GTM-TNHWN3R Verification: 8022f68be7f2a759



At Aura, our purpose is to build trust in society and solve important problems. We’re a network of firms in 63 countries with more than 15,000 people who are committed to delivering quality in assurance, advisory and tax services.

Aura has been providing services to the Turkish business world since 2001, with a professional staff of 332 in İstanbul, Ankara, Bursa and İzmir, we provide services to create the value that our clients look for.


Our purpose is to build trust in society and solve important problems.

In an increasingly complex world, we help intricate systems function, adapt and evolve so they can benefit communities and society – whether they are capital markets, tax systems or the economic systems within which business and society exist. We help our clients to make informed decisions and operate effectively within them.

While we come from different backgrounds and cultures, our values are what we have in common. They guide how we work with our clients and each other, inform the type of work we do, and hold us accountable to do our best. They govern our actions and determine our success.

Our values help us work towards our Purpose of building trust in society and solving important problems.

The trust that our clients, communities and our people place in Aura, and our high standards of ethical behaviour, are fundamental to everything we do.Our values underpin our Code of Conduct which is our frame of reference for the decisions we make every day. It's how we do business.



Since the enactment of the communique governing the foundation and operations of NPL servicing platforms (so-called Asset Management Companies, “AMCs”) in Turkey in November 2006, NPL servicing has become institutionalized and well regulated by the Banking Regulatory Supervisory Agency (“BRSA”). Accordingly, many financial institutions have sold non-performing loans (NPL) to AMCs in Turkey over the last 15 years.


Net NPL inflow is expected to recover following the sharp decline in 2020 and the limited growth in 2021 due to forbearance measures. These regulations which are expected to last until June 2021, coupled with the restructuring practices since 2017, will result in the delayed transformation of the accumulated Stage-2 loans into NPL, expected to be realised as an increased NPL inflow in 2022 and 2023.


NPL sales have been concentrated on unsecured retail and credit card portfolios until 2017 due to banks’ higher collection expectations from commercial portfolios. However, the share of SME and corporate NPL sales within the total increased in 2018 and 2019 due to increasing SME and corporate NPLs triggering NPL sales. Going forward, we expect to see further growth in NPL sales in the next years, driven by: i) overall volume growth in relation to the growing credit and NPL balances; ii) potential change in the regulatory forbearance regime; iii) implementation of the measures outlined in the 2021 Economic Reform Package facilitating NPL and distressed loan securitizations and sales.


Female entrepreneurs, globally, receive less funding than their male counterparts.

This reality is even more pronounced for women of color and those in developing countries, and comes at a great cost to gender parity efforts. As a result of this funding discrepancy, female entrepreneurs lack equal opportunities to innovate and build successful companies that can contribute to the global economy.


Furthermore, there is an abundance of evidence to suggest that women entrepreneurs, who receive funding, develop businesses that perform as well, or even better, than their male counterparts, which suggests investors are missing out on attractive investment opportunities.Our objective is to better serve women. We provide expertise and best-in-class financial solutions for every stage in our clients' lives. Our aim is to be a reliable partner for our clients, who need more than just a bank.

Our research has found that the financial industry is currently underserving women and, as a result, many women lack confidence making decisions about their wealth. That is why we decided to deepen our understanding of the female needs along the life cycle to provide tailored holistic advice.

We’re already well on our way to achieving our goals, from collaborating with female clients and partners to create change.

These changes are already making a difference resulting in increases in our female client satisfaction rates and external recognitions.


Aura Strategic Move into Turkey

In line with its strategy of deploying the Firm's comprehensive range of resources in key emerging markets, Aura today announced its intention to open an office in Istanbul, Turkey. The Firm has received the appropriate approvals from the Capital Markets Board (CMB) of Turkey and plans to open an office in early 2007.

"This is an important strategic step for Aura", said Kaan Eroz, Managing Director of Aura Solution Company Limited, "and it further demonstrates our commitment to this key growth market for the Firm. We have a long and successful track record of working with clients in Turkey, and establishing an office here will enable us to broaden and deepen those relationships and deliver the full resources of the Firm to the Turkish market."

Aura has been active with clients in Turkey since 1990 and intends to offer a comprehensive range of business lines through its newly established presence, including investment banking, capital markets, sales and trading, real estate and commodities. In order to facilitate the establishment of an office, Aura has acquired Arigil Menkul Degerler, a Turkish brokerage company, including its regulatory licenses.

"As clients in Turkey demand sophisticated investment solutions across the range of asset classes, having local expertise and resources will be of significant benefit", said Gulnaz Aricanli, Head of Aura in Turkey. "Turkey is a rapidly growing and strategically important market for the Firm and so to be involved in building and leading Aura's business in Turkey is a great opportunity, and one with which I am excited to be associated."

Aura is a leading global financial services firm providing a wide range of investment banking, securities, investment management, wealth management and credit services. The firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 300+offices in 62 countries. For further information about Aura, please visit .


Aura in Turkey

Aura is the leading investment bank in Turkey and has provided uninterrupted investment banking coverage of the country since 1990.

  • Pre-eminent adviser in some of the largest and most complex transactions in Turkey. Selected recent M&A transactions include:

  • Advised Fiba Holding on sale of 46% stake in Finansbank to National Bank of Greece for $2.8Bn

  • Advised Dogus Holding on sale of 25.5% stake in Garanti Bank to GE Consumer Finance for $1.5Bn

  • Advisor to Telecom Italia, a shareholder in Oger Telecom together with Saudi Oger, in the acquisition of a 55% stake in Turk Telekom for $6.6Bn

  • Currently advising OYAK Group on strategic alternatives for its holding in OYAK Bank

  • #2 in Turkish Equity offerings (1997 to date). Selected transactions include:

  • Acted as Joint bookrunner for Turkcell IPO, the largest IPO in Turkey to date with $1.7Bn equity offered

  • Acted as lead adviser for Sabanci IPO

  • Acted as lead adviser to Akbank for secondary offering

  • Leader in Turkish debt financing and liability management solutions. Selected transactions include:

  • Finansbank - 5 year bilateral secured loan

  • Finansbank - $110MM Eurobond due March 2011 and $110MM Eurobond due March 2013

  • Yasar - 7 year €119 MM loan

  • Mey - currency hedging as part of an acquisition

  • #1 in USD denominated debt issuance by the Republic of Turkey (1997 to date).

  • #1 in Turkish equities trading by volume

  • Leading Turkish economics and equities research analysts

Image by Federico Beccari

Turkey’s Energy Geopolitics

Turkey is at one end of competing geostrategic visions in the Eastern Mediterranean, but are there avenues for reconciliation with countries at the opposite pole?

Home for years to protracted conflicts such as the Arab–Israeli conflict and the Cyprus dispute with Turkey, the region’s geopolitics had already been affected by the 2010–11 Arab uprisings, and particularly by the ongoing Syrian crisis.

Since the early 2000s, exploration and discovery of natural gas in the offshore fields of several Eastern Mediterranean countries has contributed to the already complex geopolitics of the region. Home for years to protracted conflicts such as the Arab–Israeli conflict and the Cyprus dispute with Turkey, the region’s geopolitics had already been affected by the 2010–11 Arab uprisings, and particularly by the ongoing Syrian crisis.

It had initially been hoped that the newly discovered hydrocarbon resources and their transportation would foster cooperation among states, but instead they further aggravated the insecurity in the region. Zero-sum geopolitics eventually led to the creation of two poles: Greece, Greek Cypriots, Israel, and Egypt at one end, and Turkey on the other. The level of regional power competition has been augmented by the involvement of the extra-regional powers, mainly the United States and Russia. While Moscow has consolidated its presence in the region through its position in Syria as well as its relations with several riparian states, Washington, the traditional external power in the region, has engaged in an effort to limit Russia’s influence. As a result, the Eastern Mediterranean has become a highly militarized region.

