Escalating sanctions could cripple Turkey’s economy

Source:Financial Times Date:07Aug2018

To predict how Turkey would fare, we should look to the experience of the Russian economy after Russia annexed Crimea in March 2014. At the time, its economic growth was near its potential, it had low debt levels and the central bank held net foreign exchange reserves of $470bn. But the “biting” EU and US sanctions introduced after the invasion triggered a currency crisis, followed by a two-year recession. Russian institutions were cut off from international capital markets and unable to roll over their debt. Demand for forex soared. The crisis combined with falling oil prices to force a 50 per cent devaluation in the rouble against the dollar.