellor Angela Merkel’s ‘failed migrant policy’ will cost German and EU taxpayers $46 billion in the two years ending 2017.

Fear thee not, the consensus is that September’s elections in Germany will come and go with little to no fanfare; pro-Europe candidates enjoy wide leads in the polls. Many macroeconomists expect the year to end with the strongest ties in generations between Germany and the rest of the eurozone, led by France. Bullish analysts expect the euro to shake its jitters and end the year above €1.10.

The biggest obstacle to a happy ending, for the time being at least, comes down to Italy. General elections must take place by May 2018 but an early vote remains a possibility if the current prime minister of the eurozone’s third-largest economy does not survive the year. Investors, for their part, yawn at the mention of Italy. As the Wall Street Journal pointed out in a recent story, numbness tends to set in after 44 governments have come and gone in the space of 50 years.

The most recent survey revealed a record one-in-three Italians would vote the Five-Star Movement into power if elections took place today. The rebellious, populist party has tapped the anxieties of Italians whose per capita economic output has suffered the most since the euro was formed in 1999. Even the Greeks can claim to have suffered less.

Is an Italian uprising in the cards? The bond market certainly doesn’t buy into the potential for major disruption, grazie Signore Draghi.

At some point demographics will start to matter. The situation in France is no doubt grave, with youth unemployment at nearly 24 percent. But that pales in comparison to Italy where 39 percent of its young workers don’t have jobs to go to, day in and day out. Older voters determined to keep the establishment intact will begin to die off. In their wake will be a growing majority of voters who are increasingly disenfranchised, disaffected and despondent.

If there’s one lesson Europeans can glean from their allies across the Atlantic, it’s that bullets can be dodged, but not indefinitely. As we are learning the hard way, necessary reforms are challenging to enact. Avoidance, though, will only succeed in feeding anger and despair. The longer the voices of the desperate go unheard, as just so many silently falling trees in the forest, the more piercing their cries will be in the end.

Erdogan: "Europeans Would Revive The Gas Chambers If They Weren't Ashamed"

Six months ago, it was virtually assured that as part of his daily out at the West, Philippines" president Duterte would accuse then-president Obama of being a "son of a bitch (or whore)." Now, a similar dynamic is playing out between Turkish president Erdogan and Angela Merkel, and/or the German (and Dutch) people, whom he now accuses on an almost daily basis of being Nazis, as a result of the escalating diplomatic spat between Turkey and Europe. And while some have grown accustomed to Erdogan"s daily verbal diarrhea, today the Turkish president took it to the next level: while on Sunday Erdogan once again compared Europe with the Nazis, and accused Angela Merkel of engaging “Nazi practices", he escalated dramatically when he said that Europeans “would revive gas chambers” if they weren"t ashamed."

Speaking at yet another demonstration in Istanbul on Sunday, where he rallied support for a "Yes" vote in Turkey"s upcoming constitutional referendum, Erdogan said Europe’s “masquerade ball” is over: saying the “struggle” against his country has reached a new level, Erdogan slammed European nations, particularly Germany and the Netherlands, for their “Nazi regulations” as they revealed “the hatred they have accumulated for years against our country, our nation or even against all Muslims on TV screens and newspaper headlines every day.”

Erdogan then stunned listeners when he compared treatment of Turks to Jews during the Second World War, when he said “if [Europeans] weren’t ashamed, they would revive the gas chambers,” he said quoted by the Hurriyet Daily News.

Predictably, the Turkish president then turned his sights on Angela Merkel. "When we call them Nazis they [European politicians] get uncomfortable. They rally together in solidarity. Especially Merkel," Erdogan said as cited by AFP. “Merkel. She backs [the Netherlands] too. You too are practicing Nazi practices. To whom? To my Turkish brothers and sisters in Germany,” the Turkish leader also said as quoted by the AP. Erdogan said that the current policy of a number of European states is based on fear of Turkey’s power.

