Turkey desperate for swap lines as recession looms

A board showing the currency exchange rates of the U.S. dollar and the Euro against Turkish lira is seen outside a currency exchange office in Istanbul, Turkey. (Reuters)
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Updated 07 May 2020
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Turkey desperate for swap lines as recession looms

  • US swap line with Turkey deemed unlikely as Ankara struggles to deal with mounting economic woes
  • Coronavirus pandemic has piled added pressure on Turkey’s national currency, pushing it back to 2018 crisis levels

ISTANBUL: Turkey’s hopes of securing access to US swap lines have taken a nosedive with the Federal Reserve highlighting the need for “mutual trust” with any applicant country.

The Fed’s statement on Wednesday added weight to predictions that a US swap line with Turkey seems unlikely as Ankara struggles to deal with mounting economic woes.

Asked about extending swap lines to Turkey, Richmond Fed President Thomas Barkin said that the Federal Reserve opens swap lines with countries that have a relationship based on mutual trust with the US.

During the online forum, Barkin also noted that the Fed requires high credit criteria, adding that “it does not cover all countries.”

“Fed’s Barkin more or less rules out swap lines for Turkey,” tweeted European economist Timothy Ash.

On the same day, Turkey’s state-run Anadolu Agency claimed that London-based financial institutions are attacking the Turkish lira by using manipulative operations to devalue the currency.

Meanwhile, Turkey’s battle to halt the currency’s fall suffered a further setback this week with state banks reportedly selling dollar assets while the lira fell to lows of 7.49 to the US dollar early on Thursday.

The coronavirus pandemic has piled added pressure on Turkey’s national currency, pushing it back to 2018 crisis levels when the lira hit a record low, and triggering predictions of a full-year recession.

Experts say that the way out of the currency crisis is either to ask the International Monetary Fund (IMF) for emergency assistance or gain access to the Fed’s swap line.

Turkey’s financial authorities recently hinted at the possibility of swap deals with a number of foreign central banks in order to strengthen currency liquidity.

“It looks very unlikely that the Fed will agree to a swap line with Turkey,” said Nigel Rendell, a senior analyst at Medley Global Advisers in London.

Political relations between the US and Turkey are far from good, he said.

“Many US politicians and those at the Pentagon have not forgiven Turkey for buying the Russian S-400 missile system in clear violation of NATO protocol. Other issues relating to state-run Halkbank and US-based cleric Fethullah Gulen have caused friction between the two countries,” he told Arab News.

According to Rendell, Turkey wants to use US dollars to prop up its ailing currency.

“Turkey’s central bank has already burned through a considerable amount of cash this year and is now using borrowed funds from commercial banks and other central banks while swap facilities are in place with China and Qatar. It’s effectively throwing good money after bad,” he said.

In a surprise move on Thursday, Turkey’s banking watchdog BDDK introduced regulations targeting what it described as “financial manipulation” and “deceptive transactions.”

Banking transactions that keep the price of a financial instrument at artificial levels or influence the exchange rate will be viewed as “manipulative practices” under the ruling.

Experts predict the Turkish economy will fall into recession this year.

“Despite recent suggestions from Turkish Treasury and Finance Minister Berat Albayrak that there will be positive growth for the year as a whole, given the effects of the coronavirus, like elsewhere, a recession is inevitable,” Rendell said.

Ash said that the “the lira will weaken until we see a policy response,” citing a rate hike, massive foreign exchange intervention or a plea to the IMF as possible policy responses.

But he said that an intervention on foreign exchange rates is unlikely unless the central bank gets FX swaps from friendly central banks.

In a recent interview, Ali Babacan, Turkey’s former economy chair and ex-ally of Turkish President Recep Tayyip Erdogan, said that “the IMF won’t be sufficient to meet Turkey’s foreign financing needs even if the government were to request assistance, making currency swap deals with other central banks a necessity.”

However, Babacan, who is now leads a breakaway party challenging the ruling Justice and Development Party, said: “Turkey’s increasingly bellicose foreign policy makes such an arrangement more difficult.

“There is no such thing as exporting to countries we’re quarrelling with and asking for swap deals as if nothing happened,” he said.

Rendell compared the request for a swap line with the Fed to a gambler who has run out of money going to the bank and asking for a loan so he can go back to the gambling tables.

“Apparently, Turkey is also looking elsewhere for swap lines, to other G20 members and also to its major trading partners. It may have more luck there than with the Fed,” he said.

During an online meeting with international investors on Wednesday, Albayrak announced that Turkey is negotiating one-to-one swap deals with G20 countries with which it has a trade deficit and also a free trade agreement.

However, Ankara still rejects any swap line talks with the IMF.

By relaxing coronavirus restrictions by next week, Turkey intends to restart its retail and manufacturing sectors, but tourism and export sectors still need time to recover.


