Will Turkey delay the Canal Istanbul project?
Last week has observed two main actions from the Turkish government in a bid to fight ongoing economic turbulence that devalued the Turkish Lira around 40 percent against the United States dollar.
On the political front, Turkey secured political and economic support from two European heavyweights, Germany and France, as well as its strategic regional ally, Qatar. Russia and China have also supported Turkey in what it calls “economic warfare” against the U.S. while the European Union has also expressed its sympathy to the Turkish government’s efforts to stop the plunge of the lira.
President Recep Tayyip Erdoğan announced that Turkey’s diplomatic campaign would continue in the coming period in a bid to create a strong defensive line against more probable sanctions from U.S. President Donald Trump.
On the economic front, more concrete measures have been observed since Aug. 13, especially after Black Friday (on Aug. 10) and turbulence late Sunday (Aug. 12) when the lira lost around 30 percent value against foreign currencies.
Short-term actions were coordinated by the Treasury and Finance Ministry and were implemented by the Central Bank, the Banking Regulatory and Supervision Agency (BDDK) and the Capital Markets Board (SPK). The Central Bank’s statement that it would provide all the liquidity needed by banks and that it would introduce new regulations to the advantage of the banking system has received a positive reaction from the markets. The plunge of the lira has stopped due to these measures, however they were still far from balancing it against the dollar and the euro.
Furthermore, Treasury and Finance Minister Berat Albayrak sought to ensure the finance sector and foreign investors in a teleconference on Aug. 16. His messages on the future of the Turkish economy and measures they will adopt were not much different from his earlier statements but the fact he ruled out capital control and distancing from the free market economy were well noted.
An important message delivered by Albayrak was the fact that the state has to reduce spending in order to save some money, which was interpreted as the prevailing of moderate growth in lieu of the government’s ambition for aggressive growth. To this end, he said he wanted austerity plans from all ministries and announced that Turkey could delay some major projects.
Although the minister did not name which projects could be delayed or canceled, it is not hard to take a guess on the government’s choice, as the list of mega projects is not that long.
At the top of the list is of course the much-controversial Canal Istanbul project, which is planned to be constructed through a build-operate-transfer model. The estimated cost of Canal Istanbul is a minimum of $15 billion, according to reports, with estimates it could be doubled as the project runs.
Another major project, which will also be built through the build-operate-transfer model, is the three-level subsea tunnel under Istanbul’s Bosphorus Strait, which will connect the city’s two sides with one railway and two highways. The project is to cost $3.5 billion.
Erdoğan’s enthusiasm with regard to Canal Istanbul is well-known. At a meeting in which he outlined his 100-day action plan last month, the president stressed the environment plans would be prepared within this period.
“Abandoning this project is out of the question. It is irreversible. Why should we not have a canal like the Panama Canal and the Suez Canal?” he had asked. Two cities will be built on both sides of the canal, Erdoğan stressed, informing that around 22 million square meters would be allocated to the mass housing directorate.
As a matter of fact, the government’s studies on Canal Istanbul have unfortunately ignored the necessary analysis and assessments of experts from various fields. Erdoğan seems to only be focused on the potential employment and economic mobility as a result of a new construction campaign on both sides of the so-called seaway without its impacts on the environment, the Marmara Sea and the Bosphorus.
According to experts, there is a very delicate balance in the water flows between the Marmara and the Black Sea and the construction of the canal can ruin it. Canal Istanbul can also kill underground waters in the region and can cause drying of natural water reserves. Economic and social experts are also against the plan on the grounds that it can cause population density in an already overpopulated Istanbul.
Experts also say, unlike Egypt and Panama, Turkey already has a natural seaway. So why spend billions of dollars on such a fantasy?