Why The Turkish Government May Be The Casualty Of A $119 Billion PetroDollar "Loophole"

Tyler Durden's picture




 

It was in October 2012 when we explained how Iran evades the Western blockade (ostensibly with the implicit nod of none other than the US), and when we first defined the concept of PetroGold in the context of the Turkey-Dubai-Iran crude-for-gold triangle. For those who need a quick refresher, here it is:

In recent months there has been a lot of incorrect speculation that because Iran has been shut off from the petrodollar, SWIFT-mediated regime, its economy will implode as the country has no access to the all important greenback and can thus not conduct international trade - the driving factor behind the international sanctions that seek to topple the local government as Iran dies an economic death. And while there have been bouts of substantial inflation, which so far the local government appears to have managed to put a lid on by curbing gray market speculation, Iran continues to more or less operate on its merry ways with international trade most certainly taking place, especially with China, Russia and India as main trading partners. "How is this possible" those who support the Western-led embargo of all Iranian trade will ask? Simple - gold. Because while Iran may have no access to dollars, it has ample access to gold. This in itself is not new - we have reported in the past that Iran has imported substantial amounts of gold from Turkey, despite the Turkish government's stern denials. Today, courtesy of Reuters, we learn precisely what the 21st century equivalent of the Great Silk Road looks like, and just how effective Iran has been as a lab rat in escaping the great petrodollar experiment, from which conventional wisdom tells us there is no escape. Presenting: petrogold.

One year later, following Iran's unperturbed ability to exist in a world without US dollars, the blockade of Iran is a thing of the past, and the west has engaged in a full-blown detente with the country, much to the fury of both Israel and Saudi Arabia, in exchange for the symbolic gesture that Iran will limit its nuclear enrichment, lowering and in many cases outright eliminating Iran sanctions, which proved completely futile.

So a happy ending for Iran, if only for now thanks to the fact that despite all the status quo's lies gold is and always has been money and can substitute for dollars.

However, one country that has seen better days, whose government may be on the edge of collapse due to an unprecedented corruption scandal precisely for enabling said PetroGold scheme, and which has been in the news on a daily basis recently, is Turkey. As Turkey's Today's Zaman explains in "Iran's Turkish Gold Rush", the political crisis Turkey finds itself in may be nothing but a consequence of the PetroGold scheme conceived over a year ago, and in which Turkey played a crucial role. 

Here is how the Turkey-Dubai-Iran PetroGold triangle, or as the Zaman calls it, "gas for gold", may soon result in the toppling of yet another government, simply because it showed that existence outside of the clutches of the 'Petrodollar' is perfectly possible...

* * *

From Iran's Turkish Gold Rush, highlights ours:

Turkey's Islamist government is being rocked by the most sweeping corruption scandal of its tenure. Roughly two dozen figures, including well-connected business tycoons and the sons of top government ministers, have been charged with a wide range of financial crimes. The charges ballooned into a full-blown crisis on Dec. 25 when three ministers implicated in the scandal resigned, with one making a dramatic call for Prime Minister Recep Tayyip Erdogan to step down as well. An exhausted-looking Erdogan subsequently appeared on television in the evening to announce a cabinet reshuffle that replaced a total of 10 ministers.

The drama surrounding two personalities are particularly eye-popping: Police reportedly discovered shoeboxes containing $4.5 million in the home of Süleyman Aslan, the CEO of state-owned Halkbank, and also arrested Reza Zarrab, an Iranian businessman who primarily deals in the gold trade, and who allegedly oversaw deals worth almost $10 billion last year alone.

The gold trade has long been at the center of controversial financial ties between Halkbank and Iran. Research conducted in May 2013 by the Foundation for Defense of Democracies and Roubini Global Economics revealed the bank exploited a "golden loophole" in the US-led financial sanctions regime designed to curb Iran's nuclear ambitions. Here's how it worked: The Turks exported some $13 billion of gold to Tehran directly, or through the UAE, between March 2012 and July 2013. In return, the Turks received Iranian natural gas and oil. But because sanctions prevented Iran from getting paid in dollars or euros, the Turks allowed Tehran to buy gold with their Turkish lira -- and that gold found its way back to Iranian coffers.

