When Turkish President Recep Tayyip Erdogan attacked the Kurdish-led Syrian Democratic Forces (SDF) in northeast Syria last year, he precipitated the US indictment of a major state-owned Turkish bank—Halkbank—for violating US sanctions against Iran.
That striking point was included in a recent New York Times investigative report. Particularly, with Joe Biden as US president, the consequences could prove serious for Erdogan, other high-ranking Turkish officials, and the country, as well.
The Halkbank trial, in the Southern District of New York (SDNY), is scheduled to start next spring.
Dr. Aykan Erdemir, Senior Director of the Turkey Program at Washington’s Foundation for Defense of Democracies and a former Turkish parliamentarian, identified the Halkbank case as a potential “flashpoint” in US-Turkish relations in the next administration.
“Following Biden’s election victory, there has been growing anxiety in Ankara concerning the Halkbank case,” Erdemir told Kurdistan 24.
“A conviction against the bank would not only result in record fines, but could also lead to new indictments against other Turkish accomplices of Iran’s sanctions evasion schemes, including several in Erdogan’s inner circle,” he continued.
“This is the last thing Erdogan would like to deal with at a time when he is busy trying to save an economy in tailspin,” Erdemir concluded.
Trump and Halkbank: Turkey’s Invasion of Northeast Syria
The Halkbank case involves sanctions-busting on behalf of Iran, and it goes back many years. A related trial has already been held in the US, but only after Donald Trump became president in January 2017, did prosecutors in New York seek to indict the bank itself.
They were stymied however, because Erdogan successfully prevailed on Trump to block the criminal charges. It largely worked—until October 2019.
In an October 6 phone conversation, Trump first acceded to Erdogan’s request that US troops be removed from northeast Syria and Turkish forces allowed into the area.
Trump had long wanted to be able to say that he was bringing US forces home from the far-flung post-9/11 wars.
Read More: Turkey to attack in northeast Syria; US forces to pull back
However, the Turkish assault that followed precipitated widespread criticism in the US, including from Trump’s own political base.
Read More: Broad opposition to Trump on Syria, including Republicans and evangelical Christians
Trump quickly reversed himself. Within days—already on October. 11—the Pentagon and Treasury Department announced the change in US policy: the US would not abandon the Kurds and it was prepared to enforce that position with economic sanctions, if Ankara resisted.
And Erdogan did resist. “Threats, asking for an end to the operation, coming from left to right,” he affirmed defiantly. “I told Mr Trump, and I told the others. If you can stop it, stop it. But they did not. We take matters into our own hands.”
Nonetheless, after Trump dispatched Vice President Mike Pence to Turkey to negotiate a ceasefire, Erdogan largely acceded, and a ceasefire agreement was reached on October 17.
Read More: US announces northeast Syria ceasefire, but many questions remain
One element in the US pressure on Turkey was Washington’s green light to the SDNY to indict Halkbank. The document was already prepared, and the prosecutors rushed it out on October 15.
As the Halkbank trial gets underway early next year, it might be seen as rough justice: punishment for Erdogan’s assault on the Kurds of northeast Syria and defiance of the US call to stop.
The Halkbank Case: Accidental Discovery of 3,000 Pounds of Gold
The Halkbank case began in Turkey with an accidental discovery in January 2013. A cargo plane from Ghana was diverted to Istanbul’s main airport because of fog, as Dexter Filkins explained in The New Yorker.
Customs officials found 3,000 pounds of gold bars and after some investigation, Turkish police came to understand that a young Iranian-Turkish businessman, Reza Zarrab, “had been paying millions of dollars in bribes to senior officials in Erdogan’s government.”
Zarrab, then 29 years old, enjoyed an opulent lifestyle, funded in significant part by his sanctions evasion scheme.
In 2012, he proposed to use Halkbank to launder large amounts of Iranian funds, so Tehran could access the international banking system, denied to it because of US sanctions.
The profits from Iran’s oil sales would be deposited at Halkbank and the cash converted to gold, which Zarrab’s network of businesses and money exchanges could ship to Iran or use to buy goods on Iran’s behalf.
Zarrab approached the bank’s general manager, Suleyman Aslan, who hesitated because of the risk that the US would uncover the scheme. So Zarrab approached Turkey’s Minister of Economy, Mehmet Zafer Caglayan, for help.
Caglayan agreed—on condition that he get half of Zarrab’s profits, the Halkbank indictment explains. In 2012 and 2013, “Zarrab paid Caglayan bribes totaling at least approximately $70 million in US dollars, Euro, and Turkish lira, as well as luxury watches and other items, in exchange for Caglayan’s support.”
Asla, however, soon repeated his concern that he was under US scrutiny, and Zarrab began paying him bribes as well: he would receive some $8.5 million, the indictment states.
In December 2013, Turkish police arrested Aslan, Zarrab, and others on charges of corruption, bribery, money laundering and gold smuggling. They included Caglayan’s son, as well as a son of the Interior Minister, in whose apartment they found $750,000 in cash.
But as one might expect, senior Turkish officials reacted strongly against the investigation. Erdogan charged that the entire affair was part of a coup, launched against him by Fethullah Gulen, and he began a series of purges and arrests of police.
One police officer involved in the investigation fled to the US with an encrypted flash drive containing many documents related to the case.
In Turkey, the case was dropped, and Zarrab and those he had bribed were released from prison.
Subsequently, Zarrab resumed working with Halkbank to evade the US sanctions on Iran. The new Halkbank manager resisted at first, but he agreed to participate after Erdogan and his son-in-law, Berat Albayrak, then Minister of Energy, intervened.
The US Prosecution of Halkbank
In March 2016, Zarrab visited the US, and he was arrested at Miami International Airport, and then indicted on various charges related to his sanctions-evasion scheme.
After Trump was elected president in November 2016, Zarrab hired two New York personalities who had good ties with him to lobby on his behalf: Rudy Giuliani, who became Trump’s personal lawyer and, most recently, has sought to overturn the 2020 election results, as well as Michael Mukasey, who had been George W. Bush’s Attorney General.
Before Zarrab’s trial could begin, however, Halkbank’s deputy director-general, Mehmet Hakan Atilla, visited the US on a business trip. He was arrested in New York in March 2017, as his trip was drawing to an end.
Zarrab pleaded guilty to the charges against him and was then a key witness against Atilla, even as the US case against Atilla also relied heavily on the documents provided by the Istanbul police officer, who had fled to escape Erdogan’s wrath at the original Turkish investigation.
In January 2018, Atilla was found guilty. Although the prosecution had asked for a 15-year prison term, the judge, Richard Berman, sentenced Atilla to only 32 months, as he accepted the defense argument that Atilla had been a minor figure in the sanctions evasion scheme, following the directions of his boss, Suleyman Aslan.
Although it strained credulity, Turkey blamed Gulen for the criminal proceedings, with “state news media labeling Berman, prosecutors and even reporters pawns in an elaborate conspiracy by Islamic preacher Fethullah Gulen,” as Courthouse News Service reported.
Zarrab was released from prison in November 2017. Atilla completed his sentence in July 2019 and returned to Turkey, where Berat Albayrak welcomed him by announcing that he already had a new job: head of the Istanbul Stock Exchange.
Yet the consequences of the illegal sanctions-busting scheme have not ended. The trial of Halkbank itself is scheduled to begin in March 2021—all because Erdogan attacked the Kurds and would not listen, when Trump asked him to stop.
By: Laurie Mylroie
Editing by John J. Catherine
Source: Kurdistan 24
