Money laundering rings poison host countries

Money laundering rings poison host countries

Turkish Prime Minister Recep Tayyip Erdoğan (R) shakes hands with Iranian President Mahmoud Ahmadinejad. (Photo: Today's Zaman)

January 05, 2014, Sunday/ 00:00:00/ MESUT ÇEVİKALP

The early morning raids on Dec. 17 are still being discussed. More than 80 people were initially detained in connection with the corruption and graft investigation being handled by the İstanbul Chief Public Prosecutor's Office.

Twenty-four of those suspects have been arrested on court-issued warrants. The rest were referred to a court but released pending trial. Those arrested include two ministers' sons, a mayor, the general manager of a state-run bank and many high-level officials.

Even graver than the prominence of the accused are the charges levied against them: involvement in a bribery ring working to benefit the Iranian deep state.

In an interview with Sunday's Zaman, Assoc. Prof. Dr. Mehmet Akif Okur from Gazi University explains that Iran has created a parallel economy to evade sanctions. Because the system doesn't work legally, countries that are involved are poisoned by corruption and bribery.

Iranian Reza Zarrab is claimed to have run this deep state's operations in Turkey, under the orders of Iranian Babak Zanjani. It is alleged that Zarrab, who took the Turkish name Rıza Sarraf after receiving citizenship, laundered money and bribed high-ranking state officials in Turkey to make his plans work. Media outlets have reported that Zarrab was observed by investigators bribing four Cabinet ministers. The allegations are grave. The resignation of the three ministers involved in the case (former Economy Minister Zafer Çağlayan, Interior Minister Muammer Güler and Environmental and Urban Planning Minister Erdoğan Bayraktar) lent support to the allegations. EU Minister Egemen Bağış, who did not resign, was soon after removed in a Cabinet reshuffle.

This move, however, did not address all concerns and questions. Suspicion that the government was trying to block further investigations raised doubts about the fate of the probe. Iran has launched an investigation into Zanjani and his associates; this shows how crucial the investigation in Turkey is. So who is this Zanjani? What is his connection to Zarrab? What sort of operation were they running in Turkey? What is the role of the Iranian deep state, the Revolutionary Guard? What were the ministers given? We discussed this shady organization with Okur.

What sort of structure did the bribery and graft probe expose?

Iranian Reza Zarrab is the visible part of this business in Turkey. He is a young businessman. But the lead name is Iranian Babak Zanjani. He is pretty familiar to Iran experts. He is one of the businessmen who has ties with the Revolutionary Guards. He is someone who tries to bypass economic sanctions imposed upon Iran.

What is his relationship to Turkey?

The network Zanjani is running commits illegal and unregistered transactions in certain countries in order to evade the sanctions against Iran. Apparently, they also did some work in Turkey as well. It is obvious that Turkey is being poisoned by these activities. The Turkish judiciary will identify what they have done so far.

The West allowed Turkey to purchase some oil from Iran. Could this be related?

The sanctions are multilayered. The West allows Turkey to buy 110,000 barrels of oil [from Iran]. However, the payments should be held in a bank in Turkey; and ultimate payment to Iran is made in the form of commercial commodities. This inevitably led to a bilateral trade relationship. There is no problem here. It was even beneficial for Turkey. But there is a gray area. The real crimes were committed there.    

How is that?

In an attempt to bypass the sanctions, Iran created a network of businessmen. This [network] was created by figures who were connected to the Iranian deep state. This is what I call the gray area. And Zanjani appears here. Although the foundations of this structure were laid during the term of President Hashemi Rafsanjani [1987-1997], it became stronger during [Mahmoud] Ahmadinejad's presidency. During this period, one-third of the Iranian parliament [deputies] were [members of the] Revolutionary Guard. They were appointed to critical positions. They became more active in the economy. In 2010, nearly half of the Iranian economy fell under the control of the Revolutionary Guard. In addition, foreign operators in this structure were given financial incentives. Zanjani is one of these operators.    

So you are talking about a deep structure that the Iranian deep state created?

