What's Next in Turkey?

In late December, I posed this fateful question regarding the embattled Turkish Prime Minister: "is this the end for Erdogan?" At the time, I predicted that damaging information about Erdogan and his family members will almost certainly be leaked before the municipal elections in March 2014.

And I suggested that while Abdullah Gul (the President) would be on the rise (along with Deputy PM Ali Babacan), Erdogan would find it very hard to cling on to power and he might be forced to quit sometime this year.

In fact, it is widely rumored in Turkey that more dossiers are being readied and some of them will implicate Erdogan and his family members. One of the ministers who had to resigned openly called for the PM's resignation and said that all of the large construction projects were approved personally by the PM.

As you know, this has now happened.

Last week, an audio tape containing five separate conversations between the PM and his son hit the Internet. (An English language transcript can be found here.) During these conversations, you hear Erdogan instruct his son to give large piles of cash to several business associates for safekeeping. At some point, the son hesitantly tells his father that he almost got rid of everything and there is only 30 millions euros left to move. Only.

A second tape was leaked a couple of days later, in which Erdogan's son informs him of a businessman's offer to pay them only $10 million, a sum apparently much less than what was agreed upon, and Erdogan tells him not to accept the lesser figure.

I am not a moralist and by itself, a garden variety (albeit involving massive sums) grifter story would not be of interest to me. But this case is relevant because it contains telling clues about a coherent plan to unseat Erdogan.

The Original Scandal

The details are here.

I only want to make the following point: It is nearly impossible to conduct an investigation for two years involving senior members of the Cabinet without any leaks. This could only be done if the investigators were members of a tight group, none of whom interested in career rewards that some judicious whistleblowing might bring.

As I wrote at the time, this is why I rejected corruption vs a plot against the government dichotomy: it was both.

In other words, the corruption allegations were correct but the agents who brought them forward were doing it to unseat Erdogan.

Give Him Enough Rope

The aftermath of the initial blow was intriguing. Apart from giving his first ever interview to a foreign journalist, and denying the accusations, Gulen remained silent for the most part. He let Erdogan to be the sole actor on stage.

This calculation paid off nicely. Erdogan's huge overreaction and the autocratic steps he has taken were much more damaging that anything Gulen or his supporters might have said.

He started with a massive purge in the executive branch and dismissed or moved thousands of police officers and state prosecutors. Even to those who knew that Gulen supporters were occupying key positions in state institutions, this undertaking looked more like a cover up than a genuine desire to reform the system.

Erdogan then proceeded with several highly questionable laws. One scrapped the independence of the judiciary and attached the body that appoints judges and prosecutors to the Ministry of Justice. Another law strengthened government control over the Internet and social media by requiring all ISPs to maintain logs for two years and make them available to the authorities. It also allowed the blocking of Websites without court ruling.  

Finally, because Erdogan firmly believes that the only state apparatus uninfected by the Gulen virus is the Turkish Intelligence Agency (MIT), he pushed a law that removed all Parliamentary oversight of MIT's activities. The law also provides the Agency with much wider eavesdropping powers, including unfettered access to corporate IT systems. It accords immunity to its officers (and collaborators) and makes it a crime to report or leak its activities.

The overreaction and overreach was simply mindboggling.

Predictably, President Gul, a presumed sympathizer of the Gulen movement, signed these texts into law. Since he has no real veto power (he can only send them back for review and has to sign them the second time) he used these opportunities to raise his concerns. Once again, Gul was positioning himself as the statesman, while emphasizing Erdogan's dictatorial choices.

Once it looked like Erdogan won the power struggle and he was feeling invincible, those infamous recordings showed up on YouTube.

Are the Recordings Genuine?

Erdogan's predictable reaction to these serious allegations was vociferous indignation over what he claimed to be doctored tapes.

As you can imagine, I have no way of knowing one way or the other. But I can suggest a couple of pointers.

If these were collages, i.e., dialogues created with separate words taken from different speeches, it would be impossible to end up with a convincing exchange since the human ear is very sensitive to pitch changes such a method would necessarily entail.

It is also not possible to have impersonators to produce such recordings since every voice has a unique frequency imprint and it would be very easy to verify the authenticity of the speakers.

On the other hand, you could slightly edit actual conversations and rearrange some sentences in those conversations to create a much clearer causality. Here is a discussion of these points in English and here is the original research in Turkish.

If I were to venture a guess, I would opt, like I did previously, for both. That is to say, I believe that it is highly likely that the gist of the conversations is accurate but some editing might have taken place to sharpen their direction and content.

Who Could Eavesdrop on Encrypted Phones?

The day after the tapes hit YouTube, Erdogan inadvertently blurted out that "they are listening to government's encrypted phones."

In the tapes, you hear his son mentioning a secret number and Erdogan talks about encrypted phones, so we can safely presume that these conversations took place on a secure line using encrypted phones, like the one you see on the right.

The question is this: Assuming, as I do, that the bulk of the conversations is authentic (even if edited), how did they eavesdrop on encrypted phones? People who simply maintain that the Gulen supporters might have done it are missing an important point.

Unless you are the NSA, the only way you can listen in on these conversation is to get hold of the encryption key. In Turkey, encrypted phones sold to private citizens can be monitored with a court order as their encryption keys have to be made available to the Information and Communication Technologies Authority (BTK).

But the encrypted phones used by ministers are exempted from this practice and they use 256-bit AES (Advanced Encryption Standard), which is impossible to crack through blunt computing force.

In short, unless you have backdoor access or have the actual encryption key, there is no way you can monitor such conversations. That leaves two institutions, one is the NSA, the other is MIT. While I am sure the NSA listens in on all world leaders, I seriously doubt that they would willingly leak anything.

That leaves MIT, the executive branch institution most trusted by the Prime Minister.

Will People Care?

In Turkey, bribe accepting politicians are the equivalent of cheating presidents in France: they are part of a natural order of things. And indeed, opinion polls show that there is barely a move in Erdogan's popularity.

But this could change rapidly.

Let's look at this logically: If there was a plan to unseat Erdogan what do you think the next steps would be?

If I were implementing such a plan, I would continue what I have been doing, that is to say, leak allegations, give him space for his shadow boxing, let him deny the whole thing aggressively. And when he starts to feel like he is gaining the upper hand, hit him with video recordings of these alleged incidents. Does it not make sense?

