War is a money consuming business. Turkish President Recep Erdogan knows it better than anyone. In addition to the expenditures for conducting hostilities, the country is suffering losses from the US sanctions. US President Donald Trump's threat to “destroy the economy” of Turkey caused a record slump of the lira. However, according to Trump’s statement, this is just the beginning.
The relations between the US and Turkey had deteriorated after Turkish forces launched a military operation in northeast Syria, that is, the Kurdish-held territory. The Syrian Kurds lacking the support of the United States were forced to make a deal with the government of Bashar al-Assad and continue to repel an attack of the Turkish Army. Notably, the Assad regime is supported by Russia and Iran. Nevertheless, the countries have not stepped into an outright conflict yet. Therefore, it seems that the confrontation has barely begun. Meanwhile, the outlook for the Turkish economy and its national currency is rather gloomy. Trump has already granted the Ministry of Finance extraordinary powers to impose sanctions against Turkey if needed. Against this background, the Turkish lira is expected to face hard times and plummet to new historical lows.
