The Turkish stock exchange has lost investor confidence, the ruling party has lost percentage points in the polls, and palace advisers have suddenly decided that the greatest threat to Islamic morality is the Azerbaijani school uniform. Coincidence or political technology?
It is Monday morning, October 12, 2026. At the gates of public schools in Baku, Jalilabad, and Sumgait, vice principals are checking students against Cabinet of Ministers Resolution No. 309. The same day in Ankara, Oktay Saral, chief adviser to the President of Turkey, publishes a social media post. Depriving schoolgirls in Azerbaijan of their right to education because of a headscarf, he writes, is unacceptable, and the headscarf itself is "a requirement of faith, not an obstacle." Saral adds that Ankara expects Baku to abandon "this mistake" as soon as possible.
At the very same hours, the Istanbul prosecutor's office is preparing its fifth wave of detentions in the financial pyramid case that the Turkish press has already dubbed the "scam of the century." By that point, dozens of people are behind bars. The case involves a former cabinet minister who was also deputy chair of the ruling Justice and Development Party. A week later, a deputy finance minister will resign, and three days after that, police will detain the man credited with writing Recep Tayyip Erdoğan's campaign slogan.
I have been writing about Turkish-Azerbaijani relations for many years. Not once in more than three decades of Azerbaijani independence has a senior official in Ankara publicly demanded that Baku reverse a domestic decision of its sovereign government. The precedent was set precisely now. The timeline deserves careful examination.
An $18 Billion Fraud: How Turkey's "Tera" Collapsed
On September 16, the investment firm Tera Portföy announced that it could not meet part of its redemption obligations on units in two of its funds. Pusula Portföy issued a similar statement. The BIST 100 index fell more than 5% in a single day. By September 17, the Capital Markets Board (SPK) had suspended trading in the fund units and begun liquidating 131 funds belonging to seven asset management companies: Tera, Pusula, Hedef, Atlas, A1, Bulls, and Pardus.
On September 23, the regulator put an exact number on the victims: 455,758 unique investors. Estimates of the money involved vary. According to one financial market source, the total assets of the funds being liquidated came to about 891 billion lira; other calculations put the figure at 826 billion. In dollar terms, that is more than $18 billion. The discrepancy speaks for itself: a month after the collapse, no one in Turkey can say, to within tens of billions of lira, how much money has vanished.
The mechanics of the pyramid will look familiar to anyone who remembers the 1990s in the post-Soviet space. The funds bought shares in small companies with a tiny free float. The share prices soared, the paper value of the fund units grew, and fresh money from small investors poured into the funds. When the outflows began, the structure went into reverse: illiquid securities could not be sold at their artificially inflated prices. On the day of the collapse, Tera founder Emre Tezmen claimed his group had been hit by a "planned speculative attack." He was detained on September 19, and soon afterward a court ordered his arrest along with members of Tera's board of directors and the chairman of Pusula Finans Holding.
By October 22, according to Justice Minister Akın Gürlek, legal proceedings had been initiated against 404 people. Eighty-eight suspects had been formally arrested, 26 were in custody, and 195 had been placed under judicial supervision. Another 42 remain at large. Prosecutors have identified manipulative transactions worth billions of lira in the shares of 41 companies. Officials promise to pool the seized assets in a special fund under the Savings Deposit Insurance Fund (TMSF) and channel them to the victims.
The Family Stake: 255 Lira In, 4,482 Out
The financial crisis turned into a political one on September 26. Opposition politician Zeynel Emre released data on trades made by the family of Fatma Betül Sayan Kaya, a former minister of family affairs, a member of parliament, and deputy chair of the Justice and Development Party, which is to say Erdoğan's own deputy within the party hierarchy.
According to Emre, on April 8 Sayan Kaya bought 250,000 shares in the shipping company Özata Denizcilik at roughly 255 lira apiece, an investment of about 63 million lira. In September, shortly before the crash, the shares were sold at 4,482 lira, and about 1.34 billion lira, or roughly $27.5 million, was withdrawn from the account. That is a more than seventeenfold gain in five months. Her husband, İlyas Kaya, according to the same data, bought another 150,000 shares at the same price. Prosecutors attribute about 2.2 billion lira in income to the family. One important detail: Özata is linked to precisely the Tera funds at the center of the scandal.
