US trial of gold trader Reza Zarrab sparks concern, anger in Turkey

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Gold mogul Reza Zarrab and a top Turkish banker are charged with violating US sanctions on Iran

A court case in the United
States against a leading gold trader and a top Turkish banking executive
has sparked anger and anxiety in Ankara, with both US-Turkey ties and
the economy at risk of damage. Turkish officials have condemned as a “plot” the charges against Turkish-Iranian gold mogul Reza Zarrab and Mehmet Hakan Atilla, the deputy chief executive of Turkish lender Halkbank, of violating US sanctions against Iran.

President Recep Tayyip Erdogan has raised the issue repeatedly in official talks, according to a former American official, and called for their release.

US
media reports have suggested in recent days that Zarrab may be seeking a
plea bargain in the case and shown willingness to testify against
Turkey.

Turkish officials are now denouncing the case as a another conspiracy by the US-based preacher Fethullah Gulen, the alleged mastermind of the 2016 failed coup targeting Erdogan.

According to Atilla Yesilada, Turkey specialist at Global Source Partners, the Erdogan-led ruling Justice and Development Party (AKP) is “extremely worried”.

That explains the pro-AKP media campaign to portray the case as “orchestrated by the American Deep State and Gulenists,” he added.

Embarrassing revelations?

Zarrab
was one of the main figures of a 2013 corruption scandal in Turkey that
Erdogan also sees as a bid by Gulen to bring him down.

Caught
up in the scandal too were four ministers accused of accepting bribes
from Zarrab, 34, to facilitate sanctions-busting trade and other deals.

One allegation at the time was that ex-economy minister Mehmet Zafer Caglayan received a $300,000 (255,000 euro) watch as a bribe. He is also charged in this case in absentia.

Erdogan,
who has dismissed the claims as a fabrication, has raised Zarrab’s case
“multiple times” at the highest level under former president Barack Obama and his successor Donald Trump, former US State Department official Amanda Sloat said.

“Although
he (Erdogan) is not charged with any crime, corruption revelations
would be embarrassing to him, his family and his inner circle,”
Sloat, now a senior fellow at the US-based Brookings Institution, told AFP.

Former New York mayor Rudy Giuliani, who is part of Zarrab’s legal team, met Erdogan in Turkey in April, joined by Michael Mukasey, a former attorney general during president George W. Bush’s administration.

‘Defendants held like hostages’

The trial is now set to kick off on December 4.

Turkish President Recip Tayyip Erdogan has raised the case repeatedly in official talks with the US

Turkish President Recip Tayyip Erdogan has raised the case repeatedly in official talks with the US

(AFP/File)

Deputy Prime Minister Bekir Bozdag said this week that the defendants were being “held like hostages” and subjected to pressure.

Meanwhile, Turkish prosecutors even opened a criminal case against their US counterparts on charges of fabricating the case.

But
analysts warned that the sheer intensity of Turkey’s reaction risked
further damaging already brittle relations with the US, a key NATO ally.

“Turkish
reaction to the trial — especially accusations it is an American
conspiracy to bring down the government – could be toxic to Washington’s
perception of Ankara,”
Sloat said.

Heather Nauert, State
Department spokeswoman, dismissed the accusations that the case was an
American conspiracy, saying Washington had heard “that old same song and
dance from Turkey before”.

Negative impact on economy

There are fears of possible fines on Turkey's Halkbank

There are fears of possible fines on Turkey’s Halkbank

(AFP/File)

There are also fears over possible fines on Halkbank — and possibly other Turkish banks — in the event of a guilty verdict.

The
Turkish lira has hit record lows against the US dollar in the last
days, partly due to the uncertainty generated by the case.

William Jackson, senior
emerging markets economist at Capital Economics in London, said that if
fines were issued, there could be an effect on credit conditions and
GDP.

“The size of the fine that reports suggest Halkbank could face is large and could prompt it to tighten credit conditions.

“Moreover,
were one bank to be fined, other banks might tighten lending conditions
out of concerns that they could face fines too. That, in turn, is
likely to cause GDP growth to slow,”
he told AFP.

Why did Zarrab go to US?

Zarrab was arrested in March last year after bringing his Turkish pop star wife Ebru Gundes and their daughter to visit Disney World in Miami.

But as the trial is shadowed by a host of questions.

Why
did Zarrab, after facing legal troubles over accusations of busting
sanctions on Iran, choose, of all places, the United States for a family
holiday?

Why has Zarrab, after over one and a half years behind bars, not appeared in pre-trial hearings?

Those questions could finally start being answered on December 4.

“The
Zarrab case has the potential to trigger a severe crisis between Ankara
and Washington which could accelerate the erosion of bilateral
relations,”
said Anthony Skinner of Verisk Maplecroft, a risk consultancy.

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