“[The European states] do not have the urge to hide their intentions and cannot hide the discomfort they feel from Turkey, which is growing stronger," Erdogan said, as cited by Reuters.

Erdogan"s comments come as Turkey"s Foreign Ministry summoned the German ambassador to express Ankara"s anger over a Kurdish rally held in Frankfurt on Saturday. The Turkish president’s spokesman Ibrahim Kalin also called Germany’s actions “a worst example of double standards.” Quoted by Deutsche Welle, Kalin said that “the German ambassador was invited, summoned, to the Foreign Ministry and this [rally] was condemned in the strongest way." The spokesperson added that the “scandalous” event in Frankfurt shows that European countries are in fact actively campaigning against Turkey"s constitutional reform, which of course is merely a pretext to give Erdogan near-supreme executive and legislative power.

Scheduled for April 16, the plebiscite proposes amendments to the constitution that will make Erdogan the sole executive head of state, with the authority to choose his own cabinet ministers, enact laws, call elections, and declare states of emergency. Turkish officials have been seeking meetings with Turks living in Europe ahead of the referendum hoping to get the support of the strong diaspora — in Germany alone, there are 1.5 million people with Turkish citizenship. But these plans did not go down well with the European authorities.

“It is unacceptable to see the symbols and slogans of the [outlawed Kurdistan Workers" Party] PKK [at a rally in Frankfurt] while Turkish ministers and politicians are barred from meeting with their fellow citizens,” Kalin told in an interview to CNN Turk. Around 30,000 Kurdish supporters took to the streets in Frankfurt on Saturday to denounce the Turkish president and the upcoming referendum which seeks to expand his presidential powers.

Kalin wasn"t finished, and in the day"s final assault on Germany, Erdogan"s spokesman said Turkey accused Germany of backing last summer"s Turkish "coup" plotters.Kalin responds to remarks by Bruno Kahl, head of Germany’s federal intelligence agency, who said Turkey failed to convince Gulen was responsible for coup attempt, in Der Spiegel interview published Saturday. According to Kalin, "Kahl’s comments were proof of Germany’s support to Gulen network."

“Why are they protecting them? Because these are handy instruments that can be used against Turkey,” Kalin asked and answered.

Merkel's Migrant Deception

Authored by Vijeta Uniyal,

• As it now turns out, Hungary"s Prime Minister Viktor Orbán was right about a "secret deal" all along.


• In a government report published last month by the German newspaper Rheinische Post, experts recommended an annual intake of up to 300,000 migrants a year for the next 40 years, to counter lower German birth rates.


• As they embark on a bizarre social engineering project on a continental scale, members of Germany"s political class evidently do not see the need to consult even their own electorates. Instead, they apparently believe in creating irreversible facts on the ground, and giving voting rights to migrants permanently residing in Germany.

"Never believe anything until it has been officially denied," people use to say in days of the Soviet Union. Today, the same seems to be true for the European Union"s migrant policy. When German Chancellor Angela Merkel engineered the EU-Turkey deal on migrants, it was widely described by the European politicians and the media as a "breakthrough". Merkel and other EU leaders agreed on offering a down payment of €3 billion to the regime of Turkey"s President, Recep Tayyip Erdogan, in return for its promises to "stem migrant flows".

In December 2015, nearly four months before the EU-Turkey agreement was even formalized, Hungary"s Prime Minister Viktor Orbán accused Chancellor Merkel of working on a "secret deal" with her Turkish counterparts. President Orbán was quite specific in his claims, apparently certain that Berlin would soon reveal the details to the public.

"Beyond what we agreed with Turkey in Brussels there"s something that doesn"t figure in the agreement," President Orbán said in December 2015. "We"ll wake up one day -- and I think this will be announced in Berlin as soon as this week -- that we have to take in 400,000 to 500,000 refugees directly from Turkey."

