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Turkish Gold Dealer Pleads Guilty in Politically Explosive Sanctions Trial

Reza Zarrab may reveal a sprawling bribery scheme touching the highest levels of the Turkish government.

Reza Zarrab is surrounded by journalists as he arrives at a police station in Istanbul on Dec. 17, 2013. (OZAN KOSE/AFP/Getty Images)
Reza Zarrab is surrounded by journalists as he arrives at a police station in Istanbul on Dec. 17, 2013. (OZAN KOSE/AFP/Getty Images)

Turkish-Iranian gold trader Reza Zarrab has pleaded guilty in a New York federal court to his role in a scheme to evade U.S. economic sanctions on Iran, according to documents unsealed Tuesday. The explosive case could implicate senior Turkish officials — potentially reaching as far as President Recep Tayyip Erdogan — in a massive bribery scheme.

Turkish officials have complained that Zarrab’s prosecution represents a “plot” against their country and have repeatedly pressed their American counterparts to drop the case. Erdogan had urged President Donald Trump to drop the prosecution, but with Zarrab’s guilty plea and willingness to testify on behalf of the prosecution those efforts appear to have failed.

Among the Turkish government’s potential concerns about the case is the possibility that Zarrab’s testimony could implicate high-level officials, including Erdogan, in the sanctions-busting and bribery scheme, making Zarrab a potential liability for Erdogan.

Prosecutors allege that Zarrab supplied massive amounts of gold to Iran in exchange for oil and gas, and supplied senior members of the Turkish government with bribes to expedite shipments and ensure that local authorities looked the other way. The scheme allegedly helped Iran evade U.S.-led sanctions on its oil exports, which were hammering its economy.

Zarrab’s fate has been the subject of intense speculation in the run-up to this week’s trial in a federal courtroom in Manhattan, as the defendant was mysteriously moved from federal lockup and his lawyers missed a series of filing deadlines.

Zarrab pleaded guilty to seven counts, including one tacked on after his March 2016 arrest. Prosecutors said Tuesday that Zarrab will testify against Mehmet Hakan Atilla, a deputy CEO at Turkish Halkbank, the only one of Zarrab’s seven co-defendants facing trial. The other six remain at large, including a former Turkish economy minister, Mehmet Zafer Caglayan.

According to media reports from inside the New York courtroom, prosecutors described Zarrab on Tuesday as their star witness and said that he will tell the “inside story” of a sprawling, potentially multibillion-dollar scheme beginning in 2010 to trade gold for Iranian oil and gas, before laundering the proceeds through American financial institutions.

Sanctions at the time aimed to squeeze the Iranian economy and force the country to the negotiating table and suspend its nuclear program, which U.S. officials feared was aimed at building an atomic weapon. Zarrab’s alleged scheme provided Tehran with a lucrative source of revenue at a time when its economy was under intense pressure by American and European sanctions.

“Atilla and his lies played a crucial role in giving Iran access to U.S. dollars and U.S. banks,” Assistant U.S. Attorney David William Denton Jr. told jurors Tuesday, according to Bloomberg. “Iran did not need soldiers. Iran needed a banker.”

 Twitter: @EliasGroll