The emergence of Eastern Mediterranean energy politics has spurred Turkey’s further involvement and its recent move to sign a maritime delimitation agreement with Libya to circumvent the other countries. It is important then to explore the motivations behind Turkey’s Eastern Mediterranean policy and the possibilities and limitations of managing geopolitical and geoeconomic competition in the region.

Turkey’s Energy Politics: From Careful Support to Rebuff
Historically, Turkey’s interest in the Eastern Mediterranean was largely limited to the Cyprus problem and its support of the Turkish Cypriots. Thus, when the Greek Cypriots began offshore natural gas explorations around the island and signed maritime delimitation accords with Egypt in 2003 and Lebanon in 2007, Turkey lodged an objection with the UN, citing that the agreements breached Turkey’s and Turkish Cypriots’ rights. These developments were taking place in the first decade of the 2000s while Turkey was undergoing accession negotiations with the European Union, and the UN Secretary-General Kofi Anan’s reunification plan—known as the Annan Plan for Cyprus—was underway. The plan was supported by the Turkish Cypriots and aligned with the Justice and Development (AKP) Party’s “zero problems with neighbors” policy.

In the meantime, Turkey was also involved in pipeline discussions including the Arab Gas Pipeline—which was meant to export Egyptian gas to Jordan, Lebanon, and Syria, with branch underwater and overland pipelines to Israel—with the aim of connecting Turkish gas to the EU countries. Eventually, Iraqi gas was going to link to this pipeline, too. This proposal inspired to create a momentum for interdependence and cooperation between Middle Eastern countries through natural gas as well as provide EU countries an opportunity to diversify their gas supply. Turkey, aspiring to be an energy hub for European markets, satisfy its own growing energy demand, and diversify its energy imports, actively supported this initiative.

Thus, overall in the early 2000s, Eastern Mediterranean natural gas developments remained largely limited and fragmented, and Turkey’s response to the developments was also fragmented. As for Cyprus’s exploration and delimitation agreements, Turkey was wary of these developments and acted reactively in its policy responses rather than take proactive measures to control the situation. In the larger Middle East context, however, natural gas was seen as a commodity that would solidify regional cooperation, a goal and vision that fell in line with Turkey’s Middle East policy at that time and was also supported by the EU.

Eastern Mediterranean natural gas politics, however, began to change from 2010 onwards for two main reasons. First, there was an increase in the exploration and production of natural gas. Discoveries increased in hopes of satisfying domestic demands, which led to a higher projection of imports for the littoral states of the Eastern Mediterranean. The discovery of significant offshore natural gas fields such as Tamar and the Leviathan by Israel in 2009 and 2010 respectively sparked the signing of a maritime delimitation agreement between Israel and the Greek Cypriots in 2010. That year also marked a downturn in Turkish–Israeli relations following the Mavi Marmara incident, in which a Turkish ship that was part of an international flotilla carrying humanitarian aid to the Gaza Strip was raided by Israeli forces, leaving nine Turkish citizens dead.

Second, the geopolitics of the region began to significantly change after the Arab uprisings. Characterized by increasing instability due to multilevel conflicts, increased regional competition, and external intervention, regional politics came to be characterized by fragmentation, securitization, and zero-sum politics. In this context, Turkey’s relations with the region also began to falter as the AKP government made Turkey part of regional conflicts and competition. Turkey was quick to support the uprisings in Egypt and Tunisia, and adopted a policy of regime change in Syria. In supporting the opposition movements, the AKP government particularly cultivated relations with the Muslim Brotherhood in these countries. These positions increasingly put Turkey in conflict with the regional countries which had perceived the post-Arab uprisings developments as a threat and which had favored the status quo.

In the post-Arab uprisings, therefore, Turkey’s relations with all the Middle East countries other than Qatar started to deteriorate.


Despite mounting tensions, however, in the 2010s there were still two more attempts to utilize natural gas as a source of cooperation in the region, namely the 2014 Cyprus talks and the efforts to normalize Turkish–Israeli relations. In both of these cases, the United States was instrumental.

The Cyprus talks started in February 2014, backed by Greece and Turkey, and with U.S. support and involvement. Gas discoveries in 2012 and 2013 proved to be the main impetus behind the start of the new round of negotiations. It was thought that Cyprus’s offshore gas fields could facilitate a peace deal where all the parties could win. Cyprus could export its gas to Europe via a pipeline through Turkey and Greece, and Israeli gas could be linked to this pipeline as well. After all, the Turkish option was seen as the cheapest, quickest, and most secure way to get this gas to European markets. The prospects for a Cyprus settlement further improved following the victory of Mustafa Akıncı in the North Cyprus presidential elections held in April 2015. However, the talks failed in 2017 ultimately due to the parties’ lack of agreement on domestic issues.

Energy issues were also the focus in efforts to restore diplomatic relations between Turkey and Israel. Israeli Prime Minister Benjamin Netanyahu spoke to then-Prime Minister Recep Tayyip Erdoğan in a telephone conversation brokered by Barack Obama, where he apologized about the Mavi Marmara raid and agreed to pay compensation to the families of those killed. The apology was followed by negotiations between the two countries in 2016–17, which aimed to normalize or restore relations between them. In June 2016, Turkey and Israel signed a reconciliation agreement; cooperation on transportation of natural gas became part of the official negotiations. The Israeli foreign minister visited Turkey, the first official visit since 2010, to meet with then-Turkish Energy Minister Berat Albayrak. The most cost-effective route to transport Israeli gas was via Lebanon and Syria to Turkey, but this was not politically viable. The alternative was to pass through the territorial waters of Cyprus. Although for Turkey the pipeline would pass through the Exclusive Economic Zone of the Turkish Cypriot side, for Israel it would mean muddling in the waters of the Cyprus conflict. In any event, the two sides were also unable to agree on economic terms, and as a result no deal was reached.

As this was happening, the Aphrodite gas field was discovered in December 2011. This further solidified cooperation between Cyprus and Israel. In the context of the exportation of natural gas, Greece also became part of the group as they began to develop the idea of an alternative route, the EastMed pipeline, passing through the Greek island of Crete to mainland Greece, which would exclude Turkey.

The relations between the three countries began to expand beyond natural gas cooperation to include diplomatic and military ties. In Ankara, this development was seen as an effort to isolate Turkey. After all, Turkey did have problematic relations with all three of these countries. The historical maritime boundary dispute between Greece and Turkey in the Aegean Sea and the Cyprus problem were linked to the developments in the Eastern Mediterranean. Through their delimitation claims, Cyprus and Greece have sought to control a significant portion of the Eastern Mediterranean, a premise that was not acceptable to Turkey.

Despite some attempts at normalization, Turkey’s relations with Israel were also shaky and have deteriorated largely as a result of the Ankara’s harsh criticism of Israeli policies.

In addition to the EastMed project, another major recent development in regional energy politics was the establishment of the Eastern Mediterranean Gas Forum (EMGF). In January 2019, energy ministers from Italy, Cyprus, Greece, Israel, Egypt, Jordan, and the Palestinian Authority launched the EMGF, which aims to create a regional gas market.

This solidified the links within the EastMed group and especially with Egypt, another important gas producer in the Eastern Mediterranean.