President Orbán was ridiculed for his claims. European Commission Vice President Frans Timmermans dismissed President Orbán"s allegations of a secret deal with Turkey as "nonsense".

Bloomberg News reported the German and French outrage to President Orbán"s allegations at that time:

"France and Germany are working together to manage the flow of migrants, which is a challenge to everyone," French government spokesman Stephane Le Foll told reporters in Paris on Wednesday. "Last weekend the union reached an agreement with Turkey," and Orban should be aware of the details since he was there, Le Foll said.

A German government official, requesting anonymity because EU-Turkey talks are ongoing, said Orban"s claim that Germany made a secret deal is false.

As it now turns out, PM Orbán was right about a "secret deal" all along. According to the latest revelations made by the German newspaper Die Welt, Chancellor Merkel, along with Dutch Prime Minister Mark Rutte, had agreed to accept 150,000 to 200,000 Syrian migrants from Turkey into the EU without consulting other European member states.

Pictured above: German Chancellor Angela Merkel meets with Turkey"s President, Recep Tayyip Erdogan in Ankara, on February 3, 2017. (Image source RT video screenshot)

Die Welt reported on March 13, 2017:

Contrary to previous information, German Chancellor Angela Merkel (CDU) and Dutch Prime Minister Mark Rutte made concrete commitments on a legal refugee quota during the negotiations on the refugee deal between the EU and Turkey. Merkel and Rutte promised directly to bring in 150,000 to 200,000 Syrian refugees to Europe from Turkey each year...

The plan agreed upon by Merkel, [Turkey"s Prime Minister] Davutoglu and Rutte was presented the following day as an unexpected suggestion by Turkey. The heads of the state and governments agreed on a "voluntary intake due to humanitarian reason" in the final document of the summit.

The exact number was not revealed to the European [leaders] by Merkel, Davutoglu or Rutte. The three heads of government reached an understanding on the number 150,000 to 250,000 through a gentleman"s agreement. This has been confirmed by several individuals involved in the negotiations.

There is a plausible reason why Merkel and Rutte are still hiding these migrant figures from the public. Both Rutte and Merkel have to face their voters this year and are looking at a real prospect of anti-mass immigration parties making strong gains in the March and September general elections respectively.

Regardless of any secret dealings, however, the idea of importing hundreds of thousands of migrants into Europe fits seamlessly into what seems to be Merkel"s agenda of transforming the German and European demography.

In September 2015, before the migrant crisis could even fully unfold, Germany"s Vice-Chancellor Sigmar Gabriel declared that country could absorb up to 500,000 migrants each year.

In a government report published last month by the German newspaper Rheinische Post, experts recommended an annual intake of up to 300,000 migrants a year for the next 40 years, to counter lower German birth rates. According to these official estimates, Germany will have to take in 12 million migrants to keep the current size of the German population -- 82 million -- stable through 2060.

As they embark on a bizarre social engineering project on a continental scale, members of Germany"s political class evidently do not see the need to consult even their own electorates. Instead, they apparently believe in creating irreversible facts on the ground. They are even proposing a contingency plan to thwart a potential backlash from the population. In case of any future national referendum, Germany"s Federal Commissioner for Refugees and Migrants, Aydan Özoguz, recommends giving voting rights to migrants permanently residing in Germany.

Considering the ironclad support for Merkel"s "Refugees Welcome" policy in the German media and across the political establishment, there seems to be a consensus within Germany"s political establishment to keep the floodgates of mass-migration open, no matter how high the price.

For Merkel and Germany"s political elite, the victims of Islamist terror attacks across Germany or the hundreds of women who were sexually assaulted in Cologne"s central square on New Year"s Eve are merely roadkill on the Autobahn leading to their promised multicultural paradise.

Goodbye Old EU, Hello New Multi-Speed Europe

Authored by Peter Korzun via The Strategic Culture Foundation,

Hit by a wave of crises, the European Union is urgently searching a new model of functioning in order to survive in one form or another. The need to balance between unity and diversity is a dilemma faced currently by the bloc. Currencies, politics and interests differ to make a new pattern of European integration a reality.

