Turkey Signs Up for War--but Can It Keep Reform on Track?

Last November, when angry Turkish voters handed a landslide victory to a brand-new political party with Islamist roots, it looked as if U.S. military planners had been dealt a wild card. Incoming members of the winning Justice & Development Party--known as the AKP--were clearly more lukewarm than their more secular predecessors to backing Washington in a conflict with Saddam Hussein's Iraq. Yet keeping Turkey as a player in an anti-Iraqi coalition was crucial for the U.S.: A NATO member, Turkey not only shares a border with Iraq but its Incerlik Air Base is a vital asset for the U.S. Air Force.

Those doubts have now largely been laid to rest. In a ruling issued on Jan. 31, Turkey's National Security Council--composed of representatives from the government and the powerful armed forces--gave the green light to eventual participation in military action against Iraq. Turkish sources say that up to 20,000 U.S. and British troops could soon be stationed in eastern Turkey as a prelude to opening a northern front. At the same time, Turkey has begun moving units of its own toward the Iraqi border. "We'd like a peaceful resolution of this," says Finance Minister Ali Babacan. "But we are preparing for the worst-case scenario."

So far, the new government has been skillfully leveraging its position. After weeks of talks, Babacan says he has an "understanding" from the U.S. Treasury about a combination of soft loans, loan guarantees, and cash grants to help Turkey cope with the economic distortions of a conflict. Ankara is worried about the loss of oil from Iraq, a steep downturn in tourism revenue, and a flood of refugees from northern Iraq if war breaks out. Sources in Turkey say the government expects a package of some $12 billion, including $4 billion in cash.

American handouts will ease the economic pain. But the U.S. is also attaching strings to at least part of the package. Washington still wants the government to stick with a tough-love program of reforms outlined by the International Monetary Fund. Whether Ankara takes the medicine depends on the AKP'S charismatic leader, former Istanbul Mayor Recep Tayyip Erdogan, who is expected to become Prime Minister soon. He had been barred from running in the November elections because of a previous charge of inciting religious strife. That ban was recently lifted, allowing him to run in a Mar. 9 by-election. He should handily win that contest and then take over as Prime Minister.

While Erdogan vows fiscal rectitude, some analysts worry that he will be tempted to boost spending, particularly in the runup to local elections in April, 2004. "The real risk is that Erdogan [might lose] control of the purse strings because he wants to maintain popularity after becoming Prime Minister," says Kaan Nazli, a political analyst at New York-based consultants Eurasia Group. Already, the AKP government has introduced alarmingly populist measures. In January, Prime Minister Abdullah Gul, who is likely to become Foreign Minister to make way for Erdogan, unveiled plans to increase pensions--some to twice their current level. This backsliding prompted warnings from Washington: It does not want to prop up Turkey now, only to see a financial crisis later.

Turkey's ability to fix its economy is inextricably linked with the war's outcome. Before the first gulf war, Iraq was Turkey's second-largest trading partner. Gul recalls how, almost overnight, 10,000 trucks on the Turkish side of the Iraqi border were idled when sanctions were slapped on Baghdad after Iraq attacked Kuwait in 1990. "We carried the economic and political burden of [that] war," he says. If Saddam's fall is swift, Turkey's future could begin to look much brighter--and those IMF conditions a lot less onerous.

By John Rossant in Paris

Edited by Rose Brady

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