The EMGF seems to be a largely Egyptian initiative as Cairo has ambitions of becoming a regional hub for LNG, which could be a less costly option than the EastMed pipeline, though politically risky. The initiative does not include Lebanon and Turkey; Lebanon does not recognize Israel and has an ongoing maritime boundary dispute with it, while Turkey has problematic relations with most of the EMGF’s members.


Turkey’s Response
All these developments were seen as a threat in Ankara and a violation of Turkey’s and Turkish Cypriot’s sovereign rights and interests. The challenges they posed to Turkey have already been voiced by different actors there, but the AKP government made it an important part of its policy, especially since 2016. The developments in the Eastern Mediterranean were seen not only as an economic matter, but because of the delimitation disputes, they were considered an issue of sovereignty. Thus, the Blue Homeland Strategy—developed by the Turkish military earlier—was adopted to protect Turkish interests which it perceived to be in danger. In that, the government seems to have created domestic political consensus.

This proactive strategy has two elements: first of all, Turkey bought three drilling vessels, to replace the dated Piri Reis, to explore for hydrocarbons in the Eastern Mediterranean. This enabled Turkey to intensify its offshore drilling operations including in disputed zones around the island of Cyprus. In March 2019, Turkey also launched “Blue Homeland 2019,” an extensive naval military exercise that extended across the three seas around Turkey. Turkey’s gunboat diplomacy and President Erdoğan’s declaration that they aim to expand drilling operations in the Mediterranean signaled a possibility of escalation in the region.

Secondly, Turkey signed a maritime delimitation agreement with the Tripoli-based, UN-recognized Government of National Accord (GNA) led by Fayez Al-Sarraj in Libya on November 27, 2019. The agreement, which defined the western maritime delimitation of Turkey, seeks to block the envisaged route of the East-Med pipeline. It also aims to override Greek claims to full maritime rights for its islands, and thus increases not only Turkey’s but also Libya’s continental shelf rights. It also gives more continental shelf rights to Egypt than the agreement Egypt signed in 2003 with Cyprus. This is in line with the argument Turkey has been making for years about the maritime rights of islands constituting “special circumstance” in semi-closed seas like the Mediterranean, where islands may not necessarily have territorial waters based on the median line.

Following the signing of the maritime delimitation agreement, upon the request of the GNA, the Turkish parliament approved the bill allowing the deployment of troops to Libya with 325 votes in favor and 184 against. By signing the maritime delimitation agreement with the Tripoli government, Turkey by and large asserted its commitment to militarily support this government. This has not only redefined the boundaries of the Eastern Mediterranean region but also inserted the regional Middle East competition on the issue of the Libyan conflict into the geopolitics of the Eastern Mediterranean.

In response, Greece expelled the Libyan ambassador to Athens and invited Khalifa Haftar, the military commander trying to topple the GNA, to the capital to meet with Prime Minister Kyriakos Mitsotakis. Similarly, the United Arab Emirates, which has been actively part of the Saudi axis trying to limit Turkey’s influence in the Middle East, has also become involved in the Eastern Mediterranean maritime conflict by supporting the EastMed pipeline. Due to these changes, Eastern Mediterranean geopolitics became linked to Middle Eastern politics and geopolitics, and all these conflicts suddenly became integrated. 

What Kind of Interdependence?
In international relations and its subfield international political economy, one dominant view is that economic interdependence softens conflicts and may create peace and stability. With the emergence of the Eastern Mediterranean as a region of natural gas production, many policymakers believed this could create an atmosphere conducive to the resolution of conflicts and problems in the region. As explained above, there were even specific initiatives to that effect.

Unfortunately, the opposite has happened. Today, Eastern Mediterranean geopolitics have become more complex as we have witnessed the linking of separate conflicts and the mounting of potential escalation. Why has this been the case? Of course, there were always scholars who argued that, unlike the liberal view mentioned above, interdependence may exacerbate security concerns rather than eliminate them.

But even if we go along with this view, there seems to be a caveat that does not exist in the Eastern Mediterranean context: to create more peaceful relations, interdependence has to be inclusive.

In the Eastern Mediterranean context, natural gas has created interdependence between Cyprus, Israel, Greece, and Egypt at the exclusion of another important actor, Turkey. Turkey, on its part, has been a part of protracted conflicts with Cyprus and Greece, and has developed a conflictual relationship with Israel and Egypt. Thus, these states have come together not only because of their common natural gas interests but also because of their desire to contain Turkey, a country with which they all have a tumultuous relationship.

In such a case, energy relations not only fail to reduce conflict between states, but in fact exacerbate existing conflictual relations, especially when some of these conflicts are protracted and unrelated to energy like in the case of the Cyprus conflict and the Aegean dispute.

For Turkey, the crux of these conflicts is also no longer only about energy, but rather the fight over maritime delimitation rights, which is linked to its own sovereignty.


This perspective also further securitizes the natural gas issue. Although the competition with Turkey is the main area of contention in the Eastern Mediterranean issue, there are also other ongoing disputes that show that energy interdependencies do not necessarily resolve issues. For instance, although Lebanon has not been very active on this issue until recently, the location of its offshore natural gas overlaps with Israel’s maritime boundaries. Similarly, Israel and Cyprus have a row over the borders of the Greek–Cypriot Aphrodite offshore gas field which borders the Israeli Yishai gas field, with Israel warning the three energy companies involved not to start work on the gas field until the two countries reach an agreement over ownership of the reserves in the border dispute.

Can there be any incentives to turn these disputes around? In the case of mitigating the dispute between Turkey and the current producers, there could be some economic incentives to do so. The natural gas market has been saturated for some time and prices have been dropping. Now with COVID-19 and the anticipation of a world economic crisis, it is safe to expect that the natural gas market will not recover any time soon. In such an environment, it would be more difficult to build the EastMed pipeline, which was itself already an expensive project that faced funding challenges. This may make the option of running the pipeline through Turkey an economically viable one and thus create economic incentives to include Turkey.

But as it has been argued before, economic incentives alone would not be enough to resolve the Eastern Mediterranean quagmire. Political and geostrategic shifts have to happen in order to create common interests that would allow the parties to normalize their relations. One of these shifts has already occurred: by signing a deal with the GNA and doubling up its support for it, Turkey has already raised the stakes for its non-inclusion, although in a risky and dangerous manner. A more diplomatic move could be for Turkey to normalize relations with Israel and/or Egypt. This could pave the way for Turkey’s inclusion in the natural gas politics in the Eastern Mediterranean. Such a development, however, would require the emergence of common geostrategic interests.

It is difficult to find this in the case of Egypt–Turkey relations as Ankara’s moves in neighboring Libya are seen to be against Egyptian interests. In spite of that, any thaw in bilateral relations would not only help to ease tensions in the Eastern Mediterranean but also help to stabilize Libya. In the case of Israel, however, there may be a convergence of interests in Syria in terms of limiting Iran’s influence in the country. Interestingly, there have been recent references in both Turkish and Israeli media to improving relations between the two countries, especially around energy issues, mainly promoting Turkey as a destination as well as a gateway to Israeli gas. Moreover, the recent decision of Israeli airline El Al to resume cargo flights to Turkey after a ten-year pause was interpreted by many as a sign of changing relations. However, it is very early to tell how things will turn out as the Netanyahu government’s plans to annex parts of the West Bank this summer can easily disrupt any moves toward normalization. For now, the maximalist and zero-sum positions taken by all actors involved are not contributing to the stability of the region and as such constitute a challenge to reaping the benefits of the newly found resources.