Even Erdogan's staunchest supporters would desert him if they saw his family stuffing money bags into the trunk of several S-Class sedans.

I actually don't know if they have the appropriate visuals for these events but if something like that shows up on the Internet in the coming days, you can bet your last Lira that this whole things was a plan to get rid of Erdogan.

Why and Who?

The "why" is fairly easy.

In the last year, Erdogan made huge blunders in the region. He sided with Jihadis in Syria just to gain leverage against Kurds, he failed to start a peace process with Turkey's Kurds. He alienated all the Sunni powers in the region, like Saudi Arabia and Egypt (there is no Turkish diplomatic representation in Egypt and the last ambassador was declared persona non grata). And he stood by as Iran rose to prominence and Turkey lost most of its leverage.

In short, he disappointed his most important ally in a big way.

Domestically, since May, Turkish economy is in a free fall. The lira is down, the current account deficit is huge, unemployment is high and there is a net capital outflow. Not surprisingly, Middle East funds are now shunning Turkey.

I will let you guess the "who" using my black hole analogy.

What's Next?

I stand by my prediction in December.

What they want -let's call them the markets- is for Erdogan to leave and Ali Babacan to replace him as the Prime Minister. In that post, I also emphasized Abdullah Gul's impressive re-branding and his bright future.

I still think that they would be the dream team, Gul, the newly branded centrist statesman as President and Babacan, the brilliant technocrat, as Prime Minister.

Incidentally, this is what the Economist said this week:

Still, the conventional wisdom is that, unless voters feel the economic pinch, few will be bothered by their rulers’ sleaze. Should this prove wrong (and several people now expect AK to lose Ankara), Mr Erdogan’s fellow AK party members may at last decide it is time to replace him. 

Mr Gul is still touted as one possible successor. Another is Ali Babacan, the deputy prime minister, who has a spotless reputation.

If that happens, that is, if Erdogan leaves, Gul remains President and Babacan becomes the Prime Minister, expect smooth sailing in the region.

The American plan will be back on track, peace with Kurds will have a genuine shot, the Syrian conflict will finally have a reasonable framework and the Saudi-Sunni silliness will be in check.

If Erdogan refuses to go, dark clouds will get darker for Turkey and the region.

The Significance of Google's "Do No Evil"

This summer, as a result of series of hard o duplicate coincidences, I found myself working as a consultant for a large company's rebranding efforts.

This is not my field of expertise but I know enough about the corporate world and I am a full-fledged contrarian. So I accepted the assignment. It turned out to be a fascinating exercise.

I explained to them that when you are a large company with many activity areas that touch upon people's daily lives, it is very important that they perceive you as a benevolent force. And for that to work, you need to be and to act like a benevolent giant.

I gave them Google as an example.

Google's informal motto is "Don't Be Evil" but it is generally rendered as "Do No Evil."

Why is that curt reassurance necessary?

Well, think about it.

Google knows everything about your digital footprint. You look for a plane ticket, the following day all the Web sites you visit contain airline commercials.

You check a site in Bahasa and if you refuse Google's helpful offer to translate it for you, an hour later you are served ads in that language. Gmail has your entire mail history, in searchable format and any key word in any message will trigger new ads for you.

Here is what a journalist found out when he researched how much Google knew about him.

Google Docs, Google Maps, Google Translate contain information about your activities, your location and your interests. Picasa has your pictures, Google Drive safeguards your valuable data. Blogger maintains your blogs, YouTube holds on to your video clips.

They introduced Google+ not as a competitor to FaceBook but as a unifying framework for all these services and data. You are a blogger, your Google+ identity ties you to your content and enlarges your readership. You are a small business owner, your presence in Google Maps is enhanced through Google Plus Local Business pages.

Your online searches, your presence and activities in Google+ Communities and your data in all Google services are solidified in one detailed, accurate and perfect identity. While Google+ features only 540 million users (FaceBook has 1.2 billion), it is growing faster than FaceBook or Twitter.

Actually, the comparison with FaceBook is silly. I have been avoiding FaceBook for years and I have suffered no loss. But it would be utterly impossible for me to function on the Internet if I were to try to avoid Google. They are ubiquitous and their services are very hard to ignore.

As a result, Google knows a lot about most of us.

But what makes Google different is the way they go about their business.

Those of you old enough might remember this: Microsoft almost gave away Word (and it had no copy protection) until they destroyed Word Perfect. Same thing with Excel and Lotus 123. Then they bundled these products into Office, they installed a very hard to break copy protection scheme and charged an exorbitant price for it. We all bought it and used it because, by then, we had no choice. But we resented every minute of it.

Google does not work that way. They are not into destroying other companies. Picasa is not there to kill off Flickr or Instagram. It is there to collect more of your data.

They also do not like to force you into things. If they wanted to, most of us would be obliged to sign up for Google+. Instead, they develop excellent services and give them to you for free to entice you to come in.

This is where "Do No Evil" slogan becomes important.

If I am aware of what Google does and if I have some freedom not to sign on this, that or the other Google services, I don't mind Google selling my information from the services I use. I would have minded it if it was Microsoft, Apple or Oracle collecting my data because rightly or wrongly, I perceive them as capable of doing evil.

I am quite aware that there are many people who do not share my vision of Google. But the reason I trust Google is the fact that they actually operate differently than most companies.

Or as I told my client, they practice what they preach. Without that unison, they could not maintain that brand image.

Let me give you an example.

There is a secret Google Lab called Google X. Their operating principle is rewarding failure. Yes, you read that correctly. It is not that they want you to fail all the time. They are simply aware that unless you remove failure from the equation, most people will not look into outrageous solutions.

You must reward people for failing, he says. If not, they won't take risks and make breakthroughs. If you don't reward failure, people will hang on to a doomed idea for fear of the consequences. That wastes time and saps an organisation's spirit. 

Can you say Microsoft?

The Lab has three simple operating principles.

One, you have to identify a problem to be solved. Even brilliant ideas are discarded if they do not address a specific problem.

Two, the solution should be so amazing and effective that, it it worked, it would eradicate that problem.

Three, "there has to be some reason to believe the science or technology underpinning that solution, that makes us think the idea is only mostly crazy."

