Where goes the AKP? Is Erdogan's party a threat to Turkish secularism, or the product of it? Does the AKP represent an Islamist Trojan horse, or the benign Islamic equivalent of Europe's numerous Christian Democratic political parties? While the political signs are contradictory, the financial indicators are consistently troubling.

THE AKP'S RISE

"Secularism is the protector of all beliefs and religions. We are the guarantors of this secularism, and our management will clearly prove that." [1]

Indeed, the AKP's 2002 election victory prompted much optimism. "AK Victory Heralds New Dawn for Turkey," headlined the Daily Telegraph.[2] "Turkey Takes the Plunge: Islam and Democracy Combine Forces," opined an editorial in The Guardian. [3] Official U.S. government reaction was cautious. "Let's not speculate on the future of the Turkish government, but let us at this point congratulate the Justice and Development Party on its electoral success," suggested State Department spokesman Richard Boucher. [4]

Two years later, however, the AKP's legacy is mixed. On one hand, Erdogan has continued Turkey's drive to join the European Union. On the other, the AKP put forward a proposal which would pave the way for students from Islamic secondary schools to enter secular universities, in effect waiving the secular subjects now necessary for admission. When the General Staff balked, Erdogan quickly dropped his initiative.

The special relationship between Washington and Ankara has already suffered. Anti-Americanism is rife. Neither Erdogan nor Foreign Minister Abdullah Gül has made any serious effort to stem Turkish anti-Americanism. Even prior to the war in Iraq, Turkish relations with the United States had grown strained. Turkish newspapers closely associated with the AKP regularly spin conspiracy theories attacking prominent members of the Bush administration. [5]

The AKP has also worked to downgrade relations with Israel. Erdogan has called Israel a "terrorist" state on a number of occasions. [6] On July 13, 2004, he snubbed the visiting Israeli Deputy Prime Minister, Ehud Olmert, but found time to meet Syrian Prime Minister Muhammad Naji al-Utri the same day. [7]

AKP's victory marked the first time that any party had won an absolute majority in Turkey's Parliament since 1983, when Turgut Özal's Motherland Party (Anavatan Partisi) took 211 seats of the then 400-seat Parliament, and only the second time that Islamists took the reins of government. Never before had an Islamist government won such a substantial block in Parliament, though.

The AKP enjoyed such a large parliamentary majority for technical reasons. It had won just slightly over one-third of the vote, but, because only one other party — the center-left Republican People's Party (Cumhuriyetci Halk Partisi) -- managed to surpass the 10 percent threshold necessary to enter the Turkish Grand National Assembly, the AKP took 66 percent of the seats. All five incumbent parties failed to surpass the threshold. [8]

While the AKP has clear Islamist roots — in 1998, a Diyarbakir court convicted Erdogan of inciting religious hatred after reading an Islamist poem [9] — its victory had less to do with its Islamist agenda than with public disgust over corruption within long-feuding coalition parties. [10] The Turkish public blamed the incumbents for banking and currency crises in November, 2000, and February, 2001. Per capita income took a serious hit when, on February 22, 2001, the Turkish lira lost one-third of its value. [11]

The AKP's grip on Turkish society has only grown since its initial elections. In what was widely seen across Turkey as a referendum on the AKP's first year in power, the party won 42 percent of the seats in the November, 2003, municipal elections. In the week before those elections, I drove the approximately 200 miles between the Iraqi border and the southeastern hub of Diyarbakir. In towns such as Cizre, Nusaybin, and Mardin near the Syrian border, and large cities including Ankara and Istanbul, the AKP had saturated the landscape with offices, loudspeaker trucks, billboards, and party flags. It distributed glossy brochures and computer diskettes with campaign literature to the press.

