Turkey on Sunday May 14 holds the first round of its much-anticipated presidential election along with the parliamentary vote. For a blow by blow account of what’s happened in the run-up to the elections, Intellinews Pro subscribers can search with the keyword “elections” in the news archive (if you’re not a subscriber, now might be a good time to take a free trial. Oh, naughty!).

Amid the current bombardment of honking “Turkish elections” headlines, here are some key points to help prime you for what might be on the way:

Not normal elections

Turkey has not held fair elections since 2015. Go here for the Organization for Security and Co-operation in Europe (OSCE) reports that provide details on the sheer level of unfairness.

Since 2018, the destruction of Turkey as we knew it—covering each province of life, ranging from the economy to the judiciary, to education, health, the financial markets, food markets and so forth—brought about by the incumbent regime has continuously tested fresh limits.

With the country in the process of total collapse, the Turks have finally decided that getting rid of the Erdogan regime is the nation’s first priority. Everyone across the length and breadth of the land is fully aware, however, that casting a vote will not be enough to make that happen.

What will occur on polling day and in the post-election period is currently unknown, but it seems that it will be hard to convince Turks to accept another unverifiable proclamation of victory.

Election outcome

Ask any sensible Turk and they will tell you that in the first round of presidential voting, the president, Recep Tayyip Erdogan, will not be able to attract a vote share higher than a figure in the 30%s, while the only serious challenger, Kemal Kilicdaroglu, will make it into the 60%s.

Erdogan may have run out of road. But try telling him that (Credit: Turkish Presidency).

A 50%-plus-one-vote outcome is enough for a knockout win in the first round, but if no candidate achieves that, a second round will be held on May 28. It will be a run-off between the first and second-placed candidates from the first round.

The distribution of votes in the parliamentary ballot should be similar when it comes to the Erdogan-led and opposition blocs.

Under current conditions, however, in which an executive presidency more or less enables “one-man-rule”, Turkey’s parliament is pretty useless.

The opposition want to get back to having a parliamentary republic, but they would need a huge, probably unattainable election win to secure enough votes for a constitutional amendment to achieve that. A 2/3 majority would in fact be needed in the chamber. Otherwise, the matter has to go to a referendum.

Erdogan’s remaining voters are those who are direct or indirect beneficiaries of his regime as well as their families, relatives or associates. Nothing will change their mind at this point but the opposition coalition, the broadest ever seen in Turkey, does not need their votes in any case to bring the Erdogan era to an end.

There were two more candidates in the presidential contest. One of them, Muharrem Ince, withdrew from the race on May 11. The other candidate, Sinan Ogun, will attract a maximum of 1% of the vote.

Opinion polling is a problematic method of research. It would be handy to have a clear idea of the upcoming results of an election from getting a few thousand people to fill in a questionnaire. But as election results around the world have proved time and time again, dream on.

In Turkey’s last three elections (the 2017 constitutional referendum, 2018 presidential and parliamentary elections and 2019 local elections), Erdogan, or the Erdogan camp, attracted vote tallies in the 40%s, claiming tiny majorities.

In the referendum and general elections, despite the highly questionable official outcomes, the opposition turned tail and disappeared into the election night. In the local polls, a tiny majority countrywide for Erdogan did not mean anything consequential.

This time around, it does not seem possible that the Turks can be convinced of the “official result” even if the opposition once more shrinks away.

It could be hard to fathom the difference between “what enters the ballot boxes” and “what comes out as a result”. See the OSCE reports in the link given above for details.

Erdogan’s options

1-     Delay the elections

Given that we are into the last few days of the run-up, it seems that Turkey will indeed have its ballots on Sunday. On election day, some violent events or emergencies could still be given as a reason to cancel the polls.

2-     Declare victory despite the obvious reality

A big shock to the system that would set the stage for this has yet to arrive.

3-     Flee abroad

This would be a godsend.

What will happen before Sunday?

In the remaining time before polling day, nothing about events in Turkey should surprise the observer.