As an example, he cites the problem of a million people dying on the roads each year. The science fiction solution it came up with was driverless cars that don't crash. Google has now clocked up hundreds of thousands of miles of testing that suggests this technology will work and could transform our world.  

Tellingly, unlike every other corporation operating in what we euphemistically call the free market, Google Lab projects never take into account whether their solution would make money. They believe that you need solid marketing if your solution is incrementally better. But if the solution you cam up with is exponentially better, "the money's going to come and find you in a fair and elegant way."

Crucially, the director of the Lab adds that this has always been Google's way of conducting business.

"Things like search or translate, things like maps, have been in the public domain free to the users but often without advertising or any form of compensation - sometimes for many years - when Google didn't make money on it or even have a plan to make money on it and Google was just 'Let's make value for the users. We'll figure out how to make money later'." 

One other thing.

Unlike every other company out there with an Alpha male at its helm running a tight and hierarchical ship, Google takes another approach to management.

Google managers need to keep their staff happy because, Mr Teller says, you don't need your manager's permission to leave a particular section if you believe they are behaving in an obnoxious manner. 

"Not only will you leave but everyone will leave and that guy is going to find himself voted off the island by his own people," he adds.

That's why I believe them when they tell me they won't be evil.  

Will Hillary Clinton Run in 2016?

It is an open secret that Hillary Clinton is the leading contender in the 2016 presidential race. In fact, she is the biggest Democratic front runner of all times.

According to Washington Post, she holds a 6 to 1 lead over other Democratic candidates. Joe Biden is second with 12 percent and Senator Elisabeth Warren is third with 8 percent.

Moreover, the largest Democratic Super PAC (Priorities USA Action) has just declared that it is regrouping to support Clinton's presidential ambition. They have a huge Rolodex and they can raise billions.

Besides this extremely favorable situation, she has another advantage: there is no clear front runner on the other side.

The Republican Great White Hope Chris Christie is embroiled in a slow burning scandal. With a leaked letter accusing him of having prior knowledge of the Fort Lee incident and many subpoenaed witnesses waiting to testify, this has all the makings of a prolonged investigation with many pitfalls along the way.

Tea Party candidate Paul Ryan fizzled out when Romney - Ryan ticket performed poorly and I doubt that this time around the mainstream media will give him the same benefit of the doubt that they were willing to extend to his math-defying, if not fraudulent budget proposals.

The Libertarian candidate, the junior senator from Kentucky Rand Paul is unlikely to go far in the GOP primaries. Marc Rubio in an unknown quantity for federal politics. And despite what McCain says, Bobby
Jindal will never, ever get the majority of GOP primary voters.

And there is also the consideration (rarely mentioned in these situations) that she is by far the most qualified candidate. When she ran against Obama, I was convinced that she would have made a much better president. For one thing, her Health Care Act would have been much more progressive than Obama's (can you say "single payer"?) and she would have been a much better negotiator than the President on contentious issues.

Perhaps more importantly, it would have been much more difficult for the National Security State folks to bamboozle her. She was in the White House before and she knows how the system works.

Obama was an easy prey for these guys and they quickly positioned themselves around the inexperienced President and impressed (and intimidate) him with one scary scenario after another. From Guantanamo to NSA, there is a whole list of terribly conservative policies Obama acquiesced to during his first term.

I seriously doubt that Clinton would have gone along with the same policies.

Therefore, when we ask the question, "will she run?", the obvious answer is, she would be a fool not to. Although a lot of things can change between now and the elections, right now, it looks like it would be impossible for her to lose.

There is, however, a reason for her not to run: to leave the door open for Chelsea.

It is not an outlandish idea. When asked whether he or Hillary would be a better president, Bill said:

"Day after tomorrow, my wife, because she's had more experience," Clinton told CNN's Piers Morgan when asked whether Hillary or Chelsea Clinton would be a better president. "Over the long run, Chelsea. She knows more than we do about everything."

There is more to it than a flippant answer. The Clintons have been carefully grooming her for higher office. She went to the right schools, married the right person, stayed away from any kind of embarrassing situations. It is almost as if all her major decisions were made with a future vetting in mind.

She is also much more media and image conscious than her feminist mother, who sometimes give in to her hippie roots, when it comes to her public appearances.

I think this would the only hesitation in her mind.

She knows she can win, she knows that she is more than qualified and would make a great president.

But she does not know whether her Presidency could prevent Chelsea from running for the same office down the line. Three Clintons in, say, 46 Presidents might be too much for the country.

I personally hope that she does not run and support Elisabeth Warren, as I think Warren is more progressive than Clinton at this point.

But human nature is what it is. Just the fact that Warren would be the next likely candidate (Biden can never get elected to anything outside Delaware) might push Clinton to go for it.

To become the first female President is not something that could be easily relinquished.

And I get that.

Turkey's Risky Strategy in the Syrian Conflct

Syria continues to take up world's attention with multinational talks in Geneva. The hostile and uncompromising tone that dominates the meetings clearly demonstrates the intractable nature of the problem.

This is hardly surprising, as after millions of Syrians were displaced and many thousands killed, and the unspeakable atrocities committed, it is unlikely that Syrians could find a way to see eye-to-eye, let alone negotiate the parameters to live in the same country.

Unfortunately, as I noted before, this is a feature and not a bug.

However, the disunity and discord are not just the result of a cynical Pipelinistan map redraw. They are also caused by the fact that Syria has become the fulcrum for too many competing scenarios: every time someone pushed in one direction, there are five or six pulling the other way.

Consequently, even the Pipelineistan blueprint has become much harder to implement.

Among all these competing actors, there is one that seems to follow a dangerously complex and risky road map and that is Turkey.

The problem with Turkey is that, despite a comfortable majority in Parliament, an ineffective opposition and a very large conservative constituency, the Prime Minister feels surrounded by enemies and acts accordingly. There are many reports that the only person he really trusts is the head of the Turkish Intelligence Agency MIT, a man by the name of Hakan Fidan.

As I recently reported, some of his actions are not exactly helping Erdogan. But the two seem to have formed an interesting alliance and their strategy looks like what-if-an-intelligence-agency-was-formulating-policy.

This is clearly visible in the Syrian conflict.