Erdogan, who was extremely popular as Mayor of Istanbul in 1994-1998, has worked hard to avoid repeating his own mistakes of speaking too overtly about Islamist goals. His former boss, Necmettin Erbakan, made that mistake; as leader of the Islamist Refah (Welfare) Party, Erbakan presided over a coalition government from July, 1996, to June, 1997, which began reversing Atatürkist domestic and foreign policies — until the military forced his resignation. [12]

Erdogan has taken a slower, steadier path, careful not to rock the establishment too quickly, while, at the same time, floating an occasional trial balloon for social reforms to advance the Islamist agenda. While Erbakan sought to eschew the European Union, Erdogan has embraced it. This has strengthened the AKP's position within Turkish society, not only because many Turks believe their future lies with Europe, but also because the EU's pressure for reforms in Turkey has eroded the power of the army, the traditional nemesis of political Islam in Turkey. Erdogan has not abandoned his constituency, though. By having his wife and daughter attend public events with their heads covered, he has broken taboos on religious scarves at public events. He has also launched proposals, tabled temporarily, to equate religious and secular degrees and has sought to criminalize adultery.

Under AKP stewardship, Turkey has experienced an economic recovery of sorts. In the five-years before the AKP assumed power, Turkey's currency devalued from around 200,000 lira to just over 1.7 million lira against the dollar. Cash machines regularly dispense 20,000,000 Turkish lira notes. In the first two years of the AKP government, the Turkish currency actually strengthened to 1.5 million lira to the dollar.[13] The currency has subsequently remained stable, and the AKP announced plans to knock off six zeros on January 1, 2005. [14] While such a move has more cosmetic than fiscal value, it is, nonetheless, psychologically important for a country in which hyperinflation was so long the norm.

To its credit, the Erdogan administration has initiated inexpensive but popular reforms long ignored by previous governments. According to a schoolteacher in the central Anatolian town of Konya, the government's decision to distribute free textbooks to students is extremely popular. That the city of Konya, along with Kayseri, 200 miles east, provides AKP's core support is no coincidence. Erdogan has recently initiated other reforms geared more at winning hearts and minds than at serious economic restructuring. On July 23, 2004, Turkish radio reported rumors that the AKP would cut taxes on cigarettes. In a country where half of all adults smoke, [15] such measures affect every family. Two months later, the Islamist, pro-AKP daily Yeni Safak headlined on September 26 that Erdogan would cut taxes on consumer goods. [16] Both party members and opponents acknowledge that Erdogan listens to his constituents and works to implement concrete, tangible programs along with broader ideological policies. [17]

SURPRISING ISLAMIST BOOM

"The AKP government would like to relax fiscal policy and cut tax rates, but the need to reduce the large government debt combined with a high level of tax evasion make this difficult without jeopardizing Turkey's economic reform programme." [19]

In the context of static tax revenue and the financial hit to the tourism sector that resulted from the Iraq war, it is unexpected that the AKP has managed to make progress. Some Turkish academics and economists question whether the AKP growth is real, or whether the AKP is engaging in an economic Potemkin village charade. The latter blames "green money."

The case of Kayseri is instructive. Long a dusty, tired town most famous for its carpets and the hometown of Foreign Minister Gül, Kayseri is now booming. Malls, boutiques, and fancy hotels dot the landscape. During the 1980s and early 1990s, as Turkey wallowed in economic stagnation, Kayseri's greatest export was its people. Many young, unemployed, or undereducated men migrated to Germany, where they took a number of menial but relatively high-paying jobs.

Enter holding companies, the most famous of which is Kombassan Holding, founded in Konya by Hasim Bayram, a religious conservative who began his career as a school teacher. [20] Groups such as Kombassan grew rapidly as they issued shares in exchange for remittance income from migrant labor in Germany and elsewhere in Europe and reinvested it in a variety of local businesses. Kombassan, for example, began in 1989 as Konya Printing and Packaging, but grew to include more than fifty firms in such key areas as automotives, electronics, construction, textiles, petroleum, shopping centers and food, even purchasing Konya's soccer team. At its height, Kombassan boasted nearly 30,000 shareholders [21] and owned companies in Turkey, Germany, and the United States. [22] These translated into political influence. Bayram and other Kombassan board members financed Erbakan's Anatolia tour in the run-up to the 1996 elections and provided consistent support to the Refah Party from which Erdogan, Gül, and the AKP emerged. [23]

