Trump's Sanctions On Turkey, Russia Rattle Global Financial Markets: Reports

NEW YORK, (UrduPoint / Pakistan Point News - 13th Aug, 2018 ) :The Trump administration is unsettling markets and US allies as it makes increasing use of powerful sanctions, underscoring President Donald Trumps willingness to act alone on foreign policy even at the expense of heightening global instability, according to The Financial Times .

Turkish and Russian markets were hit hard last week as US sanctions exacerbated concerns about the fragility of emerging markets, the newspapers said in a dispatch.

The Turkish Lira [is sliding] rapidly downward against our very strong Dollar Trump tweeted on Friday, as he announced a tariff increase on Turkish steel and aluminium to add to sanctions against Ankaras interior and justice ministers.

Meanwhile, Turkeys Currency fell to another record low on Monday, hitting stocks in Europe and Asia and raising fears that the country is on the verge of an economic crisis that could spread to other emerging markets, The New York Times said.

The crisis and tensions with the United States has raised concerns over whether emerging economies that have benefited in recent years from foreign investment may also be vulnerable, according to the Times.

Rising interest rates in the United States and in Europe have made investor less tolerant of emerging markets. Foreign investors piled money into Turkish assets for years, lured by what appeared to be a stable economy and higher returns. But as interest rates rise in countries seen as safer, the relative attractiveness of riskier investments wanes. A crisis like the one in Turkey may be all it takes to send them fleeing, the Times added.

Turkeys central bank insisted over the weekend that it would take all necessary measures to preserve the countrys financial stability.

In his Friday's tweet, President Trump also said, Our relations with Turkey are not good at this time The dispute between Washington and Ankara over the detention of a US pastor has contributed to the 28 per cent slump in the Turkish lira against the dollar this month.

The Russian rouble has fallen 6 per cent since the US announced sweeping sanctions on Wednesday over the near-fatal poisoning in the UK of a former Russian spy.

Iran has also come under mounting financial pressure after the US reimposed sanctions following its withdrawal from the nuclear deal with Tehran, despite objections of close allies that had also signed the pact. The Iranian currency has fallen 60 per cent this year, forcing the countrys central bank to relax foreign exchange restrictions, according to The Financial Times.

The US has to rehabilitate its addiction to sanctions & bullying or entire world will unite beyond verbal condemnations to force it to, Javad Zarif, Irans foreign minister said on Twitter on Saturday, describing Washingtons sanctions against its Nato ally Turkey as shameful.

The US has been increasingly using sanctions since the 1990s, particularly after George W Bush ramped up activity after the September 11 2001 attacks. But Trump has taken the measures to a new level, as he seeks to take muscular executive actions that avoid the cost of military entanglements and yet have an impact, The Financial Times said.

The US Treasury last year added 944 people and entities to its sanctions list the highest number since 2001, according to Gibson, Dunn & Crutcher.

Adam Smith, a partner at the law firm and a former senior sanctions official at the US Treasury, said it was on track to add a further 1,000 Names this year. It is almost a perfect storm, John Smith, a former head of the Treasurys Office of Foreign Assets Control now at Morrison & Foerster, another law firm, was quoted as saying.

You have global crises that the US wants to confront, you have a Congress that is skeptical of the administration, particularly with respect to Russia and you have an administration that is far more willing to confront not only foes, but also friends.

Trumps decision to sanction the Turkish cabinet ministers over Ankaras refusal to release a US pastor who is under house arrest was an unprecedented move against a Nato ally, The Financial Times said.

Daniel Tannebaum, a former OFAC official now at PricewaterhouseCoopers (PwC), said it was an example of Trump using sanctions like an economic missile with an immediate impact. You have a president who likes to have quick results and you have sanctions even the mere threat of them, can dramatically impact a targets economy, he added.

The danger is that the aggressive approach and sometimes lack of co-ordination with allies exacerbates turbulence in financial markets that becomes difficult to contain.

Richard Nephew, a sanctions expert at Columbia University, cited the imposition in April of sanctions on the business empire of Russias Oleg Deripaska as an example of the US having a shoot first ask question later mentality. The backlash in markets and foreign capitals prompted the US to seek ways of lessening the repercussions.

Nephew said the sanctions against Iran may suffer because US allies did not support them, meaning there could be a profusion of loopholes and evasions by companies.

Jack Lew, Treasury secretary in the Obama administration, said multilateral participation had helped the administration pressure Iran to come to the table. But now, the world looks at US policy and theres an unpredictability to it that makes for a high degree of nervousness, Lew said in an interview with The Financial Times.

Turkeys economy is only the 17th largest in the world, but its problems are worsening Trumps trade war is rattling global commerce, damaging longtime alliances and threatening economic growth worldwide, The New York Times said.

In Turkey, Turkeys President Recep Tayyip Erdogan has blamed the crash of the lira on the United States, claiming a political, underhand plot had sent the value of his countrys currency tumbling to record lows, according to media reports.

The Turkish leader accused President Trump of waging economic war against the entire world, after the American leader escalated a diplomatic feud by doubling tariffs on steel and aluminium.

The aim of the operation is to make Turkey surrender in all areas, from finance to politics, the Turkish president told supporters in the Black Sea city of TrabzonThe lira has lost more than 40 per cent of its value against dollar this year, amid worsening ties between Turkey and the US and concerns over We are once again facing a political, underhand plot. With Gods permission we will overcome this."