New travel restrictions between U.S. and Turkey send lira tumbling

A simmering diplomatic spat between the U.S. and Turkey has now boiled over, hampering travel between the two countries and the market value of Turkey’s lira.

The U.S. embassy in Ankara on Sunday evening announced that it is halting issuance of all non-immigrant visas in Turkey following the arrest last week of an embassy worker for allegedly conspiring in a July 2016 coup against Turkish President Tayyip Erdogan. Turkey’s embassy in Washington then retaliated by suspending visas for Americans planning to visit that country.

In Monday’s currency trading, the dollar rallied as much as 7 percent versus the lira. It recently pared those gains, but still traded up a solid 3 percent compared to Friday’s session. One dollar recently fetched 3.73 lira.

The visa controversy is the latest instance of steadily declining relations between Turkey, a NATO member state, and its Western allies under Erdogan. He assumed power in 2014 and has since steered his country toward dictatorship.

Other troubling events over that timeframe:

• In May 2014, members of Erdogan’s security detail scuffled violently with protesters in Washington during a presidential visit to the U.S.
• Shortly after the anti-Erdogan coup attempt in July 2016, his regime requested extradition of a U.S.-based cleric, Fethullah Gulen, that it said helped plan the uprising. The U.S. has refused to extradite Gulen, however, citing a lack of evidence against him.
• In September, U.S. prosecutors charged a former Turkish government minister and a prominent banker with conspiring to move hundreds of millions of dollars of Iranian money through the U.S. financial system, in violation of American sanctions against Iran.
• The Erdogan regime says the embassy employee it arrested last week, a Turkish national, is in cahoots with Gulen. The embassy has called the allegations “baseless.” Turkey issued an arrest warrant for a second U.S. embassy employee on Monday.

In other words, this is a mess of a situation that obviously won’t resolve itself anytime soon, and the specter of increased conflict between Turkey longtime allies such as the U.S. appears to be giving investors some agita.