The escalating struggle between rival factions within Turkey’s political elites, ostensibly over a corruption scandal that broke last December, has led to the release of tapes of phone calls purporting to implicate Prime Minister Recep Tayyip Erdogan and his family.

The conflict represents the most serious challenge to Erdogan’s 11-year rule and to the stability of Turkey itself.

In the tapes, Erdogan is heard telling his son Bilal to dispose of large sums of money, just as the scandal was breaking on December 17.

Erdogan dismissed the leaked tapes, downloaded by millions on YouTube, as “completely untrue” and “the product of an immoral montage.” They were, he said, part of a broader campaign to unseat him by his former political allies in his Islamist Justice and Development Party (AKP), the shadowy movement led by Fethullah Gülen, known as Hizmet.

Erdogan claimed that Hizmet had infiltrated the police and judiciary, forming a parallel state, and threatened to bring those behind the “conspiracy” to court. He claimed that the United States ambassador to Turkey and other Western forces were backing Hizmet. There was even talk of expelling the US ambassador from Ankara.

While Hizmet’s precise role is unclear, it is certainly more closely aligned with Washington than Erdogan’s own faction, while Gülen, a US resident, is rumoured to be on the CIA payroll.

Since then, further tapes have been published apparently showing Bilal Erdogan’s involvement in dubious business deals.

Erdogan’s office claimed that Hizmet had for some years been tapping thousands of telephones in Turkey to blackmail and orchestrate corruption cases against leading figures and their relatives in the AKP. Officials claimed that this illegal wiretapping included Erdogan himself.

This latest corruption scandal came to light in a series of police raids on December 17, leading to the resignation of three ministers, the dismissal of others and a cabinet reshuffle. In the fallout, Erdogan Bayraktar, one of the ministers that resigned, claimed that Erdogan was fully aware of everything that happened and called on him to resign.

In a bid to stop the charges and investigations spreading, Erdogan sacked or re-assigned hundreds of judges and prosecutors, thousands of police officers and other top officials, including some from the Telecommunications Directorate and the Banking and Supervisory Agency. None of the 24 people arrested in the December raids are in jail or had their passports confiscated prior to their court cases.

On Saturday, a US State Department report strongly criticised the government’s actions following the December 17 corruption probe, calling them a scandal.

Erdogan has also introduced laws tightening government control over the Internet and the courts. The latest bill to go through parliament has strengthened the National Intelligence Agency (MIT), enabling it to access data without due process that will position it as one of the most powerful institutions in the country, under the direct tutelage of the prime minister.

In the last year, dozens of journalists have been fired as a result of government pressure, while journalists face constant intimidation and threats. Turkey holds the world record for the number of journalists in jail.

Erdogan has backtracked on his attempts to rein in the military, and supported retrials for the hundreds of top military brass jailed for their alleged participation in the Ergenekon plot against the government. The trials are widely believed to have been unjust and fraught with illegal wiretaps and concocted evidence.

So febrile is the political atmosphere that fistfights have broken out in Turkey’s parliament on at least three occasions.

The main opposition, Kemalist Republican People’s Party (CHP), has called on Erdogan to resign. The CHP is tainted with its own scandals, collusion with military repression and the decades-long war against the Kurds, and rabid nationalism.

There are also tensions between Erdogan and President Abdullah Gul, while a number of MPs have resigned from the AKP.

The latest revelations come days after campaigning started for local elections on March 30 that could in turn determine whether Erdogan runs for the presidency in August. In an attempt to ensure that the AKP mayor of Istanbul keeps his post, Turkish officials ordered that the assets of the CHP’s main opposition candidate in Istanbul be confiscated due to a bad loan dating back to 1998.

The turmoil within the Turkish ruling elite comes in the wake of the broader political crisis provoked by sudden shifts in US imperialism’s Middle East policy that have disrupted relations between President Barack Obama and Erdogan, who was once one of Obama’s preferred allies.

In July last year, Washington supported the military coup that overthrew the Muslim Brotherhood-led government of President Mohammed Mursi, a key Erdogan ally. This was followed weeks later by Obama’s decision to postpone its war plans against Syria—which the Erdogan government pushed for aggressively. This was bitterly resented by Ankara, as the Syrian civil war now threatens the security of Turkey’s southern borders, itself the result of the AKP government’s decision to back right-wing Islamist groups, and allow them to operate from Turkey. At least 4,500 Turks are reported to be fighting alongside Al Qaeda-linked groups.

Washington decided to pursue a diplomatic track with Iran, in an attempt to exert major concessions from Syria’s main regional ally. Negotiations with Iran are continuing, with Washington offering Iran limited relief to sanctions that have devastated its oil industry and economy. The sanctions severely disrupted Turkey’s own oil and gas trade with Iran, paid for in gold via Turkey’s state bank, the Halkbank, circumventing the sanctions. The Halkbank has also been caught up in the corruption scandal.

Tensions with Washington were further exacerbated by Ankara’s attempts to procure oil and gas directly from the Kurdistan Regional Government (KRG) in Iraq without going through the US-backed Maliki regime in Baghdad. Maliki faces a Sunni insurgency in Anbar province, blowback from the very forces seeking to overthrow the Assad regime in Syria he has backed.

The Turkish government also antagonized Washington by buying a Chinese missile system from a company under US sanctions for dealing with Iran, North Korea and Syria. US Congress has threatened to cut off subsidies to Turkey.

Ankara appears to have pulled back from its plans to import energy directly from the KRG and reined in support for Al Qaeda-linked militants in Syria. But it has made overtures to both Iran and Russia—under conditions where one of Turkey’s key economic policies has been to position itself as a transit hub for oil and gas from the Middle East, Russia and Central Asia to Europe.

Speaking in St. Petersburg last November, Erdogan repeated his appeal to join the Shanghai Cooperation Organization as a full member and promised in return to abandon any attempt to join the European Union. Crucially, he asked to join the Eurasian Union that Russia is seeking with the former Soviet republics.

The AKP faces increasing problems on the economic front, which will deepen the political turmoil in the country. The Turkish lira has fallen to levels that threaten to bankrupt many Turkish companies—40 percent of their loans are denominated in foreign currencies. Turkey is running a current account deficit of $60 billion a year, 80 percent of which is funded by short-term funds. It holds just $33 billion in foreign reserves, enough to cover the cost of imports for one-and-a-half months.

Turkey’s current account deficit has ranged between 8 and 10 percent of GDP during the past three years, similar to Greece in the years before its financial collapse in 2011. It has been financed by loans from Saudi and other Gulf states, but relations have soured with their support for the overthrow of the Muslim Brotherhood government in Egypt and they have started to withdraw financial support.