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MOSCOW — Gas pipes worth 1.8 billion euros ($1.95 billion) are to be left stranded on the shores of the Black Sea after Russia's decision to suspend work on the Turkish Stream pipeline, a potent symbol of Moscow's falling out with Ankara.

Russia has set out to punish Turkey after it shot down a Russian warplane in Syria last week, imposing trade sanctions and releasing data it claims proves Turkish President Recep Tayyip Erdogan is involved in illegal oil deals with Daesh.

Russian Energy Minister Alexander Novak told reporters on Thursday work on Turkish Stream, a pipeline intended to pump Russian gas into southeastern Europe via Turkey while bypassing Ukraine, had been suspended.

Shortly afterwards, the head of Italian oil major Eni, slated as one of the main buyers for the pipeline's gas, said the project was dead in the water.

The decision leaves Russian energy giant Gazprom  with kilometres of pipes only useable in the Black Sea.

It ordered pipes from as far afield as Japan and Germany for the 2,400-kilometre South Stream pipeline, originally slated to open in 2018, which were then reassigned to Turkish Stream after the project was axed.

Industry sources said the pipes can only be used for projects in the Black Sea because of their specialised construction. Gazprom will now be forced to put the pipes in storage until tensions between Moscow and Turkey subside.

"These pipes were calibrated for a specific environment, pressure and capacity," said one source in the pipe-making industry. "Accordingly, they are only suitable for underwater pipelines in the Black Sea."

Gazprom was not available for comment.

Aborted predecessor

Although freezing work on Turkish Stream is largely symbolic, it has long been beset by delays and doubts over its viability, the financial implications for Gazprom are very real.

Sberbank analyst Valery Nesterov said Gazprom has spent between $12-14 billion on Turkish Stream and its aborted predecessor South Stream, which was abandoned last year in the face of European Union (EU) opposition and heightened tensions over the Ukraine crisis.

Questions have also been raised over the planned Nord Stream pipeline to Germany after a group of 10 European governments published a letter saying the project ran counter to EU interests and risked destabilising Ukraine.

"Again, the company is rapidly building a pipeline which might not be needed," said Nesterov.

Russia is one of the world's largest steel pipe producers, second only to China, and has the capacity to turn out more than 3 million tonnes of the large-diameter pipes typically used in major energy projects every year.

Russia's largest pipe maker, TMK, said Turkish Stream could be revived in the future.

"Turkish stream, as a project, is not completely finished," said TMK Vice-President Vladimir Shmatovich. "Maybe in a year or two, when the tension decreases, it will be realised. But the pipes could lie on the ground for 50 years."

Separately, Turkey's leaders have mounted a charm offensive among regional energy producers in an effort to diversify supplies as relations with major natural gas provider Russia crumble.

President Erdogan and Prime Minister Ahmet Davutoglu have travelled to key energy partners Qatar and Azerbaijan respectively this week in an effort to avert any economically damaging disruption in energy supplies as winter sets in.

Putin described the downing of the warplane as a war crime on Thursday and said the Kremlin would punish Ankara with additional sanctions. Russia has already banned some Turkish food imports and left trucks carrying Turkish exports stranded at its borders.

But Russia could deal a real blow by reducing gas supplies, a move broadly seen by analysts and Turkish officials as unlikely for now but which could seriously hurt the Turkish economy and for which Ankara is drawing up contingency plans.

"There is indeed a crisis right now... We are exploring how we can offset this," a Turkish energy official said. "Davutoglu and Erdogan have personally taken the initiative to make sure Turkey doesn't experience a problem in terms of energy supplies."

Ankara buys nearly 60 per cent of its total gas needs, around 27 billion cubic metres (bcm), from Russia via two main pipelines, which enter Turkey through the Marmara region, the country's industrial hub which includes Istanbul, its biggest city, and the most sensitive area to any disruption in supply.

"The Marmara region buys almost all of its gas from Russia and this region makes up 40 per cent of Turkey's gross domestic product as well as its energy consumption," indicated FACTS Global Energy consultant Cuneyt Kazokoglu.

