Iran’s Turkish gold rush


Date posted: December 27, 2013

JONATHAN SCHANZER, MARK DUBOWITZ
Turkey’s Islamist government is being rocked by the most sweeping corruption scandal of its tenure. Roughly two dozen figures, including well-connected business tycoons and the sons of top government ministers, have been charged with a wide range of financial crimes. The charges ballooned into a full-blown crisis on Dec. 25 when three ministers implicated in the scandal resigned, with one making a dramatic call for Prime Minister Recep Tayyip Erdogan to step down as well. An exhausted-looking Erdogan subsequently appeared on television in the evening to announce a cabinet reshuffle that replaced a total of 10 ministers.

The drama surrounding two personalities are particularly eye-popping: Police reportedly discovered shoeboxes containing $4.5 million in the home of Süleyman Aslan, the CEO of state-owned Halkbank, and also arrested Reza Zarrab, an Iranian businessman who primarily deals in the gold trade, and who allegedly oversaw deals worth almost $10 billion last year alone.

The gold trade has long been at the center of controversial financial ties between Halkbank and Iran. Research conducted in May 2013 by the Foundation for Defense of Democracies and Roubini Global Economics revealed the bank exploited a “golden loophole” in the US-led financial sanctions regime designed to curb Iran’s nuclear ambitions. Here’s how it worked: The Turks exported some $13 billion of gold to Tehran directly, or through the UAE, between March 2012 and July 2013. In return, the Turks received Iranian natural gas and oil. But because sanctions prevented Iran from getting paid in dollars or euros, the Turks allowed Tehran to buy gold with their Turkish lira — and that gold found its way back to Iranian coffers.

This “gas-for-gold” scheme allowed the Iranians to replenish their dwindling foreign exchange reserves, which had been hit hard by the international sanctions placed on their banking system. It was puzzling that Ankara allowed this to continue: The Turks — NATO allies who have assured Washington that they oppose Iran’s military-nuclear program — brazenly conducted these massive gold transactions even after the Obama administration tightened sanctions on Iran’s precious metals trade in July 2012.

Turkey, however, chose to exploit a loophole that technically permitted the transfer of billions of dollars of gold to so-called “private” entities in Iran. Iranian Ambassador to Turkey Ali Reza Bikdeli recently praised Halkbank for its “smart management decisions in recent years [that] have played an important role in Iranian-Turkish relations.” Halkbank insists that its role in these transactions was entirely legal.

The US Congress and President Obama closed this “golden loophole” in January 2013. At the time, the Obama administration could have taken action against state-owned Halkbank, which processed these sanctions-busting transactions, using the sanctions already in place to cut the bank off from the US financial system. Instead, the administration lobbied to make sure the legislation that closed this loophole did not take effect for six months — effectively ensuring that the gold transactions continued apace until July 1. That helped Iran accrue billions of dollars more in gold, further undermining the sanctions regime.

In defending its decision not to enforce its own sanctions, the Obama administration insisted that Turkey only transferred gold to private Iranian citizens. The administration argued that, as a result, this wasn’t an explicit violation of its executive order.

It’s possible that the Obama administration didn’t have compelling evidence of the role of the Iranian government in the gold trade. However, the president may have also simply sought to protect his relationship with Ankara and didn’t want to get into a diplomatic spat with Erdogan, who he considers a key regional ally.

If the administration didn’t feel that the sanctions in place at the time were sufficient to take action against Halkbank, after all, it could have easily shut down the gold trade by amending its executive order. But at the time, Turkey was also playing a pivotal role in US policy in Syria, which included efforts to strengthen the more moderate opposition factions fighting President Bashar Assad’s regime.

It’s also possible, however, that the Obama administration’s decision had less to do with Turkey, and more to do with coaxing Iran into signing a nuclear deal. In the one-year period between July 2012, when the executive order was issued, and July 2013, when the “golden loophole” was closed, the Obama administration’s non-enforcement of its own sanctions reportedly provided Iran with $6 billion worth of gold. That windfall may have been an American olive branch to Iran — extended via Turkey — to persuade its leaders to continue backchannel negotiations with the United States, which reportedly began as early as July 2012. It could also have been a significant sweetener to the interim nuclear deal eventually reached at Geneva, which provided Iran with another $7 billion in sanctions relief.

Indeed, why else would the administration have allowed the Turkish gold trade to continue for an extra six months, when Congress made clear its intent to shut it down?