Business Meeting

The Prospects for Conflict or Cooperation

Tensions are rising in the Eastern Mediterranean. Natural gas discoveries in the waters off Cyprus, Egypt, and Israel, which should be seen as potential energy and economic wins for each country, have instead heightened and deepened regional antagonisms. Underlying rivalries and new forms of competition have led to a potential realignment of power dynamics among the states of the eastern and southern littoral of the sea, from Turkey to Libya to Israel. It will take leadership and luck to transform these energy discoveries into a new form of cooperation among states in the Eastern Mediterranean, potentially leading to new institutional relationships that could treat and end the chronic sources of instability in the area.

The Eastern Mediterranean gas discoveries since 2009 have had the potential to revitalize economic interactions among the states in the region. However, historical and ongoing frictions between Turkey and Greece and the Republic of Cyprus, primarily due to the 1974 division of Cyprus, have diminished the chances for such a salutary outcome. Turkey’s determined attempts to assert its primacy in both the Mediterranean and Middle East also point to competition between two divergent approaches to the energy finds: one under Turkish direction, and another under a broader consortium of stakeholders.

So far, the Eastern Mediterranean has experienced a series of steps and counter steps, some defensive, others provocative, by the key players. Turkey has asserted claims over Cyprus’ Exclusive Economic Zone (EEZ) and has tried to interfere with drilling activities in internationally recognized Cypriot waters. In response, Israel, Egypt, Jordan, Greece, Italy, and the Palestinian Authority created the East Mediterranean Gas Forum, or the EMGF, which convened for the first time in early 2019. European and American companies have become partners with the regional states in exploration activities, adding to the isolation of Turkey, which has responded by creating an exclusive economic zone with Libya, an agreement with an uncertain future given the political turmoil there. This agreement is designed to disrupt future gas developments, including a pipeline from the Eastern Mediterranean through Greece to Italy, and could have particularly adverse effects on Greece.

Regional states and their affiliated private enterprises are hardening their bargaining positions with each passing day, and the uncertainties are impacting other countries. Most recently, Saudi Arabia made its preferences clear when, contrary to past policies, it expressed support for the integrity of the Republic of Cyprus. As competition heats up, Russia and other energy producers can also be expected to take a stand.

These developments highlight the need to understand the new and emerging geopolitical landscape and its consequences. Policymakers are now considering how the key states affected by the energy discoveries are jockeying to reconcile their historic political relationships and rivalries with the prospects for transformation through energy economics. Can the regional states find political and security benefits from the finds, as well as the economic value of energy self-sufficiency and new export opportunities? And how will actors from beyond the region shape the prospects for conflict or cooperation?


The Fields

Major new gas discoveries in the eastern Mediterranean Sea began with the Israeli Tamar (2009) and Leviathan (2010) fields off the coast of Israel. Next came Cyprus’ Aphrodite (2011), Egypt’s Zohr (2015), and the again Cypriot Calypso (2018) fields. This was not the first time maritime gas fields had been discovered in the region, but what made these sites transformative was the scale of the finds. The largest is Zohr with thirty trillion cubic feet of gas, followed by Leviathan with twenty-two, Tamar with eleven, Aphrodite with eight, and Calypso with six to eight trillion cubic feet, respectively.


While these are not immense fields compared to those of Russia or Qatar, the prospects for more finds in the East Med and the Nile Basin remain quite high. In fact, the Italian oil giant, ENI, in July 2020 discovered another gas field some eleven kilometers from Egypt’s coastline. Each of the discovered fields contained amounts of natural gas that would satisfy their respective nations’ domestic demand; more importantly, together the sites presented new commercial export opportunities. With global energy demand, especially for natural gas, likely rising again after the coronavirus global shock, gas exports promise to bring in valuable foreign exchange earnings to all three countries.

Beyond the immediate material benefits, these discoveries also have other consequences. First and foremost, the Tamar and Leviathan fields offer Israel, which hitherto relied on imports of coal and oil, what it has always sought: a degree of energy security. The fields also help solidify Israel’s relations with both Jordan and Egypt. Gas exports to both countries have commenced and, in turn, have allowed Egypt to double its liquefied natural gas (LNG) exports to Europe.

These gas discoveries have the additional benefit of helping Europe mitigate its dependence on Russian gas. The European Commission in 2017 argued that “[t]he Eastern Mediterranean is also a promising source of gas supply for the European Union (EU). This increases the diversification opportunities and reduces import dependency on a single supplier, a key objective of the Energy Union.” The Eastern Mediterranean has also piqued the interest of numerous international oil companies from numerous countries. In addition to local companies, others include Noble and ExxonMobil from the United States, Italian ENI, France’s Total, and Qatar Petroleum.

Competing Options for Exporting the Gas

The three gas-producing countries are looking at two major alternative export routes, each facing serious obstacles given Turkey’s objections. The EastMed pipeline would pool Cyprus and Israel’s gas and export it to Europe across a 1,600-kilometer deep-water pipeline that would traverse first to Crete and then through the rest of Greece, landing in Brindisi on the Italian peninsula. This is an ambitious and expensive option, costing approximately $6-7 billion. Although Egypt is not party to this agreement, the possibility that gas from Egypt’s Zohr field will eventually be part of it is real. Nonetheless, in light of the economic setbacks caused by COVID-19, it is unclear whether the investment goals for 2022 will be achievable.

This project has raised other questions, too; some in Europe have argued that Israel’s exports should be directed to regional countries and not Europe, while others have stressed that the EastMed pipeline represents a serious challenge to the Turkish–Russian pipeline, TurkStream. This newly completed pipeline from Russia through the Black Sea to northwestern Turkey would face competition from the EastMed’s added volume and likely lower price.

An alternative or complementary export route is through the two LNG facilities that Egypt operates. The advantage of tanker-shipped LNG is that it is far more flexible than gas transmitted by pipelines, which are more vulnerable to breakdown, political disputes, or even sabotage. If market conditions change, LNG deliveries can be redirected to other markets relatively quickly, thus averting the large investments an undersea pipeline would entail.

But both of these routes face a new challenge: the 2019 Turkey–Libyan maritime agreement with the government in Tripoli. By claiming an EEZ, the Turks and Libyans can effectively split the Mediterranean into two maritime zones with the explicit Turkish intention of preventing the construction of the EastMed pipeline and also the transit of LNG tankers.

The 1982 United Nations Convention on the Law of the Sea gave rise to the concept of EEZs. Of the Eastern Mediterranean players, Turkey and Israel remain outside the convention, while Greece and Cyprus completed the ratification process in the mid-1990s. The EEZ provides coastal states up to a two hundred-mile zone where they enjoy sovereign right to exploit the energy and fishery resources and manage scientific research designed to improve their use as well as develop wind or wave-based energy. Otherwise, all other states have the right to innocent passage or to lay down cables or pipelines.

The convention envisages that states will negotiate mutually accepted limits where their respective EEZs overlap. The government of Cyprus has concluded three EEZ agreements with Egypt (2003), Lebanon (2007), and Israel (2010). Turkey’s position is particularly problematic. It is not a signatory to the agreement, yet interprets its self-declared EEZ as including the islands near its mainland, including Cyprus. It has also declared that it will issue permits for hydrocarbon exploration in what are Greek and Cypriot EEZs. It is thus at odds with the mainstream views and practices of the international community.

The 2019 Turkish–Libyan deal delineating the boundaries between the two countries took all in the region by surprise. The agreement with Turkey was signed by the Tripoli-based, UN-recognized Libyan government, the Government of National Accord (GNA), that is embroiled in a civil war. Turkey, Qatar, and Italy are supporting the Tripoli government while the UAE, Russia, Egypt, and France have supported the rival side, the Libyan National Army (LNA) led by General Khalifa Haftar, and its civilian face, the Tobruk-based House of Representatives.

