(Bloomberg) — President Recep Tayyip Erdogan is leading Turkey toward its biggest showdown with key Western allies since he assumed power two decades ago. At the heart of the row is a joint call on Turkey by ambassadors from 10 countries — including the U.S. and Germany — to free Osman Kavala, a 65-year-old businessman and philanthropist sent to jail four years ago, when Erdogan’s allies began accusing him of conspiring to overthrow the president. Kavala denies the accusations. Erdogan says the call for his release is an attack on Turkish sovereignty. The added strain on already tense ties with Western partners is likely to spur more volatility in the lira, which could push inflation even higher than its current level of around 20%.
1. Who’s Kavala?
Kavala was 25 years old and pursuing a Ph.D. at the New School in New York in 1982 when his father died, leading him to relocate to Turkey and take over the family business. Under his watch, the Kavala group of companies were active in electronics and telecommunications for the following two decades, importing everything from Commodore 64 computers to mobile phones into Turkey. In the wake of a 1999 earthquake that badly affected Istanbul, Kavala took a back seat in corporate management and began founding non-governmental organizations. According to 2019 court testimony, his NGO activities were aimed at restoring dialogue and harmony in Turkish society and strengthening Turkey’s democracy and its integration with the European Union.
2. How did he get caught up with Erdogan?
Kavala was on the board of the Turkish chapter of the Open Society Foundations funded by financier George Soros until the Turkish government shut down the branch in 2018. His affiliation with Soros has fueled Erdogan’s rancor, who once disparagingly referred to the Hungarian-born, U.S. investor as the “famous Hungarian Jew Soros.” Erdogan has accused Soros of supporting anti-government protests to divide Turkey and other countries around the world. Turkish prosecutors accused Kavala of financing and organizing the months-long Gezi Park protests against Erdogan in 2013, charges that saw the Turkish businessman put into jail in 2017. Kavala was eventually acquitted but a higher court overturned the decision, paving the way for further judicial proceedings.
3. How is Kavala still in prison then?
On the day he was acquitted, Feb. 18, 2020, Kavala was rearrested as part of a separate probe that accused him of trying to do the same thing: overthrowing the Turkish government. This time, Kavala is accused of taking part in the 2016 failed putsch against Erdogan, which the Turkish leader says was masterminded by a U.S.-based Turkish cleric, Fethullah Gulen. Kavala said the accusations are nonsense and the evidence, if any, is phony. In court hearings, he has repeatedly put a distance between himself and the Gulen movement, saying the cleric’s followers within Turkey’s judiciary were responsible for putting innocent people in jail in years past using “fictional” charges.
4. What happens from here?
Ambassadors of the U.S., Germany, Denmark, Finland, France, the Netherlands, Sweden, Canada, Norway and New Zealand demanded Kavala’s release, in line with similar calls from European courts that repeatedly said the cases against him are baseless. Erdogan’s unexpected directive for them to be declared personae non gratae and expelled has to be executed by the Turkish foreign ministry. But the president’s remarks were made publicly, which makes it difficult to retract them. Going ahead with Erdogan’s “orders” will further cloud Turkey’s relations with the U.S. and other allies and ripple through to financial markets. The currency’s path matters to Erdogan as much as it does to the rest of the nation of 86 million people. It’s already trading at record lows against the U.S. dollar and further weakness will fuel inflation. That’s hardly good news for Erdogan, whose approval ratings are measured at historic lows by various polling agencies.
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