This "gas-for-gold" scheme allowed the Iranians to replenish their dwindling foreign exchange reserves, which had been hit hard by the international sanctions placed on their banking system. It was puzzling that Ankara allowed this to continue: The Turks -- NATO allies who have assured Washington that they oppose Iran's military-nuclear program -- brazenly conducted these massive gold transactions even after the Obama administration tightened sanctions on Iran's precious metals trade in July 2012.

Turkey, however, chose to exploit a loophole that technically permitted the transfer of billions of dollars of gold to so-called "private" entities in Iran. Iranian Ambassador to Turkey Ali Reza Bikdeli recently praised Halkbank for its "smart management decisions in recent years [that] have played an important role in Iranian-Turkish relations." Halkbank insists that its role in these transactions was entirely legal.

The US Congress and President Obama closed this "golden loophole" in January 2013. At the time, the Obama administration could have taken action against state-owned Halkbank, which processed these sanctions-busting transactions, using the sanctions already in place to cut the bank off from the US financial system. Instead, the administration lobbied to make sure the legislation that closed this loophole did not take effect for six months -- effectively ensuring that the gold transactions continued apace until July 1. That helped Iran accrue billions of dollars more in gold, further undermining the sanctions regime.

In defending its decision not to enforce its own sanctions, the Obama administration insisted that Turkey only transferred gold to private Iranian citizens. The administration argued that, as a result, this wasn't an explicit violation of its executive order.

It's possible that the Obama administration didn't have compelling evidence of the role of the Iranian government in the gold trade. However, the president may have also simply sought to protect his relationship with Ankara and didn't want to get into a diplomatic spat with Erdogan, who he considers a key regional ally.

If the administration didn't feel that the sanctions in place at the time were sufficient to take action against Halkbank, after all, it could have easily shut down the gold trade by amending its executive order. But at the time, Turkey was also playing a pivotal role in US policy in Syria, which included efforts to strengthen the more moderate opposition factions fighting President Bashar Assad's regime.

It's also possible, however, that the Obama administration's decision had less to do with Turkey, and more to do with coaxing Iran into signing a nuclear deal. In the one-year period between July 2012, when the executive order was issued, and July 2013, when the "golden loophole" was closed, the Obama administration's non-enforcement of its own sanctions reportedly provided Iran with $6 billion worth of gold. That windfall may have been an American olive branch to Iran -- extended via Turkey -- to persuade its leaders to continue backchannel negotiations with the United States, which reportedly began as early as July 2012. It could also have been a significant sweetener to the interim nuclear deal eventually reached at Geneva, which provided Iran with another $7 billion in sanctions relief.

Indeed, why else would the administration have allowed the Turkish gold trade to continue for an extra six months, when Congress made clear its intent to shut it down?

This brings us back to the current corruption drama in Turkey. The ruling Justice and Development Party (AKP) has been claiming that it is a victim of a vast conspiracy, blaming everyone from Washington to Israel to US-based Islamic cleric Fethullah Gulen for its woes. Some Turkish media have pointed a finger at David Cohen, the Treasury Department's undersecretary for terrorism and financial intelligence, who happened to be in Turkey as the news began to break. Erdogan even raised the possibility of expelling the US ambassador to Ankara, Francis Ricciardone.

But if the charges stand against the panoply of well-connected figures fingered, the AKP will have only itself to blame. While the gas-for-gold scheme may have been technically legal before Congress finally shut it down in July, it appears to have exposed the Turkish political elite to a vast Iranian underworld. According to Today's Zaman, suspicious transactions between Iran and Turkey could exceed $119 billion -- nine times the total of gas-for-gold transactions reported.

Even if the Turkish-Iranian gold trade represents only a small part of the wider corruption probe, the ongoing investigation could provide a window into some nagging questions about the relationship between Ankara and Tehran. Perhaps we will finally learn why the Turkish government allowed Iran to stock up on gold while it was defiantly pursuing its illicit nuclear program -- and whether the Obama administration could have done more to prevent it.

