President Trump announced the withdrawal of the U.S. from the Iran Nuclear Deal. This brief will shed light on several legal implications arising from this historic decision by the Trump administration. First, while the Iran Nuclear Deal connotes an international agreement signed by six states and the Islamic Republic Iran, it does not have the same legal features as an international agreement does under international law. It is a mere political commitment, as opposed to a legally binding international agreement. Former President Barack Obama made considerable efforts to strike this deal. However, he followed the procedure to adopt the deal as an executive agreement, rather than a treaty passed by the Senate. Therefore, this facilitated his successor to withdraw from the agreement, specifically at the international level. Nevertheless, the Trump administration would not have been legally bound to continue with the deal, even if it had been adopted as a treaty.

So, how does the current legislation define the scope of the sanctions regime? Section 3 of the presidential memorandum signed on May 8 provides a to-do-list for the State Department and Treasury Department. According to this section, several executive orders will be “re-issued,” and individuals on the sanction lists will be “re-listed.” The government will re-register more persons and entities on the list of Specifically Designated Nationals (SDN), and this will require more enforcement effort. It will be more likely that a company, whether in the U.S. or overseas, appears on the radar unless they cut their commercial relations with Iran. These increased enforcement efforts can result in more cases that are brought against entities, banks, and companies.

The direct effect against Iranian nationals and entities in the U.S. is not anticipated to be much, since the withdrawal decision was not a surprise for them. They can move all of their assets from U.S. jurisdiction, limiting the territorial effect of the decision. However, the adverse effect will be dramatic for Europe, since U.S. enforcement authorities are not reluctant to exercise their jurisdiction over individuals and entities overseas. The withdrawal decision allows them no option but to cut off their commercial relations with Iran. The memorandum issued on May 8 explicitly instructed the State and Treasury Department “to [prepare the] guidance necessary to educate United States and non-United States business communities on the scope of the prohibited and sanctionable activity.” Hence, the government will make additional efforts to assist business communities around the world to adapt to the changes.

While U.S. authorities will attempt to implement a detailed plan to revive the sanctions against Iran, it is not clear how this will produce far-reaching effects on non-U.S. business. For instance, the high amount of fines will not only jeopardize business, but also create additional political conflict between European countries and the U.S. One notable example was the fine imposed against BNP Paribas in 2014. The amount of the fine did not only harm the French financial system, it caused tension between former presidents Obama and François Hollande. If the scope of the sanctions will be wide, there is much more possibility that this kind of conflict will occur again between Europe and the U.S. If individuals attempt to circumvent the sanction rules by committing other ‘crimes’ under U.S. law, such as conspiring to defraud the U.S., or bank fraud, they are likely to sit as defendants in a criminal trial.

The Iran Deal plays a particular role for Europe, and the trade between Iran and the EU considerably increased after signing the deal in 2015. The efforts made by European leaders, namely President Emmanuel Macron and Chancellor Angela Merkel, stem from interest in their commercial ties with Iran. These efforts include the meetings held in Washington D.C. to convince President Trump to save the deal. On 8 May 2018, European leaders promptly reacted to the decision made by President Trump. President Macron underlined the significant interest in preserving the nuclear non-proliferation regime. In a similar vein, German Foreign Minister pointed out the risk of jeopardizing the long-term relations between Europe and the U.S. Foreign Minister of the U.K., Boris Johnson, expressed his regrets of this decision. A week after the decision of May 8, several European politicians met the Foreign Minister of Iran in order to devise an effective plan. For instance, Federica Mogherini, the High Representative of the EU, expressed their willingness to carry out determined work to keep the commitments of the deal.

From a legal point of view, the withdrawal decision does not force any other parties to quit, but the abovementioned extraterritoriality will hamper the ability of others to comply with the deal in practice. For this reason, the European Union plans to use other means to keep the deal alive. For instance, the EU might impose the notorious “blocking regulations.” These regulations, which were adopted in 1996, are intended to protect European companies from the “extra-territorial application of legislation adopted by a third country.” In the past, it was considered effective against the extraterritorial sanctions imposed against Cuba by the U.S.

