Please find today’s article for publication from Oilprice.com below. It’s an interesting look at Egypt and Turkey’s plans to begin prospecting for oil and gas reserves in the Mediterranean.

What a difference fifteen months makes.

In May 2010 Israel’s cold peace with Egypt was viable, the country was celebrating massive Mediterranean natural gas finds and Tel Aviv enjoyed a military alliance with Turkey, an overwhelmingly Muslim nation.

Two events have changed that picture beyond all recognition – Israel’s 31 May 2010 attack on the peaceful Gaza-bound “Freedom flotilla,” during which Israeli Shayetet 13 Naval Special Forces commandos killed eight Turkish citizens and an American, Furkan Dogan. Outraged by the assault, Turkish Prime Minister Recep Tayyip Erdogan demanded an apology and compensation for the unprovoked attack.

He’s still waiting.

The second regional game changer has been the startling events of the “Arab Spring,” which following unprecedented massive public demonstrations, on 11 February led to the resignation …

Next month the third international annual congress of Wind Power Turkey of the Turkish Wind Energy Association will be held in Istanbul

European Wind Energy Association chief executive officer Christian Kjaer said, “Turkey could be among the top three producers of wind energy” and “has a predictable and attractive market for wind energy investors,” Hurriyet newspaper reported.

Turkey’s installed wind capacity tripled during 2007 from 50 megawatts to almost 150 megawatts. It tripled again during 2008 to reach 433 installed megawatts and by the end of 2009 it had almost doubled to 801 megawatts. At the same time, the Turkish government announced a 30 percent objective for renewable energies by 2023 with plans to push wind energy up to 20,000 megawatts of installations for the same year.

Kjaer noted, “With an average growth in power demand of 8 percent each year, …

Woe is the EM central banker; as RBI’s Dr. Subir Gokarn pointed out in Wednesday’s FT, for instance, the delicate balance between “keep[ing] inflation in check by containing the potential spillovers from food and energy prices, while minimising deviations from a sustainable growth trend” has rarely been so harrowing.  For the Central Bank of Turkey (CBT), the foundations underpinning 8.4% annualized real growth last year have paradoxically also pressured a rapidly ballooning current account deficit (roughly -48.6bn USD in 2010 versus -14.0bn in 2009) as Q4 private sector credit extension surged (41% y/y) and has remained above 40% in the first two months of 2011–well above the government’s 20-25% y/y guidance and despite reserve requirement increases.  This ‘monetary normalization lite’ underscores the degree to which lira depreciation remains the Bank’s primary tool (rather than rate hikes which invite capital flows, not to mention political scorn in an election year) to reverse the CA deficit bulge, since the alternative would

Awhile back we mentioned that one key indicator to watch in Turkey going forward was its current account deficit (CAD)/GDP ratio, which as the FT noted today in regards to Turkey’s suddenly diverging 5yr-CDS spread with Russia (with whom it had been treading in parity) is largely a function of its reliance on imported energy despite the obvious proximity advantages which shave roughly US$2-4/bbl off the spot rate.  Primarily, Turkey’s CAD should be monitored if for no other reason than the fragility of its foundation: analysts noted last December that “FDI coverage of CAD is less than 14% (12 months rolling), while portfolio flows into local bonds and equity together with rising non-resident lira (TRY) deposits make up over 70%.”  With this in mind the current spike in oil prices is particularly troublesome for Turkey’s economy, especially when coupled with the central bank’s (CBT) apparent

This post is a guest contribution by Tevfik Aksoy & James Lord of Morgan Stanley.

Rate Cut Threat Still on the Table

The main reason for expecting further short-term weakness in TRY is the threat of a further rate cut from the CBT in the coming months. The CBT made it clear in its latest Inflation Report that the future policy mix will continue to involve low interest rates combined with higher reserve requirement ratios (RRR). This dual approach is designed to help meet multiple policy objectives, including a weaker currency, slowing credit growth and a narrower current account deficit. Accordingly, we expect a further cut in the policy rate at the next meeting in February (see New Approach to Monetary Policy: Will Creativity Be Rewarded? January 26, 2011,

Turkey bulls such as myself have some pretty concrete indicators to watch going forward: while long-term the outlook remains positive–despite the fact that near-term fiscal discipline remains somewhat lax in the face of impending elections in mid-2011–Barclays Capital recently noted that AKK’s popularity (not to mention the increasingly probability of a ratings upgrade from Fitch) should reinforce discipline: “the government has been able to issue debt at nominal interest rates significantly below nominal GDP growth, which is likely to lower the government’s interest bill in the years to come.  If the government manages to move the deficit to 3% by 2012, we estimate the debt ratio falls well below 40%–a safety threshold often used for EM countries,” analysts wrote this month.  So one pertinent measure to track is gross public debt as a percentage of output, which currently sits at 42.5% projected down from 45.5% in 2009.  To this end, it’s importance

Turkey’s stock market has been one of the strongest performers among emerging economies this year as the country bounces back from a recession. The country has even been praised as “Europe’s Bric” by the British prime minister. In the video clip, Tevfik Aksoy, a senior economist at Morgan Stanley, talks to Barney Jopson about Turkey’s prospects.

Click here or on the image below to view the video.

Source: Financial Times, December 8, 2010.

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It’s hard not to be bullish on Turkey given its favorable demographic pyramid, manufacturing prowess and strategic location vis a vis the world’s proven gas and oil reserves–all against the backdrop of projections that over the next seven years its growth will match or exceed that of any other big country except China and India.  That said, as Barclays Capital notes “the comparison with Asian economic performance does not go much beyond recent headline growth” considering the country’s low savings rate and rapidly widening current account deficit.  The most recent data, in fact, points to “export growth slowing with imports continuing to boom”, which The Economist noted last month is “worrying because it suggests that competitiveness is steadily eroding.”  The solution?  In part, increase domestic savings while moving [exports] up-market and continuing to diversify trade away from the EU and towards MENA.  Per the latter issue, “in 1990 only 15% of Turkey’s exports

The World Gold Council’s (WGC) latest quarterly recap shows global gold demand is getting stronger despite rising gold prices. Gold rose 28 percent to record the highest average price for a quarter ever at $1,226.75 an ounce while gold demand jumped 12 percent on a year-over-year basis to 921.8 tons during the quarter.

Jewelry demand, which increased 8 percent on a year-over-year basis, accounted for 57 percent of overall demand, while investment demand rose 19 percent to account for 31 percent of total demand.

It appears consumers and investors, especially in India, China, Russia and Turkey, are growing accustomed to higher gold prices. At the end of the third quarter, gold demand in India had already exceeded that of 2009 and demand levels in China are ahead of last year’s pace.

The WGC says “these results demonstrate that consumers in these countries

Well-known author and investment consultant Roger Gibson recently hosted a webcast where he educated investors on the importance of diversifying into international markets and we believe it is an opportune time to explore new areas with your portfolio.

Global investment guru Nicholas Vardy says “there’s always a bull market somewhere” and it’s up to investors to find it. We think there’s a bull market emerging in Eastern Europe.

Russia may be the first country that comes to mind when you think of Eastern Europe, but it’s the other countries of Emerging Europe, countries such as Poland, the Czech Republic and Turkey, that have outperformed.

While the S&P 500 Index was only up 3.89 percent as of September 30, Turkey had risen nearly 31 percent, extending a large lead on other Emerging Europe countries. The Czech Republic (up 8.19 percent) and Poland (up 11.16 percent) have also outperformed most emerging markets. Meanwhile, Russian markets