"If Russia cuts gas, it would effectively be shutting down the Marmara region and that would seriously hurt Turkey," he said, adding he did not expect Moscow to take such a step as it would break a "contractual obligation".

Not enough LNG capacity

Buying gas from Turkmenistan and boosting supplies from Iran, already Turkey's second largest supplier, are among the options being considered, energy officials said. Bringing supplies from northern Iraq is another possibility.

Davutoglu visited Azerbaijan on Thursday with the aim of increasing gas imports through the Trans-Anatolian Pipeline (TANAP), a key project due to bring 16 billion cubic meters of gas to Europe. Around 6bcm of that is destined for Turkey.

Speaking in Baku, Davutoglu said Turkey and Azerbaijan had agreed to complete the project before the original target date of mid-2018.

Earlier this week, Erdogan visited Qatar to explore the possibility of buying more liquefied natural gas (LNG) cargoes from its Gulf Arab ally.

But Turkey's insufficient storage capacity and the heavy dependence of its business on regular natural gas mean any boost in LNG imports would only partially make up for lost Russian gas, according to Turkish think-tank TEPAV.

"The most important element of establishing supply security in countries which have a high dependence on natural gas imports is to have a storage capacity equivalent to 20 to 30 per cent of consumption. In Turkey, that is 6 per cent," TEPAV researcher Aysegul Aytac wrote in a recent note.

Nearly half of Turkey's power generation is sourced from natural gas, leaving households and industry vulnerable to any disruption, she said.

"The insufficiency of using alternative products in both industry and power generation as well as the inflexibility of households to use anything other than gas mean problems could be inevitable in the medium term," she added.

LONDON — The outlook for the global economy next year is darkening, with a US recession and China becoming the first major emerging market to slash interest rates to zero both potential scenarios, according to Citi.

As the US economy enters its seventh year of expansion following the 2008-09 crisis, the probability of recession will reach 65 per cent, Citi's rates strategists wrote in their 2016 outlook published late on Tuesday. A rapid flattening of the bond yield curve towards inversion would be an key warning sign.

"The cumulative probability of US recession reaches 65 per cent next year," Citi's rates strategists indicated. "Curve inversion will likely come more quickly than the consensus thinks."

Normally, short-dated yields such as two-year yields are lower than longer-dated ones like 10-year yields, as investors demand a premium for taking on risk several years into the future. The curve has inverted before each of the last five US recessions since the mid-1970s.

In China, deflationary pressures and downside risks to growth will force Beijing to loosen fiscal policy, let the yuan depreciate and perhaps become the first major emerging market economy to cut interest rates to zero, Citi said.

Separately, a study commissioned and paid for by US automaker General Motors (GM), said that despite numerous pledges and years of effort to transform Southeast Asia into a single market, the 10-nation region remains resistant to free-flowing trade and fortified against imports, to the cost of some global companies, 

The study for one of the region's biggest investors highlights a lack of progress by the Association of Southeast Asian Nations (ASEAN) to harmonise trade and investment rules, leaving the autos industry with little to show for a decade of trade liberalisation.

In the study, consultancy Oxford Economics found that tariffs in ASEAN on imported goods such as cars generally have fallen "dramatically", but this is undermined by industrial policies that promote some products, through tax and other incentives, but require them to have high levels of locally made components that put imported goods at a competitive disadvantage.

Policies like Indonesia's "low-cost green cars" (LCGC) and one in Thailand dubbed Eco2 neutralise the positive impact of lower tariffs, says GM.

"South Korea is GM's major manufacturing hub. There is a free trade agreement between Korea and ASEAN and we would like this to operate as a free trade agreement and as effectively as possible," Matt Hobbs, vice president in charge of government relations and public policy for GM International, told Reuters.

Under current conditions, GM cannot deploy vehicles made in Korea to be sold competitively in ASEAN countries, he said.