Turkey and Syrian Kurds

As I explained before, Turkey dropped its "zero problem with neighbors" policy and changed its stance towards Syria overnight. And Erdogan moved from being Assad's BFF to becoming his mortal enemy within the span of a week.

Since then, Turkey has been providing shelter to hundreds and thousands of Syrian refugees. It set up (with Qatari and Saudi funds) secret military bases for the Free Syrian Army (FSA). It trained FSA fighters and allowed for their free movement between Syria and Turkey. And, of course, it opened its border to shipment of arms and equipment.

Initially, the Turkish strategy was fairly straightforward: Help the rebels in anyway you can, work with Qatar and Saudis as the Sword of Sunni Islam and benefit from the largess of Sunni countries in the short run and position yourself as a critically important player (and a major energy hub) in the medium to long run.

If Syria was partitioned into three or four smaller states in the post-Assad era, one of those was inevitably going to be a Kurdish territory along the lines of Barzani's Kurdish Regional Government (KRG) in Northern Iraq. And Turkish government has privileged relations with that entity.

But there is a problem: the leading Kurdish group in Syria PYD (and the one likely to dominate an autonomous Syrian Kurdistan) is an offshoot of the PKK.

This means that Turkey's efforts to help overthrow Assad and create a (de facto or de jure) partitioned Syria will almost certainly lead to an autonomous Kurdish region controlled by the PKK and its imprisoned leader Ocalan.

Let me make a side point here:

Most observers believe that, Turkey is afraid to lose its Kurdish region to a new state of Kurdistan. I hold the contrarian view that they know that the rise of a Kurdistan is inevitable. What they want is to have a lot of influence in that new entity and perhaps envisage some sort of regional integration, modeled after their current arrangement in Northern Iraq. If that works out, instead of losing a chunk of their territory, Turkey could gain privileged access to a larger and potentially richer autonomous entity. What they fear is that, if they get the opportunity, Ocalan and the PKK might not allow Turkey'a tutelage over a newly formed Kurdistan.

Hence the serious misgivings of MIT.

As the PYD strengthened its leadership position in Syria (despite Barzani's military and financial support to other Syrian Kurdish groups), Erdogan and the MIT began to look for ways to weaken them. They arbitrarily closed border posts to stop Kurdish fighters retreat, regroup and go back fighting while allowing ISIS and Jabhat al Nusra fighters to go in and out freely.

The Kurds, who landed control of a string of towns and villages in northeast Syria after the men of Bashar Assad, the Syrian president, left voluntarily over a year ago, insist they are the victims of a proxy war that is being orchestrated by Turkey through its Syrian rebel protégés. These allegedly include foreign fighters from Jabhat al-Nusra and the Islamic State in Iraq and Syria (ISIS), the radical Islamist militias that have shot to global notoriety with their brutal ways. 

“The Turks have cleared mines, cut barbed wire fencing to let these armed gangs come through the Turkish border,” grumbles Saleh Muslim, the leader of the Democratic Unity Party (PYD), the Syrian Kurdish group that runs the de-facto autonomous Kurdish enclave. A Syrian rebel fighting the Kurds told our correspondent that “Allah be praised, Turkey is giving us some weapons” though he added that the France and Saudi Arabia were “much more generous”.

While the government insisted that Turkey was not providing arms to Jihadis, there were numerous reports to the contrary.

What the government, or should I say, MIT was hoping to achieve was some kind of temporary defeat for the PYD, so that they could pressure Ocalan to accept a peace agreement that favors Turkey and gives it more power and access to any future Kurdish entity.

Instead, Turkey found itself under immense pressure to drop its support for the Jihadis and they were forced to back off. As soon as they began to ease off arms shipment and logistic and training support, Syrian Kurds started to achieve impressive victories.

Which might have prompted Erdogan and the MIT to move that military support underground.

Last December, a convoy of large lorries were stopped by the Turkish military for containing arms and ammunition destined for Syrian Jihadis. Two agents belonging to the MIT were part of the convoy and they refused to allow the military to seize the trucks. Within hours Ankara intervened, the local governor was sacked and the convoy was allowed to move on.

Foreign Minister Davutoglu has since been maintaining that the convoy contained humanitarian aid to Turkmen groups inside Syria. But, understandably, not many people are buying that argument, especially since more such trucks have been observed.

What is interesting is that this foreign-policy-by-intelligence-organization has seriously backfired.

The overall result of their cynical ploy was the dangerous ascendancy of al Qaeda affiliated groups. These forces are now capable of acting like regular troops and they are invading regions and taking over cities. Moreover, they are extending their influence zone into neighboring countries.

Their impressive push into Ramadi and Falluja in Iraq must have been a wake up call. They are also active in Lebanon. And Jordan is clearly worried.

There are also allegations of al Qaeda bases inside Turkey, which are denied by the Minister of Foreign Affairs.

If this is not the proof of the failure of the government-by-intelligence-agency I don't know what is.

If I had a Person of the Year Award

My choice would not be the Pope.

He seems like a nice guy (though he should go easy about his PR goons who leak his every move to the media). But his organization has a bit too much to apologize for. And I didn't even linked to massive sexual abuse scandal in the previous century.

My person of the year would be Edward Snowden.

First, I am not sure that at his age I would leave a $200,000 job in Hawaii and get myself in the crosshairs of the largest intelligence organization in the world.

He did it.

People don't seem to understand how much courage and determination that takes.

Moreover, his goals were really outstanding. As he recently explained, he was not trying to change the world, he was just trying to let people decide whether they want the world changed.

I am pretty sure that at his age, I would have missed this nuance.

The only person I admired more was a former neighbor of mine.

His name was Wilhelm Pfeffer (or as I knew him Bill Pfeffer) and he was the right age to have been part of the WWII. Yet, no one knew his history. One day I asked him how it was and he told me rather matter-of-factly (just-because-you-asked-young-man) that as a young German at the tender age of 19, he decided that Hitler was an abomination. And he made the decision to move to France not to be part of his army of murderers, he said.

That is not all.

Once France was occupied, he moved with the French Resistance to Algeria but told them them he was a pacifist and would not fight and kill. He was a geologist and he offered to train French soldiers instead.

Think about that.

At 19 (a) he knew Hitler was an abomination (something that most West Europeans and North Americans did not get for a long time) (b) he accepted the consequences of leaving his country (c) he refused to become a killer for the other side just to be accepted.