It is expected that the final decision on the future functioning of the community will be made in December. The coming months are likely to see further turbulence. The EU faces legislative elections in the Netherlands this month, followed by presidential elections in France in April and May. Germany holds legislative elections in September.

French President Francois Hollande hosted his counterparts on March 6 in Versailles, near Paris, to prepare for a larger EU meeting in Rome on March 25. France, Germany, Italy and Spain used the occasion to express support for a multi-speed Europe in a joint effort to cushion the impact of the Brexit. «Unity does not equal uniformity», French President Francois Hollande told reporters ahead of a working dinner with German Chancellor Angela Merkel, Spanish Prime Minister Mariano Rajoy and Italy’s Premier Paolo Gentiloni. «For this reason I support new forms of cooperation», he said at a joint press conference with the other leaders. Some EU member states could «go more quickly» and «further in areas such as defence and the eurozone, by deepening the economic and monetary union, and by harmonizing fiscal and social policy», the French president said. Other EU members could choose to opt out of measures intended to deepen integration, he added. Hollande also emphasized the need for a European defense that would operate in coordination with NATO.

He was backed by his German counterpart. «We must have the courage to accept that some countries can move forward a little more quickly than others», German Chancellor Angela Merkel said. She insisted that other member states should be able to join the more advanced ones when they are ready. «A Europe of different speeds is necessary, otherwise we will probably get stuck. If Europe gets stuck and doesn"t develop further, then this work of peace may run into danger faster than one might think», Merkel noted. The chancellor was one of the first to mention this solution in February at the informal EU summit in Malta.

The concept allows some member states to press ahead with integration faster than others. Those in the «slow lane» would restrict themselves to participation in the single market and co-operation on foreign and security policy.

Besides Germany and France – the European Union’s «engine» – the concept of multi-speed Europe is supported by Italy, Belgium, the Netherlands and Luxembourg and several other rich EU nations. The Baltic States are likely to back it too.

In the preparation for the EU summit in Rome on the occasion of the 60^th anniversary of the Treaty of Rome, the European Commission unveiled on March 1 new ideas to keep the bloc unified. The White Paper on the Future of Europe foresees five possible scenarios for the continent by 2025: to carry on as usual; function as a single market only; do less but be more efficient; allow groups of member states to advance at their own pace; or do far more together. Thus, the EU’s executive branch is passing the buck to the member states to decide in which direction the EU should be heading.

The Commission President, Jean-Claude Juncker, argued in the European Parliament that a multi-speed Europe was the best solution. EU leaders are now considering Juncker"s options ahead of the Rome summit, where they will make their own declarations about the way forward after Britain"s expected departure in 2019.

The implementation of the multi-speed Europe concept would see some EU countries grow more united on economic and defense matters while allowing other states to catch up later. The «core» EU states could move faster and further in deepening the eurozone and harmonizing their fiscal and social policy.

The idea presupposes breaches in the basics of European integration, such as the single market, or the four freedoms of movement, capital, goods and services. In a nutshell, it all boils down to EU integration in subgroups, which is already de facto happening.

Today, the EU is divided into clubs, at times overlapping mini-coalitions based on shared geography or interests. Some countries belong to the Eurozone, some belong to the Schengen Zone, and some EU members strengthen cooperation within the European Patent Network. Germany, Sweden, Belgium the Netherlands and Austria consider the idea of creating a «mini-Schengen» and collectively close off their borders to the rest of Europe to halt the flow of refugees into their countries.

Last September, Greece organized a summit of Southern European countries – the so-called Club Med. They are prone to support more protection measures and want Brussels to give individual governments more leeway to spend and borrow as they see fit.

