Hubris, Corruption and Democracy in Turkey: Erdogan’s Fall

Posted by Lenos Trigeorgis* on December 27th, 2013

Turkish PM Erdogan, like a hero in ancient Greek drama whose arrogance from power caused him to lose touch with political and social reality and disturb the “gods” committing hubris, overestimating his own strength and blinded by his arrogance and self-righteousness, is facing inevitable fall. His latest panicky moves to fire or reshuffle 70 police chiefs in connection with the ongoing corruption investigation and forbid journalist access to police stations seem foolish and belie common sense, putting the Turkish people before a stark dilemma: (survival of) Erdogan or Turkish Democracy? As in ancient Greek drama, Erdogan’s hubris will be followed by his fall and the nemesis (punishment) of the “gods” his arrogant behavior disturbed.

Erdogan knows in his guts he is already lying on his deathbed and he is fighting desperately for his political life, even if he puts Turkish democracy at risk. That is why his latest moves are more like desperate actions of a drowing person trying to stay afloat at any cost, alluding to external and internal powers aiming to bring down his government’s economic and geopolitical achievements. Erdogan will not survive, as his arrogance and hubris unleashed too many diverse powerful forces (modern “gods”) that will ensure his end is imminent.

Until earlier this month, Erdogan was considered one of the most successful and powerful modern politicians, an “untouchable” political hero. The Turkish economy has grown impressively under his rule, and his global geopolitical ambitions for a secular Muslim Turkey as an example of democratic stability and a power broker in the broader region, from Egypt and northern Africa, to Syria and Iran, earned him tremendous credibility and respect with global powers. The US outsourced its Syria policy to Erdogan. Earlier this year, his power was solidified internally vis-à-vis the military and other opposing internal secular forces when the judiciary indicted ex armed forces chief Gen. Basbug and 300 prominent others for conspiracy to overthrow his government. It was an impressive legal case and a lesson for the Turkish military, which had viewed itself as guarantor of the secular Turkish constitution and staged three coups since 1960, to abstain from intervening in future political affairs. It was an impressive show of power by Erdogan, it seemed.

Or was it? Erdogan’s government claimed it had little to do with the judiciary’s tough prosecution and sentencing in the Ergenekon case trials, even though some western powers and internal groups accused it of manipulating the judiciary. Recent developments confirm that the Turkish judiciary has had its own mind. It is determined, tough, and has replaced the military in bringing checks and balances to Turkish democracy. What has not received due attention, is that the same tough prosecutor, Zekeriya Oz, who, like an angel saved Erdogan’s AKP government from military intervention and sentenced the generals to life imprisonment, is now heading the corruption investigation against Erdogan’s AKP government. Erdogan knows he cannot challenge the prosecutor and that he is in deep trouble, hence the controversial moves to fire or reshuffle the police chiefs, control media access to police buildings, and last- minute changes to the law requiring prosecutors to report all investigations to their political supervisors. Ironically, that would have required that investigators report to the interior minister that his son and indirectly himself were under investigation for corruption, a fatal blow to judicial independence.

It is rumored that Mr. Erdogan’s own son, Bilal Erdogan, was among the list of additional suspects ordered to be brought into custody by the Istanbul prosecutor’s office in connection with another investigation. The new Istanbul police chief (freshly appointed by Mr. Erdogan to contain the investigation) who has been ordered by prosecutor Akkas to detain the new suspects has refused to execute the order and prosecutor Akkas later stated he was removed from the case. An interesting power struggle seems under way testing the very essence of judicial independence and balance of powers in Turkey. The Istanbul chief prosecutor’s office allegedly launched an investigation into public and police officers who refused to carry judiciary orders, including the Istanbul Governor and the chief of the financial crimes unit. As Erdogan resists and interferes with the judicial process to protect his own, democratic forces will likely become more vocal.

The Turkish Association of Journalists already filed a lawsuit seeking annulment of the directive barring journalists from entering police buildings. An international journalists group put Erdogan on their suppression-of-the-press leaders list. His own AKP Izmir party deputy Mr. Gunay criticized the PM for his out-of-touch rhetoric on the corruption scandal: “He didn’t say anything to dispel the doubts raised about corruption.” It is known that as Mayor of Istanbul Erdogan interfered with justice to protect his 19-year-old son who killed a famous singer in reckless driving. So how he might be independent if his own son and the sons of his ministers are prime suspects in the corruption investigation is on everyone’s mind. He recently stated “if you have evidence of any wrong doing, juts give it to us and we will take care of it,” criticizing prosecutors for not informing the government about the inquiry. But now, despite his immensely grown power, the forces stacked against him might be even more powerful.

Corruption is not new in Turkey’s construction and energy industries. A culture of “hums” (one-fifth) made it common for officials to expect an illegal 20% cut in public deals, from ministries to municipalities. Halkbank served as a conduit for money transfers with Iran exceeding $120 billion. Corrupt arrangements in the construction of public housing led to the collapsing infrastructure during the 1999 earthquakes that gave rise to anti-establishment sentiment that brought Erdogan’s Justice and Development (AKP) party to power in 2002, amid promises of combating corruption. That is why the corruption issue is so sensitive for the AKP party, as it endangers its very identity. When that identity collapses, the party loses its credibility.

