Turkey's Long-Awaited Cabinet Without Babacan and Yildiz
In the shadow of the escalation of Turkey-Russia tensions yesterday, Turkish Prime Minister Ahmet Davutoglu has announced his cabinet, which includes some new faces as well as old, after a long delay.
The first notable exclusion in the cabinet is Ali Babacan, former deputy PM and a well known economist. He has been present in all cabinets of AKP governments since it came to power in 2002. For a short time period, he also worked as a foreign minister, then returned to his core duties in economy. He is replaced with his old comrade Mehmet Simsek, who is an ex-finance minister.
It's also interesting to see Taner Yildiz, who served as Minister of Energy and Natural Resources from 2009 to 2015, out of cabinet. An MP from Kayseri--an electrical engineer in profession--he has worked in all AKP governments. In his term, the privatization of the electricity grid and natural gas liberalization process was started, as well as the first nuclear plant project with Russia's OAO Rosatom.
Berat Albayrak, Turkish President Recep Tayyip Erdogan's son-in law, has been appointed to Minister of Energy in the new cabinet.
Berat Albayrak, as CEO of Calik Holding, is familiar with the energy business. Calik Enerji, a subsidiary of Calik, has interests in Georgia as well as Iraq, where it has shipped KRG (Kurdistan Regional Government) oil to Turkey.
An analyst, who spoke with Natural Gas Europe on the condition of anonymity, said that the energy business has difficult issues ahead to solve. "With huge debt burden, energy producer and distribution companies may face cash flow problems, even bankruptcies. The private energy sector [will] request a compromise from the new government, a supportive electricity tariffs or new incentives on tax," he said.
Economists gave mixed/balanced reviews about the composition of new AKP government at large.
"Had Babacan been retained, we expect some market participants would have begun to give the new government some benefit of the doubt. That hope is now likely on hold," said Michael Harris, a senior strategist at Renaissance Capital based in London, he wrote in a note to his clients. "It need not be too difficult for investors to look beyond Babacan if Simsek and his team demonstrate both their desire to affect positive reforms and their strength within the AKP."
"The AKP government will be exposed to greater oversight by President Recep Tayyip Erdogan, as he tightened his control over AKP recently, and the election victory can arguably be mostly attributed to him," said Durukal Gun, a EM strategist at Barclays Capital based in London.
"We can expect strong pro-growth policies from this new cabinet, and a push to lower average interest rates in the economy; bringing down inflation is unlikely to be the primary focus," said Tatha Goshe, an economist in Commerzbank based in London.
- Murat Tinas