Oil, Gold, and Bribes: A Ticking Turkish Time Bomb
By Raffi Bedrosyan
In a small courtroom in Manhattan, New York, there is a legal drama playing out, which may have serious consequences for the U.S., Turkey and Iran, but more critically for Turkish President Recep Tayyip Erdoğan. This court case is a ticking time bomb, which may explode in President Erdogan’s face, despite all his clandestine efforts to diffuse it.
Reza Zarrab, a 33-year-old Turkish citizen of Iranian descent, was arrested in Miami on March 17, 2016, as soon as he got off a plane. He stated that he had come to the U.S. with his wife and daughter to see Disney World. But the three charges against him were serious—conspiring to evade U.S. sanctions against Iran, money laundering and bank fraud. He was promptly transferred to a New York jail, where he currently sits.
And the connection to President Erdogan? Read on, as this is an international thriller in the making.
For several years, the U.S. had slapped sanctions on Iran to contain Iran’s nuclear ambitions. The U.S. had imposed strict controls on all international banks and corporations, banning them from doing any business with Iran. Therefore, Iran faced great difficulty getting paid for its oil exports. A couple of Iranian businessmen, Babek Zenjani in Tehran and Reza Zarrab in Istanbul, stepped up to circumvent the sanctions. Oil payments would be made to companies and banks in Turkey, huge amounts of gold would be bought with those funds, and then the gold would be exported from Turkey to Iran, directly or perhaps with a few stops in Dubai, United Arab Emirates, and other places in between. This scheme, although very simple, required huge amounts of money and gold transferred on a daily basis, which would undoubtedly attract the unwanted attention of government officials. That problem would be addressed by generous bribes, commissions, and police protection. When you are moving billions of dollars daily, a few hundred million dollars to government officials is just the cost of doing business.
So, with the system set up in Iran and Turkey, Reza Zarrab quickly became a “gold trading” tycoon in Turkey, making headlines with large donations to religious charities linked to Erdogan as a philanthropist, marrying a popular pop star singer, and buying several mansions along the Bosphorus. Erdogan’s government also bestowed Turkish citizenship on him with a special decree. There were a few mishaps in the scheme, such as 1.5 metric tons of gold seized in the cargo of an airplane in Istanbul by a “misguided” or “uninformed” customs official, who was promptly suspended and sent to “exile” to the interior part of Turkey.
But the scheme blew up and came out in the open on Dec. 17, 2013, when Turkish police, or rather, a certain section of Turkish police not loyal to Erdogan, arrested Reza Zarrab and the sons of three cabinet ministers, along with a few bank leaders. They had indisputable evidence including wiretaps, videos, telephone conversations, and documents proving the large amounts of bribes passed on from Zarrab to the ministers and bank officials. The evidence also included money counting machines in living rooms, several million dollars in shoeboxes, expensive gifts, and money being delivered to the ministers’ homes in suit bags. All the dirty laundry came out.
One of the most interesting telephone conversations released by the investigators and reported by several media outlets was between Erdogan and his son, when Erdogan instructs his son to get rid of all cash in the house, after he hears about the raids to his ministers’ houses. His son’s response after several hours of frantic work reveals that despite all his attempts to distribute the cash at home to colleagues, relatives, or associates, there is still some 30 million euros left at home. Despite the evidence, Erdogan did manage to escape the investigation unscathed, fired the three ministers, and also fired all the police officials and prosecutors involved in this operation, claiming that this was a conspiracy and coup attempt by the followers of Fethullah Gulen, the Muslem fundamentalist preacher living in exile in Pennsylvania. Most of the police officials and prosecutors are now in jail, and a few lucky ones have fled the country.
Reza Zarrab was released from prison in two months, in Feb. 2014. His defense was very simple: “If you don’t release me immediately, I start talking.”
It is not known why Zarrab chose to come to the U.S. Perhaps he decided to seek protection there, albeit in jail, instead of facing attempts to silence him in Turkey. Meanwhile, his partner in Iran, Babek Zenjani, was arrested and sentenced to death for defrauding the Iranian Oil Ministry for four billion dollars.
The Zarrab affair gets even more interesting in the U.S. The man who brought the charges against Zarrab was Preet Bharara, the U.S. attorney for the Southern District of New York—a star attorney who made his name as a fearless prosecutor of Wall Street wrongdoers. Erdogan’s concern about the Zarrab case was evident when he asked former Vice President Joe Biden to intervene. But luckily for him, just as the case against Zarrab started moving, the new president Trump fired Bharara, along with hundreds of other Obama appointees.
Zarrab has hired nearly 20 elite white-collar criminal lawyers to defend him. The last two hired lawyers are especially noteworthy, Rudi Giuliani, former New York Mayor and U.S. Attorney, and Michael B. Mukasey, the former U.S. Attorney General, who have promptly met top Turkish government officials. The presiding U.S. District Judge Richard Berman has asked defense lawyers to explain Giuliani and Mukasey’s role in the case, and to disclose if the government of Turkey is paying their fees. Prosecutors claimed that the hiring of Giuliani and Mukasey might present a conflict of interest because their firms also represent some of the banks alleged to be victims in Zarrab’s case. Prosecutors also said that Giuliani and Mukasey were hired to try to reach a political settlement in the case.
In another twist, Mukasey’s son, Marc, has been widely speculated as a candidate to become the New York U.S. Attorney under Trump, to replace Preet Bharara. The Zarrab case will be one of the agenda items when Erdogan meets Trump in the next few weeks.
This thriller involving power, bribery, corruption, oil, and gold will come to an end soon, but it is highly doubtful that justice will be served…