Lawmakers look for the ‘golden loophole’ in Iran strategy

If Western sanctions and diplomacy fail to curb Iran’s nuclear program, Tehran’s use of Turkey to swap oil for gold in recent years may be seen as a primary reason.

U.S. lawmakers on Tuesday quizzed Obama administration officials and outside analysts during a Capitol Hill briefing about why Iran was able to use Turkish banks to skirt sanctions and repatriate as much as $100 billion in oil revenues to Tehran.

The trading scheme is widely seen today as the largest hole that emerged in the West’s sanctions regime against Iran. And U.S. officials are voicing concerns that Iran is developing a similar scheme with Russia to swap sanctioned Iranian oil for outside goods.

The U.S. and Europe have eased some financial penalties on Iran as part of an agreement to scale back Tehran’s nuclear program. But much of the West’s oil and financial sanctions remain in place as global powers seek to permanently end the Iranian nuclear threat through upcoming negotiations in Vienna.

“We saw what happened in Turkey with the gold for oil. We see almost a copycat effort taking place, or being proposed by Russia,” said Sen. Bob Corker (R., Tenn.) during a Tuesday hearing on Iran held by the Senate Foreign Relations Committee. “Is it your sense that this was an oversight by the Treasury Department, or do you think this was an accommodation relative to the negotiations that were taking place?”

Administration officials didn’t directly address Mr. Corker’s questions. But a top sanctions expert who took part in the hearing said Iran’s ability to access gold through Turkey may be the biggest reason Tehran was able to avoid a balance-of-payments crisis over the past year. He said Iran’s access to foreign-exchange reserves had dwindled to as low as $20 billion in recent months.

“The conclusion of the long saga is that Iran was able to exploit a significant golden loophole, was able to get about $13 billion in gold and over $100 billion in illicit financial transfers and ultimately blow a major hole in the international financial sanctions regime,” said Mark Dubowitz of the Foundation for Defense of Democracies, a conservative Washington think tank.

“I think we didn’t crack down on Turkey and perhaps that is because of President Obama’s partnership with Prime Minister [Recep Tayyip] Erdogan. My fear is that on the Iran-Russia deal we will face the same situation,” he said.

Administration officials privately said they were in regular discussions with Mr. Erdogan’s government about Iran’s use of Turkish banks to swap oil for gold. And they said they warned executives at Halkbank, a large Turkish state bank, that they risked facing sanctions for its trade with Iran.

Obama administration officials said Tuesday said they have also been warning Russian officials against making good on a Moscow plan to swap Iranian oil for Russian goods.

Secretary of State John Kerry talked about the plan with his Russian counterpart,Sergei Lavrov, at a security conference in Germany last weekend, they said. “My sense is that it’s not moving forward,” Undersecretary of State Wendy Sherman testified at the Senate hearing Tuesday.

By The Wall Street Journal 


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