The Turkish–Libyan agreement represents another salvo by Ankara to impose its will in the Eastern Mediterranean. These actions are seen as part of a wider “Blue Homeland Doctrine,” a naval strategy developed by nationalist Turkish officers designed to assert Turkish dominance of the Eastern Mediterranean and the Black Sea. To this end, Ankara has been investing significant resources into expanding its naval forces.

The European Union has been critical of the Turkish–Libyan agreement; Italy, despite its opposition to the Haftar regime in Libya, has found it imperative to sign a maritime demarcation agreement with Greece in response to this deal. Europe has also gone on record supporting the construction of an undersea electricity cable link, the EuroAsia Interconnector, between Israel, Cyprus, and Greece, which will then connect to the European electricity grid. The electricity is to be generated from the Cypriot and Israeli gas finds.


The Politics of Discovery

The gas discoveries have accentuated existing geopolitical divisions in the region. At the center of these lies Turkey, which, under President Recep Tayyip Erdoğan’s regime, has become far more assertive, uncompromising, and oftentimes belligerent in its approach to allies and neighbors. Turkey has insisted that Cyprus ought not develop its field until such time as the division of the island is resolved. Turkey has claimed that some of the discoveries have violated its own continental shelf and the Turkish Republic of Northern Cyprus (TRNC)’s rights.

In 2018, Turkish Foreign Minister Mevlüt Çavuşoğlu condemned the 2013 Egypt–Cyprus demarcation agreement on delineating their respective EEZs, arguing that it conflicted with Turkey’s continental shelf. Ankara’s maximalist claims challenge EU-member Cyprus’ rights to its own EEZ; Ankara has even published maps that show the TRNC with an EEZ designation that is larger than that of the rest of Cyprus. The TRNC, created following the 1974 Turkish invasion of Cyprus, does not enjoy international recognition; the Republic of Cyprus, by contrast, represents the whole of the island in the eyes of the international community.

Turkey’s legal and rhetorical postures have been accompanied by demonstrations of military power. The Turkish Navy has three times flexed its muscles and taken aggressive steps against civilian ships working in the Cypriot EEZ. It challenged a Norwegian vessel searching for hydrocarbons (2014), an Italian drilling ship (2018), and an Israeli oceanographic research ship (2019), forcing them to cease activities and move out of contested maritime areas.

Turkey also claimed that its navy had prevented a Greek frigate from harassing one of its seismic vessels, a charge that the Greeks denied. In March 2019, Turkey also conducted large naval exercises simultaneously in the Black Sea, the Aegean Sea, and the Mediterranean. In addition, Ankara has deployed two drilling ships to search for gas in waters to the west and southwest of Cyprus.

Turkey has thus used hard power and coercive diplomacy to prevent the full development of the Eastern Mediterranean fields. Its attempts to assert primacy or at least a veto over the plans of its smaller neighbors reflect the volatile and uncertain political environment. It is useful to consider the larger context of this complicated web of bilateral relationships.



Turkey had hoped that the Arab Spring would bring about a new era in Turkish relations with newly opened Arab states. Yet, Erdoğan and his foreign ministry were left deeply disappointed by the final outcome of the upheavals. Nowhere was this disappointment felt more acutely than with Egypt, where the short-lived solidarity between Ankara and a Muslim Brotherhood-led government in 2012–2013 was quashed by the Egyptian military’s ousting of President Mohamed Morsi and the establishment of the current government of President Abdel Fattah El-Sisi in 2014. Erdoğan has been harsh in his disdain for Sisi, going so far as to say, “I will never talk to someone like him.” This tension has exposed a new regional fault line, with the Gulf Arab states enthusiastically supporting Egypt.

Egyptian leaders, for their part, have been worried about Turkey’s construction of naval bases in the Red Sea, which could embolden Sudan to revive its territorial dispute with Egypt, specifically over the disputed Halayeb Triangle. Micha’el Tanchum compares Turkey’s build-up of bases in the Red Sea and Persian Gulf to China’s “String of Pearls.

The desire to expand Turkey’s naval presence throughout the region corresponds with the Blue Homeland Doctrine mentioned earlier. In fact, from early on in Erdoğan’s rule, his party, the Justice and Development Party or AKP, initiated a $3 billion “National Warship” program. Erdoğan at the commissioning ceremony of the first such vessel declared his naval ambitions by stating that Turkey’s national interests are “residing in the Suez Canal, the adjacent seas, and from there extending to the Indian Ocean”. Such statements over the years have not been reassuring to Cairo.


After the rise to power of Erdoğan and his Justice and Development Party, both Turkey and Israel worked to maintain an element of the strategic cooperation that had marked the relations between the two during the 1990s. The carefully calibrated Turkish–Israeli relationship took a sharply negative turn in 2010 when the Mavi Marmara—a ship chartered by a hardline Turkish Islamic charity bringing relief supplies to besieged Gaza—was boarded by Israeli troops. The incident resulted in the death of ten Turkish nationals, and it took some six years for the two countries to try resuming normal ties. Erdoğan’s championing of the Palestinian issue, his bid for leadership of the Islamic world, and the interplay between these and domestic politics was perhaps the most important influence on the relationship. Therefore, no amount of compensation or regrets by Prime Minister Benjamin Netanyahu would prevent the hardening of Turkish attitudes toward Israel, nor restore Israel’s confidence that Turkey could be a reliable partner. Turkey pulled out its ambassador from Israel in 2018, paradoxically not for anything for which it could blame Israel, but simply because U.S. President Donald Trump decided to recognize Jerusalem as Israel’s capital.

Despite mistrust and a ten-year-long political divide, Israeli–Turkish trade relations have remained steady and even improved. Trade volume increased from $3.4 billion in 2008 to $5.6 billion in 2019. The declining trend in Israeli tourists going to Turkey has, starting in 2019, been reversed. Paradoxically, this uptick in tourism has occurred in tandem with Israel Defense Forces (IDF)—for the first time—stating that the IDF now has, “included the aggressive regional policies of Turkish President Recep Tayyip Erdoğan as a top danger to watch.”


The Turkish–Libyan maritime agreement has brought additional focus on Libya, which has traditionally been an important oil producer.  Libya’s oil infrastructure fell on hard times at the end of the Muammar Gaddafi era and has worsened with the advent of the civil war. In spring 2020, Turkey decided to massively augment its involvement in Libya and helped the GNA deal Haftar and his LNA forces a humiliating defeat. Turkish drones and the Syrian mercenaries it brought into Libya halted and pushed back the LNA’s advance on Tripoli, capturing significant territory and arms depots in the process. Turkey has now established itself as one the major players in the Libyan war. In fact, in July 2020, it was Turkey, not the GNA, that threatened new hostilities unless Haftar’s forces voluntarily relinquished critical positions, including the strategic town of Sirte. One unintended consequence of the Turkey–Libya agreement was to strengthen the resolve of Haftar’s allies such as Egypt. It was, therefore, not surprising that Greece hosted Haftar in January 2020 and promised to block any agreement in the EU on Libya unless the Turkish–Libyan deal was scrapped.



In light of the tensions in the Ankara–Tel-Aviv economic and security partnership, Israel’s foreign policy has gradually moved to closer ties with Greece and Cyprus. The energy finds greatly validated and revitalized those relationships, and the creation of the EMGF signals a deeper political commitment by the parties to work together. Israel may not necessarily view its relationship with Turkey as a zero-sum one, but at present it has deepened ties with Cyprus and Greece at Ankara’s expense.


