Turkey – a hub for Russia sanctions violations?
Turkey is a NATO member, an EU candidate country, and a US ally against terrorism in the Middle East, but it has also been described as a “hub for Russia sanctions violations”.
The country has not joined its fellow NATO members in imposing sanctions on Russia, and, since the start of the invasion of Ukraine, Turkey-based entities have been the subject of Western sanctions themselves for allegedly supplying Russia with goods that have aided its war effort.
The West has been trying to apply pressure on Turkey to sever its ties with Russia, and, to some extent, it seems to have worked. In September 2022, Turkey’s state banks suspended the use of the Russian Mir payment system and, in March 2023, the Turkish government instructed companies not to export to Russia a list of goods imported from the EU, UK, and US.
However, trade between Turkey and Russia has risen significantly since the Ukraine invasion. In January 2023, the Turkish Statistical Institute released foreign trade statistics which showed that Turkey exported to Russia $9.3 billion worth of goods between January 2022 and December 2022, compared to $5.8 billion the previous year. Whether much of that trade involved western-origin goods is unclear. Regardless, it seems that the West, in particular Washington and London, wants Ankara to do more to limit its connections with Russia. US sanctions in September 2023 designated five Turkish shipping and trade companies for repairing Russian Ministry of Defence vessels and transporting high-priority items to Russia. UK measures in August 2023 designated two Turkish businesses for their role in exporting microelectronics to Russia.
Better or worse than others?
It is clear from this that Turkey has a significant and growing economic relationship with Russia, and, according to the UK and US, some western goods are slipping through Turkey into Russia. But whether Turkey is a “hub” for Russia sanctions evasion as compared to other countries remains debatable.
A recent report published by the US Financial Crimes Enforcement Network identified 49 Turkish entities that were trading with Russia or acquiring US goods on behalf of Russian entities, which, in isolation, appears to indicate that Turkey is indeed a significant facilitator for Russia sanctions evasion. However, the same report also noted that 33 UK-based entities and 30 Canadian entities were engaging in the same activity, indicating that the Turkish private sector is not much more of a concern than the private sectors of core Western countries.
Therefore, it is perhaps unfair to identify Turkey as a special “hub” for Russia sanctions evasion, and it would seem that Turkey has been largely successful in pursuing, what President Recep Tayyip Erdoğan describes as, a “balanced” approach to the Ukrainian conflict. Turkey has continued to trade with Russia, while at the same time it has not provoked the West into a direct accusation of helping Russia evade sanctions (unlike, for instance, China, where the US has said that Chinese firms are “probably assisting Russia in circumventing export controls”).
What, perhaps, is more likely to destabilise Turkey’s relationship with the West is its alleged role in facilitating the sanctions evasion of the other major target of Western sanctions: Iran. US targeted procurement networks for Iran’s UAV programme often include Turkish individuals and entities (Turkish individuals and/or entities have been named in three separate OFAC sanctions actions just since March 2023).
On top of this, however, there is the especially significant case that one of Turkey’s largest state-owned banks, Halkbank, is currently facing criminal prosecution in the US for having conspired to launder billions of dollars’ worth of Iranian oil and gas through the US financial system in violation of US sanctions. Employees of the bank have already been found guilty, which the Turkish Ministry of Foreign Affairs described as “unjust” and “based on forged evidence”.
The bank itself is currently contesting the jurisdiction of the US court to even hear the case, claiming that it has sovereign immunity under US common law1. This shows why a criminal prosecution of the bank would be so significant, because it potentially implies the involvement of the Turkish government itself in orchestrating the circumvention of US sanctions on Iran, a result which Turkey and other countries (Azerbaijan, Qatar, and Pakistan) have argued would “disrupt the comity of nations”.
It is arguable that the potential Halkbank prosecution and the frequent designations of Turkish individuals and entities for enabling Iranian procurement of UAVs are far more significant issues, at least for the US, than the supply of Western goods by some Turkish entities to Russia. Therefore, whether Turkey can be said to be a hub for Russia sanctions violations remains a charged and debatable question, but what is clear is that a greater focus should be on Turkey’s economic relationship with Iran rather than Russia.
1 The US Supreme Court has ruled that Halkbank does not have sovereign immunity under the Foreign Sovereign Immunities Act but referred the case back to the lower court on the point of whether it has sovereign immunity under common law.
This article was written by James Marshall, Legal Researcher