* * *

Bottom line: dare to mess with the Petrodollar and the wrath of the US government will hunt you down... sooner or later.

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Sat, 12/28/2013 - 16:32 | 4282112 darteaus
darteaus's picture

So, after the Turkey hits the fan, how about reimposing the sanctions?

That way you kill the Turkey with the golden eggs, you show what happens when Turkeys think they don't need the dollar, and you can show you're taking a stand against nuke proliferation, helping the Saudis and Israel-just in time for the fall erections!

Sat, 12/28/2013 - 17:46 | 4282251 Pseudonymous
Pseudonymous's picture

Here comes the petrobitcoin.

Sanction that!

Sat, 12/28/2013 - 18:35 | 4282336 max2205
max2205's picture

Barry sure is a pill

Sat, 12/28/2013 - 19:24 | 4282392 Thomas
Thomas's picture

If I was a Hope and Change liberal democrat I would be a tad bit disappointed by Potus.

Sun, 12/29/2013 - 02:54 | 4282861 Troll Magnet
Troll Magnet's picture

Libtards??? This shit's too complicated. They'll just blame Bush.

Sun, 12/29/2013 - 14:54 | 4283452 Triggernometry
Triggernometry's picture

I'm rather alarmed by the author's presupposition that Iran's nuclear program is somehow illicit. Bears the odor of an all too familiar stench...

Sat, 12/28/2013 - 16:27 | 4282115 Sudden Debt
Sudden Debt's picture

Yep, America has the biggest army and can bully anybody who walks in their shadow.

The dollar isn't fiat.

The dollar is backed by the most precious commodity in the world!!!

People.

America has the biggest and strongest army. And that's the dollar backing.

And if the people pose a problem, they'll make robots that can be controlled by one man.

The day we'll have robot terminators, we're all doomed.

Sat, 12/28/2013 - 16:34 | 4282124 wee-weed up
wee-weed up's picture

 

 

America has the biggest army and can bully anybody

Uh, with the wussy Commander in Chief we currently have in the White House...

That's a bit of a stretch!

Wait for it...

He's about to draw yet another red-line...

Sat, 12/28/2013 - 17:08 | 4282194 Sudden Debt
Sudden Debt's picture

America is owned by Arabia and is more of a organisation than a country.

And Obama is the Spokesperson, not the CEO.

Going againsts muslims or say anything bad about them will become a crime in the short fututre.
It's even a crime to say "merry christmas"... but that's because the American employees wanted so by voting for it.

Sat, 12/28/2013 - 17:40 | 4282240 tony wilson
tony wilson's picture

america is run by the jew nicely corrected no need for thanks you fucking tool : )

Sat, 12/28/2013 - 21:02 | 4282521 Tijuana Donkey Show
Tijuana Donkey Show's picture

By Zionists. Not all Jews are Zionists. 

Sun, 12/29/2013 - 09:14 | 4282989 AvoidingTaxation
AvoidingTaxation's picture

Yep, 'murikans can just try to hijack the country (from leftists, tribals and muslims) via a new third party and persuading the army to side with the people. Some 20-30 millions deaths, no more! Then a new constitution. I would say a normal long democratic cycle. Look @ france or britain or germany on how it works. Now, we also know that the USSA are less and less an "european derived" country.

Sun, 12/29/2013 - 20:38 | 4284115 Rafferty
Rafferty's picture

Muslims aren't the ones driving the War on Christmas.  Jeez.........

Sat, 12/28/2013 - 16:31 | 4282125 darteaus
darteaus's picture

Not to nitpick, but doesn't China have the largest army?  It's kinda centrally located too.

Sat, 12/28/2013 - 17:09 | 4282201 Sudden Debt
Sudden Debt's picture

nah, the chinese amry has more meat in it's ranks but that's it.

The Russians had a bigger army than the germans in WOII but they just counted on the numbers and if the Germans didn't had 3 fronts they'd won easely against the russians.