Prior to the AKP's initial election victory, Abdullah Gül criticized state scrutiny of the Islamic enterprises, accusing the secular government of acting unfairly. Gül maintained that Turkish law enforcement, instead of enforcing the law, was pursuing a vendetta. [24] He was not a disinterested observer, though. Between 1983 and 1991, Gül worked as a specialist at the Islamic Development Bank in Jeddah, Saudi Arabia. [25] The Islamic banks — and especially those sponsored by Saudi Arabia — regularly channel money to Islamist enterprises. On November 9, 2004, Deniz Baykal, leader of the parliamentary opposition Republican People's Party, accused the AKP of trying to create a religious-based economy. [26]

Erdogan has been silent on the issue, perhaps because he is heavily invested in green money business. In August, 2001, Rahmi Koç, Chairman of Koç Holding, Turkey's largest and oldest conglomerate, [27] commented on CNN Türk that Erdogan has a U.S.$1 billion fortune and asked the source of his wealth. [28] According to Sedat Ergin, Ankara bureau chief for Hürriyet, Erdogan holds substantial financial stakes in three different firms, [29] which both Turkish military and intelligence officers and, according to numerous interviews, the man-on-the-street as well, believe subsidize Islamist politics. The Erdogan family controls approximately 50 percent of Emniyet Foods,[30] the distributor for Ülker, Turkey's leading confectionary company. Recep Erdogan is a shareholder in Ihsan Foods, which distributes Ülker's dairy products and owns a 12 percent stake in Yenidogan Foods Marketing, which distributes Ülker soft drinks. According to numerous Turkish diplomats and officers in the Turkish General Staff, the Turkish military refuses to buy Ülker products for its conscripts so as not to subsidize Islamism. [31] Nevertheless, since Erdogan's accession, Ülker has become increasingly visible, perhaps as businesses seek the Prime Minister's favor. Across Istanbul and Ankara, Ülker's ColaTurka has begun to replace Coca-Cola in kiosks and store shelves. According to Ergin:

"These commercial activities of the Prime Minister had no illegal aspect whatsoever. However, conformity with law does not mean conformity with the public conscience and with clean and transparent politics." [32]

The growth of the Islamic business sector is apparent across Turkey and appears intricately linked to the AKP's rise. A decade ago, rural and conservative Turks tended to inhabit poorer sections of town and shop in mom-and-pop stores or outdoor markets, while wealthier and secular Turks spent their money in modern shops and Western-style supermarkets. Green money investment has caused the pattern to blur. Kombassan's Afra supermarkets, even in Sultanbeyli, Istanbul's large and once-feared slum, are indistinguishable from their European or American equivalents. But profits earned are reinvested in other Islamist ventures or political campaigns. According to the manager of one Afra store in Sultanbeyli, the business plan is modeled after that of the German discount chain Aldi, [33] which has adopted a hub and spoke system to expand, undercut, and achieve market dominance, first by establishing hubs, and then by subdividing territory among satellites. Management strives for secrecy and opacity. [34] There is nothing illegitimate about the Aldi model, although its secrecy has raised eyebrows from Germany to Australia. In Turkey, however, Afra's rapid growth, together with political leanings, has resulted in a mechanism by which religious conservatives can generate income for Islamist parties to continue their penetration of the Turkish state. The green money influx into Turkey is not a short-term phenomenon. Rather, through careful investment, green money is laundered into legitimate businesses that will serve as an engine for Islamist parties to whittle away at Turkey's secular traditions for years to come.

