What’s
Wrong Today:
On Dec.
17, the Turkish public and Prime Minister Recep Tayyip Erdogan were shocked by
the news of a major corruption case.
Here is a
brief outline of the scandal: Sons of three government ministers were detained by police
on the morning of Dec. 17 on charges of bribery and influence peddling. On
Dec. 19, while the sons were being questioned, the Istanbul
police launched three separate anti-corruption operations and detained 52 more
people.
At the
center of the investigation is an Iranian named Reza Zarrab, a gold dealer
apparently working for Iran. Iran has been banned from using the international
money-transfer system SWIFT since March 2012
as a part of the US-EU economic sanctions regime, but apparently Turkey and Tehran
have been
using Turkey’s Halkbank to evade the embargo.
According
to al-Monitor, here is how the
plan worked: Front companies were set up in China. Then, money was
transferred from Iran with falsified documents to bank accounts opened in the
names of those companies supposedly as reimbursements for imports from China.
The money was then transferred to the accounts of real (or other front
companies) in Turkey as payment for exports. That cash was then used to
purchase gold. The gold was then sent via courier to Iran, or to
Dubai to be forwarded to Iran.
As a
result, Turkey’s gold imports and exports rose steadily. According to
al-Monitor, $8 billion worth of gold was sent to Iran over the past 3 years, in
contravention of the sanctions regime.
This complicated system was designed to
solve Turkey’s inability to pay Iran directly for the Iranian oil and natural
gas it was buying, due to the embargo.
To
counter this scheme, the United States banned gold exports to
Iran in July 2013. This has resulted in the accumulation of
nearly $13 billion in imported gold in Turkey.
Although many
media outlets have framed the scandal as a power
struggle between the Fethullah Gulen movement and Erdogan’s government, the US seems
focused on the Turkey-Iran-Halkbank-gold triangle, since David Cohen, the US Treasury undersecretary
of terrorism and financial intelligence, arrived at the end of the week in
Turkey. That can’t be a coincidence. The scandal has the potential to cause major
damage to Turkey’s relations with the US, which has already been
shaken by policy differences over Turkey’s efforts in Egypt and Syria.
The New York Times reported that
Erdogan wasted no time in moving to seal off the emerging scandal:
police chief was dismissed as the government carried out what officials
indicated was a purge of police officers and officials conducting the
corruption investigation — nearly three dozen so far, according to the
semiofficial Anadolu news agency. On Friday, another dozen police officials
were dismissed, according to local press reports
Mr.
Erdogan is trying to contain the scandal by blaming domestic conspirators and
foreign meddlers, just as he did during last summer’s Gezi Park
demonstrations,
which began over plans to raze Gezi Park in central Istanbul and convert it
into a shopping mall.
These moves
are hard to accept from the leader of an established democracy. Importantly,
there is a Presidential
election
looming in 2015, and Mr. Erdogan wants to move from prime minister to president
when his PM term ends next year. The current President, Abdullah
Gul,
is expected to make way for Erdogan’s ascension to the presidency next summer. Gul
would like to return to being prime minister, which represents something of a
challenge to Erdogan, since executive power resides mostly with the prime
minister and Erdogan would rather have someone who is pliable in the office.
Since the
scandal became public, those media allied against the government are leaking
information on the investigations, while pro-government media are not
reporting on the evidence. These outlets are instead making the claim that the
operation is a conspiracy
to topple the government, carried out by foreigners.
Yahoo News reports that Mr.
Erdogan described the bribery probe as “smear campaign” with
international ramifications, taking it out on foreign ambassadors. From Mr.
Erdogan:
are engaged in provocative actions… Do your job…We don’t have to keep you
in our country
Yahoo said
that Erdogan’s remarks were considered to be directed at US Ambassador Francis
Ricciardone, who denied the claims. Separately, The Times reported that 29 police chiefs were reassigned from their
positions in Ankara and Istanbul:
agreed that these reassignments were to punish police chiefs who kept the
operations secret from their superiors, or to eliminate policemen
thought to be close to the Gulen movement, there are those who believe the
move was intended to prevent further investigations
Regarding
the Gulen movement, the Economist reported on Erdogan’s relationship with Turkey’s most influential Muslim cleric, Fethullah Gulen, who lives in
Pennsylvania but commands a global network of schools, charities and media
outlets:
achievement of Recep Tayyip Erdogan, Turkey’s prime minister, during a decade
of rule, has been to get the army out of politics. He did it with the help of [Fethullah
Gulen]…Now Mr. Erdogan has turned on his former ally in a show of force that
is likely to determine his own future as well as that of Turkish politics
The
asymmetric struggle between Mr. Erdogan’s AKP party and the Gulen movement is devolving
into a back and forth of recrimination. It appears that there will be no winners
of this fight, so it becomes important who loses less. At the moment, the most
serious damage has been inflicted upon Erdogan and his government.
Since 2010, Mr. Erdogan has become
quite authoritarian. He has a questionable record with the press in the past
couple of years. The Turkish economy is also experiencing some trouble, with the
Turkish lira being devalued by 16% in the past 6 months. It is common knowledge
that the Turkish economy is kept at its high rate of growth by foreign cash attracted with
high interest rates, and a buoyant stock market. When there is a defacto devaluation,
foreign cash leaves first. The fact that 3.5 million people get food aid from
AKP local governments, while 6 million people receive free coal from the same
sources is well-known, and likely to help Erdogan at election time.
Yet, this
scandal doesn’t look like it will go away as easily as did Gezi Park. Whether
that causes difficulty for Erdogan and the AKP at the ballot box next year
remains to be seen.
In the meantime, Mr. Erdogan has some explaining to do
with his European allies and the US regarding why Turkey failed to comply with the Iran sanctions using the now-public gold scheme.
