September 17, 2014 | Policy Brief

Iranian Leverage over Turkey?

September 17, 2014 | Policy Brief

Iranian Leverage over Turkey?

The Turkish daily Taraf published a blockbuster article Tuesday alleging that Iran has been blackmailing Turkey. 

Turkey has been pressuring Iran, one of its major sources of oil and natural gas, to lower its export prices for natural gas. According to Taraf, Iran is now using potentially damaging documents that allege Turkish corruption and financial crimes to blackmail Turkey’s leadership to drop its demands. 

Iran currently has a sweetheart natural gas deal with Turkey. Taraf notes that fourth quarter 2013 figures reveal that Iran is Turkey’s most expensive natural gas source, with $492 per 1,000 cubic meters, compared to $321 for Azeri gas, and $424 for Russian gas.

The dispute over natural gas prices is a recurring one for these two countries. In 2009, Turkey received $800 million in compensation from the International Chamber of Commerce. In March 2014, Turkey’s Energy Minister Taner Yildiz again threatened to sue the Iranian government in an international court to arbitrate more competitive natural gas prices. 

But the relationship is not entirely antagonistic. In 2012 and 2013, Turkey quietly paid Iran for its natural gas purchases in gold, in circumvention of international sanctions against Iran to curb its nuclear aspirations. The gas-for-gold scheme between these two countries reportedly yielded Iran $12 or $13 billion.

Following the revelation of its scheme, a December 17 corruption scandal in Turkey — corroborated by a leaked Istanbul prosecutor’s report in March — further revealed a raft of additional illicit transactions between Turkey and Iran that may have exceeded $112 billion (a huge and perhaps exaggerated amount given that Iran's estimated total foreign exchange reserves are only around $100 billion). At the center of the scandal was Turkish-Iranian businessman Reza Zarrab, who was alleged to have laundered money through Iran and illegally sold gold while helping Iran to evade international sanctions. Meanwhile, Iran has conducted its own corruption investigation, and subsequently sent a delegation to Turkey to investigate Reza Zarrab’s alleged connections to another Iranian figure now jailed in Iran, Babak Zanjani.

The Taraf article suggests that Iran has documents that could “put Turkey in a difficult position.” Presumably, the alleged documents could reveal additional information about the illicit financial networks documented in the leaked prosecutor’s report.  That report named many businesses and banks allegedly involved in criminal activity, but it also left out a great deal. Iran and Turkey have yet to respond to the story. But if there is more to reveal, it is understandable why Turkey, a NATO ally now under fire for failing to cooperate with West against the Islamic State (ISIS), would want to keep this information from the public eye. 

Merve Tahiroglu is a research associate at Foundation for Defense of Democracies, focusing on Turkey. Find her on Twitter @MerveTahiroglu  


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