Will Turkey become a haven for sanctioned Russians?

The docking of two superyachts belonging to a sanctioned Russian-Israeli oligarch at a seaside resort in southwestern Turkey has reignited debate about the country’s role in illicit finance.

Over the past three days, Roman Abramovich’s Bermuda-registered yachts Eclipse and My Solaris have anchored at marinas in Marmaris and Bodrum, respectively, as part of international efforts to freeze assets belonging to Russian billionaires with ties to Russian President Vladimir Putin.

Abramovich, owner of British premier league football club Chelsea, has been sanctioned by the UK and is also on the European Union’s list of people facing asset freezes and travel bans due to of their association with the strongman of Russia. The Wall Street Journal reported today that Ukrainian President Volodymyr Zelenskyy has reportedly asked the White House to suspend sanctions drafted by the US Treasury Department for Abramovich because the billionaire could serve as a valuable mediator due to his close ties to Putin.

Turkey, a member of NATO and an official candidate for EU membership, has not joined the sanctions against Russia. Rather, he sought to find common ground designed to keep Russia and the anti-Kremlin coalition sufficiently appeased. Whether or not this fragile balance is sustainable is the subject of persistent debate.

What is not in question, however, is that Turkey offers a welcome environment for various fraudsters looking to park their money, analysts say. This led to the country being placed on the gray list of the international anti-money laundering body, the Financial Action Task Force (FATF), in October last year. The body said the construction and banking sectors in Turkey were of particular concern, as were dealers in gold and gemstones linked to terrorist financing.

Transparency International, which monitors global corruption, reported in January that Turkey fell to 96th out of 180 countries in its Corruption Perceptions Index, scoring 38 out of 100 on a scale where a score of zero indicates a Highly corrupt state. The world average is 43.

Turkey’s recent record is hardly encouraging. Turkish state lender Halkbank has been indicted in a US federal court for its pivotal role in facilitating a multi-billion dollar gold-for-oil program aimed at evading US sanctions on Iran.

“Turkey pulling another sanctions-busting plan would be a red line” for the United States, said Gonul Tol, founding director of the Middle East Institute’s Turkey program.

“There will be pressure on Ankara to comply with the sanctions regime and increased scrutiny of Turkish banks to ensure they are not violating sanctions. Russian companies, entities and individuals using Turkey to circumvent sanctions will certainly draw more attention to Turkey’s actions,” she told Al-Monitor.

Sources familiar with the sanctions process not talking about attribution point out that the United States has yet to declare secondary sanctions against third parties dealing with Russian individuals penalized for their ties to Putin, leaving Turkey alone. for the moment. But that’s not to say such sanctions wouldn’t be introduced in the future, the sources said.

Bahadir Ozgur, a Turkish commentator specializing in exposing organized crime, calls Turkey a “gangster’s paradise”.

“There are no financial controls, and the institutions supposed to perform such functions have been filled with pro-government individuals who do as they are told,” Ozgur told Al-Monitor. Ozgur was referring to the banking watchdog, known as the Banking Regulation and Supervision Agency and the Financial Crimes Investigation Committee, known as MASAK. Although there are laws in place to combat financial crimes, they are not enforced, Ozgur explained.

The flow of ‘dark money’ from former Soviet oligarchs – notably from Azerbaijan, Russia, Kazakhstan and Ukraine – has increased since the failed 2016 coup and waned further when Turkey moved to an executive presidential system in 2017 that concentrates power in the hands of Turkish President Recep Tayyip Erdogan. The system further erodes judicial checks and balances, Ozgur argued.

Senior officials from Erdogan’s Justice and Development Party have been implicated in various illicit activities, as reported by the Organized Crime and Corruption Reporting Project and the International Consortium of Investigative Journalists. The collective unveiled the links between Erdogan’s family and the Turkish Azeri oligarch Mubariz Mansimov Gurbanoglu who offered a multi-million dollar oil tanker to Erdogan’s brother-in-law.

Gurbanoglu was arrested on barely-proven terrorism charges in 2020 in a move widely seen as benefiting associates of Azerbaijani strongman Ilham Aliyev.

More recently, fugitive mobster Sedat Peker, who is currently in the United Arab Emirates, released a series of videos alleging massive corruption among senior government officials and their offspring, including Interior Minister Suleyman Soylu and the former prime minister and Erdogan loyalist Binali Yildirim. Peker claimed they were involved in the global cocaine trade, rape and extortion rackets, and he shared incriminating audio recordings until the UAE muzzled him in sign in Ankara.

“Although Turkish private banks are apparently doing due diligence on Russian individuals and entities to avoid punitive action from Washington, Turkish public lenders could once again become favored intermediaries for Russian attempts to circumvent Western sanctions.” , warned Aykan Erdemir, senior director. for the Turkey program of the Foundation for the Defense of Democracies.

“The Turkish government’s desperate need for foreign currency amid a financial crisis that has depleted the country’s net international reserves could cause Ankara to look the other way when it comes to illicit financial flows from Russia,” Erdemir said. at Al-Monitor.

“While the Biden administration has been overwhelmingly positive in its messaging to Ankara since Russia invaded Ukraine as part of an attempt to bring Turkey back into the NATO fold, unless Washington does not deliver a clear warning about sanctions, Turkey and the United States could once again find themselves on a crash course,” Erdemir added.

However, the US Congress, which sanctioned Turkey for its acquisition of Russian S-400 missiles and its invasion of northeast Syria, will watch its actions with an eagle eye.

“I suspect that any major expansion of Russian financial activity in Turkish banks or the expansion of energy exports to Turkey would cause great concern both in the executive branch and in Congress,” observed Alan Makovsky, one of America’s foremost experts on US-Turkish relations who spent many years working on the Hill.

“Israel, which also does not apply sanctions against Russia, has pledged not to be exploited by Russia for a major evasion of sanctions. It would be helpful to hear a similar commitment from Ankara, as well as a commitment to work with US officials to ensure such exploitation does not occur,” Makovsky told Al-Monitor.

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