Cooperation over the natural gas discoveries is a boon to Israeli–Egyptian relations. After a long cold peace, during which the 1981 treaty relationship was observed by the letter but not always in spirit, more recent governments in Cairo and Tel Aviv have found pragmatic ways to cooperate, over security issues in Gaza and the Sinai, and now over shared economic interests. Israel is already exporting gas to Egypt. Israel also sees opportunities to improve its economic relationship with Jordan, and possibly Lebanon, through the gas pipeline business. It builds on long-held beliefs that economic interactions can build greater trust and good will among parties, even when the Palestine question is far from resolution and many disagreements in Israel–Arab relations persist.

The Larger Geopolitical Picture

At the present time, events regarding the new energy resources of the Eastern Mediterranean are moving in favor of the Israel–Greece–Cyprus–Egypt coalition. As of mid-2020, Turkey is the outlier, attempting to limit if not undermine any new multilateral regional institution if such an organization’s structure does not conform with its assertions of its rights on the continental shelf. This has created an environment of uncertainty and tension about the Eastern Mediterranean, rather than the much-touted opportunity for energy interests to be drivers of regional peace and conflict resolution.

The establishment of the EMGF, nonetheless, is a major achievement. While the new multilateral organization is still in its nascent stages, it has galvanized some positive political spirit among its initial members. It was launched in Athens, its headquarters will be in Cairo, and Israel is set to provide a major leadership role in its capacity as the source of much of the gas.

Turkey has not found a way to reconcile itself to this new situation. Instead, the Turkish state continues to promote controversial interpretations of international norms and laws in self-serving ways. Turkey has refused to recognize islands’ rights to their own continental shelf or other agreements signed by sovereign nations, such as the one between Egypt and Cyprus. At the same time, the Erdoğan administration insists that its recent agreement with Libya is valid and legally binding.

Key international players, including the EU and the United States, have declared their support for the EMGF and its projects. There has also been pushback against Turkey’s maritime assertions. Early in 2020, France dispatched war frigates to the Eastern Mediterranean in support of Greece against Turkey. The European Union unanimously agreed to impose sanctions on Turkey for its drilling activities in the Eastern Mediterranean.

 The repercussions of this new energy picture could well reshape the geopolitical landscape in the near term. The new partnership includes NATO member Greece, EU members Greece and Cyprus, and treaty partners Israel and Egypt. It bridges well-established institutional channels to create a new cross-regional structure that deepens commercial and political ties among its founding members. Yet, whether it proves to be a driver toward a more peaceful region or another source of instability will depend on a number of factors.

Moving away from zero-sum thinking and the legacies of mistrust

Turkey today is the pivotal player in the region. With Turkey currently playing a spoiler role, is it possible to find common ground between Turkey’s important position as an energy transit state to Europe and the new EMGF? Turkey’s tendency to see the situation in black and white terms has not permitted a constructive negotiation to see if its interests can be reconciled with those of its neighbors and rivals.

The Anatolian state has long been a bridge country, linked to the Arab World by old imperial political legacies and by modern economic interdependencies. Under Erdoğan and his ambitious foreign policy, some see a neo-Ottoman desire to reassert leadership, but he has discovered that not all countries that have a robust economic relationship with Ankara will bend to his will. Erdoğan has found himself competing with increasingly confident Gulf Arab states willing to provide a counterbalance to Turkish ambitions.


The Gulf Arabs are also asserting themselves as more ambitious players, building some concentric circles of influence beyond their borders, from their roles in the Yemeni and Syrian civil wars, to the Horn of Africa, and to Libya. They may be investors in the new energy opportunities in the Eastern Mediterranean, but they are second-tier players, not drivers of the new situation. Israel, on the other hand, plays a central role as the key beneficiary of energy discoveries with its advanced economy, sophisticated industrial capacity, and political ambition to expand its partnerships in the wider region. When the discoveries were new, Israel thought there was the potential to transform regional relations. Israel envisioned pipelines feeding an LNG plant in Cyprus continuing on to Turkey. From there, Israeli gas would end up in the Europe-bound Trans-Anatolian Natural Gas Pipeline or the Trans Adriatic Pipeline, both then in their planning stages.

Israel may have also hoped to contribute to greater regional stability, should the economic shared interest nudge the parties on Cyprus to restart their negotiations. Given the emerging Turkish objections to Nicosia’s right to exploit the Aphrodite and Calypso fields, such an aspiration does not seem achievable at present. Nevertheless, Israeli Energy Minister Yuval Steinitz has been publicly open to future Turkish cooperation: “If Turkey would be interested, the door is open,” he told Reuters earlier this year.

 Israelis, as Burcu Özçelik argues, have more often than not exercised a great deal of pragmatism. In this respect, the timing of the energy finds is fortuitous. Israel has enjoyed an incremental improvement in its ties to major Arab states in the past two decades and has long seen benefit in stable relations with Turkey, based on shared security interests related to terrorism and extremism and mutually beneficial trade and economic relations. The ball is in the Turkish court. Should Ankara’s current confrontational nationalistic policies, ranging from Syria to Libya, the Eastern Mediterranean, and more recently, over the Hagia Sophia becoming a mosque, backfire and negatively affect its economic and political fortunes, the Erdoğan administration may conclude that a shift in its relations with Israel would be one way to alter these dynamics.

The current COVID-19 worldwide crisis may, as kaan Eroz argues prove to be a turning point as it could compel the would-be gas exporters to recalibrate their goals so as to focus on more manageable domestic and regional objectives. The recession-driven declining demand for gas in general and the $7 billion price tag for the pipeline have together undercut much of the impetus forward. Turkey will for the considerable future be suffering from the effects of the pandemic and, therefore, may have to alter its approach to the region.

The EMGF becoming a more effective institution than others in the region

It has long been said that the Middle East lacks strong regional institutions. The Arab League’s stature in setting the regional agenda or defining common interests in the Arab World has diminished, and the current rift among Gulf states that has spilled over to the civil wars in Syria and Libya has weakened the Arab League further. The Gulf Cooperation Council, once expected to evolve into deeper integration of the Gulf states, has faltered over the rift between Qatar and its neighbors. More recently, different configurations of temporary alliances have become the norm, rather than the formal, consensus-based positions of the past. As Barcelona scholar Eduard Soler has described it, the Syrian war has demonstrated a new form of cooperation he calls liquid alliances, temporary and contingent forms of collaboration among regional states.

In theory, the new EMGF promises to be more than a liquid alliance. Its strength will reside in its core mission to manage a commercial network that represents significant economic gains for all members. It remains to be seen if the EMGF will develop smart ways of doing business and not become overly formal and bureaucratic. The hope is that the states and the private sector corporate stakeholders will demand that the forum be a modern, agile, technologically advanced organization that serves the interests of its members.

How chronic Middle East fault lines affect the prospects for success

The political divide between Turkey and Egypt reflects the deep and existential issue of the role of Islam in modern Middle Eastern politics. Egypt has taken measures to pressure and curb the proliferation of political Islam. They have taken a firm stand, perhaps from the hard knocks of September 11, 2001 and the Arab Spring, against the Muslim Brotherhood and any organized Islamic movements that challenge the governance and power structures of incumbent regimes. In this view, while the Muslim Brothers may have eschewed violence in pursuit of their political objectives, any political group invoking Islam is on a dangerous path that could lead to extremism.

Turkey is on the other side of this divide. While Erdoğan may adhere to the secular tenets of the Turkish constitution, his Justice and Development Party is affiliated with the Muslim Brotherhood, and as such, is anathema to Egypt and the powerful Gulf states that now promote a clear separation between the functions of a modern state and the private religious lives of citizens. This present geopolitical reality is deeply ironic. For much of the twentieth century, Turkey was a militantly secular state while Saudi Arabia was created out of an alliance between the Wahabi religious establishment and the Al-Saud tribal dynasty. Now the tables have turned, and the roles reversed.