That is the definition of courage to me.

I don't know anyone who could do these things at that age and especially at that time.

Perhaps more importantly, he never shared these details with friends and neighbors. He did the right thing and he did not even let others know he was on the side of the angels.

That is a mensch in my book.

He was my hero.

So, if I had a Person of the Year Award, it would be called Wilhelm Pfeffer Person of the Year Award.

And I would give it to Edward Snowden this year.

But I don't have such an award because I doubt that I will ever find another worthy recipient.

Turkey: Is This The Beginning Of The End For Erdogan?

If you are reading this blog, chances are you already know about the huge graft scandal in Turkey.

In case you missed the highly entertaining soap opera, two weeks ago, Turkish police conducted several raids and took 52 prominent people into custody and seized over 4 million dollars in bribe money neatly stored in shoe boxes. They subsequently arrested and charged 24 of these people. Among them were the sons of two members of PM Erdogan's cabinet and the CEO of a state controlled bank. The CEO was accused of money laundering on behalf of the Islamic Republic of Iran.

I found the story rather amusing and initially, I thought about writing about the underlying ironies.

And there are many, starting with the acronym of the ruling party. You see, its supporters do not use the abbreviation of the party (the AKP) but go with the acronym AK Party, as "ak" means white and has a strong connotation of "clean" in Turkish.

To be sure, this cleanliness was never really accurate. Many AK Party politicians became extremely wealthy in their 11 years in power (including Erdogan himself who is rumored to have become a multi-billionaire on his meager PM salary). But with media consolidation after 2007, no corruption allegation ever made it to the mainstream, leaving the party free to claim a clean image. This is now over and the acronym must be an embarrassment.

The second fun fact is about the identity of the prosecutor behind the graft investigation. His name is Zekeriya Oz and he was one of the leading prosecutors for the deeply flawed Ergenekon trial. At the time, the ruling party hailed him as the brightest star in the judicial firmament and when he was reassigned in 2011 by the board of judges and prosecutors, senior AKP politicians bitterly criticized that decision as a blatant effort to change the course of independent judicial inquiry.

Now that it transpired that Oz was behind this year long investigation, the same senior AKP leaders, who had vouched for his objective and brilliant judicial mind for the Ergenekon case, are publicly claiming that Oz is an agent of the Hizmet movement and the whole thing is a politically motivated witch-hunt.

In other words, exactly the charge they dismissed as rubbish throughout the Ergenekon trial.

The third irony is about the Sledgehammer and Ergenekon cases: when the previous Chief of General Staff (who was promoted by Erdogan and who worked closely with him throughout his tenure) was arrested and later given a life sentence for trying to overthrow the government, the PM lamented that his hands were tied as he could not intervene in any investigation or judicial process.

This time around, the day after the scandal became public Erdogan dismissed or moved more than 100 police chiefs and officers and appointed two new lead prosecutors to the case, with the explicit instruction that decisions will be taken by a majority vote (two out of three). Moreover, one of the prosecutors in the original investigation claimed that a large part of the case was removed and various arrest warrants he signed were not executed. If this is not interfering with an investigation or judicial process, I don't know what is.

Fourth irony: Sledgehammer trial was about a plan that was never executed. Yet the government and the prosecutors argued that a plan was the same as an actual execution.

A month ago, a 2004 document signed by Erdogan, the then Chief of General Staff and the then Minister of Foreign Affairs (and current President) Gul was leaked to the media. It enacted a plan to destroy the Gulen movement.

When it became public, Erdogan argued that it was just a plan that was never implemented and as such it should not be taken seriously.

Right.

But, as the scandal unfolded, I realized that there was something more interesting than the ironies.

Is This Mutually Assured Destruction or a Foreign Plot?

There are two competing explanatory narratives about the scandal.

One side maintains that this is a vicious power struggle between the Erdogan wing of the Turkish Islamist movement and the Fethullah Gulen camp. And they claim that the struggle is about to turn into a Mutually Assured Destruction (MAD) type of war.

As you probably know, Fethullah Gulen is a moderate Islamist preacher who lives in self-imposed exile in Pennsylvania on a special talent visa sponsored by former CIA agents. While his movement (known as Hizmet or Service) is ostensibly a philanthropic organization running charter schools all over the world, many people believe he has serious political ambitions beyond his charitable work. And they assert that, as part of these plans, he directed his followers to infiltrate the judiciary and the security apparatus in Turkey.

Those who see Gulen's tentacles within the state argue that the National Intelligence Organization (MIT) is the only state structure that eludes him. And as proof, they refer to the February 2012 events, when a special prosecutor executed an arrest warrant against the Director of MIT, Hakan Fidan, freaking Erdogan out, in the process..

Accordingly, Erdogan's recent decision to close special prep schools (largely run by the Gulen organization) is seen as a strike against Gulen. Those schools are a major source of income for the Hizmet movement and perhaps more importantly, they operate as recruitment centers for the Imam.

In that scenario, last week's corruption scandal seems to be Gulen's counter strike. Recently, a Turkish journalist specializing on the Hizmet movement reported that a senior Hizmet figure was arrested at a US airport (link in Turkish) with many corruption dossiers implicating senior AKP leaders. The journalist claimed that the FBI submitted that treasure trove to the MIT, which, in this scenario, is the only security unit loyal to Erdogan.

The other narrative is put forward by Erdogan and his defenders and they depict these events as an American plot to get rid of him. According to these media outlets, Gulen is an American agent and one of the key players in that plan.

The more I read about the facts surrounding the case, the more I realized that maybe this is not an either-or proposition and these two narratives might actually be complementary.

There is a civil war between the Erdogan wing of AKP and the Gulen movement. Gulen movement is indeed well placed in the judiciary and security forces to be able to pull a secret year-long investigation with absolutely no leaks.

And it surprises no one (at least not me) that the US now sees Erdogan as a liability and its regional plans would be better served if he could be replaced with a less temperamental and more malleable leader.

Since Gezi events, I more or less assumed that there was an outline of a plan to remove him. But it was hardly the ingenious and nefarious coup plot Erdogan supporters claim. It was a simple re-branding effort which relied heavily on Erdogan's predictably over-the-top reactions.

But there is a twist.