Another option could be the change of currency. EU members could carry on their trade with Iran by using the Euro, so that U.S. authorities will be less likely to exercise their jurisdiction over these transactions. The rationale behind the extraterritorial application of the sanction regime is that U.S. authorities need to establish the link between an extraterritorial transaction and territory of the U.S., and, once a transaction is made in U.S. dollars, it is sufficient for the U.S. government to exercise its jurisdiction based on this link. The single fact that a bank processes U.S. dollar transactions means that this bank is on the radar of U.S. enforcement authorities, as observed in the case of PNB Paribas. If this bank fails to comply with the sanction regime as part of the domestic law of the U.S., authorities will impose a fine on this bank. In order to mitigate the loss and escape from U.S. jurisdiction, the change of currency offers a useful alternative for the EU, albeit the business between these countries is unlikely to take any legal or financial risk. Similarly, the EU can take the Indian investments in Iran, which are made in the currency of Indian rupee.

Moreover, as the spokesman of the French government suggested, the EU could challenge this withdrawal decision at the World Trade Organization (WTO) Dispute Settlement Unit by arguing it would adversely affect the trade between WTO members. In this case, the EU could attempt to resolve this issue as a trade dispute. Although they could make reasonable arguments before the WTO, a ruling from a panel may not produce an effect powerful enough to force the Trump administration to reconsider the future of the Iran deal.

The U.S. decision will undoubtedly affect Turkey as a major trade partner of Iran. Similar to the EU, this decision can decrease the trade volume between the two countries. Turkish politicians read the situation from the same page, and Turkey is likely to join the resistance against the U.S. decision. From a legal point of view, due to the uncertainty of a criminal trial brought against two Turkish citizens, namely Reza Zarrab and Hakan Atilla, Turkey will act cautiously in their commercial ties with Iran, at least in the early stage of re-instituting sanctions against Iran.

It is most likely that these possible actions within international law are largely ignored by the Trump administration. In his speech, he did not explicitly refer to any issues arising from international law. For example, the future of the United Nations Security Council Resolution 2231 remained unaddressed. While the Trump administration’s decision may cause increased conflict with Europe, the disregard for the international community’s interests and laws was not a complete surprise for the international community, and neither was the Trump administration’s withdrawal from the Iran Nuclear Deal.

In 2015 the French bank BNP Paribas was ordered to pay 9 billion dollars to the United States. What were the charges against BNP Paribas? Despite the embargo, between 2004 and 2012, BNP Paribas carried out transactions in dollars within US borders with Iran (650 million dollars), Sudan (6.4 million dollars) and Cuba (1.7 million dollars). At the time the 9-billion-dollar fine was initiated, this accounted for more than four times the net income of the bank. This amount was one of the highest fines ever recorded. Two years before this incident, the Dutch bank ING paid a 619 million dollar fine. Another bank that paid a large sum was the English Standard Chartered bank, which paid 298 million dollars. The list of fine-paying banks in this regard includes Société Générale, Crédit Agricole, the German Deutsche Bank and Commerzbank, Italian UniCredit, and the Royal Bank of Scotland. However, none of them were fined as high as BNP Paribas. The HSBC case was a little different as they were involved in money laundering from Mexican drug cartels and terrorist organizations, which they transferred via suitcases.

When the BNP Paribas fine was brought to the agenda, it was discussed alongside suspending or completely dispossessing its license. This would have led the bank to bankruptcy, as they would have been forbidden to transact in dollars. The amount of the fine was theoretically based on the volume and severity of the transactions and the possible cooperation with other banks. However, these are not the only factors. According to several sources, European banks are more likely to face a higher fine than an American bank. As reported by the New York Times, the reason for the immense fine imposed upon BNP Paribas was because the general manager of the bank denied all charges and claimed that he was unaware that such transactions were illegal according to US laws.

