January 2, 2014 | Policy Brief

Babak Zanjani: An Iranian in the Eye of Turkey’s Storm

January 2, 2014 | Policy Brief

Babak Zanjani: An Iranian in the Eye of Turkey’s Storm

Iranian authorities arrested billionaire Babak Morteza Zanjani Monday after a protracted public campaign against him that began soon after the June election of new Iranian president, Hassan Rouhani. Zanjani chairs the Sorinet Group, a holding company that includes a large cosmetics’ company in Turkey, an airline in Tajikistan, another airline in Iran, a bank in Malaysia, construction projects in Iran, and a number of other companies worldwide.

Zanjani is under European and US sanctions for helping Iran evade the oil embargo. He reportedly helped Tehran sell €17.5 Billion ($24 Billion) worth of oil and process payments through offshore banking in Malaysia. In a New York Times profile, Zanjani admitted to sanctions busting on behalf of the regime.

Zanjani boasted of being ‘an economic Basij’ and helping Tehran weather international economic pressure. However, the regime was apparently unimpressed. Iran now accuses him of failing to return over $2 billion to state coffers.

Like Iran itself, Zanjani appears caught in the crossfire between the old administration of former president Mahmoud Ahmadinejad and the new regime under Rouhani. Rouhani seeks to blame the disarray of Iran’s economy on corruption and mismanagement by Rouhani’s predecessor and his associates. Zanjani is a big fish among them.

Zanjani is neither the first nor the only one to be scapegoated, but in recent weeks, his indictment had a ripple effect across the border in Turkey, where media leaks have exposed two Iranians accused of being his middlemen, linking one to government corruption.

The first case, flagged by the Turkish press since late September, involves a former Islamic Republic of Iran Shipping Lines executive, Mehdi Shams (aka Mehdi Shamszadeh) who last May purchased Iran’s low-cost airline, Onur Air, in a reported $250 million deal. He promptly transferred five Onur airbus passenger carriers to Zanjani’s Qaeshm Air airlines in Iran – an apparent way to skirt the US spare parts embargo.

The second case involves Iranian-Turkish dual national, Reza Zarrab, whose role in Iran’s gold trade with Turkey and transfer of some 87 billion euros through Turkey’s state-owned Halkbank led to the arrest of dozens of public figures, the resignation of ministers, and a massive political crisis.

Observers in Turkey assume that the investigation is part of an ongoing feud between the ruling Justice and Development party of Prime Minister Recep Tayyp Erdogan, and the Islamic renewal movement of exiled Turkish cleric Fetullah Gülen.

But there may be more to the story. Zanjani’s arrest in Iran, two weeks after the corruption scandal erupted, is likely an indication that the quiet and illicit financial ties between Turkey’s political elite and Iran’s seedy sanctions-busting underworld are unraveling.

What exactly prompted this rupture is still unclear.  But Zanjani and Zarrab are surely not the only Iranians who cashed in. More revelations of illicit finance between Iran and Turkey may yet emerge.

Emanuele Ottolenghi is a Senior Fellow at the Foundation for Defense of Democracies


Iran Iran Sanctions Turkey