On May 7, hundreds of youngsters, carrying flags of the Nationalist Movement Party (the MHP, Erdogan's junior coalition partner) and Huda-Par (the “Free Cause Party”, another junior ruling coalition partner of Erdogan and the legal arm of a terrorist organisation known as the Kurdish Hezbollah or Hezbollah in Turkey), attacked an election rally in Erzurum in the east of the country with hails of stones.

The attack occurred as Ekrem Imamoglu, Istanbul’s mayor and one of the coalition figures who will serve as a vice president in the event of a Kilicdaroglu win, was addressing the crowd.

On the same day, dozens of people attacked a bus with knives and sticks. It was involved in election campaigning of the Green Left Party (the pro-Kurdish People’s Democratic Party (HDP) is taking part in the elections using this party as a vehicle since there is a case before the constitutional court that at one point appeared to threaten the existence of the HDP as a political party and thus ban it from the elections).

On May 9, members of the main opposition Republican People’s Party (CHP) and Erdogan’s Justice and Development Party (AKP) had an armed exchange in Gaziantep.

There have been many more violent incidents.

Some deepfake videos, meanwhile, have been released.

In recent days, the USD/TRY, in the interbank market, has been trading in the 19.50s while free market prices at the Grand Bazaar in Istanbul moved into the 21s-22s on May 11.

The pair has lately been on another record-breaking spree. The latest lira-to-the-dollar record in the interbank market, set on May 8, stands at TRY 19.76.

On May 11, Turkey’s five-year credit default swaps (CDS) fell below the 500-level, while the yield on the Turkish government’s 10-year eurobonds fell to the 8%s.

Betting on a smooth transition in power with the FX-denominated papers that pay big coupons is a smart move.

In the domestic factoring market, interest rates have reportedly jumped into the 70%s. Everyone is holding their breath, waiting to see what fate the country will encounter in the coming days.

Friday May 12 is the last trading and business day prior to the polls. There is no way price movements can be predicted.

What will happen on Sunday?

During the 2019 local elections, two poll watchers from the Felicity Party, currently a member of the opposition alliance, were shot dead. For more violent events and unlawfulness, see the OSCE reports.

On the evening of May 14, the Erdogan regime will certainly declare a victory relatively early. Some paramilitary groups will take to the streets.

What the opposition is planning is unknown.

What will happen on Monday?

If Erdogan declares victory and the opposition turns tail again and disappears, nothing will change. The USD/TRY could move up to the 19.60s and everything else will go along on its way, despite the “Doomsday ahead” sign flapping in the wind.

If Erdogan claims that a second-round presidential vote has to be held on May 28 and the opposition agrees, we will see what shocks Erdogan can deliver in the two weeks leading up to that crunch day.

Kilicdaroglu has pledged to bring Turkey out of its long winter. But he may first need to get the permission of the Supreme Election Board ... (Credit: CHP).

If Erdogan cannot find a usable reaction to an opposition victory, the fear is that his officials will remain in power until Kilicdaroglu gets his mandate from the Supreme Election Board (YSK) and takes over the presidency.

In FX, the anxiety is that the central bank will end its control on the market and the USD/TRY will shoot up. However, a rush to join the upcoming rally could also result in a sharp lira revaluation. There is no chance of a reliable prediction here, but volatility is the common expectation.

What will happen in the post-election period?

If Erdogan remains in power, nothing much will change. Turkey will stay on the path that can only lead to a total collapse.

If Erdogan accepts he has lost the vote, the period leading up to Kilicdaroglu taking the presidential post will be critical. Many people with plenty to hide will flee abroad. Some officials might create difficulties that could cause a lot of damage.

After Kilicdaroglu takes over, we will really be immersed in the land of known unknowns.

Monetary policy

Changing the central bank governor and the monetary policy committee (MPC) members will be among one of Kilicdaroglu’s first moves. He has implied that he plans to appoint Hakan Kara, a former chief economist at the central bank, as the governor. However, Deva Party chair Ali Babacan said that they will choose from various candidates.

