Trump Planning "Economy Crippling" Sanctions Against Turkey Over S-400 Purchase

With Turkey's purchase of the Russia S-400 missile-defense system looking like a done deal, the Trump Administration, which claims it already made Ankara its 'best offer' on the US Patriot missile-defense system, is trading the carrot for the stick and, in a non-too-subtle message to Erdogan and his senior advisors, warned that, if Turkey goes ahead with the purchase, the US will drive Turkey's nascent defense industry into ruin with CAATSA.

Just days after Turkish officials warned that the S-400 purchase was as good as done, Bloomberg reported on Wednesday that Trump is feeling 'bipartisan' pressure from Congressional leaders to impose CAATSA sanctions against Turkey, and the administration has devised three plans for retaliation.

Trump

Since technically any country that buys defense equipment from Russia is eligible for American sanctions, Congressional leaders are reportedly arguing that there's no legal reason to excuse Turkey from the sanctions (which appear to be applied on an ad hoc basis, seeing as America's idle threats haven't stopped India and others).

The last time Trump took an aggressive tack with Turkey, he came away with the win: everybody who insists that punitive tariffs don't work should first remember Turkey's decision to release pastor Andrew Brunson, made after Washington doubled metal tariffs on the country in August and slapped sanctions on two senior government officials. The result? Brunson was released shortly afterward.

And Trump is hoping the strategy will work again, though, so far at least, Turkey has shown no indication that it plans to back down. 

The US has been considering possible sanctions for well over a year as it became clear Turkey wasn’t going to back down. A leading proponent was Wess Mitchell, the assistant secretary of State for European affairs who stepped down earlier this year.

"This has the potential to spike the punch," Mitchell said of the S-400 purchase in Senate testimony in June 2018. "We can’t be any clearer than saying that both privately and publicly, that a decision on S-400 will qualitatively change the U.S.-Turkish relationship in a way that would be very difficult to repair."

Yet Turkey has so far refused to back down. Part of the country’s calculation, according to people familiar with the matter and outside experts, is that Erdogan believes he can split Trump off from the rest of his administration and persuade him that buying the S-400 isn’t a big problem.

Which is why Trump has developed his three plans, all of which would involve using CAATSA to impose sanctions, and the most serious of which would 'cripple the Turkish economy'. At the very least, Washington will likely cut off sales of any new F-35s to the NATO ally.

The Trump administration is weighing three sanctions packages to punish Turkey over its purchases of the Russian S-400 missile-defense system, according to people familiar with the matter.

The most severe package under discussion between officials at the National Security Council and the State and Treasury departments would all but cripple the already troubled Turkish economy, according to three people familiar with the matter, who asked not to be identified discussing internal deliberations.

Any of the options would come on top of the months-old U.S. pledge to cut off sales of the F-35 jet to Turkey if President Recep Tayyip Erdogan keeps his vow to buy the Russian system.

The idea with the most support for now is to target several companies in Turkey’s key defense sector under the Countering America’s Adversaries Through Sanctions Act, or CAATSA, which targets entities doing business with Russia. Such sanctions would effectively sever those companies from the U.S. financial system, making it almost impossible for them to buy American components or sell their products in the U.S.

Once again, the Turkish lira weakened on the disappointing sanctions news. It was down as much as 1.5% to 5.9171 per dollar on the news, though was trading off 0.6% more recently.

But there's still the G-20 summit in Osaka, where it's believed Trump and Xi will have an opportunity to meet. It's not clear how BBG knows this, but Erdogan is reportedly hoping he can speak to Trump alone in Osaka, and split him off from the rest of his advisors, like he did when he convinced Trump to pull American troops from Syria.

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