Prominent Erdogan advisor Cuneyd Zapsu, [35] described by the Center-Right liberal daily Hürriyet as "Erdogan's right hand man," [36] is also heavily involved in green money businesses. Like Bayram, he applied the Aldi model to his Bim discount chain, which grew from twenty-one stores at its founding in 1995 to more than 1,000 a decade later. [37] Other prominent companies close to Islamist causes, according to Turkish businessmen, journalists and current and former government officials, include Istikbal [38] and Yimpas. [39] The former, founded in the Islamist stronghold of Kayseri, owns the Anadolu Finance House, an Islamic bank. [40] In the teahouses, parks, and bookshops of Kayseri and Konya, locals credit the AKP for its urban planning initiatives. The industrial city of Kayseri boasts a new hotel, pedestrian malls, and a popular public park. In July 2004, government vehicles tore up the main road into town to make way for a pipeline to bring natural gas from Iran. [41]

Old men in teahouses and small shopkeepers in the market say much of the local boom is a result of Kombassan and other green money operations funded by workers in Germany. They are partially correct, according to Ilhan Kesici, a well-known economist and former Undersecretary at the State Planning Organization. Between 1990 and 1996, Turkish workers in Germany remitted between $2 and $3 billion to Islamist holding companies. Residents of Konya and Kayseri saw this money invested. But this changed in 1997. "They say this investment is from money of people living in Germany, but this is a cover up," Kesici said. [42] On June 17, 1997, a Turkish court froze Kombassan's assets and ordered it to repay shareholders $101 million. [43] But Kombassan balked, invoking a legal loophole. When it issued stocks, many were informal, "written on napkins," according to one former politician. [44] Share certificates did not bare individual names. [45] In October, 2000, Turkey's Capital Markets Board froze Kombassan real estate assets. [46] There are now so many lawsuits and liens against Bayram and his companies that continuing construction and investment cannot be attributed to money entering the economy from Turkish migrants in Germany. Yet, at the same time, Kombassan and other similar holding companies remain solvent, suggesting to a number of Turkish economists and former government officials that they enjoy access to cash outside the regulatory mechanisms of the state. [47] While individual government officials may have political grievances against the AKP and its backers, both the consistency and specificity of questions regarding Kombassan suggests a legitimate concern.

Circumstantial evidence may mount that the AKP has a significant source of green money, but economic interests have resulted in an official wall of silence. One thing is clear, however. Turkish émigrés in Germany are not the source, nor is black market and smuggling income from the Iraq cigarette and petroleum trade. They cannot account for the fluctuations in the balance of payment net error.

If Not from Germany, Then from Where?

Current and former government officials, as well as Turkish economists, variously estimated the green money infusion into the Turkish economy to be between $6 billion and $12 billon. [48] Much of the money enters Turkey "in suitcases" with couriers and remains in the unofficial economy. Even when deposited, banks ask no questions about the origins of the cash. [49] "Money laundering is one of the worst aspects of Turkish politics," a former state planning official said. [50] Political parties across the political spectrum develop slush funds without revealing their source. But, under the AKP, the unofficial economy has grown exponentially. Official Turkish statistics provide some clue as to the scope of the problem. Between 2002 and 2003, the summary balance of payments for net error and omission category — basically unexplained income — increased from $149 million to almost $4 billion. [51] This is an eighty-year record error. In the first six months of 2004, an additional $1.3 billion entered the system, its origins unaccounted. [52] But even these net error figures may be too low. According to Kesici, there could be as much as a $2 billion overestimation in tourism revenue. The Turkish government determines official tourism revenue statistics by occasional exit interviews with tourists, asking them how much money they spent at hotels, restaurants, and shopping. Results vary with time, nature, and target of the interview, and so the entire process can be manipulated to inflate revenue estimates and, accordingly, hide the net error. [53]

While no Turkish government or banking official can or will disclose the origin of the more than $5 billion which has entered the system since the AKP took power, several Turkish officials suggest that such money could only come from wealthy Arab countries like Saudi Arabia, where Gül for so long lived. Simply put, remittances from Germany have dried up, and smuggling from Iraq and Iran cannot account for an increase in net error of more than 2,600 percent.

