Turkey’s top economic management sees another shakeup

Mehmet Hakan Atilla, CEO of Turkey’s Istanbul Stock Exchange (Borsa Istanbul), resigned from his post on Monday, triggering doubts about the motivations behind this abrupt move at the one of key economic managerial posts of the country.

Atilla was appointed to his post in October 2019 in a controversial decision just after being sentenced to 32 months in prison in the US for helping Iran circumvent sanctions while he was deputy executive at Turkey’s state-run Halkbank — a case Turkish President Recep Tayyip Erdogan considered a politically motivated assault against the Turkish government.

Atilla served a 28-month jail term in the US and was released in 2019, when he was appointed as head of the stock exchange by Erdogan’s son-in-law and former Finance Minister Berat Albayrak.

For some, the resignation may be connected to the impending Halkbank trial on May 3 in New York as a gesture to fix US-Turkey relations in the upcoming months and attract foreign investors amid rising speculations that Albayrak may return to an economic management post in the government.

During the upcoming New York trial, Halkbank faces a fine of up to $20 billion with charges of money laundering, evasion of sanctions and fraud as the bank is accused of helping funnel over $20 billion for Iran in violation of US sanctions.

However, for Wolfango Piccoli, co-president of Teneo Intelligence in London, Atilla’s resignation will make no difference to the trial of Halkbank and US-Turkey relations.

“It is a desperate move by Ankara, which highlights once again the inability of Turkish policymakers to understand how these kinds of matters are managed in the US,” he said.

According to Piccoli, looking ahead, there are two key matters for investors: the size of the fine that will be imposed if Halkbank is found guilty, as it is generally assumed, and the reaction of the Turkish authorities once the ruling and the fine are announced.

“Meanwhile, they will monitor the court proceedings to see whether the whole trial becomes politically embarrassing for senior Turkish politicians — a development that could have an adverse impact on the already uneasy Turkey-US bilateral ties,” he said.

As per usual politics in Turkey, things came in pairs with Atilla’s resignation being followed by a bombshell presidential decision dismissing Zafer Sonmez as CEO of the Turkey Wealth Fund, which owns the Istanbul Stock Exchange. Like Atilla, Sonmez was also appointed by Albayrak.

Timothy Ash, a senior emerging-market strategist at London-based BlueBay Asset Management said “I think some will link the departure of Atilla and Sonmez as clearing the decks of former Albayrak appointees. But Sonmez was more of a technocratic appointment, and I think he had done a decent job in picking the Turkish Wealth Fund from the floor after it went nowhere for the first couple of years of its existence”.

“He was more a sovereign wealth guru rather than an Albayrak loyalist, so I don’t see why Finance Minister Lutfi Elvan and Central Bank Governor Naci Agbal would have wanted to oust him. Also, it’s notable that his replacement is a fellow board member and Albayrak nominee. So, it raises the possibility that Sonmez resigned for another reason,” he added.

Agbal was known for his critical stance against the economic policies that were implemented by Albayrak, opting rather for more orthodox policy-making choices like fighting inflation and increasing the policy rate.

According to Ash, the resignation of Atilla may be related to the beginning of the Halkbank trial. “And the Turkish authorities don’t want any fallout from that to damage the Istanbul Stock Exchange,” he said.

But experts also emphasize long-standing criticisms about the nominations for the country’s top management position in line with political favoritism.

For Piccoli, it remains to be seen whether it is a genuine shakeup at the top of these institutions or the usual giving away of jobs to friends and family members.

“The start is not that promising, as the newly appointed head of the Turkey Wealth Fund is a classmate of President Erdogan’s son, Bilal,” he said. “As has been the case for a long time, meritocracy plays no role in key appointments made by the government.”

Turkey’s wealth fund is considering an initial public offering of the Istanbul Stock Exchange by next year.