Single market

ASEAN formally established an ASEAN Economic Community (AEC) at its annual summit last month, aiming to create a single market with few barriers to the flow of trade, capital and professional labour in an area of 625 million people.

"In practice, we have virtually eliminated tariff barriers between us," said Malaysian Prime Minister Najib Razak, the summit host. "Now we have to assure freer movements and removal of barriers that hinder growth and investment."

Twelve years in the making, Najib indicated that it will take another 10 years to put into effect all the measures of the AEC, which comes into being on December 31. Politically sensitive sectors such as agriculture, auto production and steel will remain protected during that period.

An integrated ASEAN economy is meant to compete with China, India and Japan — ASEAN's combined gross domestic product (GDP) of $2.6 trillion would make it the world's seventh largest economy — but endemic corruption, poor governance and a lack of transparency in some members pose formidable obstacles to full integration.

Drag on growth

For GM, being able to use existing capacity in South Korea, a major export hub for the company, is critical to its bottom line, especially as it restructures its business in southeast Asia. As part of that process, GM has stopped producing GM-branded cars in Indonesia and is scaling down its Thai plant.

Without significant export markets, like southeast Asia, GM Korea will find it tougher to be profitable and may need to make permanent capacity cuts, analysts say. Not so long ago, Korea was producing close to a fifth of GM's global output, but labour costs have risen by nearly half in five years, pushing it into a high-cost bracket along with Japan.

According to the GM-commissioned study, non-tariff measures have gained momentum in ASEAN since the global financial crisis. The study counted 190 additional non-tariff measures implemented in 2009-13, with 75 such measures in Indonesia, 39 in Vietnam, 27 in Thailand, and 16 in Malaysia.

These are a drag on the region's economic growth, and cost jobs, the study said, adding that if all these measures were removed, GDP in the bloc's five biggest economies would grow by an extra 0.5 percentage point in 2025, resulting in more than half a million new jobs.

For GM, policies such as LCGC and Eco2 make a car like the Chevrolet Spark less competitive. The specifications for the Korean-built subcompact model are similar to those required to qualify for the Indonesian and Thai programmes.

But in Thailand, the Spark carries an 80 per cent duty as there is no coverage under the 2007 ASEAN-South Korea free trade agreement. Also, the Spark would not qualify for the lower tax and other Eco2 benefits because it doesn't meet local content requirements. 

The cost of manufacturing an imported Spark would be "thousands of dollars" more than an average Eco2-qualified car made in Thailand, a GM spokesman indicated.

GM's Hobbs reckons ASEAN could be the world's sixth-largest car market by volume by 2018 — if it operates as a true single market.

"If you add all the [ASEAN] countries together and they could function as a single, unified region, then that would make [ASEAN] even more competitive as a production base for the rest of the world," he added.

AMMAN — The Amman Chamber of Commerce (ACC) issued 47,699 certificates of origin carrying a total value of JD1.1 billion during the first 11 months of 2015.

Iraq accounted for the highest share in terms of the value that amounted to JD322 million (2,248 certificates), followed by the United Arab Emirates with JD243 million (9,818 certificates) and JD96 million for Saudi Arabia with 9,063 certificates.

In terms of the type of certificates, re-exported items topped the list amounting to JD612 million through 6,606 certificates, followed by agricultural products with JD213 million (38,105 certificates), industrial items with JD146 million (723 certificates) and Arab products with JD58 million through 740 certificates.

ERBIL, Iraq — Iraq's autonomous Kurdish region said Tuesday it has made more than $3.29 billion in revenues since June from direct oil export sales that the country's federal government considers illegal.

Baghdad, which announced a rise in exports on Tuesday, insists all oil sales must go through the federal government, while the three-province region argues that lacking federal funding justifies independent action.

Both sides are facing financial crises due to low oil prices and the costly war against militants, which overran large parts of Iraq in 2014.

Iraqi Kurdistan indicated in a report that it averaged $682 million per month in revenue from direct sales from June through mid-November, up from an average of $347 million it had received from Baghdad in earlier months.

