Nuclear Power Plant Project Highlights Turkish Role in Russia’s Sanctions Evasion

The United States dealt Russian efforts to evade international sanctions a significant blow by ordering the American bank J.P. Morgan to freeze $2 billion of Russian funds destined for Turkey. The move shed new light on NATO member Turkey’s assistance for Russian efforts to undercut sanctions penalizing Moscow for its invasion of Ukraine.

Russia’s Gazprombank has reportedly transferred over $5 billion through American banks to Turkey since the start of the war in Ukraine, ostensibly to finance the construction of the Akkuyu Nuclear Power Plant in Turkey’s southern Mersin province. However, a newly-concluded U.S. Justice Department investigation determined that some of the funds were being used to create an offshore dollar reserve to finance Russia’s war effort.

The Biden administration, which ordered J.P. Morgan to block several transfers involving Gazprombank because of sanctions evasion concerns, did not formally seize the frozen $2 billion for fear of angering Turkey. While any actions by the Trump administration have yet to be specified, it is painfully clear that President Recep Tayyip Erdogan’s government is complicit in Russia’s illegal action, plainly undermining the interests of the United States and its NATO allies.

Turkey’s Complicity in Russian Sanctions Evasion

The Justice Department’s investigation concluded that the payments from Gazprombank to Turkey for the Akkuyu project — established through a 2010 joint agreement between Moscow and Ankara — were being secretly bankrolled by the Bank of Russia. After the United States and its allies froze the Bank of Russia’s currency reserves following the invasion of Ukraine in February 2022, Moscow became desperate to find alternative means to establish offshore dollar reserves.

Gazprombank — until November 2024, the largest Russian bank not subject to full U.S. sanctions — was able to maintain dozens of corresponding accounts in American banks such as J.P. Morgan Chase and Citibank. Exploiting Gazprombank’s unsanctioned status, the Bank of Russia was able to send billions of dollars to Gazprombank, which would then transfer the funds to U.S. banks and convert them into dollars. Once in U.S. currency, the funds were deposited in Turkey’s state-run Ziraat Bank and distributed among Russian companies with existing accounts there. 

For Turkey, the incentives for this conduct were both economic and geopolitical: increasing the U.S. dollar supply to stabilize the lira, its national currency, without raising interest rates in the midst of crippling inflation and expanding economic and diplomatic ties with Moscow. Unlike other NATO members, Turkey has repeatedly refused to sanction Russia for its aggression against Ukraine.

The U.S. Approach: Don’t Upset Erdogan

Prosecutors at the U.S. Justice Department had planned to seize the $2 billion trapped at J.P. Morgan but were ordered to stand down by the Biden administration. U.S. officials feared that implicating Turkey could undermine the bilateral relationship, seen as critical to counterterrorism, negotiations to end the war in Gaza, and the stabilization of neighboring Syria. Turkish intelligence director Ibrahim Kalin and then finance minister Nureddin Nebati— both close allies of Erdogan — were implicated in coordinating the transfer of the $2 billion.

In May 2024, the U.S. House of Representatives Foreign Affairs Committee approved the Rosatom Sanctions Enforcement Act for voting. If the bill passes and sanctions are imposed on Rosatom, it is unclear whether the agreement to construct the Akkuyu plant would be given an exception to proceed.

Trump Should Examine Sanctions if Turkey Refuses to Budge

In a July 2024 bid to reduce Ankara’s dependence on Russia for nuclear technology, the United States initiated talks with Turkey exploring the possibility of constructing both large-scale nuclear power plants and small modular reactors. The Trump administration should further these talks and convince Turkey to cut ties with Rosatom.

Simultaneously, Washington should warn Ankara that unless Turkey terminates its contract with Rosatom for the Akkuyu project, it will face sanctions and other punitive measures.

Sinan Ciddi is a nonresident senior fellow at the Foundation for Defense of Democracies (FDD). Follow him on X @SinanCiddi. Andrea Stricker is a research fellow and deputy director of FDD’s Nonproliferation and Biodefense Program. Follow her on X @StrickerNonpro. Sophia Epley is an intern at FDD. For more analysis from the authors and FDD please subscribe HERE. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focused on national security and foreign policy.