Sayan Kaya initially declined to comment, telling reporters she "did not have the time." Late that evening, she announced her resignation from all party posts, citing "political and moral responsibility." The next morning, party spokesman Ömer Çelik said Erdoğan had accepted her resignation. She later left the party altogether and, together with her husband, gave testimony as a suspect in an Istanbul court. The couple deny the charges, and their guilt has not been established pending a verdict. For a political assessment, however, no verdict is needed: the deputy chair of the ruling party exited the market on the eve of the crash with a seventeenfold profit.
Even within the party, the reaction was harsh. Şamil Tayyar, a ruling party lawmaker, demanded that his colleague either refute the data or step down. He later declared that "others will go too."
A Deputy Minister's Son-in-Law, a Fired Regulator, and the Author of the "Century of Türkiye"
Tayyar turned out to be right. On October 19, Deputy Treasury and Finance Minister Osman Çelik submitted his request for retirement to Minister Mehmet Şimşek. His son-in-law, İskender Balcı, a board member of that same Özata Denizcilik and the son of Mustafa Balcı, a member of the Banking Regulation and Supervision Agency (BDDK), had been placed under arrest on October 2. According to Turkish media, Balcı managed to leave for Montenegro after the detention warrant was issued.
The same day, it emerged that Mahmut Sütçü, chairman of the SPK appointed only on May 9, was leaving. The official explanation was health reasons. The next morning, however, a decree in the Official Gazette made clear that Sütçü had not resigned but had been dismissed. His predecessor, İbrahim Ömer Gönül, was removed along with him: on October 14, Şimşek had authorized an investigation into the former head of the regulator.
On October 22, Ertan Aydın was detained. The name may mean little to a foreign reader, but in Turkey it is well known. A former Justice and Development Party lawmaker, he had served since 2012 as Erdoğan's chief political adviser and ran his 2023 election campaign. He is credited as the architect of the "Century of Türkiye" slogan under which Erdoğan contested the last election. After leaving politics, Aydın worked within Tera's corporate structures. In early October, he had already been barred from leaving the country.
One remark Aydın made before his arrest has become a meme in Turkey. He explained that he had left Tera after he "saw some problems and consulted with the elders." Opposition lawmaker Murat Emir asked the obvious question: who exactly are these elders, and why, knowing about the problems, did they not warn hundreds of thousands of investors? There has been no answer. According to the Turkish press, a former deputy governor of the Central Bank is among those arrested. A day earlier, İnan Altınbaş, chairman of the board of Altınbaş Holding, was detained.
The opposition is demanding a parliamentary inquiry and accusing the authorities of a selective investigation. It has a compelling argument: for a long time, the SPK did not file a complaint with prosecutors concerning Sayan Kaya, even though prosecutors had already questioned her as a suspect.
An Ultimatum from New York: Turkey Faces a Downgrade to "Frontier Market"
Investors' money is only the first line on the bill for the damage. On October 15, index provider MSCI froze a number of changes to its Turkish indexes. The company cited institutional investors' concerns about possible coordinated trading through funds affiliated with small listed companies. The wording was polite, but the message was blunt: if progress is not evident by June 2027, MSCI will open consultations on reclassifying Turkey from an emerging market to a "frontier" or "standalone" market.
For a country with heavy external debt, this is a painful signal. A downgrade would trigger automatic sales of Turkish assets by funds tracking the MSCI Emerging Markets index, where Turkey sits alongside Brazil, India, and South Africa. S&P Dow Jones Indices had issued a similar warning back in July. On the evening of October 16, S&P failed to publish its expected sovereign rating review for Turkey, which only added to the nervousness. The Turkish market responded with another decline.
