Geopolitics, the ghost factor over a possible fine against Halkbank

Geopolitics, the ghost factor over a possible fine against Halkbank

The famous “Iran sanctions evasion case” in New York, which started off as the “Zarrab case” then turned into the “Atilla case,” finally ended with the sentencing of Mehmet Hakan Atilla, the deputy director general of Halkbank. Atilla was sentenced to 32 months in prison. This means he will spend roughly a year and a half in prison after deducting his jail time since his arrest in 2017. Yet we still have no clue on how little Iranian-Turkish businessman Reza Zarrab would suffer after having cooperated with the U.S. government.

The striking aspect of Judge Richard Berman’s reasoning for his decision on Atilla, which set out a prison term somewhat lower than what Atilla’s attorneys requested, was a refutation of the prosecutors’ claim that he was an architect in breaking the U.S. sanctions against Iran through the use of Halkbank in Turkey. “Mr. Atilla was a reluctant participant and one who was following orders, albeit improper orders in my judgment,” said Berman in the courtroom. Furthermore, Judge Berman commended Atilla for an exemplary life he lived before ending up there.

It seems Judge Berman was fully aware that sentencing an honest bureaucrat, who clearly was only following orders from his superiors, with a longer prison term while the real mastermind who had built an empire by orchestrating basically everyone walking away would leave the court open to a moral questioning. However, despite what some people believe in Turkey, there was no chance under the U.S. law that Atilla could resume liberty that day after the jury convicted him as guilty from five of the six offenses. Even his attorneys did not expect such a thing!

No matter what they said in their official statements, which basically denied the legitimacy of the court decision, Ankara did not expect that either. From what I have heard, the decision has indeed served a cautious relief on the part of the Turkish officials who knew well it could have been much worse for Atilla.

Having said that, a lower prison term for Atilla does not mean that this would save Halkbank from a possible fine, which would be imposed by the Treasury Department’s Office of Foreign Assets Control (OFAC). Even if Atilla was sentenced to zero days, OFAC would have still obtained a legal basis under its mandate of administrating and enforcing sanctions with the confessions of Zarrab, who in fact pleaded guilty in the same case.

Therefore, the open question today for Ankara is not whether Halkbank would be fined; it rather is how much Halkbank would be fined. Nobody in Washington expects OFAC to announce a decision before the June 24 elections in Turkey. The Department of State has indeed been urging the Treasury to defer their decision, which might have a potential effect over the Turkish elections. It is equally important to note that the trend for the sharp weakening of the Turkish Lira is being watched very closely in the U.S. capital.

Although it is not yet official, there are signs that Ankara, instead of simply refusing to pay a possible fine – a suggestion which was very popular when the court hearings kicked off last year – might prefer to sit down with the U.S. Treasury for a bargain for the amount to be paid. U.S. diplomats have already begun to test the waters to understand how much Ankara might be prepared to pay.

Ultimately OFAC is an institution that applies those economic sanctions, which Halkbank will possibly be subject to, in harmony with the national interests of the U.S. at large. Despite a common discontent with President Recep Tayyip Erdoğan and the direction of Turkey under his role, no key decision-maker in Washington, which prioritizes strategic thinking over emotions, wants to completely lose Turkey. Thus geopolitics, which has always served as a leitmotif in Turkish-American relations, will probably be a ghost factor for the U.S. side in a possible bargain with Ankara over the fine for Halkbank.

U.S. diplomacy has grown used to the tactics employed by Turkish officials following any unfavorable development. Since a transactional approach is in play for dealing with Turkey amid the crisis of recent years, diplomats try not to get hooked on the U.S. bashing. However if that U.S. bashing catches the eye of President Donald Trump, who has made American nationalism the pillar of his administration, it is another story.

We know on several occasions in his phone conversations with Erdoğan that Trump voiced disappointment over the statements from Ankara linking the U.S. with the failed coup and terrorism. It is most likely that the statements of government spokesman Bekir Bozdağ who suggested that “the case against Atilla was a plot organized by the U.S. judiciary, CIA, FBI and FETÖ” would make their way to Trump’s desk.

For the Turkish side to display a more strategic approach to survive the possible grave consequences of a fine against Halkbank, I guess we will have to wait until the completion of the election season in Turkey.

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