(BURAK KARA/Getty Images)
Stratfor’s geopolitical guidance provides insight on what we’re watching out for in the week ahead.

President Recep Tayyip Erdogan’s gamble to retain political control of Istanbul has failed. On June 23, the Republican People’s Party’s (CHP) Ekrem Imamoglu soundly defeated former Prime Minister Binali Yildirim of Erdogan’s Justice and Development Party (AKP) in a rerun of the election to decide the Istanbul mayoralty. Imamoglu captured 54 percent of the vote, 9 percent more than Yildirim. The comfortable margin of more than 800,000 votes out of the 8.7 million cast in the election rerun dwarfed the 13,000-vote margin that separated the two candidates in the initial vote on March 31. Yildrim’s victory in that initial contest had led the AKP to browbeat the country’s electoral board into invalidating the election on the basis of vaguely defined electoral irregularities.

The Big Picture

Turkish President Recep Tayyip Erdogan’s ruling Justice and Development Party has lost Istanbul to the opposition Republican People’s Party — depriving the governing party of an important source of prestige and patronage. Beyond denting its image, however, the loss won’t likely sound the death knell for the AKP, which remains the country’s dominant political force. Nevertheless, the reverse could well initiate a round of soul-searching within the AKP — and ignite political and economic battles behind the scenes.

At the outset, Imamoglu’s victory is a testament to the strength of the Turkish democratic system. In the wake of the March 31 vote, the AKP opened itself to accusations of authoritarianism by forcing through a rerun based on what it said were unlawful appointments to some ballot box boards. By conceding the June 23 election as quickly as it did, the party has signaled that it is prepared to accept the vote instead of pushing for yet another poll to retain its hold on the city that is Turkey’s economic and cultural heart and a major source of funds for the AKP. After all, Erdogan — who once famously said democracy was a means to an end, rather than the end itself — could have found reasons to justify seeking another election until he secured his desired result, especially considering his philosophy that, as he once said, he who loses Istanbul loses Turkey. In refusing to dispute the clear victory by Imamoglu, Erdogan will improve Turkey’s image in the eyes of foreign partners like the European Union, which has chided the AKP for manipulating elections.

Imamoglu finds himself in a hole before he has even taken office — a fact that will complicate his efforts to fulfill campaign promises to economically rejuvenate the city.

Nevertheless, the AKP remains Turkey’s strongest political power, exerting influence in institutions and among all branches of government throughout the country. AKP-led institutions, including the presidency (which acquired sweeping powers when the country switched to an executive presidential system last year), can obstruct the work of Imamoglu’s administration if they wish. In short, the election hardly means that the fight for political control over Turkey is over; in fact, it could grow even more intense as the AKP fights to retain its domestic strength against the secular opposition and as the country confronts several pressing issues, including:

Debt and Municipal Finances

During the 17 days that Imamoglu occupied the mayor’s post between the March 31 elections and their cancellation ahead of the June 23 rerun, he glimpsed the severity of Istanbul’s debt: The city has a budget of 20 billion liras ($3.4 billion) but annual debts of 26 billion liras ($4.5 billion). In essence, Imamoglu finds himself in a hole before he has even taken office — a fact that will complicate his efforts to fulfill campaign promises to economically rejuvenate the city. The AKP-controlled national government could interfere in the municipality’s operations in other ways. In other municipalities in which opposition parties have taken control, the AKP has transferred ownership of municipal buildings, vehicles and administrative funds to other institutions. Only time will tell if Imamoglu is inheriting a mess that limits his ability to lead — and thus build his appeal.

The Broader Appeal of New Political Blood

Imamoglu’s appeal as an alternative to Erdogan reverberated well beyond Istanbul (it was even reported that some Turks from outside of Istanbul showed up to vote in the mayoral contest, only to learn the election was only for those who lived in Istanbul). His victory catapults him to the front of the race to challenge Erdogan in 2023, when Turkey will conduct presidential and general elections. The June 23 result, therefore, could prompt the AKP to moderate its policies to retain legitimacy and popularity as Turkish voters are showing a willingness to vote for opposition candidates, even in former AKP strongholds.

In recent years, the AKP has depicted itself as the sole guardian of Turkish stability, pursuing nationalist and pro-security policies as part of an alliance with the far-right Nationalist Movement Party (MHP). While the AKP is unlikely to abandon that rhetoric anytime soon — particularly as it continues military operations against Kurdish militants at home and abroad in Iraq and Syria — the election results could convince the party that it must shake up how it relates to the populace, perhaps by making overtures to groups such as the Kurds, who voted for Imamoglu en masse in a rebuke to the AKP-MHP alliance. Accordingly, the government could engage in more pragmatic outreach to Kurdish leaders, including imprisoned Kurdistan Workers’ Party leader Abdullah Ocalan, as well as the main legal Kurdish party in the country, the Peoples’ Democratic Party.

Managing the Overall Turkish Economy

One of the reasons Imamoglu’s campaign attracted broad appeal is Turkey’s fragile economy. Among other economic promises, Imamoglu promised to create 200,000 jobs for Istanbulites in the coming years (a more realistic promise than Yildirim’s pre-election promise of 500,000). Turks, who face significant inflation and a volatile currency, are hungry for economic stability, while foreign and domestic businesses are desperate for signs of regulatory continuity.

The Turkish lira rallied on the news of Imamoglu’s victory as foreign and domestic investors saw the electoral system work as intended. But there are bumps in the road ahead that will test the staying power of the rally. If the United States decides to move forward with sanctions linked to Turkey’s impending purchase of the Russian S-400 air defense missile system, it could deal a blow to the Turkish economy, which is rife with structural and systemic weaknesses. A key meeting this week will come between U.S. President Donald Trump and Erdogan on the sidelines of the Group of 20 summit in Japan. While Erdogan has expressed confidence that he and Trump can come to an agreement over the issue, U.S. congressional opinion is another matter.

The AKP has promised populist policies for years, while Imamoglu and the CHP have espoused a more pragmatic policy course. The national government is now caught between a rock and a hard place, as it must embark on painful structural economic reforms — even though the accompanying austerity measures could cause voters to abandon the AKP to the degree that the party’s loss on June 23 would pale in comparison to a potential reverse in 2023.

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