Erdoğan is trying to seize control of the narrative. On October 7, he promised that the capital markets would be "cleansed of greedy parasites." The authorities are promising to toughen legislation on capital market crimes before the start of 2027. On October 22, the parliamentary majority pushed through an amendment on the procedure for liquidating the funds, which the opposition immediately branded a bailout of Tera at the expense of small investors.
The Arithmetic of a Third Term
Now for the main reason to keep an eye on the calendar. Article 116 of the Turkish Constitution allows a president who has been elected twice to run again in only one case: if parliament calls early elections during the second term. That requires the votes of three-fifths of lawmakers, or 360 out of 600. The ruling alliance of the Justice and Development Party and the nationalists does not have such a majority. It needs allies.
The groundwork was being laid. On October 11, the pro-Kurdish DEM Party announced its conditional support for Erdoğan's renomination. The structure was being assembled brick by brick, and then the stock market collapsed.
The polls are registering the damage. A survey by ASAL, conducted October 4 to 10 in 28 provinces with a sample of 2,020 respondents, put the ruling party at 31.6%, four points below its 2023 result. According to figures cited in the Turkish press, internal polling shows a loss of three to six points. In a Betimar survey, half of respondents, 50.5%, believe the scandal will undermine trust in the government. Sixty-two percent of those polled by ASAL want the names of those involved made public, regardless of party affiliation.
A party accustomed to winning on an image of honest, devout people standing against a corrupt secular elite has suddenly found itself cast as that very elite. For more than twenty years, the party's principal moral capital was the claim of clean hands. Today that claim is worth less than Özata shares after the crash.
What Baku Actually Decided
Let us return to the Azerbaijani school and look at the documents rather than the headlines.
On July 7, 2026, President of Azerbaijan Ilham Aliyev signed amendments to the Law on General Education that added the principles of national identity and secularism to the foundations of the general education system. On September 21, the Cabinet of Ministers adopted Resolution No. 309, signed by Prime Minister Ali Asadov. It supplemented Resolution No. 96 on school uniforms, in force since 2022, with a provision prohibiting, in public schools, additional items of clothing that violate the uniformity of the dress code and are incompatible with the secular nature of education. On October 6, similar rules were adopted for teachers. The words "hijab" and "headscarf" do not appear anywhere in the text. For events related to history and culture, a school's teaching council may permit elements of national dress.
None of these measures touches private life, mosques, the street, universities, or private schools. They concern public secondary schools in a secular state. The Constitution of Azerbaijan explicitly declares the country secular, with religion separate from the state and the education system.
The model is hardly unique. Kazakhstan banned religious attire as part of school uniforms by order of its Ministry of Education back in 2016. Tajikistan went considerably further, legally restricting clothing "alien to national culture" in 2024. France banned conspicuous religious symbols in public schools by a 2004 law, and the European Court of Human Rights has upheld such restrictions as permissible.
The most inconvenient precedent for Ankara is a Turkish one. In 2005, the Grand Chamber of the European Court of Human Rights ruled in Leyla Şahin v. Turkey that the headscarf ban at Turkish universities was lawful. It was the Turkish state that defended the ban in Strasbourg, invoking the principle of secularism enshrined in Article 2 of its own Constitution. Mandatory school uniforms existed in Turkey until 2012, and the headscarf was permitted in upper grades only in 2014. In other words, a country that lived under this very model for decades and defended it before a European court is now declaring the same model "unacceptable" in a neighboring state.
Within Azerbaijan, the decision provoked protests, and it would be dishonest to pass over that in silence. Iranian clerics, incidentally, were also quick to criticize Baku. It is precisely this connection that explains why, for the Azerbaijani state, the secular school is a matter of security, not fashion.
One Adviser's Post and a Chorus of Pro-Government Airwaves
Oktay Saral is no random figure. He is a former lawmaker, a longtime party functionary in Istanbul, and a chief adviser to the president. A man of his rank does not write about foreign policy without understanding how his words will be read. His post was backed by Müfit Aydın, a ruling party lawmaker, who asked Baku whether Azerbaijanis' consciences were not troubling them. Then the pro-government airwaves kicked in. Islamist newspapers ran a series of pieces comparing the Azerbaijani school to Turkey's "February 28 process" of 1997, when the military forced Necmettin Erbakan's Islamist government from power. Islamic NGOs staged a protest outside the Azerbaijani Embassy in Ankara. Memur-Sen, a labor confederation close to the government, issued a statement. In Diyarbakır, a rally against the "persecution of the headscarf in Azerbaijan" was called for October 23, after Friday prayers.
