More Worries About Turkey

Iran sells natural gas to Turkey. 

It does not do this because they're friends, or have much in common. They do this because they're nearby, and have money.

Turkey, in fact, generates half of its electricity by burning natural gas from Iran.

Now ... it could be just a chance occurrence that Iran stopped sending natural gas down it's pipeline to Turkey. And it might just be chance that they've now turned the gas back on, but are keeping it at low pressure (a bit less than 10% of what they were doing). And it might be chance that they promise to get everything back up to 40% of what they were doing just as soon as they can.

But I think not.

When I see news like this, and I already know Turkey is in trouble, my first thought it that they're not paying their bills. Or that they didn't pay them on time, and then made a partial payment, and got less gas than usual.

In fact, the government of Turkey closed all industrial operations across the country until Thursday! And Iran only supplies about a sixth of Turkey's imported gas. Why is that having such a big effect? No one knows. You can read more about it here, here, and here, but the information is kind of limited.

N.B. One thing to keep in mind is that most countries do not have competitive industries in energy. Instead they have state-owned monopolies. So this is very much the government of Iran not selling something to the government of Turkey (to distribute around the country). Iran might be doing this as a purely political move, but this seems unlikely ... Iran needs all the money it can get. 

Update: Oops, I forgot about this one. Turkey also just did a currency swap with the United Arab Emirates. This means the UAE has contracted to accept Turkish Lira in exchange with their dirhans at a fixed rate. The deal is for about $5B worth over 3 years. The cool thing about this from the perspective of Turkey is that the dirhan is fixed to the dollar, while the lira is not. So Turkey has an outlet for its depreciating currency that will get it some dollars when it needs them. This is not the sort of thing you hear about very often.

Update 2: And that should definitely be interpreted as a bet the UAE is placing on Turkey. Why would they want to do this? Because Iran is the primary threat to the smaller countries along the Persian Gulf. This is "the enemy of my enemy is my friend" politics driving macroeconomic policy.