Turkey holds out on releasing American pastor in talks

Turkish flag with Kemal Ataturk portrait. (Bloomberg pic)

WASHINGTON: A Turkish delegation refused to commit to releasing an American pastor detained in the country during a meeting with the State Department in Washington on Wednesday, as both sides sought a way out of an escalating feud, a US official said.

Turkey raised concerns about a state-run lender known as Halkbank that’s under investigation for its role in a scheme to evade a US embargo on Iran and faces the prospect of a large fine by the US Treasury, according to the official, who spoke on condition of anonymity.

The meetings came as Turkey seeks to stanch an economic meltdown amid fallout from US sanctions imposed on its NATO ally over the continued detention of the pastor, Andrew Brunson. US officials said they wouldn’t discuss relief for Halkbank, or one of its bankers currently in jail, until Brunson was freed, the official said.

The Turkish delegation was led by Deputy Foreign Minister Sedat Onal. After a 45-minute discussion at the State Department with Deputy Secretary John Sullivan, department spokeswoman Heather Nauert said in a statement that “the two discussed a range of bilateral matters, including Pastor Brunson.” She didn’t elaborate.

The visiting delegation then went to the Treasury for further discussions, according to a person familiar with the plans who asked not to be identified because the Treasury meeting wasn’t formally announced.

The sanctions target Turkey’s Minister of Justice Abdulhamit Gul and Minister of Interior Suleyman Soylu, who “played leading roles in the organizations responsible for the arrest and detention of Pastor Andrew Brunson,” the Treasury Department said in a statement. While limited in their direct effect, the penalties added to the winds already buffeting investors and sent markets reeling.

Turkey, which has accused Brunson of helping efforts behind the failed military coup in 2016, has retaliated with sanctions on two US officials.

Turkish President Recep Tayyip Erdogan accuses the US of trying to meddle in its judicial procedures and rejects suspicions Ankara is holding on to Brunson as a bargaining chip to win the extradition of two Turks: Fethullah Gulen, the Pennsylvania-based preacher it accuses of instigating the botched coup, and Mehmet Hakan Atilla, the convicted Halkbank executive.

The US isn’t considering handing over Gulen to Turkey, according to the official. In a dispute that began during the Obama administration, the US has maintained that Turkey has failed to provide sufficient evidence against Gulen for a judge to extradite him.

The diplomatic row has taken the lira’s losses this year to about 30% as shoppers confront soaring prices and companies struggle to service dollar and euro debts.

While investors focus on the Turkey-US talks in Washington for any signs of an easing of diplomatic tensions that added to the lira’s woes, there’s a growing sense that the root of the economy’s ills runs deeper. With double-digit inflation and a current-account deficit seen at 6.4% of output this year, investors say the currency may continue to slide unless policy makers commit to tighter monetary and fiscal policy.