For well over a year, U.S. President Donald Trump has refused to issue sanctions under the Countering America’s Adversaries Through Sanctions Act (CAATSA), infuriating members of the U.S. Congress looking to punish Turkey for the S-400 purchase. But to force Trump to act, a provision was included in the National Defense Authorization Act (NDAA) to mandate sanctions on Turkey within 30 days of the law’s passage.

The bill passed the House of Representatives and later the Senate with large majorities that prevent a presidential veto. Trump, who has long been critical of the CAATSA’s provisions, had vowed to veto the NDAA over a failure to include measures removing legal protections for social media companies and the decision to rename several U.S. military bases.

The announcement that Washington was initiating sanctions on Turkey comes as European Union leaders move forward with new restrictions against an unspecified number of Turkish officials and entities involved in drilling activities in disputed waters in the Eastern Mediterranean.

Turkish President Recep Tayyip Erdogan described CAATSA sanctions as “disrespectful”, and said Turkey was a “top five NATO member” and not an “ordinary country”.

Aykan Erdemir, senior director of the Turkey Program at the Foundation for the Defense of Democracies (FDD) in Washington D.C., said the U.S. decision to issue sanctions was “a big deal”.

“It is extremely rare for the U.S. to sanction a NATO member state,” Erdemir said. He added that the last time the U.S. made such a move was 2018, when it sanctioned Turkish officials to secure the release of detained pastor Andrew Brunson, devastating the value of Turkey’s currency.

“Given the EU is about to widen sanctions for drilling in territorial waters claimed by EU member states, the Erdogan government appears to be on a crash course with over two-thirds of fellow NATO members.”

For the last year, analysts and policymakers have debated how far the U.S. should go in sanctioning Turkey. A range of competing arguments including the need to defend the credibility of U.S. sanctions regimes, avoid pushing Turkey closer to Russia, and how much damage should be inflicted on a fragile Turkish economy, were among the considerations that delayed any U.S. action beyond Trump’s personal refusal.

Under CAATSA, the president is provided twelve options for sanctions including export restrictions, sanctioning financial institutions holding or dealing in U.S. debt, visa refusals to sanctioned officials, and targeting transactions made in dollar or foreign currency taking place in U.S. jurisdictions.

Some of the measures allowed under CAATSA can severely harm the Turkish economy’s access to international markets at a time when it is struggling from high inflation, unemployment and COVID-19. However, it is unlikely the U.S. will choose this route and create an economic crisis for Turkey, which it still considers a strategic partner.

Instead, the U.S. has other targets in mind that can punish Turkey while showing that the teeth of its sanctions regime remain intact, with Turkey’s Presidency of Defense Industries and its head, Ismail Demir, likely to be in the crosshairs, according to Reuters.

If sanctioned under Section 231 of CAATSA, which prohibits transactions with the Russian defense sector, Demir could be added to the list of individuals banned from applying for export licenses or accessing the U.S. financial system, and with whom Americans are prohibited from doing business. This would, in effect, deter a variety of firms from working with Demir, or by extension the Turkish Defense Industries for fear of U.S. penalties.

Beyond Demir, limiting Turkey’s access to export licenses could impact the Turkish military’s supply chain, and constrain plans to grow the domestic defense sector. According to the Stockholm International Peace Research Institute (SIPRI), the U.S. remained Turkey’s largest military supplier in 2019. And restrictions on Turkey’s ability to export military equipment built with U.S. components have already been felt.

A $1.5 billion deal to provide Pakistan with Turkish-made T-129 attack helicopters has been cast into doubt after Turkey failed to acquire export licenses for their T-800-4A engine built by a joint U.S.-British venture. Islamabad has since given Ankara another year to provide the helicopters, but the set-back is a significant blow to Turkey’s reputation as a burgeoning defense exporter.

The U.S. has also already removed Turkey from the next-generation F-35 fighter jet program. Turkish officials in the defense industry dispute the impact of the move, but one U.S. source speaking to Defense News estimated the damage at $10 billion minus indirect costs. Expanded restrictions under CAATSA may worsen this situation.

The sanctions when they arrive will coincide with the transition from the Trump presidency to a new administration under Joe Biden, who many expect to act more forcefully against Turkey. However, there are signals that Biden may pursue a more careful approach to sanctions that looks to calibrate how hard they hit Ankara.

Michael Carpenter, a foreign policy advisor to Biden, said last month that the goal of sanctions should not be “pushing Turkey into a corner” and a way out to correct the issue needed to be included. Antony Blinken, Biden’s nominee for Secretary of State, told the Hudson Institute over the summer that Biden will engage with Erdogan from the start and seek to work through issues together.

In his remarks after potential U.S. sanctions against Demir were first reported, Erdogan said that he knew Biden “well” and would wait until the new president enters office to see how U.S. policy changes.

The U.S.’ European allies have also made clear that they will wait for Biden before deciding on harsher sanctions against Turkey, including the arms embargoes sought by some member states. It will then be up to the new U.S. president to balance competing impulses towards punishment and diplomacy in relation to Turkey.

But if Biden and the EU do choose to pursue a tougher line, the resulting consequences for the Turkish economy could see Erdogan double down on his already prevalent antipathy towards his Western allies and reduce the avenues for reconciliation.

The FDD’s Erdemir warned that, given the electoral pressures Erdogan is now facing at home, this path could lead to more confrontation going into the next year.

“Turkey is likely to remain on its crash course with the U.S and EU, and it wouldn’t be surprising to see further sanctions in 2021,” he said.

Ahval

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