Yet again, Turkey has been implicated in another brazen scheme circumventing U.S. sanctions on Iran. Following an exclusive report earlier this December by Politico, Sitki Ayan, a Turkish businessman and acquaintance of Turkish president Recep Tayyip Erdogan, was sanctioned by the U.S. Treasury Department for facilitating “the sale of hundreds of millions of dollars’ worth of oil for Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF).”
The sustained permissiveness of Ankara as a sanctions-busting jurisdiction for Tehran will disappoint those who saw Turkey’s support for Ukraine and more recent mending of political fences with Israel as an indication of its renewed strategic relationship and identification with the West. More poignantly, it deals a body blow to the theory that Recep Tayyip Erdogan’s Turkey can serve as a permanent check against the Islamic Republic of Iran. As the Biden administration now reluctantly looks to embrace the sanctions tool against Iran due to the clerical regime’s repression of protestors, deepening of military ties with and export of drones to Russia, and escalating atomic program, it must contend with the bitter reality that illicit oil sales obscured by Ayan’s business networks in a NATO member state have helped to keep Tehran’s terror operations afloat.
Reportedly, in March 2021 Ayan led a Turkish business delegation in a meeting with sanctioned Iranian officials in Beirut wherein both sides aimed to further smuggling operations of “Iranian oil to buyers in China and Russia to raise funds for Tehran’s terror proxies.” Western assessments first reported in Politico contend that Tehran, with the help of ASB Group which has global operations that Ayan chairs, was able to underwrite its terror apparatus to the tune of an estimated $1 billion in less than two years. Specifically, Western diplomats believe this money benefitted the IRGC-QF, which is the sanctioned brain trust behind Tehran’s constellation of proxies known as the “axis of resistance,” of which Lebanese Hezbollah, another sanctioned terror proxy, is a member. Both the IRGC-QF and Lebanese Hezbollah have global reach, ranging from kidnapping and assassination attempts to narcotrafficking to material support for other terror groups.
Ayan is no ordinary Turkish businessman who suddenly found himself in league with sanctioned IRGC-QF smugglers. Leaked documents reveal previous business ventures with Ayan’s companies and Iran trying to bring gas to Europe. In Turkey, however, Ayan’s ties go to the top. Politico reports that Ayan and Erdogan attended the same religious school (Imam Hatip) as teenagers in Istanbul, and later would later enmesh personal and professional ties. For example, Ayan was reportedly critical to the concealment of Erdogan’s ownership of a $25 million dollar tanker he received in 2008. Ayan’s name also crops up in secret telephone conversations between Erdogan and his son Bilal Erdogan in 2014, wherein the latter two were implicated in an unprosecuted graft probe.
To be clear, Erdogan’s knowledge, involvement, or potential for profiteering from Ayan’s operations with Iran remains unknown, but the continuity of illicit financial activity through a broad network of fronts in Turkey benefitting Iran brings to mind another Turkey-Iran sanctions-busting scheme that reached Erdogan himself.
Just three years ago, U.S. attorneys for the Southern District of New York charged Halkbank, a major Turkish state-linked financial institution, with fraud, money laundering, and other sanctions violations related to the bank’s alleged participation in a scheme that yielded Tehran an estimated $20 billion of prohibited funds. Now known as the “gas for gold” scheme, these funds helped Tehran circumvent the height of pre-nuclear deal U.S. sanctions (2011-2012) through gold purchases that allegedly were made on behalf of the government of Iran using revenues earned by Iranian energy sales held in Turkish accounts. Worse, starting in mid-2013 when the U.S. Congress caught wind of the exchange and the loopholes enabling it, the trade was masked using humanitarian exemptions in U.S. sanctions law for food and medicine which were later revealed as never having been delivered.
It was during the Halkbank trial and the ensuing disclosures that Erdogan was implicated to have authorized the evolving evasion scheme. Since the verdict, which has been tied up in a drawn-out appeal process, Erdogan has rewarded select sanctions busters while the Turkish government has tried to get the case to go away due to both the embarrassment the issue caused for Ankara-Washington relations as well as the vast fines that could be levied on the bank which in turn would have ripple effects throughout the Turkish economy.
While prudence dictates that Turkish firms would have shunned illicit deals with Iran after that experience, the activities of the Ayan network prove otherwise. So why then would Turkey continue to purposefully engage in similar actions?
