Long after sunset, the day's heat lingers in the urban canyons of Istanbul's Levent financial district. Beneath billboards depicting lingerie models, black sedans crawl, bumper-to-bumper, along Büyükdere Caddesi, a four-lane highway.
In a café some distance from the office towers, Umut Keles, a Turkish analyst with an American investment bank, removes the battery from his mobile phone, afraid of being wiretapped by the Turkish government. He is speaking with us under two conditions: That we not use his real name or that of his employer. The investment banker believes that the government would take action against him if it knew his identity. "There's a witch hunt underway here at the moment," he says.
Levent is Turkey's financial center, home to the offices of banks like HSBC and Deutsche Bank, as well as several corporations. They helped finance the Turkish economic boom in recent years, but now the government suspects them of supporting putschists and terrorists. "We're all afraid," says Keles. Some of his colleagues are thinking about leaving the country for good.
For more than two months now, people in Turkey have taken to the streets to protest against the government of Prime Minister Recep Tayyip Erdogan. The police have brutally crushed the protests, which began as a campaign against the removal of trees in Istanbul's Gezi Park. At least five people have already died in the demonstrations, and about 8,000 have been injured. But Erdogan says the violence wasn't caused by his government or the security forces. Instead, he claims that the unrest is the work of domestic provocateurs and their foreign collaborators.
In the hunt for someone to blame, the Turkish government is increasingly setting its sights on one group: the financial industry. In the first weeks of the revolt, Erdogan was already agitating against the foreign "interest rate lobby," vowing to "choke" speculators. His deputy, Beir Atalay, claims that the "Jewish diaspora" is behind the protests.
Seeking Scapegoats in The Financial Sector
The government has since launched investigations into the stock market. In recent weeks, the authorities have collected the emails, telephone records and chat messages of various international financial institutions, including Deutsche Bank, Credit Suisse and Citigroup. The government is now reviewing the banks' communications with their foreign customers since the protests began in Turkey, as well as scrutinizing accounts. The investigators are searching for evidence that regime opponents manipulated the markets to fuel the uprising against Erdogan. Keles says that he no longer dares to advise clients to sell Turkish securities, fearing that he could be arrested and charged as an enemy of the state.
"All rationality seems to have been lost in the search for a scapegoat," says Timothy Ash, chief economist for emerging markets at Standard Bank in London.
Opposition politicians, attorneys and journalists have been exposed to government repression in Turkey for years. But now Erdogan's aggression is also being directed against the economic elites for the first time. The premier has accused Koç Holding, Turkey's largest corporation, of "cooperating with terrorists." The Koç family controls more than 100 companies worldwide, including energy businesses, shipyards and supermarket chains, and it employs more than 80,000 people. During the Gezi protests, the Divan Hotel in Istanbul, also owned by the conglomerate, gave shelter to demonstrators fleeing police violence.
In late July, tax investigators accompanied by police searched 77 offices of the Koç energy companies Tüpras and Aygaz, and seized computers and documents. The parent company's stock price plunged after that, with Koç Holding losing more than 1 billion ($1.33 billion) in value within three days.
Markets Falling as Investors Unsettled
Erdogan's behavior is unsettling the markets, as investors question the country's constitutionality and stability. In the first three weeks of the unrest, investors sold off Turkish bonds and stocks worth more than $1.6 billion. The Turkish stock index fell by more than 20 percent, and the currency, the lira, also depreciated sharply.
The turbulence is affecting Turkey at an inauspicious time. Ben Bernanke, the chairman of the United States Federal Reserve, hinted at a stricter liquidity policy in May. Bernanke intends to pump less money into the markets in the future. This prompted investors to withdraw capital from emerging economies.
But Turkey is highly dependent on precisely those international financiers Erdogan is now targeting. During his term in office, from 2003 to 2012, foreign investors have pumped about $400 billion into the Turkish economy, compared with only $35 billion in the previous 20 years. The economic boom of the Erdogan years was fuelled primarily by euros and dollars, not the Turkish lira.
Erdogan's rise to political prominence began in the 1990s with a promise, namely that devout Muslims could also earn money. Muslim politicians, including Erdogan's mentor, former Turkish Prime Minister Necmettin Erbakan, had long equated the free market economy with the West and therefore rejected it. Erdogan, on the other hand, promoted capitalism. By 2001, the Turkish government and the secular, military establishment had driven the country into an economic crisis, and unemployment was at record levels. Erdogan seized the opportunity to form his own party, together with Abdullah Gül, the current president: the conservative Islamist Justice and Development Party (AKP). It won a surprising landslide victory in the parliamentary election a year later.