Turkey's Erdoğan gave order to start Iran trade, Zarrab says

(Updates with details of Zarrab's testimony from the fifth paragraph.)


President Recep Tayyip Erdoğan gave the order to start doing trade with Iran, Turkish-Iranian gold trader Reza Zarrab testified to a New York court on Thursday.

"What I’m saying is that the prime minister at that time period, Recep Tayyip Erdoğan, and the minister of the Treasury ... had given orders to start doing this trade," Zarrab said in the witness stand in response to prosecutors' questions.

Erdoğan was prime minister at the time of the deals in 2012-2013. Zarrab named the former minister as Ali Babacan.

Zarrab, an Iranian-Turkish national, is a co-conspirator and state's witness in the case against Mehmet Hakan Atilla, an executive of Turkey's state-run Halkbank, who is accused, along with Zarrab, of violating sanctions on Iran by funnelling cash through the U.S. banking system in an oil-for-gold swap deal.

Erdoğan, Zarrab said, widened the scheme to involve other state-run banks. The Turkish president has called the case political and designed to bring down his government.

In a second day of testimony in the New York Southern District court, Zarrab expanded on allegations concerning the complicity of another senior Turkish official in the scheme, former Economy Minister Zafer Cağlayan.

Cağlayan, Zarrab said, had given him the personal go-ahead to bribe ex-Halkbank CEO Süleyman Aslan, took regular cuts from the illicit trade, and travelled with him several times to Iran for meetings there.

"He wanted to ensure his future in some way," Zarrab said of Aslan. “I then turned to Cağlayan for permission,” he said.

Cağlayan is indicted in the case but remains outside the United States. He was last seen in public at a ceremony with Erdoğan in August.

The ex-minister took a close interest in the flow of transactions, Zarrab said. 

"He was checking out our bank statements from time to time, to see what was coming in," he said.

Zarrab said Aslan became disturbed about the money flows, saying he had received several warnings from the United States about the transactions. So Zarrab exchanged the cash for Turkish lira at Halkbank, and routed it through another bank - Arab Turk Bank - to help disguise the transactions, and then into an account at another bank, he said.

"If it were in dollars, it would have to go to the U.S. on the way to Arap Turk bank. If it were in euros, it would have to go in Europe. With it being in Turkish lira, it would stay in Turkey," he said.

Zarrab said the scheme expanded into India. Indian clients would first create an account at Halkbank and then the buyer of crude oil in India would deposit money directly into the account. Funds would then go to another Turkish bank and Zarrab would take it from there, he said.

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