Erdoğan elite control energy via illicit transactions: analysts

President Recep Tayyip Erdoğan and his son-in-law, Energy Minister Berat Albayrak, are operating a system of patronage in Turkey’s energy industry, increasing financial risks for foreign investors, according to analysts at Shadow Governance Intel.

Party loyalists are getting preferential treatment, including via state-run energy company Botaş, said Shadow Governance, an arm of UK-based corporate intelligence firm West Sands Advisory Limited, in a report published by

The report, citing unidentified sources in the sector, said Albayrak had personally benefited from some deals, including through holding shares indirectly in Ar Enerji. The company is owned by Ziya Ilgen, Erdoğan’s brother-in-law, and has won lucrative contracts with Botaş.

The control of the energy sector goes beyond economic resources and services in Turkey, but acquires political, governance and blood kinship angles ... Within this framework, Erdoğan and Albayrak have strengthened their alliance with certain businessmen believed to benefit from this relationship. In other words, patronage from the president and his son-in-law has resulted in the expansion of their business interests.

Other financial beneficiaries cited by Shadow Governance Inc. include Burhan Özcan, chairman of Botaş, Aziz Torun, a classmate of Erdoğan’s, and Ali Metin Kazancı, owner of Kazancı Group.

Judicial decisions have also helped businessmen with close ties to the government, the report said. In March last year, the Turkish Supreme Court annulled prison sentences associated with rigging tenders in public procurement contracts at Botaş. As many as 77 people were investigated by police in 2006 and many jailed. Among the beneficiaries was Nihat Özdemir of Limak Holding, who remains very active in the energy and construction sectors.

The high levels of political influence within the energy sector makes any external interests complicated, especially when the government shields allegations of corruption and embezzlement with the rhetoric that certain transactions are in the “national interest.”

The analysts also cited an import contract signed by Kazancı Group with Russia's Gazprom in 2009, which was incorporated in Gazprom investments worth about $2 billion. Ali Metin Kazancı is a major client involved in Botaş's distribution networks and last year signed a $996 million loan with private banks Iş Bank and Garanti, they said.

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