The Daily Brief: Thursday, Mar. 30
FRENEMIES: THE US AND TURKEY
US Secretary of State Rex Tillerson will arrive in Turkey on Thursday for a much-anticipated meeting with President Erdogan.
Ankara is expected to demand the extradition of Fethullah Gulen, a Pennsylvania-based cleric accused of masterminding July’s failed coup. Eyebrows were raised earlier this month when reports emerged that Trump’s former National Security Advisor Michael Flynn had considered “a covert step in the dead of the night to whisk this guy away”. While Tillerson won’t sign off on kidnapping on Thursday, he may well use the Gulen issue as a bargaining chip for Washington’s ambitions in Syria. The US still lacks a reliable and capable partner on the ground, a role Turkey could fill if conditions are right.
Mr Erdogan will also voice his displeasure at the prominent role given to US-backed Syrian Kurds in the upcoming Raqqa offensive.
Despite the wrinkled relationship, Turkey and the US do share strategic interests. Both want a Syria free of Assad, both want to defeat ISIS, and both want to constrain Iran’s regional ambitions. Could a bargain be on the cards?
Dig deeper: Erdogan’s Turkey: towards a new sultanate?
ELEPHANTS IN THE ROOM: ZUMA VS GORDHAN
South Africa’s central bankers will have a hard time ignoring the political storm brewing around them when they meet on Thursday.
The rand has dropped 4% since the beginning of the week after reports that President Jacob Zuma is planning on firing Finance Minister Pravin Gordhan. Zuma reportedly told senior officials of his plan on the same day Gordhan was ordered to return early from a trip to London, where he’d been drumming up support from foreign investors.
Why such a sharp market reaction over a political squabble?
For starters, as an emerging market economy, politics in South Africa matter at least as much as the country’s economic fundamentals. Both political heavyweights, a senior South African banker likened the tussle between Gordhan and Zuma to an “elephant fight”, and the effects have certainly been felt.
But beyond this, Pravin Gordhan’s departure has cast uncertainty over the stability of Africa’s largest economy. Mr Gordhan has been hailed for reining in spending, fending off a junk credit rating and restoring confidence in South Africa’s shaky economy; his abrupt departure from investor talks on Monday does little to maintain this confidence.
The central bank will try and ignore these developments and keep their eyes firmly on South Africa’s economic fundamentals, meaning an unchanged interest rate of 7% is likely.
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COMPROMISED? TRUMP’S RUSSIA SCANDAL
Donald Trump was plagued by his associates’ Russian connections well before he took office. On Thursday, the Senate Intelligence Committee will hold a hearing on Russian interference in the election, one of three high-level inquiries currently open.
US intelligence agencies are confident that Russia orchestrated the hacking and leaking of the Democratic National Committee’s emails to discredit Hillary Clinton’s campaign. Numerous Trump associates are also under suspicion of having potentially compromising ties to Russia, prompting speculation that the president’s pro-Putin rhetoric stems from more than a mere personal affinity.
Meanwhile, Trump’s former campaign manager Paul Manafort and son-in-law Jared Kushner are due to testify before congressional intelligence committees. The investigation process has become highly politicised – this week Democrats accused Republicans of attempting to “choke off” public information. The GOP still has a long legislative wish list, and it doesn’t want the snowballing Russia scandal to fully engulf the administration (yet).
HAPPENING ELSEWHERE…
Mexico’s central bank is expected to raise interest rates for the fifth meeting in a row to 6.5%. The peso tumbled after the election of Donald Trump late last year but has recovered strongly in recent months as concerns about the new administration’s anti-Mexican policies have subsided (somewhat).
Thursday marks 150 years since the US signed a treaty with Russia to purchase Alaska for $7.2 million (just two 1867-cents per acre!). Read more about the Alaska Purchase here.