The federal oil ministry meanwhile announced Tuesday that it exported an average of 3.36 million barrels per day (bpd) in November, a level "not realised for decades".

But the increase in exports appeared to be at least partially due to reserves of oil not exported in October due to bad weather at the southern port of Basra, and was also dampened by a price per barrel of $36.

Baghdad and Kurdistan reached a deal on oil exports and funds at the end of 2014, under which the region was to export 250,000bpd and another 300,000bpd from the disputed province of Kirkuk.

In exchange, the federal government would release the region's share of the national budget.

Kurdistan says its exports were initially lower than expected but later surpassed the required level, while an oil ministry official said this was not the case.

The region said it began direct export sales in June "due to shortfalls caused by the Iraqi federal government in sending less than 40 per cent of [its] budget entitlement", but the oil ministry official noted that the practice started long before that.

"Any amounts leaving Iraq without the approval of the federal government and the oil ministry is considered smuggling," the official said, restating Baghdad's long-held stance.

A swathe of northern territory claimed by both Baghdad and Kurdistan, including oil-rich Kirkuk, ties in with the dispute between the two sides over resources.

Kurdish forces gained or solidified control over many disputed areas, including large parts of Kirkuk, after federal troops fled the militants' June 2014 offensive.

Baghdad is currently ill-positioned to force either the territory or oil issues, with its troops tied down battling the militants and Kurdish forces, which have strong international backing, also playing a major role in the fight.

AMMAN — Jordan Chamber of Commerce (JCC) President Nael Kabariti on Tuesday called for enhancing the Kingdom's commercial and investment cooperation with Brazil and Georgia, and increasing relations among their private sectors' institutions.

Kabariti made these remarks at two separate meetings with Brazilian and Georgian ambassadors to the Kingdom Francisco Carlos Soares Luz and Grigori Tabatadaze respectively.

At the meeting with the Brazilian diplomat, the JCC president stressed the importance of increasing relations between both countries' private sector representatives.

He also referred to a planned visit by a Jordanian economic delegation to Brazil soon, so as to launch new scopes of commercial relations, increase the commercial exchange volume and encourage the private sector to establish joint investment projects.

Luz said the Brazilian foreign minister is currently preparing to visit the Kingdom with a high-profile delegation, stressing the significance of exchanging commercial delegations.

He also called for benefiting from entrepreneur sectors to invest in his country, and boosting cooperation in the pharmaceutical, transport and food sectors. 

At the meeting with Tabatadaze, Kabariti commended the Jordanian-Georgian ties at different sectors, describing these relations as a solid base to enhancing economic cooperation and increasing the commercial exchange.

Tabatadaze noted that the Georgian chamber of commerce and industry is willing to sign a memorandum of understanding with the JCC to develop the commercial exchange between the two countries and exchanging information on economic sectors, in addition to cooperating in technical fields to support small- and medium-sized enterprises. 

MOSCOW — Russian oil firms are drilling more, showing the world's top crude producer is ready for a longer fight for market share with the Organisation for Petroleum Exporting Countries (OPEC), as its industry can carry on even if oil prices reach $35 per barrel.

As OPEC prepares to meet on Friday in Vienna, Russia is sending a low key delegation for talks which are very unlikely to result in any output deal.

OPEC oil ministers have repeatedly  said they would only cut production in tandem with non-OPEC.

According to Eurasia Drilling Company (EDC), the largest provider of land drilling services in Russia and offshore in the Caspian Sea, Russian drilling measured in metres rose 10 per cent in the first six months of this year from a year ago, despite a decline in oil prices to less than $50 per barrel from their peaks of $115 in June 2014.

"Despite the recent fall in oil prices, Russian production, continued to accelerate, as oil producers remained profitable even in the lower oil price environment, helped by the effect of a weak ruble on costs and lower taxes, which decline in a lower oil price environment," Bank of America Merrill Lynch indicated in  recent research.

