WASHINGTON  - U.S.-Turkey business groups on Tuesday warned that a political dispute between the NATO allies was affecting investor confidence and had forced some firms to suspend investment plans.

In interviews with Reuters, the heads of the American Turkish Council and Turkey-U.S. Business Council, which jointly represent 250 companies, called on President Donald Trump and President Tayyip Erdogan to meet to end the dispute over the release of American pastor Andrew Brunson.

"Only the two presidents can put this relationship back on track," said Mehmet Ali Yalçinda?, chairman of the Turkey-U.S. Business Council. "We need to end this before it strains and permanently damages the relationship."

The countries are deadlocked over demands by Washington for the release of Brunson, while Turkey wants the U.S. Treasury to halt an investigation into majority state-owned Halkbank, which faces a potentially hefty U.S. fine for violating Iran sanctions.

Brunson has denied Turkey's allegations that he was involved in a plot against Erdogan two years ago.

Howard Beasey, president and CEO of the American Turkish Council, said a $300 million merger and acquisition deal by a Turkish firm in the United States was suspended last week over political uncertainty.

A second Turkish company was reconsidering plans to produce a steel product in the United States after Washington recently imposed additional steel and aluminum tariffs on Turkish imports. "That is all at risk right now, not because they don't still see opportunity, but because they just don't know where the political relationship is going to go," Beasey said, referring to increased trade and investment between the two countries.

"The United States is using its economic strength in a dangerous way for political gain and we don't agree with the use of sanctions for that reason. We can see direct impacts already," he added.

Beasey said the Turkish currency, the lira, had already been under pressure before the diplomatic rift and the United States was not to blame for its slide. He said, however, Washington's decision to impose sanctions on two Turkish ministers, and the threat of more to come, had exacerbated the problem.

The lira's weakness has cranked up pressure on Turkish banks and corporates, which now account for the bulk of credit ratings downgrades in emerging markets this year. The sell-off in the lira has spread to other emerging market currencies and global stocks in recent weeks.

The lira has lost about 40 percent of its value against the U.S. dollar so far this year. It weakened on Tuesday after Trump, speaking in a Reuters interview, said he would give Turkey no concessions in return for the release of Brunson.

Trump and Erdogan last met in Brussels on the sidelines of a NATO summit in Brussels in mid-July where they discussed the Brunson case.

 

 

(Reporting by Lesley Wroughton; Editing by Cynthia Osterman) ((lesley.wroughton@thomsonreuters.com; +1-202-354-5982;))