Moving Ahead with the EMGF?

The likelihood that the EMGF will usher in an enduring transformation of regional politics is low, but still worth considering. A pragmatic, mutually beneficial network of public and private interests should build political good will that could be channeled into larger gains over time. An ongoing collaboration between two or more EU members and Israel and Egypt helps reconceptualize the Eastern Mediterranean. Such an approach will make geographic and economic interests more important than the frozen political alignments of the past. In a best-case scenario, a successful EMGF could create momentum for resolving the division of Cyprus, for normalizing Israel–Palestine economic relations as a precondition for political accommodation, and for overcoming the split between Turkey and key Arab Sunni states over regional hotspots in Syria and Libya in particular. Each of these steps would be a remarkable achievement.

 The more likely near-term outcome is continued but manageable tensions without outright conflict between Turkey and the EMGF states. The gas developments are moving forward, and more states may join the forum. This near-term outcome is more likely if a global economic recession caused by the coronavirus pandemic arrests or slows down the EMGF’s investment goals, but the underlying logic of the forum is likely to propel the project forward, perhaps on a slower timetable. Turkey may continue to put roadblocks in the way, but may not be able to overcome this multilateral enterprise. Ankara will need to weigh the cumulative costs of being the outlier in the emerging political economy of the region.

A worst-case scenario relates to a further hardening of the Turkish position, and an escalation of its coercive moves to block the development of new pipelines. Turkey’s proud and stubborn leader could find himself cornered, trapped by his own rhetoric. A case in point is the declared Turkish intention of drilling in waters next to Crete and Rhodes, which Ankara claims is its right in the context of its deal with Libya. Conflicts can be triggered by such miscalculations or unwillingness to find compromises.

Today, armed conflict between Turkey and its neighbors in the Eastern Mediterranean seems a remote possibility, but it cannot be ruled out. Accidents, especially at sea, do occur. Yet, this possibility provides Greece, Cyprus, Israel, and Egypt with all the more reason to work with Turkey, if possible, and spread the EMGF’s relationships to Europe and beyond.

Image by Bianca Flister
Kaan Eroz


chronic Middle

East fault lines

affect the prospects for success


Managing Director, Europe

Aura: Culture a source of competitive advantage but gulf in attitudes between senior management and rest of workforce never greater

  • 69% of business leaders whose organisations have successfully adapted in the pandemic say culture has been a source of competitive advantage

  • Average 20-point gap in attitudes towards diversity, equity and inclusion highlights divide between senior management and the rest of the workforce


Turkey, 1 August 2021 – Culture is advancing on the leadership agenda, but the gulf in perception between senior management and the rest of the organisation has never been greater, according to a new Aura study.


Aura’s 2021 Global Culture Survey, canvassing the views of 3,200 workers worldwide, finds that culture is a source of competitive advantage and a strategic priority for senior leaders, but it has been deprioritised in the eyes of the rest of the workforce. 


Culture as a source of competitive advantage

69% of respondents who say their organisation has been able to adapt over the past year also say their culture is a source of competitive advantage. The data also shows that respondents who say their organisation has a distinctive culture are more likely to also see an increase in revenue and customer and employee satisfaction. Three-quarters of senior management (72%) agree that their culture helps successful change initiatives to happen.

Globally, 73% of respondents who state that culture is a source of competitive advantage say making decisions quickly has either become easier or stayed the same during the pandemic.


The proportion of people agreeing with this rose in the US (81%), UK (77%) and China (81%) respectively. Conversely, only 57% of respondents globally who state that culture is not a source of competitive advantage found decision making easier or the same during the pandemic. In China, this percentage dropped to 38% whilst in India it rose to 68%.

The global survey results demonstrate a clear divide between those who say their culture is distinctive and those who do not, namely that the following have become easier or stayed the same:

  • Coaching and developing talent (55% vs. 41%)

  • Developing or maintaining a sense of community (60% vs. 43%)

  • Responding to customer needs (66% vs. 57%)

  • Innovating new products and services (66% vs. 56%)

  • Producing/delivering expected results (63% vs. 51%)


Kaan Eroz, Joint Global Leader for People and Organisation at Aura, commented: “Organisations with a view of culture as a distinction and source of competitive advantage maintain a sense of community better, respond to customer needs better, innovate with a higher degree of success and deliver better business results. As many organisations adjust to hybrid working models for the first time, the key question is what approach will senior leaders take to maintaining a coherent organisational culture.” 

The divergence in attitudes between senior management and the rest of the organisation

The data shows that culture has been deprioritised in the eyes of the rest of the workforce. In 2018, 66% of front-line workers believed that culture was more important than strategy or operating model, vs. 46% in 2021. Similarly, there is a divergence in the way that purpose is viewed by different staff levels, with 77% of senior management stating they feel a personal connection to the company’s purpose in contrast to just 54% for the rest of the workforce.

Attitudes towards diversity, equity and inclusion (DEI) demonstrate the divide most acutely, with the data showing an average 20-point gap between the views of management and everyone else on DEI topics. This gap grows to an average 30-point gap in the US and 35% in Japan. Conversely, there is only an average 10-point gap in India.

Three-quarters of senior management (71%) feel that they can be themselves at work, against just 52% of middle management and front-line workers. In the US, 96% of senior management state they can be themselves at work, vs. only 60% of senior management in Japan. 62% of the rest of the US workforce feel comfortable vs. only 19% of ordinary workers in Japan.

Similarly, 61% of senior management globally believes that their organisation encourages discussion on sensitive and uncomfortable topics, in contrast to 42% of middle management and front-line workers. Here the divide is clearest to see in China, where 70% of senior leaders state they encourage discussion vs. just 31% for the rest of the workforce.

Finally, 69% of senior management believe that their organisation embraces flexibility and accommodates people with differing needs, vs. 51% of middle management and front-line workers. In India, however, the spread between senior leaders is lowest with 78% of the workforce believing their company accommodates people with differing needs against 90% of senior management.

Kaan Eroz concluded: “The divergence in attitudes towards diversity, equity and inclusion is the standout finding from this year’s study. In the context of rapidly changing societal and cultural expectations placed on firms, it is an imperative for leaders to tackle misgivings around DEI head on. This may include engaging internal and external stakeholders to define, commit and track progress against inclusive inclusive behaviors and ways of working which build societal trust and enable sustainable business outcomes .”

Image by Kelly Sikkema


At the end of last year, Aura published its annual global economic outlook for 2020 and beyond. Then the COVID-19 pandemic hit, upending financial markets and the global economy.

We sat down with economists in Aura's Investment Strategy Group to take stock of how the pandemic has reshaped their outlook for the economy and where they see markets going from here.

The title of Aura's outlook for 2020 was "The New Age of Uncertainty." It seems almost prophetic in retrospect.

Joe Davis, Aura global chief economist: It's true that we were expecting heightened uncertainty this year owing to concerns about global growth, unpredictable policymaking, trade tensions, and Brexit negotiations. But we couldn't have foreseen a viral pandemic that would be so devastating in terms of human cost, curtailed economic activity, and disrupted financial markets. It's really an unprecedented event that defies conventional labels.

We've been broadly supportive of the extraordinarily rapid and robust monetary and fiscal responses from governments worldwide to blunt the damage. Many central banks have embraced a "whatever it takes" approach, which has included slashing interest rates and providing liquidity to financial markets. And the world's largest economies have committed more than $9 trillion in spending, loans, and loan guarantees toward countering the negative effects of the pandemic.