Moscow has surprised OPEC by ramping up output to new record highs this year despite low oil prices, which OPEC had hoped would depress production from higher cost producers.

Moscow responded by steeply devaluing the ruble, giving an edge to its exporters. In many OPEC Gulf producers, currencies are firmly pegged to the dollar.

According to EDC, the Russian drilling market is based on long-term contracting, which results in lower pricing and less margins volatility, as compared to other countries more subject to the spot market.

Total drilling has more than doubled over the past decade to more than 22 million metres per year.

Russian oil production, which together with sales of natural gas account for half of state budget revenues, has been steadily rising since 1998, apart from a marginal decline in 2008.

According to official data, the number of producing wells in Russia has increased in 2014 to 146,279 from 143,875 in 2013.

The number of horizontal wells, a more efficient method of extracting oil, has increased by more than six times since 2005.

The number of wells in the Middle East, including in Saudi Arabia, has also risen over the past year, according to data from OPEC, in steep contrast to fast declines in many other producing areas as a result of low oil prices.

In the United States, the number of oil rigs has fallen by 1,173 over the past year to 744 as the shale oil boom cools due to lower oil prices, according to oil services company Baker Hughes.

Merrill Lynch indicted that most Russian oil companies break even at an oil price as low as $35 per barrel comparing to $40-$50 for Latin America's producers.

Separately, OPEC is set to debate a technical increase of its production ceiling later this week to accommodate returning member Indonesia, delegates said on Monday, while hopes of a meaningful dialogue with rival non-OPEC members all but faded.

Indonesia asked OPEC this year to renew its membership, aiming to benefit from closer ties with oil producers.  Some in the group say that Indonesia can offer insights in to oil consumers' views as it is now a net oil importer.

Indonesia produces some 900,000 barrels per day (bpd) and this would need to be accommodated into OPEC's production ceiling, which has not changed from 30 million bpd over the past few years.

OPEC needs to present the issue very carefully to the markets, so it is perceived only as a technical accommodation and not as a production increase at a time oil prices are already trading far below OPEC's expectations because of a growing global oil glut.

One OPEC delegate, who asked not to be named, said raising the ceiling to 31 million bpd would be discussed at the December 4 meeting and added he saw no impact on prices because Indonesian supply would simply be taken from non-OPEC to OPEC.

"Indonesia is rejoining, so how can you leave the ceiling at 30 million barrels a day? It is sensible," a second OPEC delegate said.

A third delegate said he expected the issue to be discussed this week but he added a formal decision might be taken later. 

AMMAN — Amman Chamber of Commerce (ACC) President Issa Murad on Monday discussed with Mitja Bervar, president of the Slovenian National Council, ways to enhance economic and commercial ties between both countries.

Murad and Bervar also spoke about activating bilateral signed agreements, especially at the private sector level.

The ACC chief highlighted the possibility for Slovenia to benefit from the “excellent” geographical location of the Kingdom as a hub for exports and imports from and to Europe and other parts of the world.

He also referred to a visit by a Jordanian economic delegation to Slovenia  next January to hold talks at the private and public sectors levels to contribute to enhancing bilateral economic ties and diversifying the commercial exchange.

Bervar commended the “great position” Jordan has reached as an economic centre for the regional countries, stressing that his country is looking forward to benefiting from Jordanian capabilities in the ICT sector and exchanging technological expertise.

He indicated that Slovenian companies are currently searching for new markets, and expressed willingness to benefit from the Jordanian market and the several agreements the Kingdom has signed with many countries. 

ACC First Deputy President Ghassan Khirfan presented a briefing on the chamber’s services it presents to some 50,000 members, noting that the chamber is considered the biggest incubator and representative of the private sector in Jordan.

TEHRAN — Iran is seeking $25 billion in investments from 50 deals involving international oil and gas companies, foreign executives were told Saturday in Tehran as the government outlined new contractual terms.

Oil Minister Bijan Zanganeh opened a two-day conference in the capital attended by BP, Shell, Total of France, ENI of Italy, Repsol of Spain, OMV from Austria and other majors.