Israel to ease domestic restrictions imposed due to Iran war: minister

Updated 3 sec ago
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Israel to ease domestic restrictions imposed due to Iran war: minister

Katz approved the changes for most of the country starting Wednesday evening

JERUSALEM: Israel will ease domestic restrictions imposed on its population due to the ongoing war with Iran and will “reopen its economy,” Defense Minister Israel Katz said on Wednesday.

“While we continue our intense fight against Iran until the threats are removed, we will also reopen the economy, ease restrictions, and restore Israel to paths of creativity, activity, and security,” Katz was quoted as saying in a statement after approving the changes for most of the country starting Wednesday evening.

At least 51 Palestinians killed while waiting for aid trucks in Gaza, health officials say

Updated 4 min 33 sec ago
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At least 51 Palestinians killed while waiting for aid trucks in Gaza, health officials say

  • OCHA said the people killed were waiting for food rations arriving in UN convoys
  • Yousef Nofal, an eyewitness, said he saw many people motionless and bleeding on the ground after Israeli forces opened fire

KHAN YOUNIS, Gaza Strip: At least 51 Palestinians were killed and more than 200 wounded in the Gaza Strip while waiting for UN and commercial trucks to enter the territory with desperately needed food, according to Gaza’s Health Ministry and a local hospital.

Palestinian witnesses told The Associated Press that Israeli forces carried out an airstrike on a nearby home before opening fire toward the crowd in the southern city of Khan Younis.

The Israeli military said soldiers had spotted a gathering near an aid truck that was stuck in Khan Younis, near where Israeli forces were operating. It acknowledged “several casualties” as Israelis opened fire on the approaching crowd and said authorities would investigate what happened.

The shooting did not appear to be related to a new Israeli- and US-supported aid delivery network that rolled out last month and has been marred by controversy and violence.

The UN Office for the Coordination of Humanitarian affairs, or OCHA, said the people killed were waiting for food rations arriving in UN convoys.

Also on Tuesday, the main Palestinian telecoms regulatory agency based in the West Bank city of Ramallah reported that Israeli strikes had cut off fixed-line phone service and Internet access in central and southern Gaza.

‘Aren’t we human beings?’

Yousef Nofal, an eyewitness, said he saw many people motionless and bleeding on the ground after Israeli forces opened fire. “It was a massacre,” he said, adding that the soldiers continued firing on people as they fled from the area.

Mohammed Abu Qeshfa reported hearing a loud explosion followed by heavy gunfire and tank shelling. “I survived by a miracle,” he said.

The dead and wounded were taken to the city’s Nasser Hospital, which confirmed 51 people had been killed. Later Tuesday, medical charity MSF raised the death toll to 59, saying that another 200 had been wounded while trying to receive flour rations in Khan Younis.

Samaher Meqdad was at the hospital looking for her two brothers and a nephew who had been in the crowd.

“We don’t want flour. We don’t want food. We don’t want anything,” she said. “Why did they fire at the young people? Why? Aren’t we human beings?”

Palestinians say Israeli forces have repeatedly opened fire on crowds trying to reach food distribution points run by a separate US and Israeli-backed aid group since the centers opened last month. Local health officials say scores have been killed and hundreds wounded.

In those instances, the Israeli military has acknowledged firing warning shots at people it said had approached its forces in a suspicious manner.

Deadly Israeli airstrikes continued elsewhere in the enclave on Tuesday. Al-Awda Hospital, a major medical center in northern Gaza, reported that it has received the bodies of eight Palestinians killed in an Israeli strike on a house in the central Bureij refugee camp.

Desperation grows as rival aid systems can’t meet needs

Israel says the new system operated by a private contractor, the Gaza Humanitarian Foundation, is designed to prevent Hamas from siphoning off aid to fund its militant activities.

UN agencies and major aid groups deny there is any major diversion of aid and have rejected the new system, saying it can’t meet the mounting needs in Gaza and that it violates humanitarian principles by allowing Israel to control who has access to aid.

Experts have warned of famine in the territory that is home to some 2 million Palestinians.

The UN-run network has delivered aid across Gaza throughout the 20-month Israel-Hamas war, but has faced major obstacles since Israel loosened a total blockade it had imposed from early March until mid-May.

UN officials say Israeli military restrictions, a breakdown of law and order, and widespread looting make it difficult to deliver the aid that Israel has allowed in.

Olga Cherevko, a spokesperson for OCHA, said on Tuesday that the aid Israeli authorities have allowed into Gaza since late May has been “woefully insufficient.”

Fuel has not entered Gaza for over 100 days, she said. “The only way to address it is by sufficient volumes and over sustained periods of time. A trickle of aid here, a trickle of aid there is not going to make a difference.”

Israel’s military campaign since October 2023 has killed over 55,300 Palestinians, more than half of them women and children, according to Gaza’s Health Ministry. Its count doesn’t distinguish between civilians and combatants.