This brings us back to the current corruption drama in Turkey. The ruling Justice and Development Party (AKP) has been claiming that it is a victim of a vast conspiracy, blaming everyone from Washington to Israel to US-based Islamic cleric Fethullah Gulen for its woes. Some Turkish media have pointed a finger at David Cohen, the Treasury Department’s undersecretary for terrorism and financial intelligence, who happened to be in Turkey as the news began to break. Erdogan even raised the possibility of expelling the US ambassador to Ankara, Francis Ricciardone.

But if the charges stand against the panoply of well-connected figures fingered, the AKP will have only itself to blame. While the gas-for-gold scheme may have been technically legal before Congress finally shut it down in July, it appears to have exposed the Turkish political elite to a vast Iranian underworld. According to Today’s Zaman, suspicious transactions between Iran and Turkey could exceed $119 billion — nine times the total of gas-for-gold transactions reported.

Even if the Turkish-Iranian gold trade represents only a small part of the wider corruption probe, the ongoing investigation could provide a window into some nagging questions about the relationship between Ankara and Tehran. Perhaps we will finally learn why the Turkish government allowed Iran to stock up on gold while it was defiantly pursuing its illicit nuclear program — and whether the Obama administration could have done more to prevent it.

Schanzer and Dubowitz work at the Foundation for Defense of Democracies.

Source: Foreign Policy , December 27, 2013


Related News

Police officer reassigned for attending dershane picnic

The Interior Ministry has reassigned police officer H.D., who worked at the National Police Department’s Anti-terrorism Unit in Ankara, on the grounds that he and his child attended a picnic organized by a dershane (private preparatory school) affiliated with the faith-based Hizmet movement.

Say What? Ankara Mayor Blames Gulenists for Shaking Turkey With an Earthquake

No joke: Ankara’s mayor suggests that an earthquake that has recently hit Turkey’s northwest might have been caused by the followers of cleric Fethulah Gulen.

AK Party gov’t behind anti-Hizmet declaration, leaked recordings allege

A joint declaration by a number of civil society organizations to proclaim open support for the government during debates over the closure of dershanes (prep schools) was concocted by the advisors of the Prime Minister Recep Tayyip Erdoğan and some associations were forced to lend their support, according to a number of new leaked recordings.

49-member team to report to President Erdoğan on Gülen-linked trials

A group of 49 people, nine experts from Turkey’s State Inspection Council and 40 key advisers of President Tayyip Erdoğan, will closely monitor trials concerning the Gülen movement and submit reports to the president.

The Fall of Turkey

Western officials have preferred to raise concerns over the steady dismantling of Turkey’s free institutions only privately with their counterparts in Ankara. This approach has failed. That failure has left many millions of pro-democracy Turks to fend for themselves, while a once-fringe ideological element in the AKP, reared on Islamist supremacism, has been emboldened.

A solid step in Gulen movement Alevite community dialogue: Mosque-cemevi-soup kitchen project

The Gulen movement and Cem Foundation of the Alevite community have agreed to launch an important project. They will build a mosque, a cemevi (Alevite house of gathering) and a soup kitchen side by side in the capital of Turkey, Ankara. Gulen (Hizmet) movement takes a concrete step forward to extend common shared values with Alevite […]

Latest News

This notable Pocono resident has been living here in exile since 1999

Logistics companies seized over Gülen links sold in fast-track auction

That is Why the Turkish Government could Pay 1 Billion Euros

ECtHR rules Bulgaria violated rights of Turkish journalist who was deported despite seeking asylum

Fethullah Gülen’s Message of Condolences in the Wake of the Western European Floods

Pregnant woman kept in prison for 4 months over Gülen links despite regulations

Normalization of Abduction, Torture, and Death in Erdogan’s Turkey

Turkey’s Maarif Foundation illegally seized German-run school in Ethiopia, says manager

Failed 2016 coup was gov’t plot to purge Gülenists from state bodies, journalist claims

In Case You Missed It

Fethullah Gülen undergoes successful cataract surgery

Survey shows Turkish gov’t seized at least $11 billion of company assets over Gülen links

Inside the eye of Turkey’s political storm, in rural Pennsylvania

Diagonal Dialogue from Turkey to Senegal

Abant Platform raises support for EU process, criticism for parties

AK Party gov’t searches for scapegoat for stalled PKK talks

Turkish school leaves tight quarters for spacious former Wayne corporate building

Copyright 2021 Hizmet News