Gold trader’s US arrest haunts Erdogan

Gold trader’s US arrest haunts Erdogan
State-owned Halkbank allegedly facilitated gold trading with Iran in breach of international sanctions.
By bne IntelliNews March 23, 2016

The US arrest of Turkish businessman Reza Zarrab threatens to reopen a major corruption scandal that entangled President Recep Tayyip Erdogan in 2013 and that could once again pose a grave danger to his reputation.

The news of Iranian-born Zarrab’s arrest in Miami on March 19, on charges of conspiring to evade sanctions against Iran, money laundering and bank fraud, immediately made headlines in Turkey and has become one of the hottest topics on social media. If Zarrab can be persuaded to tell US legal authorities all he knows about the corrupt network that allegedly enriched Erdogan’s inner circle, this may not only further damage the president’s international reputation but it could even wreck his drive to seek executive powers.

Perhaps the most dangerous crisis Erdogan has ever faced erupted in December 2013 when Turkish police launched house raids to arrest the sons of the former interior minister Muammer Guler, and former economy minister Zafer Caglayan among others. Suleyman Aslan, then general manager of the state-owned lender Halkbank, was also detained, with police reportedly finding $4.5mn in cash stashed in shoeboxes at his home.

Zarrab was accused of heading a crime network that bribed Erdogan’s ministers and other state officials with millions of dollars in cash and gifts to facilitate gold trading with Iran via Turkey’s state-owned Halkbank in breach of international sanctions. Guler, Caglayan, and then EU affairs minister Egemen Bagis were accused of taking bribes and were forced to resign.

But Erdogan quickly dismissed the corruption probe as a plot orchestrated by his former ally-turned foe Fethullah Gulen to topple his government. He purged hundreds of police chiefs and officers who took part in the investigation and his government fired the prosecutors leading the case.

However, in February 2014 several audio recordings started to circulate on the internet – through the social media platforms Twitter and YouTube, despite government attempts to block access – which purportedly showed corruption in the highest circles.

In one of these leaked recordings – supposedly recorded shortly after the corruption investigation was launched – Erdogan allegedly discussed with his son Bilal how to get rid of vast sums of cash stashed at their home.

These postings were all anonymous and the authenticity of these leaked voice recordings has never been verified. Erdogan has always maintained that the vrecordings were fabricated by elements within the police and judiciary service loyal to US-based cleric Gulen.

In October 2014, prosecutors dropped the case and dismissed charges against 53 people implicated in the corruption probe.  Zarrab, the alleged kingpin of the network, was released after spending 70 days in prison.

Erdogan had not even tried to distance himself from the businessman, instead praising him as a philanthropist. “I know him as a gold trader, contributing to the country’s economy, ” Erdogan said.

In 2014, Zarrab appeared on pro-government TV channel AHaber in a lengthy interview to clear his name. He claimed he financed 15% of Turkey’s current account deficit by himself through his TRY25bn ($9bn) worth of gold exports.

Apparently Turkish politicians agreed: deputy premier Numan Kurtulmus, the then economy minister, handed the 33-year-old an “exporter award” last year for his contributions.

Ghost from the past

The indictment unsealed in the Southern District of New York against Zarrab and two other Iranians claims that the defendants engaged in hundreds of millions of dollars-worth of transactions on behalf of the government of Iran and other Iranian entities, which were barred by US sanctions, laundering the proceeds of those illegal transactions and defrauding several financial institutions by concealing the true nature of these transactions for almost five years from 2010 to 2015. The US prosecutors are seeking a 75-year jail sentence for Zarrab.

According to prosecutors, Halkbank illegally enabled Teheran to convert the receipts from oil and gas trading into gold, which was taken by couriers to Dubai, where it was converted again into  much needed foreign currency.

Erdogan’s critics hope Zarrab’s arrest could now force the Turkish authorities to reopen the 2013 corruption case. One sentence in the indictment reinforces that hope: “The charges announced today should send a message to those who try to hide who are their true business partners.”

Zarrab’s arrest coincides with one other significant development: his alleged business partner, Iranian billionaire Babak Zanjani, was recently sentenced to death in Iran for withholding money made from selling oil under sanctions.

His critics also believe Zarrab’s arrest indicates that Erdogan is rapidly falling out of Washington’s favour. One speculation is that Zarrab intended to give himself up to the US authorities, and will  seek a plea bargain to avoid a heavy sentence in exchange for providing some information and giving some names.

Otherwise his decision to travel to Miami with his wife, Ebru Gundes, a Turkish celebrity, to take their little daughter to Disneyland, looks an extraordinary miscalculation, as he should have been aware that the US has been watching his every step.

If Zarrab is really ready to sell out his friends at high places in Turkey, some people in Ankara will surely have sleepless nights.

“You’ll see, Zarrab will speak out and we’ll learn all the truth”, leader of the main opposition Republican People’s Party (CHP) Kemal Kilicdaroglu said on March 22.

However, for the arrest of Zarrab to be damaging to the ruling party, its supporters should hear and learn about the case. And this requires a free media, which is slowly becoming extinct in Turkey.

It should also not be forgotten that when the corruption scandal erupted in 2013, Erdogan claimed foreign powers and their local collaborators had joined forces to topple his government and to undermine Turkey. This strategy played well with AKP’s core constituency and his party won the March 2014 local elections and then the presidential election in the first round in August that year.


Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.