​PKK and ISIS will raise risk premiums in 2016

TURKEY - In Brief 17 Dec 2015 by Atilla Yesilada

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PKK and ISIS will raise risk premiums in 2016 While Turkish markets greeted Fed’s “dovish tightening” move with a moderate rally, I’m writing this post to remind our readers of the daunting challenges that face Turkey in the political arena, on top of a relatively large current account deficit and a huge pile of maturing F/X debt. In addition to Syria, Turkey has picked up near-permanent conflicts with Russia and Iraq, the latter of which might not be fully discounted in Turkish risk assessment reports. But, there two dark horses which are certainly not mentioned in the risk analyses for 2016 that can cause market reversals frequently. As I write these lines more than 10K security forces, first time including armored troops of the Turkish Army, locked down 7 Kurdish cities in the Southeast on intelligence that PKK guerillas moved in them to spend the winter. A similar operation on land and air is also on-going against the traditional PKK guerrillas in rural Turkey and based in camps on Northern Iraq. Ankara’s aim is to decisively defeat PKK and its extensions in the cities and then move to a new framework of Peace Process, where the terms will be dictated by Turkey. Encouraged by Russia and Iran, PKK intends to capture new Kurdish cities for its self-declared “autonomy” and if possible to broaden the insurgency to Western cities with large Kurdish minorities. In the meantime, up to 300K Kurds are reported to be left homeless or forced to migrate from their homes. While opinions differ, Kurds seem to have lost any hope of peace and equally divided between those who wish to surrender to an oppressive state, and others who seek a separate a homeland. Local businesspeople ...