By Tuvan Gumrukcu
ANKARA (Reuters) - Turkey's President Tayyip Erdogan said Russian S-400 defences would begin arriving within 10 days, Turkish media reported, setting the clock ticking on possible U.S. sanctions after his warm meeting with President Donald Trump on Saturday.
Hard-hit Turkish financial assets jumped on Monday after a weekend in which Erdogan said Trump had told him at a G20 summit there would be no U.S. sanctions, and the U.S. leader said Turkey had been treated unfairly over the missiles deal.
Turkey and the United States, NATO allies, have been at odds over Ankara's decision to purchase the S-400s, with Washington warning of U.S. sanctions if the delivery took place.
Turkey has dismissed the warnings from Congress and Trump's top secretaries, saying it would not back down and holding out hope that the White House could protect it from sanctions that could hit its already soft currency and economy.
Erdogan's comments offered the most specific timeline yet on the delivery of the ground-to-air missiles that U.S. officials have said are not compatible with North Atlantic Treaty Organization (NATO) defences.
"Within 10 days, maybe within one week, the first shipment will have arrived. I told Trump this openly," Erdogan was cited as saying on Sunday by Hurriyet newspaper after his meeting with Trump in Japan.
The United States says the S-400s will compromise its Lockheed Martin Corp F-35 fighter jets, of which Turkey is a producer and buyer. Washington has also formally started the process of expelling Turkey from the F-35 programme, halting the training of Turkish pilots in the United States.
The Turkish lira strengthened 1.6% on Monday to below 5.70 against the dollar, and Turkey's main stock index rallied 2.7%. The dispute over the S-400s has been a key concern for investors this year.
Turkey's economy, the largest in the Middle East, is in recession after a currency crisis last year chopped 30% from the lira and sent inflation and unemployment soaring. The lira has dropped another 8% so far in 2019.
"So (a) green light from Trump to Turkey to go ahead and get S400s -- or that is now the Turkish view," said Tim Ash, senior emerging markets strategist at BlueBay Asset Management.
"I would imagine U.S. diplomat and defence department officials are in disbelief -- Trump is like the proverbial bull in the China shop."
After the Trump-Erdogan talks, the White House said Trump "expressed concern" over the S-400 deal and "encouraged Turkey to work with the United States on defence cooperation in a way that strengthens the NATO alliance."
INTERPRETING TRUMP
Speaking to reporters after the G20 summit, where he held bilateral talks with Trump, Erdogan said he believed the dispute over the S-400s would be overcome "without a problem" and added that his U.S. counterpart supported Turkey in the dispute.
"In our phone calls, when we come together bilaterally, Mr Trump has not said so far: 'We will impose these sanctions.' On the S-400s, he said to me: 'You are right.' We carried this issue to a very advanced level," Erdogan said, according to broadcaster NTV.
"At this advanced level, Trump said: 'This is injustice'. This is very important. I believe that we will overcome this process without any problems," Erdogan added.
ADVERTISEMENTHe said the two leaders had agreed to delegate officials to follow the issue. He also said Turkish and U.S. foreign and defence ministers would "open the doors" to resolving the matter.
Buying military equipment from NATO-foe Russia leaves Turkey vulnerable to U.S. retribution under a 2017 law known as the Countering America's Adversaries Through Sanctions Act, or CAATSA. Trump would need to sign off on the sanctions.
"Even though Trump's comments were rather positive, this matter does not just end with the president. There is still a sanctions bill regarding Turkey waiting in the U.S. Congress," said Cem Tozge, director of Ata Invest.
"Hence, the uncertainty continues but the market got what it wanted to hear at the weekend."
Turkey's external assets also sailed higher, including dollar-denominated sovereign debt climbing to the highest levels in months. The cost of insuring exposure to Turkey's sovereign debt through credit default swaps declined to their lowest level since early April.
ADVERTISEMENTIn an effort to sway Turkey away from the S-400s, the United States has offered to supply it with Raytheon Co Patriot missiles.
Erdogan was quoted by NTV as saying: "One S-400 is worth three Patriots. If the conditions are even equal to the S-400 (deal), we would buy Patriots, but if they are not, then we have to think of our interests,"
Erdogan also said that he hoped the issue of Turkish lender Halkbank, which faces U.S. Treasury sanctions over an Iran sanctions-busting case that has further strained ties between the allies, would be resolved soon, NTV said.
(Additional reporting by Behiye Selin Taner in Istanbul and Karin Strohecker in London; Writing by Daren Butler; Editing by Jonathan Spicer and Catherine Evans)
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