Turkey’s ‘119B Iranian Money Laundering’ Scandal

Reza Zarrab

At the heart of the scandal: Reza Zarrab

The unfolding money laundering scandal rocking Turkey’s political scene has serious implications for U.S. foreign policy, as well as the geo-political landscape for years to come.

This story first broke on December 17, 2013, when Iranian-Azeri businessman Reza Zerrab was accused of being involved in irregular money transactions, mostly from Iran, totaling $US119 billion between 2009 -2012. Zerrab, who had long been suspected of taking part in financial felonies, is accused of laundering the money mainly through Bank Mellat, which is 40-percent owned by Iran.

Based on a tip from a police source, who wishes to remain anonymous due to the sensitivity of the issue, Zerrab was also involved in irregularities related to naturalization of some foreign citizens through covert deals and bribes with the sons of government ministers.

The beginning of the operations agianst the money laundering scheme dates back to December 14, 2011, when three Azerbaijanis and an Iranian were caught with 14.5 million and 4 million euro in cash in their suitcases at Russia’s Vnukovo airport.  The Russian Federal Customs Bureau investigated the case, released the couriers, and an arrest warrant was issued for these three businessmen. Both cases involve money transfered without any actual corresponding trade.

Three Turkish Ministers have resigned over their sons being taken into custody in the sweeping corruption and bribery scandal that has rattled Prime Minister Recep Tayyip Erdogan’s allies and government. PM Erdogan has denounced the corruption probe as a plot by foreign and Turkish forces to thwart his country’s growing prosperity, and discredit his government ahead of local elections in March 2014.

Francis Ricciardone_US_Ambassador_to_Turkey

U.S. Ambassador to Turkey, Francis Ricciardone

Last week, PM Erdogan threatened to expel ambassadors from Turkey after four pro-government newspapers accused U.S. Ambassador Francis J. Ricciardone of scheming against the government. The American ambassador reportedly told EU ambassadors that he warned Halkbank to cut its ties with Iran, and that because they didn’t listen, “you are watching the collapse of an empire.” Despite some reports Ambassador Ricciardone having told pro-Turkish government outlets that the U.S. was involved in the corruption investigation, the ambassador has denied this via his Twitter account.

The Turkish investigation comes about the same time the U.S. State Department and Treasury having “blacklisted” a dozen entities doing businees with Iran. At the same time, President Obama, Vice President Biden, and Secretary of State Kerry asked the U.S. Senate to hold off on any new sanctions against Iran, because it could hurt P5+1 negotiations with Iran.

I find the sanctions scandalous.  There are fourteen countries exempted, and many others that are allowed to do business with blacklisted countries.   What’s to stop the State Department, or the Obama administration from leaking this information?

Turkey’s US$  $3.4 billion deal with China over a long-range air-and-land missle defense system could have been the reason to put pressure on PM Erdogan. The Chinese defense firm picked by Turkey to co-produce the FD-2000 system not only beats its competitors in price, it also comes up to the quality of its Russian, French, and even American rivals. At the same time, China Precision Machinery Import and Export Corp (CPMIEC) has been sanctioned by the US for alleged violations of the Iran, North Korea and Syria Non-proliferation Act.

Whatever the reason may be, the United States could be the party responsible for the “anonymous” tip that could lead to bringing down the Erdogan government.