Flynn allegations raise stakes for Erdoğan

A foreign power offering money to a Trump adviser to abduct a Muslim cleric from his Pennsylvania home to an island jail off Turkey's coast...

An Iranian gold trader laundering cash through the U.S. banking system to evade sanctions on Iran, with the alleged complicity of a NATO ally’s economy minister and top officials of a state-run bank. 

The stuff of movies.

But these are the allegations being levelled at officials in Turkey, a decades-long friend of the United States.

U.S. Special Counsel Robert Mueller has begun an investigation into the role of Mike Flynn, a former White House national security advisor to President Donald Trump, in a plan with Turkish officials to forcibly remove the cleric, Fethullah Gülen, from his Pennsylvania mansion, U.S. media reported last week. The Turks also asked Flynn to help quash the money-laundering case in return for more than $15 million, according to NBC.

And on Thursday, Reza Zarrab a chief suspect for circumventing the sanctions on Iran, failed to turn up in court for a hearing, a sign that he has now turned state witness and could help implicate Flynn and more Turkish officials.

Iranian-Turkish businessman Zarrab and Hakan Atilla, a deputy chief executive of Turkey’s Halkbank, are due to stand trial in a New York courtroom Nov. 27 on charges of bank fraud, defrauding the United States and obstructing sanctions. Atilla’s ex-boss and former minister Zafer Çağlayan are also listed in the indictment.

The allegations of complicity at the highest levels of government are shaking relations between the United States and Turkey.

Prime Minister Recep Tayyip Erdoğan is incensed at the developments, calling the Zarrab allegations fabricated and politically motivated. Turkish prosecutors have in turn arrested a U.S. pastor they accuse of complicity in an attempted military coup last year, which Erdoğan blames on Gülen. Pastor Andrew Brunson’s incarceration, protested by members of the U.S. Senate and State Department, has been followed by the arrest of two U.S. consular officials on the same charges, prompting the United States to suspend visa operations in early October, citing security concerns.

And the Turkish lira is falling – investors are starting to pull capital out of Turkey, once a haven for asset managers looking for high, safe returns. Firms such as GAM Holding of Switzerland, with $185 billion of assets under management, and a former central bank chief of Turkey are starting to warn of a potential financial crisis, as the lira stokes inflation and hurts Turkish firms' ability to repay more than $200 billion of foreign loans.

Tim Ash, senior emerging markets strategist at hedge fund BlueBay Asset Management in London, said there is particular concern among investors that more Turkish officials could be implicated in the Zarrab case.

“Let's see what is revealed during the course of the trial and obviously what the end verdict is," Ash said. "The market is clearly concerned that there could be further allegations/evidence that suggests links further to the Turkish administration, and institutions."

Aside from Zarrab and Attilla, who are in U.S. custody, seven other defendants are being tried in absentia. They include Süleyman Aslan, Atilla’s former boss, and Çağlayan, whose last public appearance was at a ceremony with Erdoğan in late August.

Former Economy Minister Zafer Cağlayan sits behind Erdoğan at an event on Aug. 26
Former Economy Minister Zafer Cağlayan sits behind Erdoğan at an event on Aug. 26

A few days after that ceremony, Erdoğan stepped to the defence of Çağlayan and other Turkish suspects in the Zarrab case.

“I am saying clearly that I see this step taken against our former economy minister (Çağlayan) as a step taken against the Turkish republic," Erdoğan said. “These steps are purely political. The United States needs to revise this decision, there are very peculiar smells coming.”

Erdoğan and his government are trying to lay the blame for the Zarrab trial on the influence in the United States of the Gülen movement.

A columnist for the pro-government Yeni Şafak newspaper, citing Turkish Prime Minister Binali Yıldırım, said on Nov. 14 that the White House was being besieged by the “enemies of Turkey”, an oblique reference to Gülen and his followers. The future of U.S.-Turkey relations would depend, Yıldırım said, on the White House’s positive view being accepted by other institutions.

Since the failed coup, Turkish police have detained thousands of Erdoğan’s critics on terrorism charges under state of emergency powers, many of them alleged followers of Gülen, including generals, security officials, judges, bureaucrats, journalists and human rights activists. The state of emergency has prompted the United States and the European Union to call on Turkey to restore full democracy.

The possible abduction of Gülen was discussed between Flynn, Erdoğan’s son-in-law and Energy Minister Berat Albayrak and Foreign Minister Mevlut Çavuşoğlu in September last year. Former CIA Director James Woolsey was also present at the meeting held in a New York hotel room.

Woolsey has since said that the plan was theoretical, involving “a covert step in the dead of night to whisk the guy away” in comments to the Wall Street Journal.

Flynn met again with Turkish officials at New York’s ‘21’ Club in December, while he was serving on the presidential transition team, when the subject of the Zarrab case also came up. NBC reported. U.S. government investigators have already questioned witnesses to the meeting, it said.

“As I see it, the Flynn matter will only aggravate the reputation of Recep Tayyip Erdoğan’s Turkey as untrustworthy and a "rogue state,” said Kevin Snapp, a former federal court staff attorney who has been closely following legal developments in both the Zarrab and Flynn cases.

“Although I don't think Çavuşoğlu and Albayrak will be charged, their presence at the September meeting suggests more was afoot than an anti-Gülen lobbying/PR campaign. It is hard to believe the Turkish government would think that lobbying Congress or "exposing" Gülen in the media -- Flynn's cover story -- would produce the desired result. But if not kidnapping, what?”