Turkey has begun to address its mistakes as Turkish President Recep Tayyip Erdogan agreed to change his policy under current Finance Minister Mehmet Simcik and new Central Bank Governor Hafiza K. Ergan. Türkiye seems to be engaged in geopolitical maneuvering now.
Despite strong ties with Russia, Ankara first handed over the leaders of the Azov Brigade to Ukraine and later agreed to accept Sweden into NATO, and Russia is arguably not keen on the move.
Viktor Bondarov, head of the Security Council and the Russian Federal Security Council, said that Turkey is turning from a neutral country to an unfriendly one. Russian media discourse has become more aggressive.
What influenced Erdogan’s decision?
First, Ankara had to show solidarity with its NATO partners ahead of the alliance’s summit meeting in Vilnius on July 11. Second, Turkey may have sent a signal emphasizing the importance of the agreements, given Moscow’s refusal to extend an agreement that would have allowed Ukraine to safely export grain and other foodstuffs across the Black Sea. Unfortunately, Russia seems to have taken this signal and announced the cancellation of the agreements.
It must be said that this result was expected. Last June, Dmitry Peskov, a spokesman for Russian President Vladimir Putin, hinted that the prospects of extending the grain deal were virtually non-existent.
Peskov outlined the conditions set by the Russian side, which allowed the Russian Agricultural Bank to participate in the SWIFT system for global financial transfers. Although the EU has expressed its willingness to examine the move, no practical action has been taken.
What to do now?
Russia faces huge losses in accessing additional revenue. Additionally, strained relations with Turkey could further deteriorate, leading to the loss of another ally and disruption of existing supply chains.
As for the global economy, Chicago wheat futures rose 3.5% after wheat contracts were terminated. However, while not expecting catastrophic consequences, Russian wheat exports will not be affected, thus avoiding major shortages. Additionally, the market has taken into account the decline in Ukraine’s exports. Instead, the biggest concern is the potential impact of El Niño on farms and the rhetoric of the US Federal Reserve.
As far as the Federal Reserve is concerned, if fiscal tightening continues, chances of a recession will rise, which will affect oil and wheat prices.
Igor Kochman ■ Financial consultant
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