The Region 29-31,7,2023

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A Weekly Deep Dive into Strategic Trends in the Middle East

Executive Summary:

In this week’s analysis, we explore two significant and unpredictable trends in the region’s two most powerful states. In Turkiye, President Erdogan continues to make unexpected U-turns in his foreign and economic policies, driven by the urgent need to revive Turkiye’s struggling economy. Meanwhile, Israel grapples with escalating internal divisions as well as security threats within and beyond its borders.    

Erdogan Changes Key Policies to Gain Allies, Attract Foreign Investors, and Balance the Great Powers

Since his reelection in May, President Erdogan has made rapid, mercurial changes in Turkiye’s foreign and fiscal policy. He has sought to mend ties with the West, transformed Gulf rivals into allies, and reversed his previous public finance policies. 

Earlier this month, President Erdogan surprised his NATO allies when he dropped his opposition to Sweden’s request to join the military alliance and sufficed to cooperation guarantees from the United States on the F-16 fighter jet sale, NATO, and the EU concerning a new economic mechanism with Turkiye. 

Another dramatic shift occurred when the Turkish president’s visit to former adversaries in the Gulf secured $60 billion in partnership agreements last week. 

President Erdogan’s goal of attracting global investment and creating jobs through a global financial management approach became evident when he appointed as finance minister Mehmet Simsek, a liberal economist. Simsek accepted the position only after being granted a non-interference guarantee and receiving Erdogan’s endorsement for a gradual interest rate increase over 18 months. In two months in office, Simsek has begun to manage the lira’s depreciation and tax hikes, while the US-educated economist Hafize Gaye Erkan, the first Turkish woman appointed central bank governor, worked on doubling Turkiye’s interest rates. To remove any bureaucratic resistance to Simsek and Erkan’s new approach, Erdogan appointed three new deputy governors to Turkiye’s central bank. The Central Bank announced a significant 900 basis points increase in the primary interest rate and projected a 58 percent inflation rate by the end of 2023.

While making these changes, Erdogan has maintained a “one foot in each camp” strategy to reassure global investments and manage great-power rivalry. China has been a case in point. During the new Chinese Foreign Minister’s first high-level visit to a NATO country, which took place less than three weeks after NATO accused Beijing of undermining international order in space, cyber, and maritime domains, the Turkish president conveyed to Wang Yi that he had cautioned other countries against sidelining partners in the Asia-Pacific region. President Erdogan repeatedly told his Chinese guest that Turkiye is willing to deepen cooperation with China in trade and energy and boost bilateral relations to a new level. 

Indicative of his balancing act, however, Erdogan has simultaneously reached out to China’s regional rival South Korea. On the 28th of July, Turkiye’s foreign minister Fidan hosted South Korea’s foreign minister Park Jin in Ankara to sign a road map agreement for a “dynamic-Turkiye-Korea partnership.” The trade volume between the two countries is expected to jump from $10 billion last year to $15 billion. Turkiye faces an overall trade deficit of $8.85 billion, surging by 44 percent as of April 2023

Erdogan is not finished with his significant post-election policy changes. This week he is likely to turn his attention to significant changes in the Turkish military when he presides over the Supreme Military Council to decide appointments and promotions within the Armed forces. 

Israel Faces Growing Internal Discord, a New Iranian Threat, and an Unlikely U.S. Diplomatic Initiative

Last week ACLS identified three significant risks to Israeli interests in the ongoing dispute over the Netanyahu government’s planned changes to Israel’s judiciary:  the possibility of increased internal political and civil strife, security deterioration, and fractures within the Israeli military. The first two have worsened in the past week.

On Monday, July 24, the Netanyahu government moved ahead with the passage of the judicial reform law in the Knesset. Government supporters hailed the law’s new restrictions on the “reasonableness doctrine,” a tool used by Israel’s unelected judiciary to invalidate government decisions that judges believe neglect relevant considerations or do not weigh them correctly, even if not violating any specific law. The Netanyahu government and its supporters hold that the doctrine has created an undemocratic imbalance of power in Israel in favor of unelected judges.

Critics of the overhaul contend that the reasonableness doctrine safeguards unenumerated rights in Israeli law, and that limiting it would undermine the legal protection of those rights in a country that has no written constitution. As the reform law passed the Knesset, protests continued in Jerusalem, the 56-member opposition coalition boycotted the vote, and President Herzog proclaimed that those in power bore responsibility for mending the rifts the overhaul had opened up. 

While the massive protests in Israel’s cities absorbed the attention of Israeli police and security officials, National Security Minister Itamar Ben Gavir’s visit to the Al Aqsa Mosque risked stretching security forces even thinner. The visit not only sparked an international outcry but also resulted in clashes between Palestinians and the Israeli forces, who fatally shot a minor protesting the far-right national security minister’s visit. Clashes in the West Bank continued as well. On Monday morning, July 31, 2023, Israeli forces conducted a raid in Jenin, arresting Fathi Otoum, the leader of the Hamas movement in the city, and another leader of the Jenin armed brigades. The raid reportedly responded to the “Ayyash Brigade” claiming responsibility for firing a missile at the “Ram-On” settlement in the northern West Bank. Palestinian officials confirmed Otoum’s arrest.

The internal Israeli turmoil and the continuing tensions between Israeli forces and Palestinian militants in the West Bank cast a pall over the new US priority of achieving a Saudi-Israeli normalization deal. The region is filled with the viral news that the Biden administration is pitching a deal under which Saudi Arabia would receive U.S. security guarantees in exchange for recognizing Israel, while Israel would improve conditions in Palestinian territories by stopping settlements and avoiding West Bank annexation. But it is unclear why Saudi leaders would dive into a politically risky deal while Israel is undergoing such internal strife. Yuli Edelstein, head of the Knesset’s Foreign Affairs and Defense Committee, seemed to agree as he brushed off the possibility of such a deal, noting that most of the Saudi discourse is with the current American administration and not with Israel.  

Finally, to add to Israel’s security problems, on July 30 Israel’s Shin Bet security announced it had foiled significant Iranian cyber attacks against Israeli government officials. Israeli security uncovered a sophisticated spearphishing campaign by Iranian cyber operatives seeking to gain intelligence on Israeli state policy. The Iranian operatives reportedly used LinkedIn contacts to lure Israeli officials and researchers into opening malicious files allowing Iranians to control their computers. The incident aligns with cyber experts’ assessment of a growing Iranian regime cyber-attack capability. In May, Microsoft released a Threat Intelligence report tracking Iran’s rapid cyberattack escalation in May, with 24 known operations since June 2022. The Microsoft report also noted that the Iranian regime has begun using cyber attacks not just in the traditional malware sense but also to advance specific propaganda goals, such as Tehran’s broader aim of countering the Abraham Accords, suppressing internal Iranian political dissent, and bolstering Palestinian militancy. Microsoft’s experts concluded that the Iranian regime is getting faster in operationalizing its cyber operations.

The events of the past week showed that Israel’s internal and external crises are far from calming down, while the U.S. administration seems more focused than ever on a regional normalization deal that has almost no hope of happening under present circumstances. The Iranian regime lurks in the background, looking for opportunities to exploit Israel’s distraction and Washington’s misplaced priorities.


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