Let me explain.

The Plan (If There Was One)

While many people are convinced that Gulen is an insidious opportunist driven by his ambition to become the leader of Turkey, I see him as someone who had made a Faustian pact to become the religious leader of mainstream Islam.

As I mentioned before, his ideology is the only coherent and modernist counterpart to Wahhabi or Salafist teachings. In that sense, he fits perfectly into what I see to be the American plan for the Middle East. Which also explains how and why he continues to live peacefully in Pennsylvania and his visa applications are sponsored by former intelligence officers and ambassadors.

As for his nemesis, Erdogan, my regular readers know that I singled him out as the lead actor in the US produced drama in the region. The problem is that, Erdogan, who was almost a method actor in the original Kabuki theater, has turned, over time, into a Chaplinesque caricature of an autocrat.

You must have heard of Baron Acton's dictum that "power tends to corrupt and absolute power corrupts absolutely." After his last election victory, it has been reported that Erdogan stopped listening to other people and he began running the government with a small group of trusted aids. Apparently, he treats even his own ministers with disdain and mistrust. Throughout, there have been numerous reports that he is unable to control his temper (which some people attributed to his diabetes) and he routinely lashes out at journalists, civil society leaders or colleagues.

More importantly, in the process, he dropped the ball economically. His focus remained on large construction projects, which were designed to be glamorous for him and profitable for his supporters (the construction magnate Agaoglu was among those arrested). But he did very little to fix the chronic current account deficit or to stop foreign capital outflow.In fact, his polarizing rhetoric seemed to have accelerated the exodus of foreign capital making the current account deficit even worse.

On top of all that, he committed a series of blunders in the Middle East and alienated an impressive list of regional and global players, including Israel, Egypt, Iran and Saudi Arabia. And of course the US.

Given all this, I assume that there must be a consensus that he needs to go. You hardly need a conspiracy theory to see this. But how do you get rid of him?

His supporters find him charismatic and believe that he is a man of God, working tirelessly for the country and his constituency. They see him as their dragon slayer who will stand up to internal and external enemies.

How do you turn such a man into a pariah?

If I were asked to do it, I would take a page out of Joao Santana's book. I would first make him appear as an out-of-touch and out-of-control leader. This would galvanize and unify his opposition and solidify a darker image. Then I would expose his corruption dossiers. And this would make him appear the opposite of a man of God: a greedy politician filling his pockets.

It is not a very original idea but judging from the turn of events, it looks like someone else might have had the same inspiration.

Gezi events appears to be the turning point and (if such a re-branding plan existed) the first step.

And therein lies an interesting tale.

When Gezi protests erupted, Erdogan remained silent initially. He was scheduled to go to Morocco and he was expected to make a statement upon his return. At the time, President Abdullah Gul and Deputy PM Bulent Arinc were making conciliatory noises (both men are said to be "inspired by" Gulen). The expectation was that Erdogan was going to do the same upon his return.

However, I learned from reliable sources that just before his trip, Erdogan was submitted a report by his trusted aid Hakan Fidan, the Director of MIT. And the report concluded that the protests were actually a plot by foreign powers wanting to destabilize the government. It also claimed that radical left wing organizations were the main groups behind the unrest.

We now know that both claims were complete and utter rubbish.

Apparently, this made Erdogan livid and he immediately adopted a very belligerent rhetoric and a decisive action plan. He ordered the police to forcibly remove the protesters, he famously lashed out at them as "capulcu". And he introduced his extremely dubious "interest rate lobby" discourse.

The police executed his orders, wounding hundreds of people and killing at least four. It was a hugely disproportionate use of violence against peaceful demonstrators. Overnight, the opposition became unified and Erdogan appeared as an out-of-touch and out-of-control autocrat. Even some Islamist groups joined the protests.

Now, let's think about this for a minute.

First, there is the role played by MIT in this. If there is a "deep state," as people in Turkey would like to believe, a US controlled Gladio structure, wouldn't MIT be part of that shadowy apparatus? Historically, it certainly was. In fact, it was smack in the middle of it. So when I hear the MIT director submitting a completely bogus report to the PM and changing the course of history, I wonder whether the highly inaccurate conclusions of that report could be seen as an honest mistake.

If you wish to mislead the PM and encourage him to overreact to change his public image, is there a better way than give him such a report and let him hang himself? If you argue that Fidan is a trusted aid and he would never do that, I would suggest that stranger things have happened when it came to intelligence organizations.

Secondly, if the opposition narrative is correct and the police are controlled by the Gulen movement, shouldn't we question why they used such excessive force in implementing Erdogan's order to empty Taksim Square? If Gulen himself and Gulen-inspired politicians recommended a softer approach, why would a police force supposedly taking its orders from the movement opt for a massive use of force?

You see what I am hinting at.

Once the first step is complete and Erdogan's image is tarnished (and the opposition unified), the second step would be to open up the treasure trove of corruption dossiers. If there was such a plan, that is. And this is exactly what happened.

In fact, it is widely rumored in Turkey that more dossiers are being readied and some of them will implicate Erdogan and his family members. One of the ministers who had to resigned openly called for the PM's resignation and said that all of the large construction projects were approved personally by the PM. To me this is a thinly veiled threat against Erdogan. It means that they know the skeletons and they have the key to the closet where they are kept.

There is a third element that support the idea of a plan to politically terminate Erdogan. As I wrote recently, there has been an unmistakably clear and very successful re-branding effort to turn Gul into a caring and moderate politician. In fact, at every juncture, as soon as Erdogan staked a position Gul carefully moved away from that stance and made it clear that he did not approve of it.

If Gul does not accept to resign as president to make way for Erdogan to replace him, Erdogan has only one option left. He will have to publicly renege his commitment to term limits and fight for a third term in office. A year ago, this would have been fine and perhaps even encouraged by most observers for the sake of stability. But now, such a move would make him look like a greedy and power-thirsty politician even in the eyes of his supporters.

Which means his negative re-branding is almost complete.

What's Next?

I only have a couple of educated guesses for the short run. In medium and long term, I can only speculate on likely outcomes but not on the unfolding of events.

In the short run, I am pretty sure that the new Minister of the Interior, Efkan Ala, who is one of the closest collaborators of Erdogan (he was Prime Ministry's Under Secretary and he is not an MP) will go after Gulen supporters.

