Turkish President Tayyip Erdogan sits during an interview with Reuters in Manhattan, New York, U.S., September 25, 2018. Picture taken September 25, 2018. REUTERS/Andrew Kelly
© Reuters

Recep Tayyip Erdogan, Turkey’s president, has alleged that a detained American pastor at the centre of a row between Ankara and Washington has “dark connections to a terrorist group” even as he said the countries were beginning to mend relations.

In a speech to mark the reopening of parliament after the summer recess, the Turkish president accused Donald Trump of using Andrew Brunson as an “excuse” for imposing sanctions and criticised the US for threatening Turkey.

Mr Erdogan said the two nations had “started to make progress” towards reaching a common understanding, but added that it was “not at the desired level.”

Bilateral relations deteriorated sharply in August when Mr Trump announced punitive measures against two Turkish ministers and doubled tariffs on Turkish steel and aluminium imports after the collapse of talks to free Mr Brunson.

Mr Brunson, an evangelical preacher, has been detained for almost two years on terrorism and espionage charges that he strongly denies. The dispute between the two Nato allies plunged Turkey into a currency crisis.

(FILES) In this file photo taken on July 25, 2018 US pastor Andrew Craig Brunson is escorted by Turkish plainclothes police officers to his house on in Izmir. The United States on August 1, 2018 hit two top Turkish officials with sanctions over the ongoing detention of an American pastor facing terror charges, heaping pressure on Ankara to release the prisoner fueling a bitter diplomatic feud.The move targeting Justice Minister Abdulhamit Gul and Interior Minister Suleyman Soylu further ratcheted up tensions between the NATO allies, and comes after President Recep Tayyip Erdogan insisted his government would not give in to Washington's threats.Andrew Brunson, who led a Protestant church in the Aegean city of Izmir, was placed under house arrest last week after nearly two years in jail on charges of espionage and supporting terror groups. He faces up to 35 years in jail if convicted. / AFP PHOTO / --/AFP/Getty Images
Andrew Brunson, an evangelical preacher, has been detained for almost two years © AFP

Mr Erdogan has repeatedly insisted he will not back down in the row and on Monday gave little indication that he had shifted that stance.

Mr Brunson is due to appear before a court in the western city of Izmir at the end of next week, a hearing that investors will be watching closely.

While the Turkish president voiced hope that the disagreements would be resolved “soon”, he warned it had been a mistake for the US to use “the language of threats and blackmail instead of dialogue”.

He also described a US probe into Halkbank, a Turkish state-owned lender, as “an unprecedented example of unlawfulness”. Ankara has previously asked Washington to drop a US Treasury investigation into the bank, which is accused of violating US sanctions on Iran, in exchange for releasing Mr Brunson.

The US, however, has told Turkey that it is no longer willing to do a deal for the preacher and that he must be released without preconditions. Mike Pompeo, the US secretary of state, said last week that Turkish officials “know the expectation” that Washington has of them.

Mr Erdogan said on Monday that he believed the US would correct its “wrong approach”.

After weeks of volatile swings, the Turkish lira has stabilised and slowly strengthened in response to last month’s sharp interest rate rise and the announcement of lower targets for economic growth, which some investors saw as a sign of realism from the government.

A resolution to the row with the US over Mr Brunson would be seen as crucial further step towards rebuilding confidence in Turkey and limiting the damage of a looming recession.

In his speech to parliament, the Turkish president said he believed the country had now emerged from the “hardest part of the crisis.”

Economists warn, however, that while the financial markets have stabilised, there is pain ahead for the real economy as recession bites.

New data released on Monday showed that manufacturing activity slumped to its lowest level in nine years in September. The purchasing managers’ index (PMI) compiled by IHS Markit and the Istanbul Chamber of Industry fell to 42.7, its sixth consecutive drop. Any figure below 50 signifies an overall decline in sentiment.

Analysts say that one benefit from the plunge in the currency, which has lost 36 per cent of its value against the dollar this year, is the rebalancing of the country’s trade deficit.

Statistics released on Monday showed that exports rose 23 per cent year-on-year in September while imports fell by 18 per cent.

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