A caveat is in order here. The anti-Azerbaijani wave is not confined to Erdoğan's circle. On October 13, former Republican People's Party leader Kemal Kılıçdaroğlu also called on Baku to "liberate women." Fatih Erbakan's New Welfare Party attacked Azerbaijan even more fiercely, and Erbakan himself is now barred from entering Azerbaijan. His deputy, Muhammed Fatih Müceci, reproached Erdoğan for failing to intervene personally.
This detail, in my view, reveals the logic of what is happening. The ruling party's chief electoral rival on the religious right is precisely New Welfare, which is drawing devout voters away from Erdoğan. The corruption scandal strikes at the government's moral authority above all in the eyes of these very voters. The headscarf issue is the party's oldest identity capital, the one it rode to power in 2002. Playing that card now means reclaiming moral superiority among the most sensitive audience at exactly the moment when talk of Özata's billions makes such superiority impossible.
The scheme runs on a classic dual track. The adviser says what the religious base wants to hear, pro-government media amplify the issue, and the man at the top keeps his distance and his room for retreat. On October 7, even before the resolution took effect, Ömer Çelik declared that the party would allow no one to drive a wedge between Turkey and Azerbaijan. Erdoğan himself has said nothing publicly. The palace has reserved for itself the role of arbiter in a conflict launched by its own people.
Diverting public attention from a domestic crisis to an external irritant is a textbook maneuver. In April 1982, amid inflation and mass protests, General Leopoldo Galtieri sent the Argentine army to the Falklands. For several weeks, the Plaza de Mayo was transformed from a site of protest into a site of patriotic rallies. Two and a half months later, the junta lost the war and lost power. The comparison with Turkey is, of course, imperfect: no one is going to war. But the mechanism is the same. What is unprecedented in our case is the choice of target. For the first time, the object of such an operation is a country that Turks customarily call the other half of "one nation."
"One Nation, Two Independent States": Baku Responds
The response came the next day. On October 13, the ruling New Azerbaijan Party, led by Ilham Aliyev, issued a statement addressed directly to Erdoğan's party. It called the remarks by Saral and Turkish lawmakers populist and irresponsible, and accused Turkish media of spreading inaccurate and biased information. The party noted that Turkey is itself constitutionally a secular state. The key sentence of the statement came without any diplomatic softening: "We call on the ruling Justice and Development Party to abandon this harmful policy."
The document's central point concerned the formula "one nation, two states." Baku stressed that it means one nation and two independent states, and that it gives neither the right to impose its political and ideological approaches on the other. The Milli Majlis working group on interparliamentary relations with Turkey issued a similar statement, recalling the Shusha Declaration of June 15, 2021, which elevated relations between the two countries to the level of an alliance. State television channel AzTV called Saral's position a crude interference in internal affairs. As early as October 12, the Media and Broadcasting Council had warned against attempts to politicize the school uniform issue.
The most telling reaction came not from Baku. On October 14, Devlet Bahçeli, leader of the Nationalist Movement Party and Erdoğan's chief ally, publicly stressed the need for mutual respect for the sovereignty and domestic law of the two countries. In other words, the president's closest coalition partner signaled that he had no intention of playing this game.
On October 15, the seventh summit of the Conference on Interaction and Confidence-Building Measures in Asia (CICA) opened in Baku. Erdoğan did not attend. Turkey was represented by Foreign Minister Hakan Fidan, who was received by President of Azerbaijan Ilham Aliyev. After the meeting, Fidan confined himself to a guarded formulation: from time to time, he said, "there may be different approaches on certain issues." For a minister who in 2023 described Azerbaijan's counterterrorism measures in Karabakh as justified steps on its own sovereign territory, this was a revealing admission that the two sides had indeed parted ways.