The issue regarding banks and companies that violate the embargo in the US has long been a topic of debate. Former US attorney Eric Holder once stated that all banks should be severely punished if they break the law, since no bank is “above the law.” However, financial authorities stated that suspending or dispossessing a bank’s license along with high fines could lead to the de-stabilization of the international finance system – their argument was that “for the sake of financial stability, banks should not be imprisoned.” According to reports in France, as a result of these discussions, judicial authorities developed a fine system based on monetary punishment in accordance with the transactions operated by the bank involved. This meant that banks were freed from a lengthy judicial procedure in the US and the media stories that would eventually come along with such cases. What’s more, banks managed to save their license and were given the right to remain functioning in the US financial system.

For Paris, nothing explained the reason for the astronomical fine imposed upon BNP Paribas; they believed that no other bank was treated as harshly or as unjustly as the French one. In fact, even though only two years ago the transactions made from HSBC to drug cartels and terrorist organizations in Mexico were proven, they were not subject to this kind of treatment.

The French Foreign Minister at the time, Laurent Fabius, criticized the US decision by stating, “If the law has been broken, the punishment must be reasonable and proportional. Neither the fine, nor the suspension of the bank’s license is a rational decision.” Fabius called his US counter-part, but was left in vain. The following day former Minister of Finance Michel Sapin also expressed his criticisms by warning that France will continue to protect its interests if the US does not approach the BNP Paribas case justly. The former Governor of the Bank of France Christian Noyer travelled to the US with the French Prudential Supervision and Resolution Authority (l’Autorité de contrôle prudentiel et de resolution) General Secretary Edouard Fernandez-Bello, in order to warn US officials that such a fine will have a chain effect in Europe and to explain the risks the proposed amount will have on the French economy.

Former Minister of Health Xavier Bertrand believed that this was an attack on France and thus Europe. Further, he blamed the US management for using BNP Paribas as a warning tool for all other banks. The subject was discussed in all its aspects beginning with the imperialism of the dollar, to the question of the role of BNP Paribas in trade relations between the two continents.

The most prestigious name that supported BNP Paribas was without a question the former President of France, François Hollande. Before attending an anniversary with Obama, celebrating the end of World War II, Hollande had written to the US President. The letter stated that while he was aware that BNP Paribas had to pay a fine, the amount declared was unjust and unreasonable. Obama replied to the letter during the dinner with a simple “It’s none of my business.” In the end, after many postponements, a formal hearing took place in Manhattan and BNP Paribas was fined along with the suspension request of 13 personnel, including the general manager of the bank.

So, what’s so different now?

The Iranian businessman Reza Zarrab and his wife, Turkish singer Ebru Gundes, were off to Disneyland while the fine for BNP Paribas had been confirmed. It is not known whether “Disneyland” was a reference to the trial in New York. However, what took place afterwards was that Zarrab was arrested at the airport and the Southern District of New York Prosecution Office sentenced him to 90 years imprisonment and ordered a 50 million dollar fine. Later, Zarrab made an agreement with the prosecutor and became a witness rather than a defendant in the same case. Exactly one year after his arrest, the deputy general manager of Halkbank, Hakan Atilla, was arrested while travelling back to Turkey from the US and was put to prison within hours. All banks including BNP Paribas were at service in the US while they violated the embargo, which is why they were subject to federal laws. However, no US prosecutor arrested a manager of a bank, and thus there was no trial – so much that even those who transferred money to drug cartels and terrorist organizations via suitcases were not arrested.

As is understood therefore, in terms of the current Iran Sanctions Case, the accusations were made against a person rather than a bank. This was one of the many firsts experienced in this case. Another was that, compared to the institutions in the US and Europe, a non-US citizen had set up a commercial and monetary transaction between two companies through a bank that is not part of the American stock market. Turkey never implied that it will ignore the US sanctions imposed upon Iran and Ankara made necessary adjustments in this regard. In fact, in March 2012, the Turkish administration confirmed that they would record around a 10-20% decrease in imports with Iran. Meanwhile, after some time, Zarrab noticed a good not on the embargo list: gold. According to Zarrab’s comments during his trial, this was his own discovery. So, Iran’s money that was blocked in Halkbank and other bank accounts was to be transferred from US dollar to TRY accounts, then withdrawn as a deposit for the gold export to Iran. Initially what was happening under Zarrab’s discovery is that Iran’s blocked money in Turkey was being withdrawn and kept by Zarrab and his fellows, gold was taken to Iran. In this way, while Turkey was paying for petrol and gas in gold, Iran was also able to reclaim its blocked incomes. This system took place between 2011 and 2013. In 2013, when gold was added to the embargo list, Halkbank stopped the transactions.