Iran is a rentier state whose revenues are based on rentier activities. And the political competition on the domestic stage is all about how to share the revenue. Oil revenues constitute almost half of the government's revenues. If you add natural gas and other underground resources, natural resources constitute almost the entire budget. Because of the Western sanctions, Iran was unable to sell oil by normal procedures. Therefore, they decided to sell oil through their operatives. In short, they created a parallel economic structure. Because this was not legal, the agents of this structure resorted to bribery to accomplish their goals in other countries. Countries like Turkey, where they were active, are being poisoned by money laundering, corruption and bribery.

How does the “gray” system work?

Oil extracted in Iran is sold to third countries. The revenues are transferred to Iran in the form of cash or gold. Of course, because the system is illegal, the transactions in the third countries have to involve bribery or blackmail. The mediators of course receive their entitlements and commissions.

Is this how Zanjani works?

Exactly. He even described this process in an interview. He changes the [listed] origin of the oil he extracts in Iran in the ports of third countries, including Malaysia and Tanzania. In small ports, he transfers the oil from one tank to another. He changes the origin of the oil and sells it at a more reasonable price. He transfers the money to Iran by wiring it to his own bank. He presents this as the profits of his companies. He has 65 companies. The one in Turkey is registered as a cosmetics firm.    

Did the US and European countries figure out this system?

Of course. It has been noted that Iran has tried to violate the embargoes 272 times over the last three years. The activities of this structure were tracked in Latin American and African countries. European and US authorities realized that Iran was attempting to sell Iranian oil in Tanzania, because the oil was documented as coming from Tanzania.

Where else did they carry out this scheme?

It is known that they are fairly active in Tajikistan, which is referred to as one of the four countries where money laundering is extremely easy. Likewise, it became apparent that 150 companies were established in Georgia as affiliates of the Revolutionary Guard. Unregistered banking transactions were performed between these companies. They use couriers in their money-laundering activities. Some of these couriers were identified and arrested in Turkey. This organization receives the payments through gold or commercial goods. In this way, cash is transferred to Iran and as a result, the embargo is violated and the financial pressure is eased. Therefore, the nuclear program is sustained. But in the end, this structure poisons Iran and the countries where the operations are carried out.    


There are serious losses in the system because it works illegally. The transactions are conducted via risky actions, including bribery. The cost is paid in the oil of the Iranian people. In addition, the members of the ring sell the oil at a cheaper price because the origin has been changed. Even if they sell it at a higher price, they may claim that they sold it cheaply. There is no accountability. Because of the sanctions, they are unable to transfer all the money to the country. The network is allowed to use the money outside Iran in their own enterprises. For instance, Iran had $2 billion in Zanjani's hands. A special commission was set up in parliament because he didn't return the money. He eventually gave back the money because of mounting pressure.

So they are not controlled by the state?

Not entirely. Their activities are even destructive to Iran. The network invested the oil revenues in privatization in the country. They even bribed authorities when buying privatized public institutions. It has been proven that they bribed 40 Iranian deputies. Zanjani is argued to have been involved in 140-150 privatization operations. They administered domestic funds through the illegal funds they transferred. The new Iranian president, Hassan Rohani, is trying to get rid of this structure. Before Turkey, Iran initiated an investigation against Zanjani.

They relied on the same methods in Turkey as well -- bribes, expensive gifts, etc.

Bribery and blackmail are part of the political system in Iran. The most recent case took place in February. After a political dispute, then-president Mahmoud Ahmadinejad announced that Iranian Parliament Speaker Ali Larijani received bribe money. In addition, he presented video footage of the bribery transaction at the Iranian Parliament.

Similar cases have taken place in the past as well. Bribery and blackmailing are part of the Iranian political system. From this perspective, the aforesaid parallel structure might have bribed the relevant authorities in Turkey so that it could achieve its goals. The media reports refer to this. However, the legal process will reveal all the details of the incident.

So Iran was laundering its money in Turkey while also poisoning its major regional rival?

 Yes, this is a situation of hitting two birds with one stone. They launder their monies and also poison Turkey. This is pretty clear.

So Turkey's image was inevitably eroded...

