Ilhan Tanir
Nov 28 2017

U.S.-Turkey ties could get very bad, very quickly, expert tells Ahval

The impact on U.S.-Turkish relations of the oil-for-gold sanctions busting case due to open in New York on Dec. 4 could be monumental with Turkey potentially escalating tensions and the U.S. administration ill-prepared to deal with the fallout, a leading U.S. expert on Turkey said.

Howard Eissenstat, associate professor of history at St. Lawrence University and senior non-resident fellow at the Project on Middle East Democracy, told Ahval that after seeing some of the reactions from Turkey's pro-government media, he was afraid Turkey might dangerously miscalculate its response to the trial.

The U.S. government, he said, is also not ready to handle the potential repercussions of the case.

Iranian-Turkish gold trader Reza Zarrab is charged with running a complex plot to help Iran evade economic sanctions imposed over its nuclear programme, by shipping gold bullion from Turkey in return for oil. 

Zarrab, however, is no longer named as a defendant in the trial, one of several indications he may have turned state’s witness and is ready to implicate all those involved in the plot in return for a reduction in the decades he might otherwise face behind bars if he fights and loses the case.  

His testimony could implicate Turkish officials and leading politicians.

Mehmet Hakan Atilla, a former executive of Turkish state bank, Halkbank, is now the only person named as a defendant. Atilla is charged with laundering the proceeds of the scheme through the U.S. banking system.

Eissenstat said Turkey had presented the case as a "political witch-hunt" against the government of President Recep Tayyip Erdoğan. 

"It's highly likely that there could be billions of dollars of fines levied on Turkish banks; paying such fines would be extremely distasteful to President Erdogan and I’m not sure he’d be willing to do so,” Eissenstat said. “Or, in spirit of a reciprocity, Turkey may put their own fines on American banks."

"The problem is," he said, that "refusing to pay fines will escalate the crisis ... then the issue will go beyond billions of dollars of fines to taking steps to take Turkey out of financial markets and U.S. banking system etc."

Eissenstat said his concern was that "if Erdoğan engages in the tit-for-tat politics that he has used for other issues, this becomes a very big crisis, very quickly." 

"I am not entirely convinced Erdoğan understands the repercussions of, or the U.S. government is fully prepared for such a worst case scenario" Eissenstat said, "at any rate, there is very little that any U.S. government can do to intervene with the federal court."

Eissenstat warned: "Before the crisis spins out of control, the U.S. needs to speak clearly to Turkish officials about likely outcomes to try to manage the crisis."

U.S. authorities used the traditional language of diplomacy when warning the Turkish government about targeting its consular employees, before it suspended its visa services in Turkey in October.  These warnings were apparently not clear enough to be heard Turkey officials. On the contrary, even though the U.S. decision was preceded by warnings, Erdoğan seems to have been surprised by the US response,” Eissenstat said.

"Miscommunication and misapprehension" between the capitals was the reason, he said.

Whether the crisis can be managed at all depends on what emerges from the trial in New York, Eissenstat said.

"If Erdoğan's family members or inner circle are hit, then the crisis will be much more difficult to manage."