Sat, 12/28/2013 - 17:21 | 4282212 Tinky
Tinky's picture

"...if the Germans didn't had 3 fronts they'd won easely against the russians."

drinking, eh?

Sat, 12/28/2013 - 18:13 | 4282307 Sudden Debt
Sudden Debt's picture

No, the germans where superior in every way. It took the world to bring them down. America was at the point of surrender if Normandie failed and thank god there where all those fronts.

You should read some books and not base all you knowledge on Disney movies.

Sat, 12/28/2013 - 21:04 | 4282526 Tijuana Donkey Show
Tijuana Donkey Show's picture

Uhhhhhh, no. The USA had plenty of reserve production, and a little item called the nuclear bomb. Normandy was a poorly planned operation, and American's suffered because of it. 

Sat, 12/28/2013 - 21:20 | 4282544 lakecity55
lakecity55's picture

The Allies had Ultra, the German cipher system. Captured it with Germany unaware.

The Germans almost won even after we had read all their encrypted traffic.

 

Sun, 12/29/2013 - 06:10 | 4282921 silvermail
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Defeat of the Germans was began on July 17, 1942 in Russia, at Stalingrad. Everything that happened after that date, it was only a technical completion of victory.
Stalingrad cauldron, it is that was a true defeat of Germany.
The Germans could not withstand vs the Siberian Divisions Russian, who are accustomed to life in the winter cold.
Russian cold winter was like a killer for German soldiers. But for Stalin's Siberian divisions, cold winter was like a usual tradition - as a grunt from own mother.

If you think, that the Russian might be loses this war without any codes or without any external help, then you have forgotten the lessons of history.
I remind you: Napoleon conquered Moscow and already celebrated victory. Russians celebrated victory a little later - in the Paris.

Sun, 12/29/2013 - 20:50 | 4284127 Rafferty
Rafferty's picture

True.   It also seems to be accepted generally that  the German WW II army was the finest fighting force the world has ever seen.

Tue, 12/31/2013 - 16:11 | 4289292 DanDaley
DanDaley's picture

Russia has always had 2 of the greatest generals in history: General Snow and General Mud (worth many divisions each).

Sat, 12/28/2013 - 18:10 | 4282302 TimmyM
TimmyM's picture

Sudden Debt, I don't disagree with you much, but the Germans had no chance. Russian weather was an insurmountable obstacle. They did not have the right vehicles, clothes or fuel. The US should have stayed out of the war and let those two kill each other off. The world would be so different now.

Sat, 12/28/2013 - 18:19 | 4282316 Sudden Debt
Sudden Debt's picture

I agree with you there.
And I'm pretty sure you will agree with me than that we should just let all the Middle eastern countries kill each other off.

Sun, 12/29/2013 - 06:24 | 4282927 silvermail
silvermail's picture

Harry Truman spoke in the U.S. Senate on June 23, 1941: “If we see that Germany is winning,” he said, “we ought to help Russia, and if Russia is winning we ought to help Germany, and that way let them kill as many as possible.”
http://www.rjgeib.com/heroes/truman/truman.html

WALL STREET AND THE RISE OF HITLER
http://www.reformed-theology.org/html/books/wall_street/index.html

Sun, 12/29/2013 - 14:23 | 4283388 casfoto
casfoto's picture

Very similar to when in the beginning of the war England sent their troops up to Finland. The poor lads were not suited for the harsh climate. Their cloths were thin and there weapons did not work in such cold areas. Many of the boys died just do to these problems. If we send our people in we should send them to win with proper attire.

Sun, 12/29/2013 - 15:46 | 4283571 silvermail
silvermail's picture

Only good clothes not allows you to live in the cold. If a man and his body does not have the experience of living in the cold, then the best warm clothing is a small help for him.
Warm clothing will not save you if you need to live in the snow a few weeks. You should have experience of such life and body, accustomed to such a life and such a cold.
The human body, which was born and raised in Siberia or Alaska is very different from the human body, which born and raised in Spain or Greece.