In any case, a full-blown orthodox governor, which would offer a chunky real return, will be at the wheel under a Kilicdaroglu administration.

The opposition bloc rules out the option of bringing in the IMF since the Turks have an allergy when it comes to the Fund.

In the first rate-setting meeting, a big rate hike will be delivered.

Turkish economists want 20-30% from the first shot (the benchmark currently stands at 8.50%) and gradual increases thereafter depending on the course of inflation.

Foreign investors, meanwhile, want a front-loaded shot that will be followed by gradual rate cuts. This move would offer a 30-40% USD-denominated return in a few months to the investors from a revaluation of the lira-denominated government debt papers coupled with lira valuation.

FX-protected deposits scheme (KKM)

If the USD/TRY goes higher than the deposit rate, the central bank or the Treasury pays the spread under the “KKM” scheme. There is more than $100bn in the KKM accounts.

Bilge Yilmaz of the Iyi Party, who hopes to take over the post of treasury minister or finance minister (the current treasury and finance ministry will be split into two parts), says KKM will be ended.

The maturities are around three months. So, all accounts will be closed in a maximum of three months. There is a fear of it creating more than $100bn in FX demand. However, FX deposits are not real physical FX. So, it would not create a huge problem.

Banks’ government paper stock

The government has lately pushed local banks to buy government papers. The interest rates are in the 10%s versus official inflation in the 50%s. They are now rather afraid of writing losses given rate hikes. However, this will not become a systemic problem.

The irony is that the banking stocks have been rallying in recent days. Assigning a logic to price moves at the casino and racket that is Borsa Istanbul requires a strong imagination and face. You should not laugh at your own babble while talking.

Fiscal policy

If Erdogan remains in power, he will deliver some sharp tax hikes.

If he leaves power, the opposition will, it says, move on talk of “cutting the waste” and “taking money back from thieves”. They have promised big, big wage hikes for everybody.

They should also think of bringing the sea to Ankara. And they can also create heaven on Earth somewhere in Anatolia. That would be splendid.

Official data series

Turkey’s official data series are a real mess. If Erdogan stays in power, the numbers will remain absolute nonsense.

As president, Kilicdaroglu would change the head of the Turkish statistical body TUIK (or TurkStat). How a transition to a new data series would be executed is anybody’s guess.

Foreign policy

Turkey currently does not have a foreign policy, just Erdogan’s relations with his counterparts. If he remains in power, this will continue to be the case.

Erdogan has no problem with Nato or the Western governments. He will approve Sweden’s accession into Nato in June. The hold-up has only been about the elections.

The Western media will keep describing and redescribing cliches such as democracy or human rights, while Erdogan will keep doing business with everyone from the US of A to China.

If the opposition manages to take the steering wheel, Turkey will have a foreign policy again. A balanced and non-offensive stance will be put in place.

The lobbing of insults at the Western countries will stop. Turkey will re-become a normal partner in the Western organisations.

The revival of the EU accession process and a visa-free Europe regime for Turkish citizens are among hopes. Erdogan has done politicians in Europe a big favour over the years. They have not needed to deal with potential public responses to a proposed Turkish accession into the EU, as it became out of the question, while Erdogan has not allowed millions of migrants to head for Europe via Turkey (thanks to some handsome payments).

The opposition bloc cannot open the doors into Europe for the migrants as that would be the end of its hopes for EU accession talks and the visa-free regime. They are talking about “sending the Syrians back according to their own free will”.

They should not stall on bringing the sea to Ankara. That would be so good for the Ankarans. They could swim when it gets too hot in the summer.

The huge trade deficit (at more than $20bn per year) with China is a big issue. Since the sum is far too big, the opposition cannot deal with the China lobby in the country.

Turkey’s stance in the deepening new cold war is not the job of the next government, but it is a longer-term issue. Some noise about the Uyghurs on Xinjiang will definitely be heard.