There is the Visegrad Group of emerging Central European powers – Poland, Hungary, Slovakia and the Czech Republic (V4). There are the tiny Baltics who share much in common. And there is the Nordic Council (whose members include non-EU Norway and Iceland). Actually, Scandinavia is already a bloc within a bloc. These nations are historically close to make them natural bedfellows. The Nordic Council’s activities never hit media headlines, but this union already exists to aid the Northern European international governance.

The Visegrad countries have refused to take asylum seekers and migrants despite EU demands for solidarity.

Hungary"s leader Viktor Orban wants to build an «illiberal democracy« and the Polish government is under EU monitoring over alleged constitutional violations. On March 2, a day after the White Paper came to light, the Visegrad group members issued a joint declaration to the effect that find the idea of a multi-speed Europe unacceptable. They look upon a multi-speed Europe as a sign that they will be treated as poor relatives or second-class citizens.

Multi-speed Europe would create rival blocs and perpetuate divisions, with France and Germany setting the rules with others left to catch-up. Countries outside the core will be marginalized being kept outside of the decision making process. The EU is to become a loose alliance, a patchwork of blocs within blocks.

Calling a spade a spade, the EU is a bloc on the verge of destruction. The process of disintegration has started and it is unstoppable. A multi-speed Europe is merely recognition of the reality. This is the time to say goodbye to the EU we once knew. A patchwork of clubs is emerging instead to change the European political landscape once and for all.

"Nazi Dogs": Turkey Prepares Sanctions Against The Netherlands

The bizarre diplomatic scandal that erupted over the weekend, after the Netherlands banned several prominent Turkish politicians from organizing and participating in pro-Erdogan rallies just days ahead of the Dutch general election where immigration will be perhaps the most important topic, and which prompted numerous accusations of "nazism" and "fascism" by Turkey"s president Erdogan, appeared set to escalate further on Monday when the Turkish cabinet is expected to consider imposing sanctions on the Netherlands in a deepening row with the country"s NATO ally. Cited by Reuters, one minister said punitive measures were likely.

A government source told Reuters that sanctions were expected to be discussed when the cabinet of ministers meets at 7 pm (1600 GMT). Ankara"s minister for EU Affairs, Omer Celik, said sanctions were likely. "We will surely have sanctions against the latest actions by the Netherlands. We will answer them with these," Celik said.

In addition to economic measures, sanctions could affect cultural activities, and military and technological cooperation. "When the sanctions are imposed, what we need to be careful about is being realistic. We are not completely closing the windows," the source said. "However, we want to show that what has been done to Turkey will have a response." He said certain cultural activities may be cancelled and the re-evaluation of military and technological cooperation was also on the table.

Earlier, Turkey summoned the Dutch charge d"affaires on Monday to complain about the ban - imposed due to fears of unrest and distaste at what the Netherlands sees as an increasingly authoritarian tone from Erdogan - and the actions of Rotterdam police against Turkish protesters over the weekend, foreign ministry sources said. As we reported on Sunday Dutch police used dogs and water cannon to disperse hundreds of protesters waving Turkish flags outside the consulate in Rotterdam. Some protesters threw bottles and stones and several demonstrators were beaten by police with batons, a Reuters witness said. Mounted police officers charged the crowd.

"The Turkish community and our citizens were subject to bad treatment, with inhumane and humiliating methods used in disproportionate intervention against people exercising their right to peaceful assembly," a statement attributed to ministry sources said.

As further reported over the weekend, President Erdogan, who is seeking support from Turks in a referendum on boosting his powers, accused the Dutch government of acting like "Nazi remnants" and said it should face sanctions for barring his ministers from addressing expatriate Turks to drum up votes. The row marks another low point in relations between Turkey and Europe, further dimming Ankara"s prospects of joining the bloc. It also comes as Turkey is caught up by security concerns over militant attacks and the war in neighboring Syria.

Some 400,000 Turkish citizens live in the Netherlands and an estimated 1.5 million Turks live in Germany.