Sat, 12/28/2013 - 18:52 | 4282356 Abitdodgie
Abitdodgie's picture

The "US ARMY" is a privatly owened corperation, just like the "UNITED STATES" is just like" NASA" just like " UNITED STATES POST OFFICE' The United States of America does not have shit , just like you dont own your houes or car or yourself , or your children , remember you gave them to the state when they were born ,YOU signed the birth cert.

Sat, 12/28/2013 - 16:28 | 4282121 jekyll island
jekyll island's picture

I suspect the bank of Rothschild had a hand in this somewhere along the line.  

Sat, 12/28/2013 - 17:11 | 4282203 Sudden Debt
Sudden Debt's picture

The Saudi's did when the Turkish army commanders stepped down a few years back.

Sat, 12/28/2013 - 16:31 | 4282122 ebworthen
ebworthen's picture

Probably a back-door way to smash gold down too; get it all sent to Iran, China, anywhere but the West (The Land of Fiat).

Perhaps a long term strategy in the works to try to affect sentiment towards precious metals and change 6,000 years of tradition.

p.s. - "It's nobody's business but the Turk's", but what the hell were they thinking getting rid of all that Gold?  They pulled a Gordon Brown.

Sat, 12/28/2013 - 16:33 | 4282131 BigJim
BigJim's picture

I doubt the Turks were exchanging their gold - I expect they bought it on the open market, and then sent it to Iran.

Sat, 12/28/2013 - 16:44 | 4282148 ebworthen
ebworthen's picture

Right, but instead of buying Gold with Lira and holding it and buying fuel oil and gas with Lira; they bought fuel with Gold and exchanged it for Lira - meaning they devalued their currency in exchange for fuel and not holding any Gold.

Sat, 12/28/2013 - 16:49 | 4282161 dark pools of soros
dark pools of soros's picture

just listen to the guy..  do you really expect to explain anything to him?

Sat, 12/28/2013 - 23:31 | 4282690 emersonreturn
emersonreturn's picture

"i expect they bought it on the open market..."

 

turkey has gold, it wouldn't surprise me it they import as well.

Sun, 12/29/2013 - 02:14 | 4282848 Hongcha
Hongcha's picture

Yes ebworthen.  The Chinese will be coming here to buy whatever bullion is left; well, they already are with Cash4Gold.  But by then any transaction involving gold will be illegal in the U.S.

Sat, 12/28/2013 - 16:38 | 4282138 Peter Pan
Peter Pan's picture

Only one detail matters in this story......that gold is still money.

Those stupid Turks who got caught, got caught with fiat. If they had been reading ZH they would know about gold and boating accidents.

Sat, 12/28/2013 - 16:45 | 4282151 Kirk2NCC1701
Kirk2NCC1701's picture

Wait till "Bitcoin for Gold" exchanges hit the Fan.  That's when the real Shock & Awe show starts.

Sat, 12/28/2013 - 16:52 | 4282163 Colonel Klink
Colonel Klink's picture

Fail, there's not enough bitcon value to substitute for oil and gold.

Sun, 12/29/2013 - 02:31 | 4282852 TheHound73
TheHound73's picture

Lol, BTC doesn't give a fuck how valuable it becomes.

Sun, 12/29/2013 - 07:52 | 4282959 Pseudonymous
Pseudonymous's picture

Dunno about "Bitcoin for Gold", but there already is Gold 4 Bitcoins.

Sat, 12/28/2013 - 16:46 | 4282154 h0oS
h0oS's picture

The reality is far more complex than the article suggests and any belief that the US is some how calling the shots is grossly over estimating US influence. Erdogan's regime is in trouble due to massive incompetence and arrogance, principally with his domestic policy (to grab as much power for his cronies as possible and piss on his own military mostly from fear) and its utterly inept handling support for NATO/Al-Qaeda alliance in Syria.

Gold plays a key role in Iran's sanction busting, but oil plays a larger role. The bilateral trade agreements and capacity trades that Iran relies upon for international trade hugely diminish the need for US dollars for international trade. US dollars are principally required to placate the small and medium sized business not, the key industries that Iran relies upon.

