Despite attempts by the US to clamp down on Turkey's purchases of Iranian gas, Turkish gold exports to Iran surged to $120m in February after a brief pause in January. That suggests the gold-for-gas trade between the pair is set to continue despite new sanctions being rolled out the same month.
Turkey sold $117.9m worth of gold to Iran in February, while exports to the United Arab Emirates, which has served in the past as a transit route to Tehran, rose to $402.3m - up from $371m in January - Turkish data showed, according to Reuters. Turkey's total gold exports rose 18% to $551.6m in February from $466.0m the previous month.
The data suggests that a drop in gold exports in January may have been a temporary response to tightened US sanctions. Washington is trying to stem the gold-for-gas trade, which has seen Turkey exploiting a previous loophole in US attempts to strangle Tehran financially. The international sanctions are intended to force Iran to comply with demands over its nuclear programme.
However, energy-hungry Turkey is finding it difficult to secure the oil and gas it needs to power its expanding economy. Iran is its second largest supplier, and Ankara spent 2012 circumventing international sanctions preventing payments to Iran in dollars or euros by handing over Turkish lira. That cash was then routed through Turkish state-controlled Halkbank to purchase gold, which was then couriered either to Dubai to be sold for hard currency, or back to Tehran.
The system has also been used to help other major consumers of Iranian energy, such as India, pay their bills. Turkey's monthly gold sales to Iran peaked last July at $1.8bn, while overall exports of the precious metal to the country rose to $6.5bn in 2012, more than 10-times the level of 2011. Exports to the UAE rose to $4.6bn from $280m over the same period.
The US sought to halt the trade by introducing tightened sanctions on precious metals sales to Iran on February 6. The new restrictions also threatened Halkbank's ability to work with international banks, and January gold exports to Iran plummeted. While the February figures show a consequent rise, the levels are clearly still well below last year's peak.
At the same time, with few options to boost gas purchases from elsewhere overnight, Ankara - which will see a six-month waiver exempting it from the sanctions on trade with Iran expire in July - says it can't halt energy imports from Iran instantly. Turkey's options are limited by its infrastructure, as well as the geo-politics of its neighbourhood. The Arab Spring and situations in Iraq and Syria limit its options. However, the recent move towards reestablishing relations with Israel may offer it some respite.
However, gold traders say the gold-for-gas trade will continue for the meantime, despite evident nervousness. "Due to the sanctions, nobody wants to attract attention. That may be the reason why exports stopped to Iran in January," an unnamed Istanbul gold trader told Reuters. "However, trade with Iran continues; there will always be transfers. Looking at this year's figures, the February exports to Iran are quite low, so it shouldn't cause issues."
Supporting the argument that the trade is set to continue, Turkish gold imports climbed to an eight-month high in March. Turkey has few natural resources, and is traditionally a net importer of gold. It continued buying in the precious metal last month, and imports increased to 18.26 tonnes - the most since that export peak was hit in July - the Istanbul Gold Exchange reported on April 2.
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