Ankara's alliance with Abu Dhabi is strengthened
A new stimulus injection approaching $51 billion is again being offered to the faltering Turkish economy by the United Arab Emirates, cementing its alliance with Turkey and its president personally.
In the context of Tayyip Erdogan's tour to the Gulf countries, Ankara and Abu Dhabi signed agreements worth more than 50 billion dollars, which was the goal of Erdogan's tour to neighboring countries in the Middle East. The news immediately sent the Turkish lira up 0.5%, but the Turkish currency fell again a few hours later, settling at 26.87 Turkish lira to the dollar in the evening. The pound has depreciated by 30% since the beginning of the year.
The Turkish president and his Emirati counterpart, Mohammed bin Zayed, attended the signing of a large number of memorandums of cooperation in Abu Dhabi. These consist of pledges with a total value of 50.7 billion dollars, while at the same time they also provide for the commitment of the sovereign investment fund of Abu Dhabi to purchase bonds of Turkey worth 8.5 billion dollars. The agreement provides that the money from the bond purchase will be used to finance reconstruction projects in the areas destroyed by the February earthquakes. According to the estimates of the Turkish government, the total cost from the devastating earthquakes of February exceeds 100 billion dollars. But given the support from the Emirates, the money from the bond sale will finance everything from nuclear power investments to green hydrogen and petrochemicals production, as well as space exploration and defense spending.
According to the head of Abu Dhabi's sovereign wealth fund, Tahnoon bin Zayed, the money from the “earthquake relief” bonds will go mainly to building houses to house those who lost their homes due to the earthquakes in central and southern Turkey. It will be about the so-called sukuk, the Islamic bonds.
At the same time, the sovereign wealth fund of the Emirates, which has capital of 160 billion dollars, announced that it has signed an agreement with the Turkish bank Export Credit Bank, within the framework of which it will allocate 3 billion dollars to finance companies that plan to export their products to the Emirates, but also to other markets. As part of his tour of the Gulf countries, the Turkish president first visited Qatar. This is the ally that has repeatedly supported him with capital injections in the order of 10 billion dollars, but also with currency exchange agreements that temporarily replenished Turkey's foreign exchange reserves when they had been depleted due to the repeated interventions of the central bank in the foreign exchange markets in order to support the lira.
The agreements concluded by the Turkish president are the culmination of a process of rapprochement with the Gulf countries after years of hostility and coldness, especially with Saudi Arabia. There have been systematic efforts by Erdogan to reach out to the Gulf countries, looking forward to multi-billion dollar capital injections that Turkey needs to cover its deficits. At the same time, the Turkish president is trying to attract investments amounting to 25 billion dollars from the Gulf countries after the hemorrhaging of foreign investment capital that has been leaving Turkey en masse in recent years, reacting to the problematic choices of the Turkish president in monetary and economic policy.