Such money would be enough to prop up and stabilize the Turkish currency and underwrite some of the popular reforms, which are both relatively inexpensive but, nevertheless, beyond the reach of the Turkish treasury, if based only on the official budget. One former AKP member acknowledged a Saudi problem. [54] A national security correspondent for a major Turkish daily elaborated on the impact of the aid:

"The change in foreign policy isn't happening in a vacuum. Saudi Arabia and Malaysia have made their foreign aid to the AKP dependent on Turkey readjusting its position toward Israel." [55]

When asked if the foreign aid was official or unofficial, he pointed beneath the table.

While it is impossible to find a detailed accounting of the unofficial economy, some Turkish economists suggest that the influx of money might have to do with Saudi and other Persian Gulf citizens' liquidation of their U.S. holdings in the aftermath of the September 11, 2001 terrorist attacks. Some bankers estimate that individual Saudi investors withdrew between $100 and $200 billion from U.S. accounts in the year following the terrorist attacks. [56] While some Saudi analysts disputed the size of the currency flight, no one disputes its significance. [57] One Turkish economist suggested that, even if Saudi citizens moved $20 billion to France, $10 billion to Lebanon and $6 billion to Switzerland, there would still be ample funds left to invest unofficially in Turkey. The money may support legitimate businesses. But, if both the investor and business fail to declare it, then such funds might remain immune to taxation and regulation. Opacity might replace the transparency meant, at its core, to protect Turkish citizenry from illegal financial or, perhaps, political manipulation.

Several current and former Turkish officials suggested that AKP advisors Korkut Özal [58] and Cuneyd Zapsu are involved in managing the green money influx. Korkut Özal, the younger brother of Turgut Özal (Prime Minister, 1983-1989; President, 1989-1993), is the leading Turkish shareholder in Al-Baraka Finance, perhaps Turkey's leading Islamic bank, and Faisal Finance, which also has roots in Saudi Arabia. [59] While Korkut's financial connections were initially helpful to his brother, Turgut Özal suspected Islamist involvement in the failed 1988 attempt on his life and slowly drifted away from the Islamist camp. Upon Turgut's death from a heart attack five years later, he was hardly on speaking terms with Korkut, who re-emerged during the Erbakan government. [60]

Like Korkut Özal, Zapsu eschews the limelight, although several Turkish and American media reports from the time of the AKP victory identify him as one of Erdogan's chief advisors. Zapsu maintains a moderate face and portrays Erdogan as a moderate as well. "Everyone knows Tayyip Erdogan is not a shariat [Islamic law] guy anymore," he told the New York Times a day after the AKP's election victory. [61] But some of Zapsu's relations suggest his convictions lie elsewhere. On October 27, 2001, Hürriyet reported that Zapsu was the business partner of Yasin al-Qadi, whose assets were frozen by the U.S. Treasury Department's Office of Foreign Asset Control because of links to Al-Qa'ida. [62] Erdogan cannot be held accountable for the faulty judgment of an aide, but, in a global war on terrorism, such close links between his advisor and a terrorist financier are cause for concern.

POTEMKIN REPUBLIC?

Already, many in Turkey fear the AKP's reach. A number of businessmen and politicians point to the case of Cem Uzan as reason to mute criticism. Cem Uzan was an entrepreneur who, along with Turgut Özal's son Ahmet, created Turkey's first private television station. Uzan's business interests rapidly grew in the late 1980s and early 1990s. In many ways, Uzan operated his business with a "mafia mentality," according to a Turkish political advisor. He used his television station to attack opponents. A U.S. court has also confirmed many Turkish officials' complaints that Uzan was dishonest. [63] He acquired Telsim, one of Turkey's first GSM telephone services and, in 1993, went into partnership with Motorola. Beginning in 1998, Motorola issued a series of eight loans to Uzan totaling $1.8 billion. When it became clear that Uzan would not repay, Motorola sought legal recourse. Uzan may have been dishonest, but, with anti-foreign sentiment high in the wake of Turkey's 2001 financial crisis, he became a popular hero. "People say that the IMF [International Monetary Fund] cheated Turkey, so it's good he [Uzan] cheats Motorola," a sociologist at Istanbul's Kadir Has University told The Chicago Tribune. Uzan launched a political party and a "rock ‘n' roll-style" nationalist campaign, which earned him 7.25 percent of the vote, placing his Genç [Youth] Party fifth. Had he entered Parliament, he would have enjoyed parliamentary immunity. [64] "His philosophy was, instead of paying Motorola $2.5 billion, ‘I can become Prime Minister of Turkey by spending $30 million,'" a former presidential advisor said. [65]