Everyone is aware that despite Halkbank being a completely different case, the super-powerful US could have fined the bank – there was no need for Zarrab to be a witness or for Atilla to be a defendant. However, the US did not take the course of action as it had done with other banks. Instead of a formal hearing, an operational lawsuit process was started. Of course, it is clear that the intention of the authorities in this case was not to just fill their pockets by collecting money from here and there in an unjust and irrational manner. No – the main objective here is a political confrontation with the Turkish government.

The Turkish government charges on the United States on many issues related to national security, including the extradition of Fetullah Gulen, the leader of the FETO criminal cult, which carried out the July 15 coup attempt, support for YPG/PKK and recently Turkish-Iranian businessman Reza Zarrab episode. Zarrab was detained in the US last year for violating the US sanctions against Iran, the US government has begun to play its cards.

When Reza Zarrab was exonerated last week from facing trail by the US District Judge Richard Berman, it was interpreted as a positive response from the US government. However, soon it was realized that Zarrab had turned into the US government’s foreign policy tool to counter Turkish demands of Gulen’s extradition and halting support for the YPG.

Zarrab decided to “cooperate with the US authorities” and to testify in the case of Mehmet Hakan Atilla, a former deputy CEO of Turkey’s Halkbank – also accused in the same case. However, Zarrab claimed that he bribed former Turkish economy minister Zafer Caglayan in 2012 as part of a billion-dollar scheme to smuggle gold for oil, thus violating the United States sanctions on Iran. He even directly attacked the Turkish President Recep Tayip Erdogan, claiming to have heard from Caglayan that the then Prime Minister ordered banks to participate in the scheme. While Zarrab’s mention of Erdogan was second hand information and with no evidence at all, neither the judge nor the jury raised this issue.

However, the fact that the US sanctions are not binding on Turkey because they are not sanctions agreed on by the UN, is clearly ignored in this matter.

As shocking as these claims are against the Turkish government, which has been for a year trying to aid Zarrab in this case by repeatedly appealing to the US government for his acquittal, his surprising turn itself draws suspicion.

Already in Turkey the sentiments are high against the US for its support to the YPG and FETO, and its lukewarm response to last year’s coup attempt that killed more than 250 people and left thousands injured. The current Zarrab episode must be seen in this backdrop across Turkey.

In a column in Hurriyet Daily newspaper journalist Cansu Camlibel, who attended the week-long testimony of the 34-year-old Reza Zarrab at the US District Court for the Southern District of New York in Atilla’s case, wrote about the drama of Zarrab’s claims. Cansu points out his unusual confidence and preparedness that he could have most probably drawn from his collaboration with the FBI and prosecutors after he decided to cooperate with the US government.

https://thenewturkey.org/what-is-really-behind-the-iran-sanctions-case/

“How flawlessly he drew two separate diagrams on a white board in the courtroom to describe the steps used to withdraw Iran’s oil and gas money from Halkbank, and use that money to make international payments on behalf of Tehran, indicating that he had rehearsed this little act for many weeks with the prosecutors,” wrote Cansu.

There is much to indicate that Zarrab, just like Gulen, has become a new tool for some circles of the US government to take on the Turkish government. The mass majority of US media – most importantly the New York Times, which has been covering every development of the Zarrab case – has turned Zarrab into a “hero” now for the simple fact that he is ready to throw mud at the Turkish government.

What is to be seen is to what extent the Turkish government can respond to Zarrab’s claims. His assets have already been seized in Turkey and 17 people who have been working with him, including three suspects, Sinem A., Regaip A., and Mustafa H., have been arrested. They are accused of sending documents to the US concerning his legal proceedings there.

*Written by Waseem Ahad. 