Ala, with his vast experience in bureaucracy, is expected to play a central and practical role in purging the followers of the Gülen movement, who are particularly influential in the police and judiciary.

If his past behavior is any indication, Erdogan will also order tax audits for pro-Gulen businesses and he will try to prevent them from bidding in large state contracts. He might try to seize Zaman (the largest Turkish newspaper) and its English language counterpart, Today's Zaman and sell it to one of his supporters (it was one of his favorite tactics prior to media consolidation).

Almost as likely, the Gulen camp will retaliate with more corruption allegations and they will get closer to the PM with every leak. They might hit close collaborators first, then family members and finally the PM himself.

I also suspect that this slowly unfolding process will cost the AKP electorally, starting from the municipal elections early next year. My prediction is that their vote will hover around 35 percent but might go lower if particularly damaging information surfaces before these elections.

It is hard to speculate beyond that point because there are too many variables that might change between now and then.

But I can make two predictions.

One is that Erdogan will find it difficult to hang on to power in the next year or so and he might quit before the 2015 general elections citing health reasons.

Two, Abdullah Gul will become the new star of the party.

Many pundits see him taking over the PM post. I am inclined to think that he might prefer his current position which is above politics and work with another pro-Gulenist PM.

One name that comes to mind is Ali Babacan, a formidable technocrat who enjoys the work and does not chase the limelight.

He would be perfect as he would let Gul become the public face of the administration while he acts like a super trouble-shooter.

For once, I am actually curious to see how things will unfold..

Is France the Sick Man of Europe?

When I moved to Paris almost ten years ago, I expected to be enchanted with what I assumed to be the best synthesis of capitalism and an egalitarian society with impeccable living standards.

Up to that point, I had been reading how the French system was superior: Their healthcare system was exemplary, frequently elected the best in the world. Their school system produced solid managers, innovative engineers and world class thinkers and literary figures. They had an amazing social safety net, their minimum wage was more than decent and they believed in leisure society, as everyone enjoyed at least four full weeks of vacation time.

Add to all that excellent food, very good and affordable wine, a mild climate with barely a speck of snow all year around and you could picture me giving myself virtual high-fives all the way to Paris.

Imagine my surprise when I discovered that the superior French system was a mirage, a holographic picture taken a couple of decades earlier.

The Real France

By the time I arrived, France was running continuously a budget deficit for at least 30 years, unemployment had reached double digits, the influx of expats pushed food and accommodation prices so high that ordinary French people were simply unable to maintain a reasonable middle class life style (at least not in Paris and certain other popular regions). Their minimum wage (known as SMIG, which stands at €1430.25 as of July 2012) wouldn't be enough to pay the rent for a one bedroom apartment.

The healthcare system was falling apart. The education system was crumbling and the students were disillusioned with their job prospects.

Having lived through the Thatcher-Reagan revolution, it was obvious to me that the system had a number of structural problems. And unless they were fixed (and fixed rapidly), sooner or later capitalism would fix it for them, as it did in the UK and the US under those two hapless luminaries.

But I also knew that if the correction was left to capitalism, the French system would become something else entirely. It would look like today's America or Britain, that is, a polarized society with massive income disparity and a sharp winners and losers perspective permeating everything, including the distribution of vital services. (If you doubt that vision, think of the American system today with Obama and the British system with Cameron and tell me the difference).

I could also tell that France had never gone through the North American IT-based productivity revolution. Most computer systems were archaic, inventories were still taken by hand, banks operated on a batch processing system and most custom software packages were written with simplistic languages like Visual Basic.

But when I voiced my concerns about productivity, my French friends always defended their system by citing the OECD statistics that place France very high on the productivity scale. I know that their numbers can look high.  But I think these high figures are mostly based on the industrial sector. It is a capital-intensive and highly automated sector and I am sure French industrial workers work their tails off. But the service sector is a different ball game.

If you look at the period where the IT-led productivity took off in the US and the UK, France is at the bottom of the scale.

And since then, the productivity gap has remained a major issue.

Mittelstand or Does Size Matter?

You might have heard that a category of German companies known as Mittelstand are credited for the economic health of the country. These companies of up to 500 employees (or €50 million annual turnover are the stuff of legends.

And the French business press routinely bemoan the fact that France does not have a similar structure. That is because the French economy is structured to discourage Medium Enterprises, the ME in the SME. It is a peculiar system.

On the one side there are tiny companies, one or two person family firms. They don't hire much and they have a high failure rate (twice as many bankruptcies as Germany).

On the other side, there are large enterprises, most commonly in fashion and food & beverage sectors. And there are state-championed giants in high tech fields like aerospace and nuclear energy.

In the middle, you find French style SMEs but they are much smaller than the German Mittelstand: They are characterized by their constant effort to never have more than 49 employees. (Beyond 50 they have to spend on training and provide additional benefits.)

In OECD countries, SMEs are usually the main source of employment and you can see from the above picture why unemployment has remained stuck around 10 percent for the last four decades. However, in my humble opinion size is not the decisive criterion.

There are other factors at play.

Management, Innovation and Tools of Productivity

The primary characteristics of Mittelstand companies is to promote innovation and target export markets. Better products do not compete on the basis of price and they command higher margins. And opening up to foreign markets gives companies more independence and flexibility: if you have more outlets, you can weather cyclical crises with relative ease.

To achieve this, Mittelstand companies maintain a lean management structure, emphasize continuous on-the-job training, encourage in-house innovation, invest in Research and Development (R&D) and they promote Information and Communication Technologies (ICTs).

Let's start with lean management structures:

Jean-Daniel Weisz (...) compares the way German firms and their French counterparts operate. French middling companies, he says, have twice as many layers of management between the boss and the shop floor: usually 18, compared with a German maximum of nine.

Think about that: Average of 18 layers of mid-management versus a maximum of 9 levels.

Moreover, these managers are the product of elitist Grandes Ecoles, which means that they are convinced that they already received all the training they will ever need. According the an early Harvard Business Review study, they view management not as a set of techniques but as a state of mind. It sounds like a line from a Godard movie but that's what passes for business perspective in France.

The same study also found that French businesses are overly hierarchical and sharply compartmentalized.