While the Motorola suit itself did not alarm Turkish politicians, Erdogan's actions upon taking office did. Uzan showed no sign of losing popularity just because his first political bid fell short of the 10 percent threshold. Indeed, he may have finished fifth, but, significantly, the Genç Party outpolled five established parties, including such heavyweights as former Prime Minister Bülent Ecevit's Democratic Left Party (Demokratik Sol Parti), which polled 22 percent in 1999 but received just 1 percent in 2002; Recai Kutan's Felicity (formerly, Virtue) Party (Saadet Partisi), which received 15 percent in 1999 but only 2.5 percent in 2002; and former President Turgut Özal's Motherland Party (Anavatan Partisi) which polled only 5 percent in 2002, down from 13 percent in 1999. [66] Uzan thus posed a political threat to Erdogan, and the Prime Minister responded. Using the Turkish Savings Deposit Insurance Fund, whose members Erdogan appointed, the government seized 219 companies belonging to the Uzan group, effectively bankrupting one of Turkey's wealthiest conglomerates [67] and, simultaneously, removing funds with which Uzan could have paid an August 1, 2003, U.S. court judgment.

Some Turkish professional bureaucrats, businessmen, journalists, and even politicians raised the question of Saudi money flowing into AKP coffers through green money business intermediaries. "The problem is Saudi Arabia. If you solve that, then our problem is solved," one independent parliamentarian told me at his office in the Grand National Assembly. [68] A former member of the AKP concurred:

"Before the 2002 election, there were rumors that an AKP victory would lead to an infusion of $10-$20 billion, mostly from Saudi Arabia. It looks like the rumors came true." [69]

Still, it is hard to speak with precision. While Turkish journalists and officials acknowledge that Saudi investment in Turkey and Turkish politics has increased since 2002, the exact nature of the investment is murky and circumstantial. "It needs to be questioned, but no one is questioning," an economist and former government budgetary officer said. [70]

The nature of Turkish media contributes to a general reluctance to investigate. While Turkey has a vibrant press and a number of national papers, there has been a tremendous consolidation of ownership to just a few companies. The Dogan Group, for example, owns not only well-known dailies like Hürriyet and Milliyet, but also Radikal, Posta, and the Turkish Daily News, among others. [71] Together, these capture perhaps 50 percent of total Turkish daily circulation. In addition, Dogan Group television stations like CNN Türk and Kanal D have perhaps a 20 percent market share. The problem is not that Dogan companies always tow the party line. Many Turkish journalists produce hard-hitting analysis. But a number of journalists complain of self-censorship. The same media barons who own a large portion of the press have branched into other sectors, where they are more dependent on government largesse. "Everyone is vulnerable — economically and politically — if they oppose the government," a businessman explained. The Dogan Group, for example, also owns banks and insurance companies, 4,000 gas stations, industrial plants, import-export companies, and hotels.[72] The investment is simply too great to risk government ire, especially given the example of Uzan.

CONCLUSIONS

If the AKP is able to translate money into power and power into money, then the main loser will be Turkish secularism. As an executive with one of Istanbul's largest firms said, "The AKP is like a cancer. You feel fine, but then one day you start coughing blood. By the time you realize there's a problem, it's too far-gone." [74]

NOTES:

Michael Rubin is Editor of the Middle East Quarterly and Resident Scholar at the American Enterprise Institute. He thanks Suzanne Gershowitz for her assistance with the research for this article.

The foregoing article by Michael Rubin was originally published in the Middle East Quarterly, Winter, 2005, and can be found on the Internet website maintained by the Middle East Forum.

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