The Kapali Carsi

Turkey- Cemaat Wars: The Emperor Strikes Back

I submitted my post for the Economonitor trending topic “The biggest risk for 2013 that no one but me is worried about” on Monday. In that post, I argued that Turkish political risks were being ignored and therefore unpriced at the moment.

One of the political risks I mentioned there was the possibility of internal strife withing the ruling Justice and Development Party (AKP), especially between President Abdullah Gul (who is formally not affiliated with any party now but the former unquestioned number two of the AKP after PM Recep Tayyip Erdogan). This is a power struggle, as Erdogan would probably like to ascend to a beefed-up Presidency in 2014 after changing the Constitution, while Gul may not want to give up the post (he is eligible to rerun), but there is a religious element as well. Gul is very close to the Gulen order, named after the influential Islamic cleric living in Pennsylvania. In the last year or so, we have seen, as part of this struggle, several prominent Gulenist bureaucrats, such as Central Bank Governor Durmus Yilmaz, sidelined by the AKP.

In my latest Hurriyet Daily News column, I argue that Turkish Capital Markets Board head Vedat Akgiray, a known Gulenist who was was dismissed by the government on Thursday, might have been the latest casualty in this war. I go over all the rumors on the reasons behind his dismissal, including economy czar Ali Babacan’s official explanation. Anyway, you can read the whole thing at the HDN website.

As for an addendum, let me start by going over my “super-scientific” methodology in reaching my conclusion: I talked to 14 experts who follow Turkish politics better than me (journalists, columnists, academics and analysts) and asked them why they think Akgiray was fired. They could name more than one reason. At the end of the day, cemaat wars, the title of my column, got 60 percent of the vote, followed by performance (30 percent) and other (10 percent). No one bought economy czar Babacan’s explanation that they needed change because the CMB was lagging behind the rest of the economy.  I know that this is not very scientific; I’ll try a survey with an online tool such as surveymonkey next time.

Anyway, let me briefly expand on the different explanations I went over in the column:

As for the unsuccessful IPOs, Turkish daily Radikal argued that (in Turkish) the Van Et (a meat firm) IPO, which was bought up by its owner at dirt-cheap prices, was the main reason for the dismissal. In fact, there were several of these unsuccessful IPOs, but if you are looking for one, the best is Akgiray’s own company BIMEKS. The graph below shows its performance after its IPO in April 2011:

A couple of readers emailed me privately, saying that the BIMEKS IPO was more than enough reason to sack Akgiray, so I guess some people have been hurt financially:(…

BTW, I can almost hear you say, “wait, did the CMB Head actually own a company”. Yes and no! He transferred the shares of his company to his brother a week before he was appointed to head the CMB. The CMB Law says that he should have transferred his shares to  third-degree relative  from the time he was been appointed to the time the appointment came into effect by being published in the Official Gazette. Brother is not third degree, but Akgiray’s defense is that he transferred the shares before he was appointed, and so the law does not apply to him! But legal experts don’t agree (in Turkish).

Coming back to the Van Et IPO, the owner of that firm is the guy I mention in the column- the one with shady dealings with current and former CMB officials- the one who is now in prison for organized crime! A Turkish news outlet has some details, in Turkish of course.

As for the “Galatasaray incident” I mention in the column, it is really complicated, showing that the football club’s managers are really finance whiz-kids (or crooks, depending on how you see it). If you speak Turkish, just google “Galatasaray SPK” and many items will pop up. But if you don’t, here’s a summary in Turkish and English a friend sent me– she apologized for the English, but it is the best summary in Shakespearian I could get my hands on. But IMHO, the craziest part of all this was the CMB’s attempt at arbitration between Galatasaray and small shareholders sung the club. As a Turkish blog notes, this was completely illegal.