Commenting on the Turkish official visits, the Dutch government said the visits were "undesirable" and it would not cooperate in their campaigning. According to polls, it is set to lose about half its seats in elections this week as the anti-Islam party of Geert Wilders makes strong gains. Monday was the third time the Dutch envoy had been called in since Saturday over the row. The Dutch ambassador is on leave and the Turkish foreign ministry says it does not want him back "for some time".

For now, economists do not anticipate a major fallout from the diplomatic scandal. Ozgur Altug, chief economist at BGC Partners in Istanbul, said at this stage he did not foresee the row having serious short-term economic consequences. Still, with Dutch direct investment in Turkey amounting to $22 billion, making the Netherlands the biggest source of foreign investment with a share of 16%, there is a substantial risk of escalating retaliation which could impact the deteriorating Turkish economy which recently posted double digit inflation.

"If the tension escalates and if countries start imposing sanctions against each other, it might have serious implications for the Turkish economy," Altug said.

Turkish exports to the Netherlands totalled $3.6 billion in 2016, making it the tenth largest market for Turkish goods, according to the Turkish Statistical Institute. Turkey imported $3 billion worth of Dutch goods in 2016.

Additionally, Reuters notes that Dutch visitors are important to Turkey"s tourism industry, which was hit hard in 2016 by security fears due to attacks by Islamic State and Kurdish militants. Some 900,000 Dutch people visited Turkey last year, down from 1.2 million a year earlier.

Ankara has given the paramaters it seeks to de-escalate: it is is seeking an official written apology for the treatment of its family minister and diplomats in Rotterdam, the Turkish foreign ministry sources also said. However, as noted on Sunday morning, Dutch Prime Minister Mark Rutte has said it is Erdogan who should apologize for comparing the Netherlands to fascists and Nazis, adding that Turkey was acting "in a totally unacceptable, irresponsible manner". NATO Secretary-General Jens Stoltenberg called on Turkey and the Netherlands to defuse the row.

Meanwhile, assuring that the scandal is likely to get worse before it gets better, a front page headline in the pro-government Aksam newspaper place a photo of a police dog biting the thigh of a man during Saturday night"s protest in Rotterdam, above which it placed the headline "Nazi Dogs."

It's The "Most Volatile" Year For Political Risk Since World War II

"In 2017 we enter a period of geopolitical recession," warns Eurasia Group president Ian Bremmer, adding that international war or "the breakdown of major central government institutions" isn"t inevitable, though "such an outcome is now thinkable." In the company"s 19th annual outlook, Eurasia fears that U.S. unilateralism under Donald Trump, China’s growing assertiveness and a weakened German Chancellor Angela Merkel will make 2017 the "most volatile" year for political risk since World War II.

This is the most volatile year for political risk since World War II, @EurasiaGroup says https://t.co/7EfzqhH11p pic.twitter.com/E7XwVa5VkP

— Bloomberg (@business) January 3, 2017

As Bloomberg reports, the warning is a reminder of the range of threats to stability in 2017, from elections in Germany, France and the Netherlands and Britain’s planned exit from the European Union to setbacks in emerging nations such as Brazil and refugee crises.

With Trump’s ascent to the presidency on an America First platform, the global economy can’t count on the U.S. to provide “guardrails” anymore, according to Eurasia, which advises investors on political risk. Trump’s signals of a thaw with Russia, skepticism toward the North Atlantic Treaty Organization and his “alignment” with European anti-establishment parties such as France’s National Front could weaken the main postwar alliance protecting the global order, according to the report released Tuesday.

“You could see an environment that geopolitically is by far the worst that we’ve experienced in decades in 2017 and yet the investment into the U.S. markets and the strength of the American dollar is going to grow,” he said in a Bloomberg Television interview.

