Erdogan Shifts Focus From Istanbul Loss to Foreign Affairs

Selcan Hacaoglu and Firat Kozok
Erdogan Shifts Focus From Istanbul Loss to Foreign Affairs

(Bloomberg) -- Turkish President Recep Tayyip Erdogan, weakened by an opposition party’s landslide victory in Istanbul’s repeat election, scrambled to reassert his standing as the country’s most dominant politician in half a century by refocusing attention on a crucial trip to Asia.

In a spate of back-to-back Twitter messages after results came in Sunday night, Erdogan congratulated Istanbul’s new mayor, Ekrem Imamoglu, vowed to maintain an alliance with a key nationalist party, and pledged to promote Turkey’s interests at home and globally. He announced he’ll visit China and Europe after a meeting of the Group of 20 nations in Japan later this week.

The Turkish president, who is expected to meet President Donald Trump at the G-20 summit, sought to signal that he has moved on to more important issues such as threatened U.S. sanctions over the purchase of a Russian missile-defense system. Turkey’s deal with Russia is irreversible despite the risk of U.S. penalties, according to Foreign Minister Mevlut Cavusoglu.

Still, Erdogan had no choice but to flick at the currents underlying the Istanbul defeat, which has created ferment within his AK Party and emboldened his jubilant opponents. He’s also aware that his refusal to concede defeat in the original election on March 31 is seen by many as fraying Turkey’s rule of law at a time when the economy is suffering.

Investors, however, welcomed the end to the electoral drama, and stocks and the lira surged before paring gains.

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“As in the past, we will work toward our 2023 goals without making concessions on democracy, the rule of law, the peace and stability of our country in line with the principles of our Republic Alliance,” Erdogan said, referring to his alliance with nationalist leader Devlet Bahceli, which he needs to maintain to retain power through the 2023 centenary of the Turkish Republic.

The president will be keeping a close eye on sentiment within the ranks of the AK Party and Bahceli’s MHP, said Anthony Skinner, Middle East and North Africa director at risk analyst Verisk Maplecroft. “He has less room to maneuver than in recent years,” Skinner said.

Losing Istanbul was much more than ceding control of Turkey’s largest city and commercial powerhouse. The mayor’s job was the springboard for Erdogan’s own political career. If Imamoglu, 49, performs well, then the president -- Turkey’s most influential leader since the modern republic’s founder, Mustafa Kemal Ataturk -- may find himself with a future challenger.

Defeat in Istanbul, home to about a fifth of Turkey’s 82 million people, also weakens AKP access to a major source of patronage and handouts. By some estimates, the city absorbs a quarter of all public investment and accounts for a third of the country’s $748 billion economy.

Bahceli sought to shut down any talk of early parliamentary and presidential elections at a time when the economy remains in distress with a double-dip recession threatening and unemployment stuck around 14%.

“Talking about a new early election is among the worst menaces to our country,” he said, reiterating he would work with Erdogan to resolve the country’s problems.

Investors, who’ve been hoping Turkey’s leaders would finally shift their focus to economic reforms, welcomed the decisive nature of Imamoglu’s 54% to 45% victory over AKP candidate Binali Yildirim, a former prime minister. The lira was trading 0.3% stronger against the dollar at 2:35 p.m. local time. The Borsa Istanbul 100 Index gained 1.7%.

Imamoglu, who’d been deposed after 18 days in office after the election board deemed the March vote tainted, broadened his margin of victory to nearly 800,000 votes from 14,000 in the earlier balloting. He ran on behalf of the CHP party and was backed by other opposition factions.

Erdogan, who had led the challenge to Imamoglu’s initial win, has hinted the new mayor could run into legal problems. He suggested Imamoglu might be tried for allegedly insulting a provincial governor, and a prison sentence could lead to his ouster -- much as Erdogan lost his own seat as Istanbul mayor in 1998 for reciting an Islamic poem deemed a threat to Turkey’s secular order.

Erdogan also has other levers of power to assert his will over the city. His party commands a majority on the municipal council, and together with an ally, leads 25 of Istanbul’s 39 districts.

“Imamoglu has risen as an inspirational national leader and Erdogan has the difficult task of neutering the man without making him into a martyr and inadvertently swelling his base,” Skinner said.

Read why Turkey’s president cares so much about the Istanbul race

(Updates with remarks from Turkey’s foreign minister in third paragraph.)

--With assistance from Cagan Koc and Firat Kozok.

To contact the reporters on this story: Selcan Hacaoglu in Ankara at shacaoglu@bloomberg.net;Firat Kozok in Ankara at fkozok@bloomberg.net

To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, Amy Teibel, Paul Abelsky

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