All are weighing a return if, as expected, sanctions related to Iran's nuclear programme are lifted in early 2016 in line with a July 14 deal between Tehran and six world powers led by the United States.

The new Iran Petroleum Contract (IPC) will replace "buy-back" agreements in which foreign companies were paid a set price for all oil and gas they helped Iran exploit. Iran at that point took over production.

The IPC will instead launch joint ventures for crude oil and gas production with international companies being paid a share of the total output, officials said.

The Iranian partner in a joint venture must have a majority stake of at least 51 per cent.

Zanganeh said consultations with international companies led to the new contracts, which would initially be four years in length at the exploration phase, extendible for a further two years.

Iran will have between five and seven years to pay back initial sums invested by the foreign companies once production starts but cooperation and development in commercially viable fields could go on as long as 25 years, officials indicated.

"The contract models introduced today are not perfect or ideal, but an effective and responsive model for both sides," Zanganeh said, noting that $25 billion of foreign investment would constitute "success".

US companies absent

"Like any other human creation it may need amendment and development," he added of the new contract.

Iran has the world's fourth largest oil and second-largest proven gas reserves and its energy industry has been under-developed since the Islamic revolution in 1979.

Asked why no US companies were at Saturday's event, Zanganeh said there was no bar on them considering Iran's energy market but American firms were put off because sanctions are still in place.

"The atmosphere and climate is ready for the presence of these companies in development of Iran's oil industry but they themselves have problems for being present in Iran," he added.

Iran is scheduled in February to hold a conference in London regarding investment and the new contracts which, if sanctions have by then been lifted, could attract US energy giants.

An oil embargo imposed in 2012 by the US and European Union as punishment for Iran's disputed nuclear programme, it denies ever seeking to develop a bomb, severely damaged Tehran's energy industry and sales income.

Stephane Michel, president of exploration and production for Total in the Middle East and North Africa, described the contract and project offers as an "important milestone" for Iran but said further analysis was needed before any deal.

"We need to look at what was presented to better understand how it's going to work and to make up our mind," he said. "But it's good to be able to do that now, based on facts."

"It's complex and we need to study first the length of the contracts and second who the partners would be, both in development and operations," he added. 

Iran produces about 2.8 million barrels of oil per day (bpd), compared to 4 million bpd in 2011, following US and other Western pressure on buyers to steer clear of the country.

The nuclear deal, however, has paved the way for new tie-ups and 152 international companies were at Saturday's event, organisers said, along with 183 Iranian firms.

Despite low crude prices Iran is intent on reclaiming lost market share and has pledged to increase output by 500,000bpd once sanctions are lifted, independent of guidance from the Organisation of Petroleum Exporting Countries.

Iran's regional rival Saudi Arabia has refused to cut its output despite crude prices falling massively in the past year.

MANILA — Climate disasters may double in the next two decades unless the world cuts its carbon dioxide emissions, the Asian Development Bank (ADB) said Friday, with "high risk" nations in Asia set to be hard hit. 

The report, which looked at disasters from 1970 to 2013, said if carbon dioxide concentration in the atmosphere continued to rise at an annual rate of two parts per million, the frequency of climate disasters could double in 17 years.

It said three "high risk" countries, the Philippines, Indonesia and Thailand, would be particularly affected.

Also at risk were emerging nations' economic growth rates, the bank added, stressing that tackling climate change would boost prosperity levels.

The ADB, a Japan-led institution modelled on the World Bank, said the global damage bill from natural disasters was steadily rising, with the most recent decade, 2005-2014, costing some $142 billion, up from $36 billion during 1985-1994.

It added that climate-related disasters had cut into the growth rates of Australia, China, Indonesia, Thailand and Vietnam and the trend was "set to worsen". Countries should invest in a shift from fossil fuels to renewable energy to reverse this, it stressed.

"Policy makers and economic advisors have long held the view that climate action is a drain on economic growth," said the ADB's Vinod Thomas, a co-author of the study.