In China, a scheduled leadership transition makes it likely that President Xi Jinping will be “more likely than ever to respond forcefully to foreign policy challenges,” potentially leading to spikes in U.S.-China tensions, according to Eurasia. To maintain domestic stability, Xi might “overreact” to any sign of economic trouble, leading to a risk of new asset bubbles or capital controls, Eurasia said.

Merkel, who is seeking re-election in the fall, faces likely disputes over Brexit, Greece’s simmering debt crisis and an “increasingly authoritarian” Turkish President Recep Tayyip Erdogan, threatening a refugee accord between the EU and Turkey.

“Despite just how wrong the polls have been in recent major electoral contests across the developed world, Merkel will win a fourth consecutive term,” the report said. “But the need to appease domestic critics this year will leave her a diminished figure, impacting the quality of her leadership both at home and in the EU.”

Other risks cited by Eurasia include:

• Lack of economic reforms, with only China on a “positive trajectory” among 14 major nations and Italy, Russia, Saudi Arabia, South Africa, Turkey and the U.K. declining.

• Politicians blaming central banks, including the Federal Reserve, for economic woes. Such attacks mark “a risk to global markets in 2017 by threatening to upend central banks’ roles as technocratic institutions that provide financial and economic stability.”


• A “witch hunt” against parts of the opposition in Turkey, even tighter control over government and the media by Erdogan, and pressure on the Turkish central bank to keep rates low and rely increasingly on fiscal stimulus to offset slowing growth.


• North Korea’s nuclear program, which may yield some 20 nuclear weapons, combined with technological advances allowing strikes at the U.S. west coast in the future.


• National Front leader Marine Le Pen winning the French presidential election is the biggest political risk in Europe, where EU ties and the euro area are “in a process of gradual, slow-motion disintegration,” New York University economics professor Nouriel Roubini said on Bloomberg Television. “If Le Pen comes to power in France, if an anti-euro party comes to power in Italy, this could be the beginning of the end of Europe and the euro zone,” he said.

Eurasia concludes...

This year marks the most volatile political risk environment in the postwar period, at least as important to global markets as the economic recession of 2008. It needn’t develop into a geopolitical depression that triggers major interstate military conflict and/or the breakdown of major central government institutions. But such an outcome is now thinkable, a tail risk from the weakening of international security and economic architecture and deepening mistrust among the world’s most powerful governments.

Full Eurasia Group Report below...

Duterte Meets Putin, Lashes Out At Western "Hypocrisy", While "Fed-up" Turkey Wants To Join Shanghai Bloc

As China"s president Xi was setting the stage for a new regional free-trade deal dubbed the Free Trade Area of Asia-Pacific at the Asia-Pacific Economic Cooperation summit in Lima, Peru now that Obama"s TPP has suffered a quiet death, a new geopolitical axis was being formed.

In the first meeting between the Philippines" outspoken president with Russian leader Vladimir Putin in Peru, Duterte held nothing back in his views about major powers like the United States, suggesting he is sticking to his guns on re-aligning foreign policy away from Washington, despite his warm words for incoming U.S. president, Donald Trump.

Reiterating a recurring talking point from his national addresses, Duterte lashed out at Western "bullying" and "hypocrisy" in his first meeting with Russian counterpart Vladimir Putin and said when it came to alliances, the United States could not be trusted. "Historically, I have been identified with the Western world. It was good until it lasted," he told the Russian leader. "And of late, I see a lot of these Western nations bullying small nations. And not only that, they are into so much hypocrisy," he said, according to a transcript of Saturday"s meeting provided by his office cited by Reuters.

Setting the groundwork for closer relations with the long-term US ally, Putin congratulated Duterte on his May election win and said he had done a lot in a very short time to build trust and confidence between Russia and the Philippines. Duterte responded with similar words and then chided Western powers, particularly the United States, for intervening in conflicts for their own national interest and cajoling others to side with them.

As Reuters notes, Duterte"s overtures to Russia are similar to those he made to China, until recently a bitter rival. He is now praising Beijing and tapping it for investment in a stunning about-face that has unnerved a region wary of a Chinese hegemony taking shape in Southeast Asia.

