May 15 2018

Halkbank trial could completely destroy U.S.-Turkish relations, says Erdoğan

The outcome of a trial in the United States which uncovered a sanction-breaking scheme involving Turkish state officials and bankers could “completely destroy” relations between the two countries, Turkish President Recep Tayyip Erdoğan suggested during an interview with Bloomberg TV on Monday.

“Of course, right now a great injustice is being done to HalkBank,” Erdoğan told Bloomberg TV’s Guy Johnson, referring to the Turkish state-owned bank embroiled in the scheme to break U.S.-sanctions on Iran.

The New York Southern District court was told last December that Iranian money had been moved through HalkBank until 2016 using mechanisms designed by the trial’s defendant, HalkBank executive Mehmet Hakan Atilla set up gold transfers and imaginary food exports.

“Hakan Atilla is a friend of ours who has been regularly visiting the U.S. and has been detained in his last, or his sixth visit, without any crime existing. There should be no such injustice,” said Erdoğan.

After star witness Reza Zarrab, a Turkish-Iranian gold trader, gave testimony implicating Erdoğan and Turkish former finance minister Zafer Çağlayan during an eventful trial, Atilla was convicted on five of six charges last January and is currently awaiting sentencing. Prosecutors have recommended a sentence of at least 15 years.

Erdoğan maintains that Atilla is innocent, but admitted he did not know what the final result of the court would be.

“I hope it doesn’t yield a result that will completely destroy Turkish-U.S. relations,” he said, later adding that “if Hakan Atilla is going to be declared a criminal, that would be almost equivalent to declaring the Turkish Republic a criminal.”

With the United States expected to level a substantial fine at HalkBank, speculation has mounted over whether the Turkish state will step in to pay any fine.

Turkish Deputy Prime Minister Mehmet Şimşek said in January that while HalkBank would be responsible for paying any possible fine, the Turkish government would step in to provide assistance in the event that a ruling puts the bank into serious financial trouble.

As the country’s economy continues to stutter and the lira’s value plunge, there is a good chance that the fine will be high enough to cause a crisis in Halkbank, Andy Birch, an economist at IHSMarkit, told Ahval TV on Tuesday.

Pressed by interviewer Guy Johnson on the issue of the fine, Erdoğan refused to guarantee that the government would intervene to pay the fine, but said the bank would “do what the laws require (it) to do.”