On October 20, foreign media, citing three officials, reported that Baku had allegedly asked Ankara to dismiss Saral, and that Erdoğan's absence from the summit had only made matters worse. No one has officially confirmed this. The pro-government Turkish press responded predictably, with outrage over Azerbaijan's "interference" in Ankara's personnel decisions. The irony of the situation appears to have been lost on the authors of those columns.
An Israeli Ricochet and an Iranian Shadow
The dispute quickly spilled beyond school uniforms. In Turkey, criticism of Azerbaijan was compounded by reproaches over its ties with Israel. The Azerbaijani side responded by pointing to Turkish-Israeli trade, which persisted for years despite Ankara's loud rhetoric. In this dispute, Israel serves as a convenient rhetorical weapon for both sides, but it is a sideshow.
The Iranian dimension matters more. For decades, Tehran has used a religious agenda as an instrument of pressure on Azerbaijan: through the Shiite clergy, through satellite channels, through networks in Nardaran and Masally. Every time Turkish Sunni Islamists attack Azerbaijani secularism, they objectively end up in the same boat as the Iranian mullahs. One telling detail: the prominent Turkish preacher Ahmet Mahmut Ünlü framed his position as Turkey supporting Azerbaijan against Iran while rejecting the headscarf ban. The logic is odd. The secular school is itself one of Azerbaijan's lines of defense against Iran.
The Price of Words That Cannot Be Taken Back
Let us look at what is at stake, in figures. The Baku-Tbilisi-Ceyhan oil pipeline has been operating since 2006, carrying Azerbaijani oil to Turkey's Mediterranean coast. The Trans-Anatolian Natural Gas Pipeline, TANAP, is designed to carry 16 billion cubic meters a year, 6 billion of which are earmarked for Turkey. The Baku-Tbilisi-Kars railway opened in 2017. SOCAR owns the Petkim petrochemical complex and the STAR refinery in Izmir. Azerbaijan's total investment in the Turkish economy, by various estimates, is approaching $20 billion, making Azerbaijan one of Turkey's largest foreign investors. The Zangezur corridor, which that same Justice Minister Gürlek spoke about enthusiastically in Baku this summer, becomes a mere line on a map without Azerbaijan's participation.
On July 2, 2026, President of Azerbaijan Ilham Aliyev received Akın Gürlek in Baku. The minister spoke at the time of relations founded on shared history, culture, and brotherhood, and gave assurances that Turkey would continue to stand by Azerbaijan. Three months have passed. Now his ministry is running a pyramid scheme case that keeps drawing in more and more people from the inner circle of power, while others from that same circle debate what girls wear in Azerbaijani schools.
Azerbaijan owes no one an explanation in this story. The school uniform decision was made by a sovereign state within the framework of its own Constitution, is consistent with the practice of most Turkic states, is supported by European case law, and directly mirrors what Turkey itself did until 2012. It is the other side that should be justifying itself: the side that turned an ally's domestic decision into material for its own election campaign.
My forecast is as follows. Oktay Saral will not be formally dismissed before the end of 2026: Erdoğan never gives up his own people under outside pressure. But the headscarf issue will disappear from the lips of Ankara's officials before Erdoğan's first face-to-face meeting with President of Azerbaijan Ilham Aliyev. The majority alliance will block a parliamentary inquiry into the "scam of the century." And in June 2027, MSCI will be assessing not Turkish declarations of brotherhood but free-float figures, and that conversation will be impossible to divert.
That leaves the question Turkish journalists are putting to Ertan Aydın, a question that is in fact addressed to the entire system. Who are the "elders" he consulted before leaving Tera?
Until there is an answer, Ankara prefers to talk about something else. In a widely shared video from Imishli, a schoolgirl in a headscarf tearfully tells her principal that she scored 97 points and has done nothing to bring shame on her school. Turkish television channels played it around the clock. Stories about retirees who lost their savings in the Tera funds were noticeably scarcer on those same channels.