Perhaps more importantly, change and innovation are almost actively discouraged by the system. Let me give you a concrete example.

You are an engineer or a researcher in a French company and you have just invented something new. Maybe a new method to produce more with less or a brand new product. And your invention directly benefited the company's bottom line, with increased revenues, lower expenditures and higher stock value. Can you guess what your reward will be?

You will get a bonus of €500 to €2500. Before taxes. That's it.

Do you know how much a German engineer will get if she or he comes up with a better method or product? Since 1957, companies are legally required to give such innovators a proportion of the revenues generated by their innovation. The more the company earns, the more the inventor/innovator collects.

Even in China, since 2010, the person who comes up with a better product is given 2 percent of the additional revenues and if the invention is licensed to another company, they collect 10 percent of the royalties.

To be sure, French researchers have an outstanding record and they came up with many great inventions that changed the world. But it is quite damning of the system that very few of these new ideas and products were commercialized by French companies.

French companies have another management-induced obstacle.

According to the Economist, a World Economic Forum of Davos report found that while "the French have a "stronger work ethic than American, British or Dutch employees." They're just not motivated by their managers." In fact you could call it apathy and in some cases intense dislike.

France ranks last out of ten countries for workers’ opinion of company management, according to a report from 2007. Whereas two-thirds of American, British and German employees say they have friendly relations with their line manager, fewer than a third of French workers say the same. ...
A study of seven leading economies by TNS Sofres in 2007 showed that France is unique in that middle management as well as the lower-level workforce is largely disengaged from their companies.

The disconnect is not just within corporations, it is also reflected in management attitudes towards global markets.

While German Mittelstand company managers remain very active in global markets and bring up their supply chain with them, French managers are almost entirely absent from the global scene. This is partly due to the Grandes Ecoles mentality: they know best and don't need stinking foreigners to tell them otherwise. Partly, it is the unintended consequence of the insular nature of the French elite. They rarely speak any foreign language, they almost never had any experience living abroad and they are too happy to stay within a familiar market delineated by language and history, such as France and North Africa. A French report in 2008 concluded that, unlike Germany, France had no longer any international expertise.

The insular and parochial management culture affected the productivity efforts. When the US, the UK and Scandinavian companies were heavily investing into ICTs, French companies were staying away from them.

A recent report reached this conclusion:

En définitive, les mauvaises performances françaises en termes de croissance du PIB et de la productivité peuvent être interprétées comme la conséquence d’un investissement insuffisant en éducation supérieure et en TIC, d’un marché du travail trop rigide, d’un marché des biens insuffisamment concurrentiel et d’un renouvellement insuffisant du tissu entrepreneurial. [my emphasis].

In that sense, my critical assessment of Air France, a global company run by French business elite with no regard towards productivity can be generalized to the rest of the French economy.

Just like my French friends who loved to point to high industrial productivity figures to tell me I am wrong, you could also counter with recent ICT investment figures. In Europe, Germany, the UK and France are now the top spenders on high tech tools. Point taken.

However, like high productivity figures, these numbers hide a different reality. The ICT revolution of the 90s was geared towards increasing labor productivity. These new spending programs are designed for a different purpose. The bulk of it is for new technologies like virtualization solutions and moving things up to the Cloud. They hardly make employees more productive. They are shiny new toys that will reduce corporate carbon footprint and get subsidies from the state.

There is one other point you find in the new ICT figures: In France, unlike other European countries, a large portion of that spending goes towards software development. Normally, this would be encouraging, but in this case it is largely because they need to catch up with the rest f the world and update all the primitive Visual Basic enterprise software packages that seem to be running the operations of most French companies.

You think I exaggerate. Two anecdotes to illustrate the point.

Around 2005, French IKEA was using an inventory system that was updated once a day (I asked). Therefore, during the day, each time a customer asked if an item was available at the warehouse, a clerk had to call another clerk for a visual inspection. The computer showed two but the clerk had no idea if someone bought them. Maybe it is still the case, I can't tell you. I have not bought anything from IKEA in a long time. But no US store had such a system past 1995. Including, I am sure, IKEA itself outside France.

Second anecdote. Two years ago, I went to a branch of Groupama, a large insurance company operating in 14 countries. It was to get a quote and I asked them to print me a couple of tables. The custom software package was so user-unfriendly that they couldn't do that. So, the only thing the person I was dealing with could do that was to copy various tables in to an empty Word document and print that. It took her 10 minutes. All the while she complained about how terrible the software was. The workaround was suggested by her manager. I agreed with her. The package should have done that with two clicks.

Then I asked why she simply did not click Ctrl-P on each table. She was shocked to see that you could print almost anything under Windows with that key combination. She went around the office to tell everyone that. I became a hero.

Two years later, they are still using the same software and since that person moved to another branch, the new people still copy and paste tables for customers.

You can see the unifying thread in all this.

An insular and elitist management class creating structures to penalize innovation, devalorize their own R&D, discourage employees, turn their backs to global markets and ignore lean corporate structures and new management techniques implemented elsewhere.

A Huge Missed Opportunity

What is sad in all this it was a historic opportunity to set an example.

You see, in the UK and the US, the huge productivity gains made companies very profitable. But senior management and CEOs moved quickly and appropriated everything. Executive pay shot through the roof and real wages continued to decline.

France had a historic opportunity.

If they had implemented ICTs at the same time as everybody else, valorized their own R&D, motivated their employees, copied the lean management structures and new techniques being implemented elsewhere and expanded their global horizon, they could have pushed France to the forefront of global capitalism.

Given the social democratic nature of the system and the relative power of the unions, such a system would be inclined to distribute these profits derived from productivity gains more equitably. Which would have made France a prosperous, affluent and peaceful capitalist system.

People would have used them as a stellar example of what could have been when they criticized the winner-take-all culture that emerged in the UK and the US.

They could have become the envy of the world.

Instead, with parochial and elitist managers blaming "lazy" workers for their every mistake, an ineffectual government mismanaging the economy and discouraged and alienated employees, France is on its way to becoming a second tier economy.

As a Francophile, I find this to be a shame.

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UPDATE

This is a headline on the BBC Web site from this evening, or a full day after I posted the above assessment.

PMI surveys raises fear that France may be back in recession.

It mentions the possibility of a "triple dip" recession.

What can I tell you?