NATO deal between Turkey, Sweden and Finland brings home wins for Erdogan — and a possible F-16 breakthrough

NATO officials on Tuesday celebrated Turkey's lifting of its veto against Sweden and Finland joining the transatlantic alliance, a move that brought the Nordic states one step closer to full NATO membership four months after Russia launched its invasion of Ukraine.

Turkey's initial opposition came as a major stumbling block and a surprise to many, amid growing urgency among Western nations to push back against Russian President Vladimir Putin. Finland and Sweden took a historic decision to end their nonaligned positions and join the alliance in the face of Russia's aggression, but new countries joining NATO requires unanimous approval from all existing member states.

Turkish President Recep Tayyip Erdogan was staunch in his demands of Sweden and Finland, which centered on their relationships with groups that Turkey's government deems a terrorist threat.

What is a big win for NATO is also a victory for Erdogan, analysts say, and one that the president needed in order to shore up domestic support as his economy flounders and Turks struggle with inflation that's exceeded 70%.

"Win all around, apart from Putin who is the big loser in all this," Timothy Ash, an emerging markets strategist at Bluebay Asset Management, wrote in a note Wednesday. "Good decision by Erdogan. He takes some political capital into elections."

"He negotiated hard, right up to the last minute, and got real wins with assurances" on security issues and likely on more military equipment from the U.S., Ash wrote. "He had his call with Biden and will get his one-on-one with Biden at Madrid. He comes back in from the cold with the West."

The breakthrough with Turkey followed four hours of talks and weeks of deliberations and debate, culminating in a trilateral agreement between Turkey, Sweden and Finland. The agreement involved the Nordic countries lifting arms embargoes they had previously imposed on Turkey, toughening their laws against Kurdish militant activists that Ankara deems to be terrorists, and addressing Turkish extradition requests for suspected Kurdish fighters.

Turkey is home to 14 million Kurds, one of the largest ethnic groups in the world without a homeland. Their population of 30 million is spread across Turkey, Iraq, Iran and Syria as well as in immigrant diasporas around the world. Kurds have faced decades of persecution throughout Turkey's modern history.

One major Kurdish separatist group, called the PKK, or the Kurdish Workers' Party, has been essentially at war with the Turkish state since the 1980s, engaging in violent tactics that have triggered bloody responses and resulted in more than 40,000 deaths.

Turkey, Sweden and Finland all classify the PKK as a terrorist organization. But Erdogan accused the two Nordic states of harboring and supporting PKK fighters, which those countries deny. But Sweden in particular does support and send aid to other Kurdish groups in Syria that Turkey's government does not differentiate from the PKK.

For Erdogan, a guarantee of better cooperation on this issue and demonstrated respect for its security needs was priority number one.

Turkey "got what it wanted" from the deal with Sweden and Finland penned Tuesday night, the Turkish president's office said in a statement. That meant "full cooperation with Turkey in the fight against the PKK and its affiliates," including a PKK offshoot in Syria called the YPG, which had been supported by Western countries including the U.S. in the fight against ISIS.

Stockholm and Helsinki also pledged "not to impose embargo restrictions in the field of defense industry" on Turkey and to take "concrete steps on the extradition of terrorist criminals," according to the statement.

Erdogan will also get a one-on-one meeting with U.S. President Joe Biden during the NATO summit in Madrid, in what many suspect was another sweetener to the deal. He's expected to push for a U.S. sale of F-16 fighter jets to Turkey, which the Biden administration said was an issue separate from the NATO deal.

It's not clear whether the F-16 sale will go through, but many observers expect it to do so as a gesture of unity following Erdogan's acceptance of the new NATO applicants. The U.S. in 2017 kicked Turkey out of its F-35 program after it purchased Russia's S-400 missile defense system.

"F-16 deal surely has to be done — let's hope the U.S. Congress does not put a spanner in the works," Ash wrote. Congress is typically required to approve all U.S. arms sales.

Ultimately, Erdogan will need to see actions rather than words to feel like he got a good deal.

"The most important is to wait and see what will be the implementation of the commitments on the ground," Hakki Akil, a former Turkish ambassador who served in the Middle East and Europe, told CNBC. "Especially Sweden may face some internal policy problems," he said, because of political pressure from influential Kurdish groups in Sweden.

"We can say that this agreement is success for President Erdogan, but the internal political impact or gain in the country might be limited because of the economic situation in the country," he added.

Turkey's presidential election is in June 2023, and a lot can happen between now and then. But by gaining some concessions from the West and proving he can deploy leverage to his advantage, Erdogan can return to Turkey with something to show for his efforts.

Still, the economic crisis hitting the country of 84 million — whose currency has lost half its value in the last year — may ultimately play a bigger role.

"Erdogan has again shown his pragmatism, avoiding a crisis, taking some political capital ... which he will hope to deploy domestically in elections," Ash wrote. "But the election outcome is still mega uncertain."