Now Obama needs to pressure Turkey
March 27th, 2013
09:30 AM ET

Now Obama needs to pressure Turkey

By Jonathan Schanzer and Emanuele Ottolenghi, Special to CNN

Editor’s note: Jonathan Schanzer, a former terrorism finance analyst at the U.S Department of the Treasury, is vice president for research at the Foundation for Defense of Democracies, where Emanuele Ottolenghi, author of ‘The Pasdaran: Inside Iran’s Islamic Revolutionary Guard Corps,’ is a senior fellow. The views expressed are their own.

In a surprise development on Friday, Israeli Prime Minister Benjamin Netanyahu issued an apology to Turkish Prime Minister Yayyip Erdoğan over the ill-fated May 2010 flotilla conflict on the high seas between Israeli commandos and Turkish-backed activists seeking to break the Israeli blockade of Gaza.

The clashes left nine Turks dead. Erdoğan has been demanding an apology ever since, while ramping up his anti-Israel rhetoric – most recently, comparing Zionism with fascism. With relations at their nadir, the Israelis had nothing to lose by issuing this apology – Netanyahu's apology was clearly a concession to U.S. President Barack Obama, who just garnered a great deal of goodwill during his much-heralded trip to Israel.

But if Obama plays his cards right, he should make demands of Erdoğan, too. The relationship between the two men is already warm. According to the Los Angeles Times, “Obama has logged more phone calls to Erdogan than to any world leader except British Prime Minister David Cameron.” But the president has ignored the fact that Turkey has also become one of the more troubling epicenters of illicit financial activity.

After delivering the Israeli apology to Turkey, Obama has an opportunity to demand that Erdoğan cease this activity.

For one, Turkey is believed to have emerged in recent years as one of the primary patrons of the Palestinian terrorist group Hamas. In December 2011, Erdoğan reportedly “instructed the Ministry of Finance to allocate $300 million to be sent to Hamas’ government in Gaza.” Since then, Turkey has reportedly provided Hamas with funds for hospitals, mosques, and schools in the Gaza Strip, with other resources to help rebuild the territory, particularly after the Hamas war with Israel in November 2012.

Turkey is not Hamas’ only sponsor, of course.  There is Qatar, which has been on a regional spending spree. And there is also Iran, which has had a difficult time meeting its sponsorship obligations, thanks to Western sanctions designed to derail its nuclear program.

Sanctions won’t work, however, if Turkey has its way.

Iran has apparently been benefiting handsomely from Turkey’s Halkbank. According to Turkey’s Deputy Prime Minister Ali Babacan, “In essence, gold exports [to Iran] end up like payments for our natural gas purchases.”  In August 2012, according to Reuters, “nearly $2 billion worth of gold was sent to Dubai on behalf of Iranian buyers.” Halkbank acknowledged that it was responsible for processing the payments. Despite increased scrutiny, the Turkish newspaper Zaman noted in January that the Iranian “gas-for-gold” was still going.

Halkbank, meanwhile, has reportedly helped Iran on other scores. In February 2012, the Wall Street Journal reported that Halkbank was processing “payments from third parties for Iranian goods.” This included “payments for Indian refiners unable to pay Tehran for imported oil through their own banking system for fear of retribution from Washington.”

In November 2012, a Turkish banking watchdog announced Halkbank had curbed its illicit dealings. But the bank’s website clearly boasts of a representative office in Tehran.

To be fair, Halkbank is almost certainly not the only Turkish institution to have dabbled in sanctions busting schemes. In November 2012, the Turkish newspaper Zaman noted that there are currently over 2,000 Iranian companies registered in Turkey. How many of these companies have ties to the Iranian government? How many of them throw off cash to the regime? More importantly, how many of them help Tehran procure dual-use materials that brings the Iranian nuclear bomb one step closer to reality?

As it turns out, at least one does. German police recently exposed a network that supplied Iran with nuclear industry components through Turkey. But the announcement came only after hundreds of components for Iran’s Arak heavy water nuclear reactor made their way to Iran undetected.

Turkey can, in this case, claim that it had no knowledge of this network. But that won’t fly when it comes to the Turkish branches of Bank Mellat, an Iranian bank sanctioned by the U.S. and the EU. Turkey continues to allow the bank to operate on its soil because the United Nations has yet to designate it. According to Zaman, as recently as April 2012, other Iranian banks have also applied to operate in Turkey’s financial market.