Construction development has boomed during Erdogan’s decade-old rule. Massive privatizations of government assets exceeding $50 billion were accompanied by allegations of corruption in government licenses, bids, tenders and land sales. Favored businessmen were given no-bid government contracts and state-owned banks offered them preferential loans. A new office in charge of land sales for the creation of public housing was put directly under the prime minister. Affiliated construction businessmen were sold huge plots of land, even for projects unrelated to public housing. Torunlar GYO, founded by Erdogan’s childhood friend Aziz Torun, became one of the wealthiest real estate partnerships. Minister of Environment and Urban Development Erdokan Bayraktar, who was forced by Erdogan to resign, accused the PM publically of personally approving many of the development projects under corruption investigation, giving added credibility to the corruption claims. The violent containment of the Gezi Park protests against demolition of a symbolic Istanbul park for commercial development still reminds of an unholy alliance between the AKP and big construction business interests.

Behind the judiciary’s investigation there might be forces loyal to Mr Gulen, a powerful Islamic cleric who controls an informal religious, education and business network that infiltrated powerful Turkish institutions, such as the judiciary, police, central intelligence, even the AKP party itself. Whether Zekeriya Oz is an altogether independently-minded prosecutor or his staff may be influenced by the Gulen movement, it is certain that Mr Erdogan and his AKP government are in deep trouble. For one, they antagonized the powerful Gulen movement that now turned against them. Although the Gulen movement has been an invaluable ally for the AKP party in a mutually beneficial relationship during AKP’s decade-old rule sharing the benefits of a booming domestic economy, in helping Turkish businesses when doing business abroad with Gulen’s global network connections and during the recent showdown with the military, Erdogan’s arrogance led him to antagonize his natural allies. Besides some foreign policy disagreement (with the Gulenists being more pro-Western), ongoing efforts by the AKP to restrain Gulenist influence (in discussions with the military in 2004) culminating with AKP’s decision last month to close down Gulenist private preparatory schools turned hubris to nemesis.

Another powerful “god” that Erdogan’s arrogance may have disturbed is violating US and EU sanctions against Iran. Two of the main current arrests are related. 29-year old Iranian businessman Reza Zarrab, accused of bribing the Economy Minister and three ministerial sons spreading more than $65 million in bribes, is suspected of coordinating illegal money-laundering and gold-smuggling transactions with Iran worth over $120 billion. Some of the bribes are directly linked to financing AKP party surveys. The CEO of state-run Halkbank, Suleyman Aslan, with $ 4.5 million found in shoeboxes in his house, is also under arrest in suspicion of money laundering and gold trading with Iran. The illegal gas-for-gold exchange scheme worked as follows: Turkey bought huge amounts of oil and natural gas from Iran and deposited the payments in a special account for Iran in Halkbank. Then the bank converted the amount to an equivalent amount of gold bars, which were transferred in armored vehicles and delivered at the border to Iranian officials. Some loads were sent by airplane to Qatar and Russia. Halkbank may also have acted similarly on behalf of other counties buying oil from Iran, such as India (also paying in gold). Gold trading from Turkey to Iran increased significantly after March, when SWIFT transactions with Iran were discontinued.

Zarrab stated that he has been working for Iranian businessman Babak Zanjani, who has made $ billions assisting the Iranian government bypass the international sanctions imposed against it. Zanjani is blacklisted by the EU and US, although he denies the connection with Zarrab. A series of sms messages sent by Zarrab to the Economy Minister involving bribes and to Zanjani for helping release a confiscated airplane gold cargo are part of the evidence. Likely the US National Security Agency is also aware of these activities, hence the near rift between Erdogan and the US Ambassador and the talk about foreign circles intervention in the corruption investigation. “No one should jeopardize US-Turkey relations with such ill-intended slanders” a US Embassy statement warned. In the past, 47 US Congressmen prompted by the Israeli AIPAC lobby in the US had signed a letter calling for sanctions against the bank. Davis Cohen, who had a meeting with Halkbank officials warning over its dealings with Iran in 2009 as a US Treasury intelligence agent (Wikileaks), is scheduled to visit Turkey again now as US undersecretary for terrorism and financial intelligence responsible for monitoring the sanctions against Iran to discuss easing of the gold trade after last month’s Geneva agreement following Iran’s concessions. Erdogan went as far as accusing business groups like the Turkish Industrialists and Businessmen’s Association for allegedly acting with international conspirators, implying mainly the US and Israel. He also attacked the media for spreading anti-Turkish propaganda. The signs of hubris, and the coming nemesis and Erdogan’s fall seem to be near.


*Lenos Trigeorgis holds a PhD (DBA) from Harvard University and is the Bank of Cyprus Chair Professor of Finance at the University of Cyprus and President of the Real Options Group. He has been a Visiting Professor of Finance at the London Business School. He is the author of Real Options (MIT Press, 1996), Strategic Investment(Princeton University Press, 2004) and Competitive Strategy (MIT Press, 2011).

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Source  http://blog.stockwatch.com.cy/?p=2090