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Turkish Prosecutor’s Report Highlights Illicit Iran Transactions

Turkish Prosecutor’s Report Highlights Illicit Iran Transactions

Jonathan Schanzer, Merve Tahiroglu
20th March 2014 - FDD Policy Brief

Turkish headlines on March 14 focused on the contents of a 300-page report, allegedly penned by Turkish prosecutors, detailing a criminal organization under Iranian businessman Rezza Zarrab. Zarrab, who has been at the center of Turkey's corruption scandals since December of last year, is alleged in this report to have conducted a wide range of illegal activities in Turkey, including money laundering through Iran, Dubai and China.

The March 14 report reinforces much of what has already been written about the Turkish gas-for-gold scheme, which transpired between 2012 and 2013, and yielded Iran some $12 billion in illicit transactions at the height of the sanctions regime designed to halt Tehran's nuclear ambitions. However, the report goes so far as to identify the specific companies owned by Zarrab and his network, based primarily in Turkey, with some nodes in Iran and Dubai, that allegedly facilitated these transactions.

According to the report, China began to play a role in 2013. Front companies reportedly sent funds from Iranian banks in Iranian rial or Chinese Yuan denominations to Chinese bank accounts as payment for non-existent exports. Once the funds were converted to Turkish lira or euros, the funds were allegedly sent back to Turkey to purchase gold to be exported to Iran or Dubai, where gold was melted into bricks before being sent to Iran's central bank.

In anticipation of congressional legislation that would bar these transactions explicitly, Zarrab's network reportedly pivoted to a complex money-laundering scheme. This allegedly involved forgeries under the cover of food and drug exports to Iran beginning in April 2013.

Senior Turkish figures, however, were reportedly uncomfortable with this new construct. The report alleges that Turkey's economy minister, Zafer Çağlayan, preferred the illicit gold activity, driven by the apparent concern that if the gold trade ceased, Turkey would show an account deficit in a pre-election period. Çağlayan reportedly brokered a deal whereby state-owned Halkbank lowered its commission rate for gold while processing cash transactions from China.

The March 14 report calls into question the role of China in Turkey's massive sanctions-busting scheme. The Turkish parliament held a session on Wednesday to address these and other serious charges leveled in the document. However, political acrimony prevented serious discussion about the veracity of the charges.

Jonathan Schanzer is vice president for research at the Foundation for Defense of Democracies, where Merve Tahiroglu is a research associate focusing on Turkey.

Tags

china, csif, energy, iran, sanctions, turkey