While I tend to agree with these explanations, I cannot understand why the government waited so long to act. All these issues, with the exception of the Galatasaray incident, are all at least one year old. But a reader notes that any other way would have been problematic under the current laws, and that the new CMB Law  provided the golden opportunity for the government to sack Akgiray.

A related issue is whether Akgriray had been notified of the government’s decision beforehand. A couple of dailies, including Today’s Zaman, seem to think so. But I know for a fact that (my little spy bird in action again) Akgiray was signing long-term MOUs and other agreements with some “unnamed” institutions right before he was sacked. That had led me to believe he had no idea, either. Besides, in an interview with Radikal (in Turkish), Babacan noted that “these sorts of things are undertaken without prior notification, as in the private sector”. He also underlined that Turkish stocks had hit new heights after the decision to remove Akgiray, and that they had also been congratulated in Twitter. It is admirable that the economy czar is finding the time to follow social media, but he does have a point: I got several emails from readers who noted that regardless of whether he was Gulenist, Akgiray was unsuccessful.

Changing gears a bit, a couple of readers have asked me what I make of the new CMB Law. While I appreciate the effort to protect small investors, I see several pitfalls. For example, individuals’ money in investment/asset management firms cannot be touched under the new law, even by the government. So if you owe someone money or have not paid your taxes, just open up an account at an investment/portfolio firm and put all your money there. If you speak Turkish, here’s a column discussing this matter.

Another clause directly affects your friendly neighborhood economist. If I say I expect a Balance of Payments crisis, I could end up in prison for two to five years under the new CMB Law if someone complains I was manipulating markets and misinforming investors! But I think this clause will be good for me: While I won’t tone down a bit, I expect many analysts and even columnists will be muzzled down or at least engage in auto-censure- which will make my Turkish econ. commentary even more valuable!:) Radikal columnist Ugur Gurses discusses this aspect of the new law. In a separate column, he argues the “Akgiray operation” is merely the government’s attempt at controlling the CMB after having taken over the Istanbul Stock Exchange. And Finansonline’s Tanju Gorgulu discusses other aspects of the Law.

Changing gears again, Gul’s hiring of out-of-favor bureaucrats is hardly solely my observation. Radikal columnist Cuneyt Ozdemir noted back in the spring (in Turkish) that Cankaya was turning into a “shadow cabinet”. As for the row between Gul and Erdogan, which I mentioned at the end of my column, there were even rumors that Gul would start his own political party (in Turkish) when his term was up, but I think he is way too smart to know he would not stand a chance against the ruling AKP’s election machine, even if he is backed by Gulen. I have been arguing, on the other hand, that he’ll either run again for President or he will want the AKP if he decides to concede the Presidency to Erdogan without a fight. Erdogan, on the other hand, would be very happy if he could find a prestigious international post to send Gul to, such as the Nato and U.N.- I wonder what will be available in spring 2014, when Gul’s term is up.

Finally, if nothing else, I love my title for this column: I was of course paying homage to Episode V of  Star Wars, and I changed Empire with Emperor on purpose– or maybe I should have said Sultan or Padishah Emperor as in Dune:). Anyway, I believe it may as well be best title ever. I plan a follow-up titled The Return of the Gülenist🙂 (bold part on purpose), but I may have to wait a little bit for that….

4 Responses to “Turkey- Cemaat Wars: The Emperor Strikes Back”

Emre Deliveli edeliveliDecember 13th, 2012 at 8:57 pm

I got the same question for Capital Market Board (ex) President Vedat Akgiray. The problem is that unlike the eagle tattoo on my back, no one wears a Gulenist tattoo, right?:)

In Turkey, it is kind of common knowledge that Gul is a huge Gulen sympathizer if not an outright Gulenist. For one thing, he always pays a visit to Gulen's public schools on Presidential trips abroad. But other than that, I am not sure of the solid connections between the two. If you are really interested, two sources who would definitely know more than me are Harvard Prof. Dani Rodrik and

Yep, Besiktas is the BEST!

Most Read | Featured | Popular