Mercantilism presents one potential answer. On paper, Turkey was weaning itself off Iranian energy during the latter half of the Trump administration (2018-2020) to avoid sanctions exposure. But just because Ankara’s energy imports diversified did not mean that its off-the-books activities ceased. In fact, as sanctions pressure on Iran mounted and formal trade declined, risk-tolerant Turkish firms—such as those in the Ayan network—may have sensed a greater opportunity to make a buck by helping their neighbor bust sanctions.
At the strategic level and into the present, such firms would be buoyed by the perception that the West needs Turkey more than ever and will be more likely to turn a blind eye to any corrupt ventures. Turkey has already played an outsized role in supplying combat drones to Ukrainian forces to resist and degrade Russian assaults. It has also become (and is fast positioning itself) as a go-between for Russia and Ukraine. Already, Turkey has helped facilitate shipments of Ukrainian grain, thereby preventing a worldwide food and economic crisis. The utility of these actions may have emboldened Erdogan to play hardball with the West in other areas, and at no cost. For example, Turkey is now the only country in NATO holding up the accession of Finland and Sweden to the alliance.
The same may be said of recent changes in Turkey’s foreign policy relating to Iran and the region. Restoring diplomatic relations with Israel and repairing relations with Saudi Arabia (after first bashing the Abraham Accords), and thwarting Iranian intelligence and terror operations on Turkish soil (after first making Turkey a permissive jurisdiction for these forces) might give the appearance of Turkey’s importance to regional stability and order. But lest we forget, these moves can easily be reversed by Erdogan himself, who has mastered the U-turn in Turkish politics. To that effect, the moves are better explained by domestic politics than geopolitics. Erdogan appears keen on racking up a series of foreign policy “wins” by cooling select regional crises in the run-up to his 2023 re-election bid at home, which coincides with the centennial of the Turkish Republic.
The impact of Ayan’s sanctions busting enters the picture. No story of Turko-Iranian relations is complete without reference to the fluid and compartmentalized collaboration and competition between Turkey and Iran over the past four decades. But the net result of Turkey becoming a hub for Iran sanctions evasion and terror underwriting means that the paradigm of “frenemy” to describe the bilateral relationship might soon find itself out of date. Put differently, Iranian decision-makers need not fret that Turkish forces have bombed Hezbollah in Syria if Turkey is still helping Iran illicitly accrue revenue to back its most successful proxy.
This is why traditional foreign policy measures used to assess the status of the Iran-Turkey relationship—such as their historical and ethno-sectarian enmities, domains of strategic competition (the Levant, Mesopotamia, or the Caucuses), regional alliances, or even changing trade patterns—are today insufficient to make sense of Ankara-Tehran ties.
Accordingly, policymakers must pay more attention to how Turkey and Iran could continue to try and subvert the formal financial system through dubious business practices rather than focusing on goals for their above-board trade. For example, while both countries desire to have a formal trade balance of $30 billion annually, given the history of sanctions busting, any assessment of Turkey-Iran economic ties must take into account the political connectivity of which Turkish banks, businesses, and even persons are engaging with Iran, as well as the growth of Iranian owned businesses in Turkey, Iranian acquisitions of Turkish real-estate, and Turkish citizenship sales programs.
Despite implementing some of the toughest sanctions in history against an adversary, the United States is undermining its own support for the rules-based order as well as the strength of the dollar as a national security tool every time it lets its sanctions atrophy or not follow up on sanctions violations. That’s why the designation of Ayan and his network should beget a much larger investigation by the Treasury Department into Iranian sanctions evasion schemes through Turkey, as well as the degree to which the Turkish state may have permitted or enabled such activity. Conversely, inaction by the U.S. government could be perceived as a sign of weakness by other powers—be they friend or foe—and exploited.
The Biden administration should further authorize the Treasury Department and any relevant authorities to investigate to the fullest extent possible the money flows enabled by the Ayan network and the specific terrorist organizations they funded so as to impede ongoing and deter future smuggling operations.
There’s no doubt that the United States has bent over backward to be seen as keeping Turkey on its side given the issues raised by the Ukraine conflict. But it’s high time policymakers realized that so long as Turkey continues to enable adversaries like Iran to evade American sanctions, it will be an ally in name only.
Sinan Ciddi is a non-resident senior fellow covering Turkish domestic and foreign policy at the Foundation for Defense of Democracies (FDD) in Washington, DC, where Behnam Ben Taleblu is a senior fellow covering Iranian security and political issues. They both contribute to FDD’s Center on Economic and Financial Power (CEFP).
By: Sinan Ciddi
Source: National Interest