In the clearest sign yet that a new geopolitical alliance is being formed, before leaving for Peru Duterte said if Russia and China decided to create a "new order" in the world, he would be first to join. In his talk with Putin, Duterte blasted the United States and its Western allies for taking the lead in wars he said had ultimately failed. "They seem to start a war but are afraid to go to war. That is what"s wrong with America and the other," he said.

"They were waging war in so many places, in Vietnam, in Afghanistan and in Iraq ... They insist if you are allied with them that they follow you."

Duterte has spoken of his admiration for Chinese President Xi Jinping and also for the leadership of Putin. In an interview with Al Jazeera broadcast on Thursday, he described Putin as sincere, and joked that he had a "hillbilly" style.

* * *

The Philippines wasn"t the only nation expressing a desire to drift away from western-influence. On Sunday Turkish president Tayyip Erdogan was quoted by Reuters as saying that Turkey did not need to join the European Union "at all costs" and could instead become part of a security bloc dominated by China, Russia and Central Asian nations.

Sensing that Turkey"s prospects of joining the EU look more remote than ever after 11 years of negotiations, after European leaders have been critical of its record on democratic freedoms, while Ankara has grown increasingly exasperated by what it sees as Western condescension, the Turkish president is increasingly resorting to scorched earth diplomacy, and increasingly more vocal threats of drifting away from the European sphere of influence. Yesterday Turkey announced it is considering the purchase of a Russian-made S-400 long-range air defense missile system as an alternative to western unwillingness to help Turkey develop an anti-missile defense shield.

The diplomatic escalation continued today when Erdogan told reporters on his plane on the way back from a visit to Pakistan and Uzbekistan that "Turkey must feel at ease. It mustn"t say "for me it"s the European Union at all costs". That"s my view." 

"Why shouldn"t Turkey be in the Shanghai Five? I said this to (Russian President) Mr Putin, to (Kazakh President) Nazarbayev, to those who are in the Shanghai Five now," he said.

"I hope that if there is a positive development there, I think if Turkey were to join the Shanghai Five, it will enable it to act with much greater ease." 

The Shanghai Cooperation Organisation (SCO) was formed in 2001 as a regional security bloc to fight threats posed by radical Islam and drug trafficking from neighboring Afghanistan by China, Russia and four Central Asian nations -- Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.

Naturally, Turkish membership of the SCO, which had initially not included Uzbekistan and been known as the Shanghai Five, would be likely to alarm Western allies and fellow NATO members. Kazakhstan, Kyrgyzstan and Uzbekistan speak Turkic languages, and Ankara signed up in 2013 as a "dialogue partner" saying it shared "the same destiny" as members of the bloc.

Other affiliate parties include Mongolia, India, Iran, Pakistan and Afghanistan which are SCO observers, while Belarus, like Turkey, is a dialogue partner. Dialogue partners are entitled to take part in ministerial-level and some other meetings of the SCO, but do not have voting rights.

* * *

Last week Erdogan urged Turks to be patient until the end of the year over relations with Europe and said a referendum could be held on EU membership in 2017.

However, it appears that Erdogan himself is getting both impatient and frustrated.

Meanwhile the EU is treading a fine line in relations with Turkey: it needs Ankara"s continued help in curbing a huge flow of migrants, especially from Syria, but is alarmed by Turkey"s crackdown on opponents since a failed coup attempt in July. As a result, more than 110,000 people have been sacked or suspended since the abortive putsch, and some 36,000 arrested. Media outlets have also been shut down.

While it remains to be seen just how far both the Philippines and Turkey go in their separate paths to impose their own terms in a world where US - and western - influence is increasingly declining, it is becoming clear that the "legacy" world order is under substantial threat and that new geopolitical alliances are actively being negotiated behind closed doors with every passing day.