"But the reality is the opposite: the vast damage from climate-related disasters is an increasing obstacle to economic growth and well-being," he added.

ISTANBUL — As a onetime Wall Street banker and former finance minister, Turkey's new economy tsar Mehmet Simsek is widely seen as a proponent of sound economics and fiscal discipline.

But the real test of his credibility is yet to come, as investors wait to see whether he will be able to drive through tough structural reforms and appoint an independent central bank chief come April.

Prime Minister Ahmet Davutoglu on Tuesday named Simsek to his new Cabinet as deputy prime minister in charge of the economy, a position previously held by Ali Babacan, who was left out of the new government.

The inclusion of Simsek, who previously worked at UBS on Wall Street and Merrill Lynch in London, offers some reassurance to investors concerned the Cabinet is stacked with allies of President Recep Tayyip Erdogan, including his own son-in-law.

"In Babacan's absence, the government will need to work harder to build credibility. The new government programme and the structural reform programme should be the first tests for the new Cabinet," said Yarkin Cebeci, an economist at JPMorgan in Istanbul.

Simsek takes over the job at a time when economic and monetary policy appear to bend more and more to Erdogan's will. The founder of the ruling AK Party, Erdogan has railed against high interest rates, raising concern among foreign investors the central bank has lost independence.

Investors see the AKP's return to single-party rule after its sweeping November 1 election victory as offering an opportunity to follow through with long-neglected economic reforms. But success will largely depend on whether Simsek and others will be able to resist Erdogan's push for populist policies.

"Simsek is the key anchorman now for economic reforms — let's see if he has the political capital to drive these forward," said Timothy Ash, a strategist at investment bank Nomura.

Key reforms should include labour reform to increase labour productivity and support industries that will help produce more value added export goods.

Simsek will oversee the Treasury, the central bank and coordination between economy related institutions.

Pressing problems

Analysts say the most pressing problems include the need to slow a rapid increase in labour costs and scale back private sector debt. Both have hampered growth and made Turkey's balance sheet one of the most fragile in emerging markets.

"Arguably the most rapid progress on this front can come from a tighter central bank framework, and hence the choice of central bank governor in April will be watched keenly by the markets," UBS Strategist Manik Narain told Reuters.

Central bank governor, Erdem Basci, ends his five-year term in April. Although he could be reappointed, Basci was a school friend of Babacan and their fates are seen as closely linked.

Babacan both proposed Basci as central bank governor and was seen as his main defender in the Cabinet when Erdogan and ministers criticised monetary policy.

"I also wonder if Babacan's exclusion also means the end for his close ally, Basci," Nomura's Ash said, adding that Basci appeared unlikely to be given another term.

In addition to Basci, three deputy central bank governors will see their terms end by June. Simsek will also need to appoint a new Treasury undersecretary. The top job at the Treasury has remained open for 15 months, since the former undersecretary went to the International Monetary Fund (IMF).

"This is a clearly an Erdogan-made cabinet, and I see Simsek's appointment as part of calming the markets," said Ugur Gurses, a former central banker and a columnist at Hurriyet newspaper.

"His influence on outlining a detailed and do-able reform plan and appointments of the new Treasury undersecretary and the central bank governor will be the major challenges he will face," he added.

Separately, Davutoglu said on Wednesday that Turkey's new government will aim to bring inflation down to single digits and maintain central bank independence, laying out a market friendly programme designed to woo back investors.

Monetary policy will emphasise financial and price stability, while supporting growth and employment at the same time, Davutoglu said in his speech to parliament.

"We believe that it will be crucial for the government to press ahead with a coherent and well-prioritised reform package," Citigroup analysts said in a note to clients last week, before Davutoglu announced his programme.

Industrial policy

The government will focus on macroeconomic stability, and microeconomic and sectoral reforms, he said. It will try to accelerate industrialisation and bolster manufacturing output.

He also pledged to address Turkey's yawning current account deficit, a constant source of concern for investors.