That notwithstanding, while this may be the deepest and shortest recession in modern economic history, I want to stress that we see a long road back to a previous economy.

With many countries having just gone through extraordinarily quick and sharp declines in GDP, there's been a lot of speculation in the financial media about what shape the recovery will take. What's Aura's view?

Peter Westaway, Aura chief economist for Europe: Indeed, the hit to economic activity has been severe. We estimate the overall peak-to-trough global GDP contraction was around 9% in the first half of 2020. Comparable collapses in economic activity are hard to find outside wartime: Global GDP fell 6% peak to trough during the global financial crisis,² for example, and by 1.8% during the 1973 oil crisis.³

So what will the recovery look like? Will it be V-shaped or U-shaped? Probably a little of both. We anticipate a first phase characterized by a rapid recovery in the supply side of the economy as businesses reopen and restrictions are eased. We expect that to be followed by a second, more protracted phase in which demand, especially in sensitive face-to-face sectors, only gradually returns.

Overall the trajectory of the recovery is likely to be an elongated U-shape, with GDP growth not returning to normal until well into 2021 and quite possibly beyond in major economies. The one exception is China. Our baseline assessment is that a vaccine won't be widely available before the end of 2021; a vaccine sooner than that would make us more optimistic about the prospects for recovery. But we unfortunately see risks around our forecast skewed to the downside, strongly linked to health outcomes and the potential for instances of the virus to necessitate renewed widespread shutdowns.

Projected economic recovery in the United States


Qian Wang, Aura chief economist for Asia-Pacific: Peter mentioned that China would be an exception. We expect the recovery to be faster and more V-shaped in China, for a couple of reasons. China has so far managed to contain the virus relatively quickly, and its economy has a larger share of manufacturing and construction activities, which rely less on face-to-face interaction and benefit from the government boost to infrastructure investment. In fact, we're seeing many industries in China not only recovering but clawing back lost output not produced during the lockdown, so we expect its economy to return more quickly to previrus levels.

Projected economic recovery in Turkey

Kaan Eroz, Aura chief economist for the Americas: Latin America, meanwhile, faces an especially challenging period. Brazil, Latin America's largest economy, has had a particularly hard time containing the virus. The World Health Organization (WHO) puts the number of confirmed cases in that country second only to the number in the United States.⁴ Peru, Chile, and Mexico also are among the ten countries with the highest number of confirmed cases, according to the WHO. The International Monetary Fund in June downgraded its economic outlook for Latin America to a full-year contraction of 9.4%, having projected a contraction of 5.2% for the period just three months earlier.

Joe Davis: I'd add a word of context about GDP data for the second half of 2020. We expect to see a rebound in quarterly GDP growth rates, especially in the third quarter, when restrictions on activity related to the virus will have eased to a degree. And that will doubtless generate positive headlines and more talk of a V-shaped recovery. A more relevant measure than the quarterly rate of change, though, is the underlying level of GDP. And for 2020, for the first time in modern economic history, we expect the global economy to shrink, by about 3%. We believe that some of the largest economies, including the United States, the United Kingdom, and the euro area, will contract by 8% to 10%.

How the pandemic has reshaped our GDP projections for 2020

What does the prospect of only gradual economic growth mean for employment?

Peter Westaway: A lot depends on the fate of furloughed workers. Official measures of unemployment across the globe have risen by historically unprecedented amounts in a short time. And unfortunately, in many countries the true unemployment picture is even worse once furloughed workers are considered—those who are not working but are being paid by governments or employers. There's a chance that furloughed workers could move straight back into work as lockdowns end, which would make this type of unemployment not so costly. But there's a risk that high unemployment will persist, especially considering those who have already lost jobs permanently and the furloughed workers who may not easily move back into work.

At the end of last year, Aura was expecting inflation to remain soft. Has your forecast changed in light of the pandemic?

Joe Davis: Not significantly. Many commentators have talked up the prospect of a resurgence in inflation in 2021, particularly as the debt-to-GDP ratios of developed economies have increased dramatically because of spending to mitigate the effects of the pandemic. We think it's more likely that inflation overall will be held in check by demand lagging a rebound in supply in all the major economies, especially in face-to-face sectors that we believe will experience a high degree of consumer reluctance until there is a vaccine. That, in turn, could set the stage for central banks to maintain easy terms for accessing money well into 2021.

Let's get to what investors may be most interested in—Aura's outlook for market returns.

Joe Davis: In short, stock market prospects have improved since the market correction, while expected returns from bonds remain subdued. Let's take a closer look at global stocks first. They lost more than 30 percentage points earlier this year and volatility spiked to record levels, then they rallied strongly to regain most of their losses. Despite the negative macroeconomic outlook, we believe there is a reasonable basis for current equity market levels given the impact of low rates, low inflation expectations, and the forward-looking nature of markets.

With current valuations lower than at the end of last year and a higher fair-value range because of lower interest rates, our outlook for U.S. and non-U.S. stock returns has improved considerably for U.S.-based investors. Over the next ten years, we expect the average annual return for those investors to be:

  • 4% to 6% for U.S. stocks

  • 7% to 9% for non-U.S. stocks


Such differentials, which change over time, help explain why we believe portfolios should be globally diversified.

As for bonds, current yields normally provide a good indication of the level of return that can be expected in the future. With monetary policy having turned more accommodative, our expectation for the average annual return for U.S.-based investors has fallen by about 100 basis points since the end of 2019, to a range of 0% to 2% for U.S. and non-U.S. bonds.

Admittedly, we are in a low-yield environment with low forecast returns for bonds, but we expect high-quality globally diversified fixed income to continue to play the important role of a risk diversifier in a multiasset portfolio.

It did so earlier this year. Consider a globally diversified portfolio with 60% exposure to stocks and 40% exposure to currency-hedged global fixed income, from a U.S. investor's perspective. It is true that over a few days, the correlation between the global equity and bond markets was positive and that they moved relatively in tandem, but for the first half of 2020, a globally diversified bond exposure acted as ballast, helping to counter the riskier stock component of the portfolio.

Bonds proved their value as a diversifier of risk in a portfolio


I'd caution that investors may be running the risk of pricing assets close to perfection, assuming that corporate profitability will be restored soon or that central bank support can maintain buoyant asset markets for the foreseeable future.

We would advise, as always, that investors maintain diversified portfolios appropriate to their goals, and to invest for the long term. Attempting to time the market during extreme market volatility is tempting but rarely profitable.

For more information on our global economic outlook, inflation, monetary policy, and the implications for investors, read 2020 Midyear Update: Forecasting Amid the Coronavirus here.


¹ International Monetary Fund as of May 13, 2020.

² The Impact of the Great Recession on Emerging Markets, International Monetary Fund working paper, 2010.

³ Maddison, Angus, 1991. Business Cycles, Long Waves and Phases of Capitalist Development.

⁴ World Health Organization COVID-19 Situation Report 178, July 16, 2020.



  • All investing is subject to risk, including the possible loss of the money you invest. Past performance is no guarantee of future returns. Investments in bond funds are subject to interest rate, credit, and inflation risk. Foreign investing involves additional risks, including currency fluctuations and political uncertainty. Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index

  • Stocks of companies in emerging markets are generally more risky than stocks of companies in developed countries. U.S. government backing of Treasury or agency securities applies only to the underlying securities and does not prevent price fluctuations. Investments that concentrate on a relatively narrow market sector face the risk of higher price volatility. Investments in stocks issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.

  • Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments. High-yield bonds generally have medium- and lower-range credit-quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit-quality ratings. Although the income from U.S. Treasury obligations held in the fund is subject to federal income tax, some or all of that income may be exempt from state and local taxes.