U.S. Pastor Case Marks Day of Reckoning for Turkey's Economy

(Bloomberg) -- The trajectory of Turkey’s pummeled economy and the country’s ties with the U.S. hang precariously on Friday’s proceedings in a local courtroom.

Andrew Brunson, a preacher from North Carolina who has lived in Turkey for two decades, appeared in court near the Aegean port of Izmir over his alleged involvement in a 2016 coup attempt to topple President Recep Tayyip Erdogan.

If pre-hearing speculation turns out to be accurate and Brunson is soon freed from house arrest, the threat of another round of the U.S. sanctions that helped fuel a rout in the Turkish lira will likely lift. A decision to press ahead with a trial on terrorism-related charges that carry a maximum 35-year prison sentence would send the currency and relations with Washington into an even deeper dive.

U.S. Pastor Case Marks Day of Reckoning for Turkey's Economy

During the morning session, the court listened to two prosecution witnesses who contradicted earlier testimony in which Brunson was accused of assisting coup plotters seeking medical care and shelter in Izmir, as well as having links to banned Kurdish PKK militants.

Ahead of the hearing, Erdogan had vowed not to interfere in and “to abide by whichever decision the judiciary makes,” Hurriyet newspaper reported. The president last week accused the U.S. of using Brunson as a pretext to impose sanctions on Turkey, while leaving the door open for a reconciliation.

U.S. Pastor Case Marks Day of Reckoning for Turkey's Economy

The Washington Post on Thursday reported one way forward. Without naming its sources, the paper said that the White House had agreed to lift sanctions against Turkey, which would allow Brunson to be sentenced to time already served or serve any remaining sentence in the U.S. The lira strengthened on the speculation. State Department spokeswoman Heather Nauert said she wasn’taware of any such deal with Turkey.

The drama surrounding Brunson, who led a small evangelical Presbyterian church in Izmir, has strained the relationship between Turkey and the U.S. -- longtime allies and fellow members of the North Atlantic Treaty Organization -- like no other diplomatic spat in decades.

The Trump administration vehemently rejected the allegations against Brunson as baseless and slapped sanctions on two members of the Turkish government. The move triggered financial turmoil. The weaker lira sent inflation to almost five times the central bank’s target and interest rates have been hiked, with the benchmark now at 24 percent.

The U.S. administration refrained from imposing further punishments in the run-up to Friday’s hearing but has hinted at the possibility of more punitive measures should the court proceed with Brunson’s trial. Turkey’s constitutional court is separately evaluating a demand by Brunson’s lawyer for his client’s release.

Erdogan accuses the U.S. of trying to meddle in its judicial procedures and rejects suspicions that Ankara is holding on to Brunson as a bargaining chip to win the extradition of two Turks: Fethullah Gulen, the Pennsylvania-based preacher it accuses of instigating the botched coup, and Mehmet Hakan Atilla, the Halkbank executive sentenced to prison in the U.S. for violating Iran sanctions.

The pro-government Star newspaper said Thursday that freeing Brunson doesn’t make sense without securing Atilla’s release from the U.S., and that barring that, the pastor should be convicted of spying and imprisoned.

The Brunson case is just the latest irritant to Turkish-U.S. ties. Relations were already strained by U.S. cooperation with a Syria Kurdish force viewed by Turkey as a terrorist affiliate of the PKK separatists it has battled at home for decades, as well as the issue of Gulen. Despite being a NATO member, Turkey also agreed to buy Russia’s S-400 missile defense system over U.S. objections.

“The elimination of the Brunson case or some positive developments in this regard may not erase all the hitches we are experiencing in Turkish-American relations,” Ilnur Cevik, a top adviser to Erdogan, said in an article in the Daily Sabah newspaper on Friday.

©2018 Bloomberg L.P.

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