After Trump’s Sanctions, Biden Can Reset With Turkey

(Bloomberg Opinion) -- Turks are debating whether the sanctions imposed on their defense procurement agency by the Trump administration are “light” or “heavy.” The sanctions, under the Countering America’s Adversaries Through Sanctions Act, are meant to punish Turkey for its purchase of Russia’s S-400 missile-defense system, which its NATO allies say compromise the alliance’s defenses.

They target the procurement agency, known by its Turkish acronym SSB, for “knowingly engaging in a significant transaction” with Rosoboronexport, Russia’s main arms-export entity. The sanctions bar the SSB from U.S. export licenses and authorizations for any goods or technology, from loans or credits by U.S. financial institutions, and from U.S. Export-Import Bank assistance for exports. They also impose an American veto on loans by multilateral financial institutions to SSB.

Sanctions have also been imposed on SSB president Ismail Demir and three other officials, blocking any assets they may have in American jurisdictions and barring their entry into the U.S.

Many in Turkey view the sanctions announced on Monday as being “light” because the package does not include measures that could impact the country’s financial system. But in reality, such measures were never likely. Once the U.S. decided to invoke CAATSA, the range of targets was limited to individuals or entities who are involved with, or have facilitated, the transaction with already sanctioned Russian military industrial companies.

In my view, the package should be considered a moderately heavy set of measures, similar in nature to the CAATSA sanctions imposed on China in 2018, after Beijing’s purchase of the S400 system and the SU 35 fighter from Russia.

A “light” package would have been limited to sanctions against specific officials. A “heavy” package might have prohibited the SSB from engaging in U.S. dollar denominated transactions.  But the act is not designed for use against a country’s financial system like, say, the sanctions against Iran, which have their own separate legal basis in the Iran Sanctions Act.

The sanctions, the first of their kind against a NATO ally, will essentially affect Turkey’s burgeoning military-industrial ecosystem. Direct military sales are not at risk since these transactions can be carried out directly by the Turkish military. But the sanctions will handicap the ability of the Turkish government to embark on long-term partnerships with American companies; these are necessary for the development of advanced platforms like new fighter planes or missile-defense systems.

There is also a risk that European companies may also be spooked by these measures and be less willing to enter multinational military-industrial projects led by the SSB.

The ban on access to American technology could also hinder the ability of Turkish military companies to export systems that incorporate U.S. technology. The planned $1.3 billion sale of attack helicopters to Pakistan has already been delayed because the U.S. has been holding back export clearances for the helicopter’s Honeywell International engines.

How will Turkey respond? Ahead of the sanctions announcement, President Recep Tayyip Erdogan warned that he would regard their imposition as “disrespectful” to Turkey. But since the announcement, the foreign ministry has said only that it “will retaliate in a manner and timing it deems appropriate.”

Policymakers in Ankara now face a quandary. Turkey’s reaction can take the form of further alienation from the West, building on the narrative that the West has become an unreliable strategic partner and is seeking to undermine the country’s inevitable rise to world-power status. Turkey would then seek to deepen its collaboration with non-NATO powers like Russia and China. The end result could be more sanctions and Turkey’s divorce from the Western community of nations, a detrimental outcome for both sides.

A more palatable alternative is for the Turkish government to recognize the overall costs of its anchorless foreign policy of the past few years, and view the incoming Biden administration as an opportunity to re-engage with Washington. The “wait and see” tone of the statement issued by the foreign ministry can be taken as an indication of the willingness to await the change of guard in the White House.

Biden’s arrival represents an opportunity for a broader reset. The new president will inherit a vastly different geopolitical landscape compared to the last year he held office as vice president. Turkey figures more prominently now in many of the regional conflicts and dynamics. The convergence of foreign-policy visions would undoubtedly help both Turkey and the U.S. to navigate their regional challenges.

Provided that Washington and Ankara agree on such a common vision enshrined in a new strategic roadmap, the priority should be the removal of the CAATSA sanctions. The National Defense Authorization Act awaiting veto-proof congressional approval includes a clause that the lifting of CAATSA sanctions be conditional on Turkey ceasing ownership of the S-400 system. That may be politically unfeasible: It is tantamount to asking the Turkish government to publicly acknowledge the futility of a multi-billion dollar purchase. Instead, Ankara and Washington could possibly agree on a joint monitoring regime that would eliminate the surprise element in any future decision to operationalize these systems.

The CAATSA sanctions should therefore be viewed as the first act of a new Turkey-U.S. relationship that will be shaped by the willingness of Biden and Erdogan to find common ground and salvage a critical relationship.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Sinan Ulgen is the executive chairman of Istanbul-based think tank EDAM and a visiting scholar at Carnegie Europe in Brussels.

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