Sat, 12/28/2013 - 16:48 | 4282157 Seize Mars
Seize Mars's picture

h0os

Yeah, but it still benefits the petroUSD, doesn't it? Funny how that seems to happen?

Sat, 12/28/2013 - 17:03 | 4282185 h0oS
h0oS's picture

Well, maybe, but the détente with Iran will benefit the petroUSD far more so. The Saudi dictators will make all sorts of noises, mostly generated from gas escaping from various orifices at any US rapprochement with Iran. But ultimately they take their orders from Washington. As Churchill said "The Americans will always do the right thing, after they have exhausted all alternatives". The reality is that the US needs Iran as much as Iran needs the US. The Iranian state has by far the best prospects for stability in very unstable region and has historically been the regional hegemon. The Arab dictatorships are falling apart and the Zionist entity is decaying under its apartheid policies.   

Sat, 12/28/2013 - 17:27 | 4282225 Winston Churchill
Winston Churchill's picture

It would be a natural partnership with the Saudi oilfields running on fumes.

Not quite sure how TPTB are going to reverse 40 years of propaganda to achieve it in the

face of AIPAC though.Russia and China will have something to say about as well.

Obozo and his minions are incapable of pulling this type of diplomacy and a raproachment on

this scale would have to be done very quickly.

Sat, 12/28/2013 - 17:59 | 4282260 h0oS
h0oS's picture

I agree with you on several key points. Obozo and his minions are highly unlikely to accomplish much, but all they really have to do is a keep a lid on AIPAC, the nutters running Israel will do the rest by pursuing their apartheid agenda which will result in further net immigration from Israel while Palestinian demographics goes to work continuing to increase the Arab Muslim population. They should be able to achieve this, its just a matter of saying one thing and doing quite another, no problem for this administration.

Poll after poll has shown the majority of US citizens support a peaceful resolution to the Israeli problem and the re-establishment of ties with Iran. The realignment of US policy to pursue US objectives over Zionist objectives will allow the MSM brand anyone supporting Israel as unpatriotic and somewhat of a racist.

China and Russia will back the détente, they all stand to gain from rebuilding trade ties with Iran and of course the ensuing engergy, infrastructure and arms deals that will follow.   

Sun, 12/29/2013 - 09:01 | 4282984 o2sd
o2sd's picture

But Oceania has always been at war with East Asia, you were never at war with Eurasia. 

40 years of propaganda is easy to unravel, you just begin a new line of propaganda.

In fact, it has already begun. Look on the interwebs for documentaries of journalists visiting Iran in recent months (I saw one recently, but it's name escapes me). Everywhere they go, the Iranians love Americans and want to be their friends. It was all just one big misunderstanding on both sides you see.

 

Sun, 12/29/2013 - 11:11 | 4283062 Winston Churchill
Winston Churchill's picture

The US population would have to be dumb as a box of rocks to buy it.

Oh wait.

Because Obama.

Sun, 12/29/2013 - 06:29 | 4282931 silvermail
silvermail's picture

Speaking at the Bali Democracy international summit over the weekend, Turkish PM Recep Tayyip Erdo?an blasted the IMF’s role in the global debt crisis, stating that  “It is thought-provoking that the IMF is not using gold as a global currency’‘ and that “One would wish that the IMF would help the countries in trouble, but this is not the case.

Not content to stop there, Erdo?an likely placed a target on his/Turkey’s back when he stated that the world should flee the petro-dollar for gold: The world should consider switching to a monetary unit such as gold, which is at the very least an international constant and indicator which has maintained its honor throughout history. This is something to think about.

http://www.silverdoctors.com/turkish-pm-the-world-should-consider-switch...


Sat, 12/28/2013 - 16:45 | 4282156 Seize Mars
Seize Mars's picture

Wow. Kudos, ZeroHedge.

Great reporting.

This shit never ends. At least the scumbags in power are predictable, right? I mean at least that's something.

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