Saudi Arabia’s $5 billion deposit in Türkiye’s central bank – What is Riyadh’s end game?
On Monday, 6th March, Saudi Arabia agreed to deposit $5 billion in Turkey's central bank through the Saudi Fund for Development (SFD). Saudi Arabia's rapprochement with Turkey last year, highlighted by Erdogan's visit to Jeddah, ended a severe rift in the relationship between the two countries that started in 2018 with the murder of Saudi journalist Jamal Khashoggi in Istanbul. The Turkish President's fiery remarks against the perpetrators of the assassination, coupled with pre-existing estrangement caused by the two states' opposing approaches to the Arab Spring, led to an effective boycott of Turkish goods by Saudi Arabia. The climate seems to be changing.
While multiple such deposits or currency swap deals with the country's struggling central bank have taken place over the last few years, this particular deposit can be linked to the upcoming Turkish general elections. In other words, Saudi Arabia and Crown Prince Mohammed Bin Salman (MBS) may have prematurely cast their vote over their preferred administration in Turkey. Of course, the ground-breaking news of Saudi Arabia and Iran restoring ties on 10th March forces us to reconsider the basic explanation behind the deposit and ask more questions. What does Saudi Arabia aim to achieve with this move, and what are the implications for Turkey and President Erdogan?
For Turkey and Erdogan, restored ties with Saudi Arabia are necessary to revitalise a struggling economy and currency, especially after the tragic earthquakes in early February that claimed the life of almost 48,000 people and whose economic impact is estimated to be around $100 billion. Until now, therefore, this rapprochement was seemingly one-sided, with Erdogan essentially appeasing MBS in exchange for economic boons. How does the restoration of ties with Iran alter our perception of Saudi policy vis-à-vis Turkey?
Saudi Arabia's deposit – a sizable contribution, with no strings attached, officially at least – seems to have come at a perfect time for Erdogan as he is preparing for the most challenging elections he has faced since assuming power. To convince his electorate once more, he needs to accrue as many economic tools as possible in his arsenal, without an outright change of economic or monetary policy, and this deposit represents exactly that. Saudi Arabia, in turn, senses an opportunity: the weaker the incumbent Turkish President is, the more desperate he will be to establish deals with preferential terms for Riyadh. This strategy would be consistent with the restoration of ties with Iran. Saudi Arabian interest in restoring ties with former rivals is a prerequisite for expanding its political footprint and influence in the Middle East, and economic tools are critical in increasing its leverage over states vying for foreign investment.
On the other hand, the united Turkish opposition's candidate for the presidential spot, Kemal Kılıçdaroğlu, criticised MBS harshly last year, vowing to "make him pay for what he has done in our land". This discourse may not necessarily translate into official foreign policy, as it can be interpreted as pre-election statements meant to rally nationalist voters, instead of a concrete future agenda. Nonetheless, it would be logical for the Saudi Crown Prince to prefer a continuation of the status quo and thus re-election of the current Turkish administration. It is hard to imagine, however, that the sole motivation of this deposit would be to influence the outcome of the upcoming Turkish elections. What is more likely is that all the aforementioned factors lead Saudi Arabia to this policy: an opportunity to gain leverage over another regional power, a policy of rapprochement with rivals to expand economically, and an interest to maintain the status quo in the restored relationship with Turkey.