Turkish dollar-denominated bonds and the lira have both fallen in recent days, with investors concerned about its credibility and the potential for U.S. sanctions over a Russian weapons deal.
"Turkey's purchase of S-400s undermines efforts to coordinate arms production/procurement within NATO — and the risk now is that other countries follow Turkey's lead, buying major arms systems from non-NATO countries," Timothy Ash, emerging markets strategist at Bluebay Asset Management, said in an email. "Perhaps more importantly for the U.S. defense industry, the green light has been given for NATO members to buy kit from rival countries, Russia and China, in particular.
Turkey could respond to sanctions by restricting U.S. access to its Incirlik air base, a strategically vital launchpad for American operations in the Middle East. It could also escalate attacks on U.S.-backed Kurdish militias inSource: The White House"I think Russia outsmarted U.S. in the last few years when it comes to attracting Turkey toward it," Bakeer told CNBC. "It would be a big mistake to help Moscow achieve its goals of widening the gap between the U.S.
Some regional experts believe sanctions would likely fall on military-related companies, which they say wouldn't take a massive toll on Turkey's economy. But if they hit banks, Turkey's sovereign rating and its lira currency could suffer further. The Pentagon also said in June that it would pull Turkey from the F-35 program, which included Turkish companies' involvement in the maintenance and building of the jets, if it went through with the S-400 purchase.
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