Since Tehran’s Trilateral Summit on Syria this September, the Islamic Republic News Agency keeps reporting on the possible establishment of a joint bank between Iran and Turkey. Enjoying trade ties worth $11 billion in 2017 and planning on bringing that amount to $30 billion in the near future, Iran and Turkey would need a joint bank to insulate trade exchanges from American sanctions.
During the last round of comprehensive sanctions against Iran (2012-2015), Turkey became a major laundry for Iranian oil proceeds and the centre of an elaborate sanctions evasion plot involving the state-owned Halkbank. While the bank has surprisingly not been sanctioned by the U.S., it is thought that as much as $37.5 billion of Iranian money could have been laundered in the international banking system through Halkbank. Legal proceedings in the U.S. have already incriminated Reza Zarrab, a Turkish-Iranian trader, as well as Mehmet Hakan Atilla, Halkbank’s former manager for international banking. Turkey’s former Economy Minister Zafer Caglayan and Halkbank’s former general manager, Suleyman Aslan, have also charges listed against them. This shows that the scheme was known at the highest levels of the Turkish state, which comes as no surprise as Reza Zarrab implicated President Erdogan in the sanctions evasion plot.
Resembling the Special Payment Vehicle (SPV) proposed by the European Union, the Turkey-Iran bank would enable the countries to avoid American sanctions by using their own national currencies and transacting through a guarantee fund, which would enable bilateral trade to function without relying on the international banking system.
The raised possibility of a joint bank comes at a time when Turkey faces an acute economic crisis whilst Erdogan increases his control over economic institutions. Indeed, by nominating himself as the head of Turkey’s sovereign wealth fund and by placing his son-in-law Berat Albayrak at the Finance Ministry, Erdogan has probably enhanced his position to help Iran evade U.S. sanctions again.
ISNA, October 10, 2018, Iran, Turkey may establish joint bank
ISNA, September 16, 2018, “Iran-Turkey to establish joint bank to promote trade ties”
Ahval, Mark Bentley, January 19, 2018, Tens of billions of dollars is likely U.S. gambit in talks over Halkbank
Reuters, Brendan Pierson, November 30, 2017, “Turkish gold trader implicates Erdogan in Iran money laundering”
New York Times, Benjamin Weiser, May 16, 2018, “Turkish Banker in Iran Sanctions-Busting Case Sentenced to 32 Months”
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