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Turkish banks unwilling to repay Erdogan loan: Report | Banking Issues


Some major banks in Turkey are reluctant to lend money to President Recep Tayyip Erdogan Istanbul canal As a result of the environmental crisis and the financial risks imposed on the construction project, four major girls told Reuters news agency.

Two of the sources said the international agreement signed by Turkey’s top seven banks was a barrier to financing Canal Istanbul, which Erdogan called a “crazy operation” when it was run a decade ago.

The government hopes to clear the ground in June of the canal, which will connect the Black Sea to the north and Lake Marmara to the south and which will be 45km (28 miles) across swamps, farms and towns west of the city.

Erdogan says the canal will protect the Bosphorus River, which flows through Istanbul, by converting large numbers of people.

However, the mayor of Istanbul, engineers – and, according to one study, a number of citizens – are opposed to the project on the grounds that it could harm the marine environment and resources that supply about one third of the city’s water supply.

Russia, meanwhile, has expressed concern over the operation in a safe haven because it could open up a second base to the Black Sea, home to the Russian military.

“I do not think we can take part in helping Kanal Istanbul,” said a bank official who asked not to be named. It can lead to other environmental problems. ”

Six Turkish banks, including Garanti Bank, Is Bank and Yapi Kredi, have signed the United Nations Principles for Responsible Banking, which encourages signatories to protect the public and the world.

“Obviously we do not want to lease such a project due to environmental constraints,” a second banker told Reuters, adding that signatory banks should adhere to the UN-backed agreement.

In 2019, the price of the canal is estimated at 75 lira – or $ 13bn at the time – in a government report.

‘Rewarding work’

The skepticism of other Turkish lenders to support the project makes foreign and foreign investment a major factor in the fulfillment of Erdogan’s dream.

A spokesman for the Ministry of Finance did not immediately respond to a request for comment.

Asked if Turkish banks would be involved in finance, Erdogan’s spokesman and adviser Ibrahim Kalin told Reuters that the move would “attract” investors and creditors in the near future.

The Guarantee Bank declined to comment. Bank and Yapi Kredi did not immediately respond to a request for comment.

DenizBank and state-run VakifBank also declined to comment on the channel’s finances, while Akbank and Halkbank and Ziraat Bank government officials did not immediately respond to a request for comment.

The cost of the canal will undermine other projects such as the new Istanbul airport that has defined Erdogan’s debt-related legacy.

A sign that reads ‘Where’s $ 128 billion?’ – referring to the money that Turkish state-owned banks sell to support their lira currency in foreign markets – hangs at the Beyoglu office in the Republican People’s Party (CHP) in Istanbul, Turkey [File: Dilara Senkaya/Reuters]

A short-term foreign debt of $ 150bn in banks and companies has set up a lira and highlighted the dangers of foreign exchange losses in Turkey.

The financial crisis in 2018 delayed the process but came back to haunt the economy as the coronavirus resumed and the government approved development plans last month.

In a response to Sunday, Kalin, Erdogan’s adviser said there was already interest in payments that would be available to all including companies in Turkey, Europe, America and China.

“It’s a rewarding career … and we hope it goes ahead,” he told Reuters news agency.

‘White elephant’

But for many Turkish banks, especially lenders that support Europe and those involved in the credit union, the risks could be huge, sources say.

He said doing such a large project would reduce their chances of getting into debt again, as there was a risk that the project could be disrupted later.

“No Turkish bank, or government or government, can put such a risk in place,” said one former bank official.

A bar worker collects chairs before closing, on the last day of restaurants and bars, in Istanbul, Turkey [File: Dilara Senkaya/Reuters]

Turkey’s Ministry of Natural Resources has conducted an environmental assessment that allowed the project to take place.

But European allies at Turkish banks may not see Turkey’s natural credentials as credible, the former banker said.

“This is one of the white elephants. “With the exception of land prices, it is difficult to see any benefits,” he said.

Canals can damage marine ecosystems and basins that supply about one-third of Istanbul’s freshwater, according to the Union of Chambers of Turkish Engineers and Architects.

Moscow worries that the canal will not be mentioned by the Montreux Convention which prohibits access to foreign wars in the Black Sea via the Bosphorus Strait.

A Turkish official said in 2019 that the new canal would not be covered by the convention, which began in 1936.

This month, during the construction of the Russian army near Ukraine, the Kremlin said President Vladimir Putin had told Erdogan to call for the summit to take place.

The fourth banker also said that because opposition parties opposed the project, construction could be halted if the Erdogan Justice and Development Party (AK Party) was removed. Presidential elections are scheduled for 2023.

“The scale of the project is enormous. It has significant risks and credit risk, ”he said. “It still looks like a state-owned pet business.”


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