The connection between Russian sanctions and bizarre Turkish monetary policy

are moving away from Russia, but one is getting closer: Turkey. Russian tourists and émigrés are pouring into Istanbul and the country’s coastal resorts, snapping up properties by the thousand. Russia is helping to fund a nuclear plant costing $20bn in Akkuyu, in the south. While many countries have cut exports to Russia since its invasion of Ukraine, Turkey’s have surged by 60% in dollar terms. Western firms, constrained by sanctions, appear to be using Turkey as a go-between to export to Russia.Turkey’s bizarre monetary policy is one reason why the country is so keen on Russian cash. Despite inflation soaring to 80%, on August 18th Turkey’s central bank cut its interest rate from 14% to 13%—the opposite response to what any sane economist would recommend. Recep Tayyip Erdogan, Turkey’s president, wants lower borrowing costs in order to goose the economy, and thus improve his chances at the election next summer. But loose monetary policy has caused the lira to slide. It has lost three-quarters of its value against the dollar since 2018, and a weaker currency adds to Turkey’s inflation difficulties by raising the cost of imports still higher.