Israel launched its campaign aiming to destroy Hamas after the group’s Oct. 7, 2023, attack on southern Israel, in which militants killed around 1,200 people, mostly civilians, and taking another 251 hostage.

The militants still hold 53 hostages, fewer than half of them alive, after most of the rest were released in ceasefire agreements or other deals.


Iran’s Khamenei rejects Trump’s call for unconditional surrender

Updated 18 June 2025
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Iran’s Khamenei rejects Trump’s call for unconditional surrender

  • ‘The Americans should know that any US military intervention will undoubtedly be accompanied by irreparable damage’

DUBAI/JERUSALEM: Iran’s Supreme Leader Ayatollah Ali Khamenei said in a statement read by a television presenter on Wednesday that his country will not accept US President Donald Trump’s call for an unconditional surrender.

In his first remarks since Friday, when he delivered a speech broadcast on state media after Israel began bombarding Iran, Khamenei said peace or war could not be imposed on the Islamic Republic.

“Intelligent people who know Iran, the Iranian nation, and its history will never speak to this nation in threatening language because the Iranian nation will not surrender,” he said.

“The Americans should know that any US military intervention will undoubtedly be accompanied by irreparable damage.”

Thousands of people were fleeing Tehran on Wednesday after Israeli warplanes bombed the city overnight, and a source said Trump was considering options that include joining Israel in attacking Iranian nuclear sites.

Israel’s military said 50 Israeli jets had struck around 20 targets in Tehran overnight, including sites producing raw materials, components and manufacturing systems for missiles.

A source familiar with internal discussions said Trump and his team were considering a number of options, which included joining Israel in strikes against Iranian nuclear sites.

Iran had conveyed to Washington that it would retaliate against the United States for any direct participation, its ambassador to the United Nations in Geneva, Ali Bahreini, said. He said he already saw the US as “complicit in what Israel is doing.”


Israeli army drone downed over Iran

Updated 18 June 2025
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Israeli army drone downed over Iran

  • Iranian state television broadcast pictures of the wreckage of what it said was an armed Israeli Air Force Hermes drone in the central city of Isfahan

JERUSALEM: The Israeli military said Wednesday that one of its drones had been downed while operating over Iran, the first such loss it has acknowledged since the start of hostilities last week.

An army statement said the drone had gone down in Iran after being hit by a surface-to-air missile.

“No injuries were reported and there is no risk of an information breach,” it added.

Iranian state television broadcast pictures of the wreckage of what it said was an armed Israeli Air Force Hermes drone in the central city of Isfahan.

The Israeli air force has been launching daily raids on Iran since last Friday, with the country targeting missile sites in particular along with other military and nuclear-related sites.

Military spokesman Effie Defrin insisted that Israel was “operating freely” over Iran with air strikes that have involved “dozens of aircraft of various types.”

“We will continue to strike anywhere within Iran that we choose. Yes, there is resistance, but we control the skies and will continue to maintain that control,” he told a televised press briefing on Wednesday.

The Israeli military said on Monday it had achieved “total air superiority in the skies over Tehran.”

More than 50 Israeli Air Force fighter jets carried out air strikes in the Tehran area on Wednesday morning, targeting a production facility for uranium enrichment centrifuges among other locations, according to an earlier statement from the military.


Iran will respond firmly if US becomes directly involved in Israeli strikes, says UN ambassador

Updated 18 June 2025
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Iran will respond firmly if US becomes directly involved in Israeli strikes, says UN ambassador

  • Iran’s envoy to UN in Geneva Ali Bahreini sees the US as ‘complicit in what Israel is doing’
  • Tehran would set a red line, and respond if the United States crosses it

GENEVA: Iran has conveyed to Washington that it will respond firmly to the United States if it becomes directly involved in Israel’s military campaign, the Iranian ambassador to the United Nations in Geneva said on Wednesday.

Ali Bahreini told reporters that he saw the US as “complicit in what Israel is doing.” Iran would set a red line, and respond if the United States crosses it, he said, without specifying what actions would provoke a response.

Israel launched an air war on Friday after saying it had concluded Iran was on the verge of developing a nuclear weapon. Iran denies seeking nuclear weapons. US President Donald Trump called on Tuesday for Iran’s “unconditional surrender.”

Bahreini called Trump’s remarks “completely unwarranted and very hostile. We cannot ignore them. We are vigilant about what Trump is saying. We will put it in our calculations and assessments.”

The US has so far taken only indirect actions, including helping to shoot down missiles fired toward Israel. It is deploying more fighter aircraft to the Middle East and extending the deployment of other warplanes, three US officials said.

“I am confident that (Iran’s military) will react strongly, proportionally and appropriately. We are closely following the level of involvement in the US... We will react whenever it is needed,” he said.

Thousands of people were fleeing Tehran and other major cities on Wednesday, Iranian media reported, as Iran and Israel launched new missile strikes at each other.