Riyadh and Ankara are in talks over the potential deposit, a Saudi finance ministry official said, without providing further details. A Turkish finance ministry official confirmed that the two sides were discussing a deposit.
“The talks haven’t concluded but they are in the final stages,” he said. A pact with Saudi Arabia would cap months of efforts by Turkish president Recep Tayyip Erdoğan to repair relations with Crown Prince Mohammed bin Salman and expand commercial ties with the kingdom as the Turkish leader seeks new sources of foreign cash ahead of his re-election bid next year.
Turkey spent at least $17.9bn defending the lira between March and September, according to Goldman Sachs. The country’s attempts to prop up its currency come as its central bank has slashed interest rates this year despite scorching inflation.
Fresh funds from Riyadh could buy Ankara more financial breathing space at a time when it is also facing acute pressure from high energy prices. Ankara has already forged billions of dollars in currency swap deals in recent years with countries including Qatar, China, the United Arab Emirates and South Korea.
Funds were transferred this year by Russia’s state nuclear agency to Turkey for the building of an atomic power plant, providing a $5bn-$10bn boost to Turkey’s foreign exchange reserves, according to analyst estimates.
Turkey’s net foreign assets, a key proxy for its foreign currency reserves, registered at $11.5bn on Monday, down from a recent high of $14.1bn on November 16, according to calculations. The figures are flattered by $47.6bn in short-term borrowed funds from Turkish banks and $23.6bn from other central banks, according to Goldman estimates based on data from November 16.
A deal with Saudi would also indicate a warming of relations after the 2018 killing of Khashoggi, a columnist for the Washington Post and critic of Prince Mohammed, at the Saudi consulate in Istanbul set off a bitter feud between the two countries.
Erdoğan accused the “highest levels” of Saudi’s government of the murder, and Turkish officials leaked to the press grisly details of the killing in what was seen as an effort to embarrass the crown prince. But a long-running currency crisis has forced Erdoğan to mend relations with Riyadh and other powers in the Middle East, where he has sparred with Israel, Egypt and the UAE over Turkey’s assertive foreign policy.
An Istanbul court in April halted the trial in absentia of 26 Saudis in connection with Khashoggi’s killing. Erdoğan then travelled to Riyadh and later hosted Prince Mohammed in Ankara in what the Turkish president has described as a “new era” in relations with the Gulf state. In turn, Saudi Arabia began easing an unofficial embargo on Turkish exports it had established following Khashoggi’s murder.