Part of the problem is Turkey’s legal regime. For more than five years, the Financial Action Task Force (the U.N. of terrorism finance) warned that Ankara had neither adequately criminalized terrorism finance nor established sufficient infrastructure to identify and freeze terrorist assets. FATF first flagged the problem, via a mutual evaluation, in 2007. Ankara did nothing for five years, until FATF threatened to add Turkey to the black list, which currently only includes Iran and North Korea. Erdogan and the Turkish parliament eeked out legislation and averted the blacklisting just shy of the February 22 deadline.

The result of this five year blackout and cavalier attitude to sanctioned Iranian financial institutions: Turkey was not bound to any laws, despite international pressure to fight terrorism or illicit nuclear proliferation. With over 2,000 Iranian companies involved in anything from energy to commodities, real estate to finance to the automotive sector, the potential for mischief is enormous. Had Turkey put its house in order, it might have been able to prevent significant embarrassment.

Turkey watchers quietly concede that more embarrassment is likely on the horizon. From Hezbollah assets to money-changers and gold dealers who do Iran’s bidding to government backing of jihadists in Syria, Turkey will remain an illicit finance problem for the foreseeable future.

Thanks to his ability to deliver Israel's apology, Obama has increased leverage to reverse this trend.

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Topics: Iran • Turkey

soundoff (26 Responses)
  1. SAS

    The US is in no position to lecture Turkey on its so called links to terror while US taxpayer dollars are funding human rights abuses and war crimes in the illegally occupied Palestinian territories on an enormous scale.

    March 27, 2013 at 10:05 am | Reply
    • Paul II

      We have every right to lecture Turkey after their genocide of Armenian Christians, not to mention *their* illegal occupation of northern Cyprus. What is happening on the borders of Israel is a minor conflict that has been blown way out of proportion compared to real atrocities happening around the world right now.

      March 27, 2013 at 11:43 am | Reply
      • OH

        Minor conflict? If you have ever been to Palestine, you can not possibly say it's a minor conflict. You just simply can not.

        March 27, 2013 at 12:25 pm |
      • Joseph McCarthy

        You forgot to mention the Kurds who are striving to gain their well deserved independence from Turkey, Paul. We need to help these two countries set up a timetable for the Kurds to gain their independence and unite with the Kurds of northern Iraq and set up their own home state.

        March 27, 2013 at 2:59 pm |
      • Ferhat Balkan

        It is the Cypriot Greeks and Armenians who need a lecture in history and hypocrisy. They so easily forget the Khojaly massacre, or the rejection of the UN plan to solve the Cypriot issue called the 'Annan Plan'. How easily you forget and blame when you continually deny your own history and refuse equality with Turks.

        March 27, 2013 at 6:59 pm |
      • Thinker23

        OH... Ifthe Palestinians did not like the results of their war against Israel they would NEGOTIATE A BETTER DEAL long ago. They had plenty of opportunities.

        March 28, 2013 at 11:49 am |
      • thk4yrslf

        Well said SAS. US is the master of 'dirty tricks' when it comes to channeling money and arms against those regimes that are "in conflict with US interests".

        Paul II – how do you make the connection between this news article and the Armenians and Greeks? Get over it...

        March 30, 2013 at 3:06 pm |
  2. Dino

    If he places that call he might also want to talk about the

    A just and fare solution to the Cyprus issue, and for Turkey to end the invasion

    Accept a legal and fair resolution to the Aegean dispute with Greece

    Better treatment of the Kurds

    Religious protection and freedom for minorities living in Turkey

    Turkey doing the mature thing as a nation and acknowledging the Armenian, Pontiac, Assyrian genocides

    March 27, 2013 at 12:20 pm | Reply
  3. deniz boro

    To do what else?. A State's fpreign policy survives the next election. USA is not exampt from this universally accepted rule. Every country has its owm schedule which can not be compromised. But can be negotiatiated and rearanged.. But it must be remembered that Turkey is a sovereign state of 90 million alomg with its functioningn democracy which authorizes its organs of governance. To wish for more would take the human civiliztion back for let's say "the pioneers".