The bribery and corruption allegations were published in the international media. This undermines Turkey's image. This makes the Iranian deep state happy. In addition, Turkey's global image is also being undermined because of its contribution to the violation of sanctions. The US is seeking ways to cooperate with the new Iran, whereas Turkey had business with the old one.

Is it possible to attribute the establishment of 2,116 Iranian companies in Turkey over the last three years to this attitude?

There are both official and unofficial dimensions in this case. When Iran started business with Turkey because of the sanctions, the Tehran administration tried to carry out its businesses via its own firms. This is the official dimension. In the unofficial part, there are firms that were created by the ring. The financial police should carefully deal with them.

Does the current legal investigation into the bribery charges show that the Iranian deep powers are extremely influential in Turkey?

Media reports show that the members of the ring have infiltrated into many state units by using the illegal money in their hands. This is pretty dangerous. The money this intricate and influential network gives away is not just in the form of bribes. It is also followed by blackmail. Inevitably, this leads to security problems as well.

Is not it interesting that this was not investigated by the intelligence agency?

Serious and established intelligence agencies take preventive measures. People in critical positions are protected. These are delicate issues. They cannot be ignored.

Is it possible to argue that the Iranian deep state secured connections in Turkey?

There are some issues that remain unexplained. There are connections. Why is Turkey supplying cash money to Iran given that we are experiencing problems with this country in our Syria policy? Is this not indirect support of the Syrian regime?

Is it possible that the Turkish government does not know anything about what has been going on?

I do not think that such huge monetary transactions can be performed without the government's knowledge. The photos published in the media reveal that Zarrab was in touch with ministers and high profile figures.

What did Turkey get out of these money transfers?

In fact, it was harmful rather than beneficial. Illegally obtained money is not invested money. And because it is illegal, the whole process contaminates the whole system. It corrupts the bureaucracy. Even Iran, the main origin of the money, has been corrupted. Like Rohani who recently came to power, Turkey should also get rid of these kinds of criminal rings.

Is the trafficking of money a factor in the Turkish government's attention to Iran?

It became apparent that the government's attention was not all about ideological. The money trafficking appears to be another factor. There is a network of relationships. The judiciary in Turkey has to clarify this vague picture.

What will Rohani do?

Rohani argues that these structures should be effectively dealt with so that normalization with the West can be achieved and so that nuclear sanctions can be eased. In a speech in September, he said the Revolutionary Guard should withdraw from the economy. He places emphasis on the ongoing investigations to clear the way for the middle classes.

What sort of measures are they taking?

They set up an inquiry commission in the Iranian Parliament. In its report, the commission refers to Zanjani. There will be a bitter struggle between Rohani and the Iranian deep state over the next six months. For instance, the construction of a shopping mall in downtown Tehran by Zanjani was halted. If a final nuclear deal is made, the fight against the deep structure will become more influential.

Will they be able to completely eradicate it?

It would not be easy. The Revolutionary Guard is very powerful. They have weapons. Religious leader Ali Khamenei also supports them because he is one of the 300-400 people who hold full control over the national assets. But there is strong opposition to this order among the public; this reaction is growing. And Rohani wants to use this.

What would have happened if this had taken place in a European country?

The case would have been taken to the judiciary. The allegations would have been seriously investigated. Figures holding crucial positions in the West would act in compliance with certain rules. Intelligence units would not allow any contact with corrupt structures. If a multidirectional relationship were detected in the investigation and a money transfer were proven, the relevant figures could be tried with treason. Heavy punishments would be introduced.

What will happen if the exposed structure in Turkey is not fully investigated?

 The third country elements would be further encouraged to conduct illegal acts in Turkey. This encourages other, similar structures to become active in Turkey. To avoid this, this kind of criminal ring should be completely eradicated. In the meantime, the ongoing graft probe in Turkey is not against Halkbank; it is only part of the operation. And it is not safe to argue that this is an operation handled by the US and other global powers. US Department of the Treasury Undersecretary David Cohen traveled to Turkey a few times to review the bank transfers. In a report he submitted to US Congress in May, he noted that Halkbank did not commit any irregularities in oil transactions. The money found in the house of the bank's general manager is a separate issue. However, the main issue is money laundering and the bribery as part of it.

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