President Donald Trump’s departure from long-established U.S. policy has exacerbated this uncertainty, forcing both governments and businesses to navigate an increasingly complex strategic environment.
The recently concluded NATO summit in Ankara reflected this new reality, demonstrating how geopolitical and defense imperatives can take precedence over other important political goals. Nowhere is this trade-off more evident than in the West’s relations with the summit’s host country.
Turkey has long been an underappreciated NATO ally and a vital economic bridge between Europe and the Middle East. Although its ties with NATO and the West have weakened in recent years, the country’s unique strategic position makes it indispensable to the alliance.
Located at the crossroads of Europe and Asia, Turkey occupies one of the world’s most important geopolitical junctions. Control over the Bosphorus, which connects the Black Sea to the Mediterranean, makes it the guardian of Russia’s main maritime route through warm waters to the rest of the world.
Turkey also borders Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Iran, Iraq, and Syria, and shares the Black Sea coast with Bulgaria, Georgia, Romania, Ukraine, and Russia. With a population of nearly 88 million and the second-largest armed forces in NATO, it is one of the leading regional powers. Economically, it has become one of the region’s leading manufacturing and logistics hubs.
Having remained neutral for most of World War II, Turkey firmly aligned itself with the West by joining NATO. It later became an associate member of the European Economic Community—the predecessor of the modern European Union—and eventually applied for full membership.
The accession process gained momentum after Recep Tayyip Erdoğan’s Justice and Development Party (AKP) led by Recep Tayyip Erdoğan won the 2002 elections, but negotiations dragged on for years and effectively stalled after 2017. The delay is largely due to the EU’s reluctance to move forward amid growing concerns about a drift away from democracy under Erdoğan’s rule.
Erdogan’s increasingly authoritarian rule has also strained relations with the United States, although Trump appears to be far less concerned about this than his predecessors. In 2019, the first Trump administration blocked the sale of U.S. F-35 fighter jets to Turkey after the country acquired the Russian S-400 air defense system, as U.S. officials feared that Turkey’s possession of both systems could provide Russia with valuable intelligence on the F-35.
The second Trump administration is taking a markedly different approach: it is pushing forward with plans to sell more than $700 million worth of jet engines for Turkey’s KAAN fighter jet program, while signaling a willingness to reconsider the sale of the F-35.
Turkey’s Foreign Policy and Economy
The acquisition of the S-400 became the embodiment of Turkey’s independent foreign policy and its willingness to maintain close ties with both the West and its main rivals.
As relations with the U.S. and the EU became increasingly strained, Erdogan continued to develop ties with Russian President Vladimir Putin, while simultaneously supplying drones to Ukraine. Most recently, Erdogan sharply criticized the war with Iran and, according to Trump, even considered the possibility of entering the conflict against Israel.
This strategic ambiguity, along with Erdogan’s unconventional economic views—primarily his repeated assertions that raising interest rates causes inflation—coincided with a marked deterioration in Turkey’s economic situation. Two decades ago, the country was considered one of the world’s most promising emerging markets, especially following the radical reforms implemented by former Economy Minister Kemal Derviş after the financial crisis of the late 1990s.
However, under Erdoğan, economic performance has been clearly uneven.
Overall, growth has been steady over the past two decades, driven by significant improvements in infrastructure as well as the rapid development of the defense industry and other manufacturing sectors.
However, this growth has been accompanied by recurring cycles of boom and bust, periods of very high inflation, and periodic macroeconomic instability. Although inflation fell sharply after peaking at 85% in 2022 thanks to the implementation of a major stabilization program, the economy continues to suffer from persistent problems, including exchange rate volatility and weakening exports.
The wars in Ukraine and Iran have been both a blessing and a burden for the Turkish economy. On the one hand, Turkey has benefited from the redirection of business from other regions of the Middle East and the growth in military equipment exports. On the other hand, disruptions in global energy markets and increased volatility in commodity prices have made it difficult to keep inflation in check.
Strategic Role
In the years leading up to this month’s NATO summit, the EU and other Western allies remained wary of Turkey due to Erdogan’s attacks on democratic institutions, his close ties with Putin, and his questionable economic policies.
However, as Turkey’s strategic importance has grown, many NATO allies have begun to focus more on cooperation in the areas of security and defense. The summit demonstrated this shift even more clearly: Trump was effusive in his praise of Erdogan, while European allies largely refrained from publicly criticizing the Turkish leader’s domestic policies.
These shifts underscore the recognition of Turkey’s strategic importance and its key economic role in a region that is becoming increasingly unstable.
But they also reflect the dilemma facing Western democracies: some of the countries most critical to transatlantic security are among those that have strayed the farthest from democratic norms. If too much pressure is applied, they may fall into the orbit of rivals such as China and Russia. If, on the other hand, the pressure is insufficient, the erosion of democratic institutions may accelerate, undermining both the values the West seeks to defend and its authority in upholding them.
Balancing these conflicting imperatives is extremely difficult, as EU and NATO leaders are discovering. However, doing so will be crucial not only for preserving the West’s authority but also for realizing Turkey’s full potential as a strategic ally and economic partner.
Anne O. Krueger,
former chief economist of the World Bank and former first deputy managing directorof the International Monetary Fund, is a senior fellow in international economics at the Johns Hopkins University School of Advanced International Studies and a senior fellow at the Center for International Development at Stanford University.
© Project Syndicate, 2026.
www.project-syndicate.org
