MANHATTAN (CN) – As Hakan Atilla learns what sentence he must serve for helping Iran launder billions of dollars, Istanbul’s fragile markets will watch closely Wednesday for cues about the fate of the Turkish banker’s former employer.
Atilla had served as one of 13 managers at Halkbank, a Turkish government-run institution implicated in massive violations of U.S. sanctions, before his arrest last year at New York’s John F. Kennedy Airport.
With his conviction in January on sanctions violations, Turkey experts from here to Istanbul expect another shoe to drop soon for Halkbank.
“I think the markets are prepared for a fine of some sort from U.S. Treasury, but how much?” Asli Aydintasbas, a senior fellow at the European Council on Foreign Relations, said in a phone interview. “That’s the question.”
The question could carry profound implications for the future of Turkey’s economy, which has been roiled by a recent coup attempt against the country’s President Recep Tayyip Erdogan and his fevered hunt for supposed enemies under the country’s State of Emergency.
At Atilla’s trial, U.S. prosecutors could only estimate the scale of the Halkbank money-laundering scheme. In one sentencing brief, for example, they noted testimony from gold trader Reza Zarrab, who had been a key witness against Atilla, that he funneled “a few billion” euros in Iranian oil proceeds through the bank.
“The trial record also showed that the scheme involved both billions of dollars’ worth of gold transactions … and billions of dollars’ worth of fraudulent food transactions,” Assistant U.S. Attorney Michael Lockard wrote in a memorandum.
How U.S. regulators tabulate the damage, Aydintasbas said, could send Turkey’s markets into turmoil.
“So, if we’re talking about $1 or $2 billion, $3 billion, I think the markets have prepared for something like that,” she said. “But if we’re talking about $8, $9, $10 [billion], that would send shockwaves through the Turkish economy at a time when things are looking very, very fragile, particularly in terms of liquidity.”
Experts on U.S.-Turkish relations in both countries believe that is what Erdogan has feared most from the start of the Iran sanctions case.
Insisting upon deep cover, a U.S. Treasury official refused to decline comment on the record.
“Treasury does not comment on investigations, including to confirm whether one exists,” the official said.
The Erdogan Establishment
New York-based expert Steven Cook, a Council on Foreign Relations fellow who wrote the book “False Dawn,” noted that the case against Atilla here traces its origins to a 2013 corruption scandal implicating Erdogan’s political allies.
One of the targets of that corruption investigation was Zarrab, whose arrest in the United States prompted years of lobbying by Erdogan’s government for his release.
“I think it’s clear that Reza Zarrab sat at this nexus of influence between the [Turkish] government and this world of corruption and sanctions-busting, and he was at arm’s length,” Cook said. “He was the plausible deniability.”