Turkey has been the darling of foreign oil and gas investors who are looking to new frontiers that are less risky, from a security and political stability point of view. This is Turkey-for now. Despite the fact that they still haven't made that one big find, Turkey is an extremely significant strategic investment, depending on how you play it. But the uncertainty has been piling up ever since the Gezi Park protests that shook the foundations-however mildly-of Prime Minister Recep Erdogan's power base.
Next year-indeed, four months from now--will be a definitive one for Erdogan-he could either solidify his power, or lose it entirely. For the first time, in 2014, Turkey will hold direct presidential elections, which will be followed by general elections in 2015. The significance of this is that Erdogan has said that he will not seek another term as prime minister. Instead, he will be running for president, pitting himself against a co-founder of the ruling Justice and Development Party (AKP), current President Abdullah Gul, whose popularity has experienced a fair boost since Erdogan's mishandling of the Gezi Park protests.
The problem for Erdogan-despite his massive power base-is that he has shown complete disregard for some key figures in the AKP, and they have taken notice. Now there are clear cracks in the lining of the ruling party, and this may or may not end up favoring Erdogan by the time elections come around next year.
Erdogan is now being compared…
Turkey has been the darling of foreign oil and gas investors who are looking to new frontiers that are less risky, from a security and political stability point of view. This is Turkey-for now. Despite the fact that they still haven't made that one big find, Turkey is an extremely significant strategic investment, depending on how you play it. But the uncertainty has been piling up ever since the Gezi Park protests that shook the foundations-however mildly-of Prime Minister Recep Erdogan's power base.
Next year-indeed, four months from now--will be a definitive one for Erdogan-he could either solidify his power, or lose it entirely. For the first time, in 2014, Turkey will hold direct presidential elections, which will be followed by general elections in 2015. The significance of this is that Erdogan has said that he will not seek another term as prime minister. Instead, he will be running for president, pitting himself against a co-founder of the ruling Justice and Development Party (AKP), current President Abdullah Gul, whose popularity has experienced a fair boost since Erdogan's mishandling of the Gezi Park protests.
The problem for Erdogan-despite his massive power base-is that he has shown complete disregard for some key figures in the AKP, and they have taken notice. Now there are clear cracks in the lining of the ruling party, and this may or may not end up favoring Erdogan by the time elections come around next year.
Erdogan is now being compared to Egypt's military coup leader, General Al-Sisi-that is to say, authoritarian--a comparison that is damaging to his reputation and a reflection of his waning popularity outside of Turkey.
Most tragically for Erdogan is his loss of support from the Islamist Gulen Movement, led by the highly influential Fethullah Gulen, an Islamic preacher. The political battle has been raging, quietly for some time, but Erdogan's recent move to close down schools that belong to the Gulen movement, or the Hizmet Movement (otherwise known ominously as "the Community" in Turkey) brought it out into the public more visibly. This was then exacerbated by some intelligence leaks that showed the AKP government (meaning Erdogan) actually connived with the secularists in 2003 to undermine the power of the Gulen movement.
This puts Erdogan in a bad place between secularists who increasingly view him as authoritarian and Islamists who say he has betrayed him.
Erdogan is also drawing ferocious blowback from the National Movement Party-a nationalist outfit that doesn't appreciate the prime minister's courting of the Kurds in the name of peace. This applies both to efforts to forge peace with the Kurdistan Workers' Party (PKK) and to forge an energy partnership with the Kurds in the Kurdish region of Iraq. And these two issues are tied together intricately. The National Movement Party doesn't understand Erdogan's sudden change of heart when only a year ago he was taking moves against Kurdish groups in Turkish parliament.
The Kurdish issue is being handled well-at least better than it ever has been, and much better than Gezi Park, which has turned out to be a nightmare for the prime minister.
Erdogan is most certainly not out of the picture yet-but his political battle next year will not be an easy one by any means.
Doing 'Dynasty' Business in Turkey
Who you partner with in Turkey is political, and the first question any investor should ask is: on which side of the political divide does a potential partner fall? This is pertinent for determining whether a partner can get something done-and whether lobbying for key energy projects that stretch beyond Turkey's borders will be given the time of day by the "inner circle". (Right now, even the inner circle is wary of approaching Erdogan, we are told, due his increasingly explosive nature.)
But this playing field could change drastically after presidential elections next year and general elections the following and we could see a new polarization of Turkey powerful business dynasties.
The key dynasties (groups or holdings) are: Dogan, Koc, Sabanci, Dogus, Calik, Zorlu, Ulker and Ilhas.
Right now, these dynasties are roughly divided into four political groups:
Staunchly secular (publicly against AKP): Dogan and Koc
Secular but publicly more neutral: Sabanci and Dogus
Opportunistically pro-AKP (but not Islamist): Calik, Zorlu
'Legitimately' pro-AKP and Gulenist (Islamist): Ulker Group, Ihlas Holding
Koc Holding represents the largest business family in Turkey-but Erdogan has had no qualms about taking them on. The head of the Koc family, Mustafa Koc, has been butting heads with Erdogan for years, but the situation reached a new climax in September, when Erdogan responded to Koc's criticism of his handling of the Gezi Park protests by having the tax police raid his refinery subsidiary (Tupras) and cancelling a $1.1 billion tender for Koc to build a warship, among other things. Erdogan also saw to it that legal action was launched against the holding, alleging that it orchestrated the February 1997 military coup. Dogan Group is also being attacked with criminal charges in the same vein (it had the nerve to have its media holdings publish Koc's anti-Erdogan statements). This has caused some serious reserve among potential investors-with good reason.
Bottom Line
The relationship between the AKP and the Gulen Movement has changed significantly over the past year-and even more significantly over the past 6 months. Prior to this the two had co-existed with the understanding that they could benefit each other-the Gulen Movement helping the AKP through its media control and the AKP reciprocating with Gulen-linked tenders and government positions. The AKP-meaning Erdogan-managed to amass too much power, however, enough so that it became clear that the balance had shifted and Erdogan didn't necessarily need the Gulen Movement to the extent that he once did.
We see a dangerous challenge mounting for Erdogan, but it is not yet his definitive downfall; it may actually end up seeing the Gulen Movement sidelined. Erdogan has managed to amass enormous power and it will not be easy to sideline him. Still, make no mistake, this is not about Gulen-supported schools-this is about political supremacy, and the battle will be defined first with presidential elections, then with general elections.
Contact OP Tactical, the intelligence unit of Oilprice.com, for information on our due diligence and tactical operations in Turkey.