Erdogan Refrains from Harsh Response to Biden Row Over ‘Genocide’ Label

(Bloomberg) -- President Recep Tayyip Erdogan is refraining from further escalating his latest spat with NATO ally U.S., a sign the Turkish leader is wary of derailing his nation’s fragile finances.

Speaking for the first time since Joe Biden’s landmark description of the Ottoman-era mass killing of Armenians as genocide, Erdogan on Monday accused the U.S. president of sacrificing ties between the two North Atlantic Treaty Organization allies to domestic political pressures.

But Erdogan fell short of taking other options into consideration, which a senior Turkish official said included the freezing of a key defense deal with the U.S.

While Biden’s move was largely symbolic, it set the tone for his administration’s approach to ties with Erdogan. No U.S. leader since Ronald Reagan has used the genocide term for fear of alienating Turkey.

Recent standoffs with the U.S. have caused substantial financial pain for Turkey, and Erdogan said he’d discuss differences in a meeting with Biden at the NATO summit in June.

“We have to leave aside the issues poisoning relations between the two countries, and look at how we will take steps toward the future,” Erdogan said. “Otherwise, we will have no other choice but to implement the new practices required by the new level to which our relations have fallen.”

Possible Repercussions

Erdogan did not elaborate. But one repercussion could be Turkey freezing the Defense and Economic Cooperation Agreement that has enabled collaboration with the U.S. in regional conflicts such as Syria and Iraq since it was signed in 1980, according to an official familiar with Turkish deliberations at the highest level of Erdogan’s administration.

Erdogan said Biden’s categorization of the killings of Armenians as “genocide” has further deteriorated ties after a crisis over Ankara’s purchase of a Russian air-defense system.

Biden Marks Armenian ‘Genocide’ in Challenge to Ally Turkey

Base Threats

Biden spoke to Erdogan on Friday for the first time since taking office, while Secretary of State Antony Blinken and National Security Adviser Jake Sullivan both called their Turkish counterparts ahead of the president’s genocide designation.

On Monday, a spokeswoman for the National Security Council said the U.S. values the close partnership with Turkey on a wide range of regional security issues.

As Erdogan wrangled with Washington in the past, he’s threatened to deny the U.S. access to an early-warning radar at Kurecik, a critical part of NATO’s ballistic-missile defense capabilities, as well as Incirlik Air Base, close to Syria and used by the Pentagon to store tactical nuclear weapons. Neither happened.

Turkey launched a cross-border attack against separatist Kurdish militants in northern Iraq within hours of Biden’s statement, and other retaliatory options could include attacking allied Kurdish fighters in Syria who received U.S. assistance to fight Islamic State, the official said.

Erdogan vowed to eliminate the threat of terrorism emanating from Syria.

Turkey Hits Brake on Syria Foray After Deals With Russia, U.S.

The dispute over how to label the atrocities is at the core of tensions between Armenia and Turkey, which have no diplomatic ties and face each other across a closed border. In 2020, the Turkish military supported Azerbaijan in its armed conflict against Armenia over the disputed region of Nagorno-Karabakh, an enclave inside Azerbaijan with an Armenian ethnic majority.

Turkey’s government has also deliberated steps likely to antagonize landlocked Armenia, which consumes large amounts of Turkish food supplies sent via Georgia, and increase support for Azerbaijan, the person said in options also confirmed as being under consideration by a second Turkish official.

The genocide designation -- while echoing a move Congress made in 2019 -- only drove home the U.S. administration’s willingness to play hardball with Erdogan’s government.

Biden Marks Armenian ‘Genocide’ in Challenge to Ally Turkey

News of Biden’s move tilted sentiment against Turkish assets which fluctuated on Monday. The lira dropped as much as 1.1% on Monday before rising 1.3% to 8.2862 per dollar as of 8:12 p.m. in Istanbul as analysts tried to assess whether tensions between the two countries will prove to be temporary.

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