    March 27, 2013 at 12:53 pm | Reply
  4. JAL

    Sooner or later Israel will realize that it is in their best interest to support its Arab neighbors. The Arab Spring offers a clean start for everyone. The apology is a move in the right direction.

    March 27, 2013 at 5:30 pm | Reply
    • Thinker23

      Israel DOES support each and every neighboring Arab state that is supporting Israel as we speak.

      March 28, 2013 at 11:52 am | Reply
  5. Ferhat Balkan

    Israel may apologize, but we will not forget the 9 passengers that lost their lives aboard the Mavi Marmara. It took Israel this long to apologize after clearly engaging in an act of piracy! A ship with passengers that included international aid workers and journalists was cowardly attacked on international waters by commandos who clearly had one objective in mind. Israel can say they're sorry, but we will not forget and will not so easily forgive!

    March 27, 2013 at 7:09 pm | Reply
    • Thinker23

      According to the international law any state has the right to stop, inspect and even SINK any vessel delivering supplies to the enemy during a war, Ferhat. Even Israel.

      March 28, 2013 at 11:54 am | Reply
      • Ferhat Balkan

        The UN fact-finding mission found that the IDF broke international law, and that there was evidence sufficient to initiate prosecutions for breaches of the Geneva Convention. That pretty much spells piracy.

        March 28, 2013 at 6:30 pm |
      • Thinker23

        As far as I recall, the UN fact finding mission conclusion was that the Israeli actions were legitimate... but if you believe that any law was broken BE MY GUEST and enlighten us.

        March 29, 2013 at 11:32 am |
      • Ferhat Balkan

        The UN fact-finding mission report stated the following: "There is clear evidence to support prosecutions of the following crimes within the terms of article 147 of the Fourth Geneva Convention: wilful killing; torture or inhuman treatment; wilfully causing great suffering or serious injury to body or health". The report also stated that it found no medical evidence of IDF commandos being shot. It recommended that Israel pay reparations, and also described Israel's blockade of the Gaza Strip as "totally intolerable and unacceptable in the 21st century".

        March 29, 2013 at 6:50 pm |
  6. j. von hettlingen

    Due to its geostrategic location, Turkey is the hub of many activities in the region. Its relations with Iran, the Hamas and probably the Hezbollah shouldn't be seen as a threat to the US. On the contrary, the Obama administration could use Turkey as a conduit to deal with Iran and the Hamas.

    March 28, 2013 at 10:45 am | Reply
  7. 100 % ETHIO

    These Earthly Humans are causing too much troubles, that upsets the Earth.

    How do you see Jew within America or Jew without America?

    What could make America to be like/dislike by the World Populations?

    March 28, 2013 at 8:47 pm | Reply
    • Yussel Spray

      What makes America disliked is envy of our democracy and prosperity. Every Arab country is a squalid mess, look at Egypt, Tunisia & Libya turning into medieval Islamist despotisms; the Saudis & Gulf States are petro rich but freedom poor. Thus the Arabs have one constant explanation for the source of their misery: it is all the fault of the Jews! It is easier to whine than to build decent societies.....

      April 3, 2013 at 7:58 am | Reply
  8. Ferdi

    @ Joseph McCarthy, should Texas wants it independence from the US would you allow it ? I guess your answer will be NO. So stop lecturing others on who wants independence and who doesn't. You won't want part of your country to be cut off so are the Turks.

    March 30, 2013 at 7:34 am | Reply
    • Joseph McCarthy

      Wrong, Ferdi. My answer to that question would definitely be yes! If Texas wants to secede from the U.S., I say, let it! In fact, Texas did that back in 1861 when it joined the Confederacy.

      April 2, 2013 at 7:48 pm | Reply
  9. Ferdi

    @ Joseph McCarthy, you want Texas to be cut off from the US, So are the Turks.

    March 30, 2013 at 7:36 am | Reply
  10. Heinz

    Not everything is perfect with Turkey, but USA needs remember that Turkey is NATO member. USA should support and invest great deal in capital in Turkey. Turkey is already one US friendly nation and this would become also one great business alliance. In contrary, USA is losing credibility, is losing lives, is losing businesses in the non-NATO unofficial collaboration with South Korea. This need be stopped, Washington DC likes it or not.

    April 3, 2013 at 10:18 am | Reply
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    August 27, 2013 at 6:05 am | Reply

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