December 5, 2017
Gold Trader’s Sensational Case Pushes Iran and Turkey Closer
By Shahir Shahidsaless
Halkbank, Headquartered in Ankara
Already-strained relations between Turkey and the US took a further negative turn on Nov. 30 when Reza Zarrab, a controversial Turkish-Iranian gold trader, told a New York court that Turkish leader Recep Tayyip Erdogan was personally involved in an international money-laundering scheme that allowed Iran to break US sanctions.
Zarrab testified that starting in 2012 he helped Iran deposit funds from selling oil in Turkey’s state-owned Halkbank and two other banks and used the money to buy gold. The gold was then smuggled to Dubai and sold for cash. Zarrab was arrested in March 2016 in Miami while visiting the US with his family.
The Turkish government has described the trial as “theater” and a “plot against Turkey and Recep Tayyip Erdogan.” Erdogan responded to the reports by saying that Turkey has “never made commitments to the US. … The world is not only about the US. We also have trade and energy relations with Iran.”
The case is pushing Turkey and Iran closer as are other regional developments including the end of large-scale conflict in Syria. Iran and Turkey have found themselves united, encouraged by strong, mutual motives.
On the Turkish side, in recent years, the Turks’ relations with the US have frayed over two issues they perceive as existential threats. First is US support for Syrian Kurdish militias, which Ankara considers affiliates of the Kurdish insurgency in Turkey. There’s no sympathy for an autonomous or independent Kurdish state in mainstream Turkish politics. So the US crossed some major red lines when it seemingly went down that path in Syria in its campaign to destroy the Islamic State group.
Second is the Americans’ continuing rejection of Ankara’s request for the extradition of Fetullah Gulen, an opposition Turkish leader. Erdogan contends that a July, 2016 coup attempt against him was engineered by Gulen, who has lived in a secluded compound in Pennsylvania for the past 16 years.
On top of these comes the Zarrab case. As it unfolds, Zarrab’s revelations could irreparably damage Erdogan’s reputation. Heavy penalties of billions of dollars could also be levied on the Turkish banking system, crippling the economy amid an already serious devaluation of the Turkish lira. As an example, breaches of sanctions on Iran cost BNP Paribas, the French bank, $8.9 billion in US fines three years ago.
At the same time, the Zarrab oil-for-gold scheme also brought Iran and Turkey together in pragmatic if not friendly solidarity. Looking back, one can understand how this solidarity enabled Iran to keep its head above water under the crippling sanctions imposed by the US in 2012 over Iran’s then advancing nuclear program.
Meanwhile in Syria, Turkey has no logical or practical reason to compete with Iran and demand the departure of Bashar al-Assad. Thanks to Russian and Iranian military intervention on the side of the Syrian dictator, Syria is a done deal. Assad is going to stay, as on the battlefield no faction remains that is able to topple him.
From the Iranian side, conditions are ripe for serious alignment with Turkey on other regional issues.
In Iraq, the independence of Iraqi Kurdistan would not only threaten Iran, which could face destabilization in its Kurdish districts, but more importantly could result in the creation of a state with close ties to Israel in Iran’s backyard. Israel was the only state to support Kurdish aspirations for independence in a Sept. 25 referendum. Israeli Prime Minister Benjamin Netanyahu released a statement ahead of the referendum saying that Israel “supports the legitimate efforts of the Kurdish people to attain a state of its own.”
Prior to the referendum, Israeli flags were popping up in Iraqi Kurdistan at pro-independence rallies. Israel’s support for an independent Kurdish state makes sense. Such a state -- which now looks exceedingly unlikely -- would likely try to check Iran’s influence and restrict the movement of Iran-dominated Iraqi militias, known as the Popular Mobilization Forces.
It was this common Iran-Turkey concern about Iraqi Kurdish independence as well as converging positions in Syria, that resulted in Iran’s military chief, General Mohammad Bagheri, meeting with Erdogan in August, the first encounter of its kind since the 1979 Islamic revolution in Iran. According to reports, “Bagheri said the two countries agreed on intelligence sharing and cooperation on many issues in the military, defense and security areas during his visit to Ankara.” Bagheri’s visit was followed by an Oct. 1-4 visit to Tehran by Turkish Chief of the General Staff General Hulusi Akar and an Oct. 4 visit to Tehran by Erdogan.
Iran also embraces Turkey’s emerging geopolitical trajectory, which is bringing both countries closer to Russia.
First, in Syria, Russia-Iran-Turkey cooperation could not happen in the absence of close consultation between Iran and Turkey. The trilateral meeting of the presidents of Iran, Russia, and Turkey in Sochi in November also reflected the waning influence and effective sidelining of the US. Iran can enjoy a much stronger position within this trilateral alignment.
Second, the improving relationship between Turkey and Russia – at a time when US-Russia relations are at an “all-time low” according to President Donald Trump – helps cement Iran-Turkey relations within the three-way partnership, which serves as a platform to confront US policies in the region.
Iran is also enjoying another victory over its arch-enemy, Saudi Arabia, as a result of the Iran-Turkey alignment. This victory is in the Qatari crisis, which is an additional example of Saudi defeat in recent years, adding to Iran’s empowerment in Iraq, the quagmire in Yemen, and Saudi losses in Syria and Lebanon.
On Nov. 28, in a story that did not make headlines in Western media, the Turkish and Qatari ministers of economy signed an agreement with their Iranian counterpart to combat the Saudi-led boycott of Qatar. Under the agreement, Iran will be a transit hub and the three nations will tackle “obstacles to sending goods from Iran and Turkey to Qatar.”
Some may argue that the current Iran-Turkey partnership is likely to be short-lived. However, despite recent comments by President Trump to the contrary, it is doubtful that the US will sever ties with Kurdish militias in Syria as they are considered a major component of the US proxy military power on the ground. And differences over the extradition of Gulen will likely remain as a Gordian Knot in US-Turkey relations.
More importantly, the Zarrab case can only get uglier and more complicated as it nears a verdict. For instance, in response to Zarrab’s statements and their broad media coverage, Turkey’s chief prosecutor issued an arrest warrant for Graham Fuller, an octogenarian ex-CIA officer and former vice-chair of the US National Intelligence Council who hasn’t visited Turkey in decades, accusing him of having links to Gulen and "attempting to overthrow" Turkey's government.
What if Erdogan leaves the scene? Few observers expect Erdogan to face a serious challenge in the 2019 election, although it is too early to make a solid prediction. His Achilles’ heel, however, could be the economy. So far, forecasts are not that dark, although that could change as Erdogan takes a belligerent stance toward the US or the country faces penalties or sanctions as a result of the Zarrab case.
Shahir Shahidsaless is an Iranian-Canadian political analyst and freelance journalist writing about Iranian domestic and foreign affairs, the Middle East, and the US foreign policy in the region. He is the co-author of Iran and the United States: An Insider’s View on the Failed Past and the Road to Peace. He is a contributor to several websites with focus on the Middle East as well as the Huffington Post. He also regularly writes for BBC Persian. He tweets @SShahisaless