A street vendor makes soap bubbles at Istiklal avenue on July 26, 2018 during in Istanbul. / AFP / OZAN KOSE
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Erdogan knows where his economy, heavily reliant on foreign financing, is most vulnerable.Enraged by Turkey's detention of an American pastor on terrorism and espionage charges, the U.S. president imposed sanctions Wednesday on two of Erdogan's Cabinet ministers. Turkey responded Saturday by freezing the assets of two U.S. Cabinet secretaries.The lira had plunged more than 20 percent even before Trump's sanctions.The U.S. could follow the pattern it applied in Russia, and blacklist "major industrialists who are supporting Erdogan,'' according to Richard Nephew, an expert on energy sanctions at Columbia University in New York.The U.S. equivalent is the Department of Homeland Security.In the same speech, he urged the U.S. not to lets its political issues infect the economy. A few hours earlier, U.S. Secretary of State Michael Pompeo had said he's hopeful that Turkey will release Brunson in the coming days.Sanctions imposed by the U.S. last week were at the mild end of the spectrum – but still, in the market's view, "a critical threshold was passed'.' And even if there's no further diplomatic deterioration, the lira's current level and the balance-sheet problems it creates could keep investors away.
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