It all began in April 2013 with a letter written by an effective group of members in the US House of Representatives to former US Secretary of State John Kerry and the US Secretary of Treasury Jack Lew. The letter, which mostly bared the signatures of the opposing republicans, stated that Turkey had violated sanctions the US had imposed on Iran. Approximately seven months later, when police officers linked to the Fetullah Terrorist Organization (FETO) initiated a “judicial coup” attempt on December 17 to overthrow the Turkish government, there was a US management that followed the case closely behind the scenes. The authorities from the US, who wanted to be kept anonymous at the time, stated that they had warned Turkey about the Iranian businessman Reza Zarrab. One of them had stated the following during an exclusive interview to a well-known newspaper:

“If cargo planes are carrying tons of gold, this cannot go unnoticed by customs officials or the state. We had clear evidence that the embargo imposed on Iran was infiltrated through this trade. We had informed both Halkbank and the Financial Crimes Investigation Board.”

This was how the operation that resulted in the request for a warrant issue to the former minister of economy Zafer Caglayan in the US started. This operation was not only used to interfere with the internal affairs of Turkey, but also as a means to defame Turkey internationally. So how did we come to this stage and what do these accusations in the case against the Turkish people by the US mean? To answer these questions, we have to go back a bit. According to the December 17 summary, the police probe based on “corruption” led by Gulenist criminal cult members at the time, started in 2012. Currently, it is not possible to determine whether FETO informed the US on the Zarrab case, or whether the US warned the police, who constantly gave briefings at the Ankara Embassy. But what we do know for sure is that the US was aware and very uncomfortable that Turkey paid Iran for the natural gas trade in gold.

While the sanctions imposed on Iran are merely a product of the US legal system, US hegemony in international finance allows the country to bring others under its own judicial judgements. The main reason for this notion is the authority the US Congress has granted the US president and its judiciary for the last 30 years. On December 11, 2011, the US congress allowed the government to apply sanctions to any persons, banks, or organizations that have a financial relation with Iran for natural gas and petroleum with the clauses in the Budget Control Act. Other laws and presidential decrees implemented in 2012 and 2013 increased these authorities. As a result, a list of all the banks, companies and organizations in Iran were published in order to ban trade relations with the country. It is important to note that this ban has no basis in international law and has not been approved by the UN Security Council.

A new accusation against Caglayan

Zafer Caglayan’s name was first added to the Reza Zarrab case, which has been continuing since last March, on September 6. Caglayan’s statement regarding continuing trade with Iran was also included in the abovementioned letter written by the US Congress. This means that Zafer Caglayan had been in the radar for some time. This year in March, the deputy general manager of Halkbank Mehmet Hakan Atilla was arrested in the airport while leaving the US, which he had visited on many occasions in the past.

Firstly, it is important to emphasize that the Reza Zarrab case is based on the violation of a law enforced by the US to the rest of the world. The issue here is not corruption, in fact the US does not take that issue into account. The prevailing opinion of those that are following the case in the US is that the US government was aware of Halkbank’s defiance of the sanctions and have been monitoring them ever since. It is possible that FETO members have provided the FBI and former Southern District of New York Prosecutor Preet Bharara with all the documents and information after December 17, 2013. What we understand from the aftermath of the judicial process of the Zarrab accusation, which was confirmed by the Grand Jury in December 2011, is that the December 17 case is one of the essential elements in Bharara’s investigation. In fact, Bharara presented the recordings and statements in this document as corroborating evidence to the court during the trials. It was his former boss and Democrat Senator Chuck Schumer who referred Bhrara for this position. Schumer, is known for receiving millions of dollars from FETO-linked institutions and persons. He is also a popular figure in FETO’s umbrella organization in Washington, the Turkish American Association. Currently Schumer has taken over one of the most important political positions by being the leader of the Democrats in the Senate.

If we are to analyze from this framework, then we have to point out Richard Berman, who is the judge looking at the case. Berman had criticized the discontinuation of the December 17 operation whilst participating in an international conference organized by FETO-linked law firm Yuksel-Karkin-Kucuk. During the symposium he gave an interview to the FETO-linked media agency Cihan News agency and blamed the current President Recep Tayyip Erdogan, who was prime minister at the time, for not respecting the constitution. He also stated that the Turkish government’s intervention was “changing the rules of a game while it is being played.”  This judge who has been making partial accusations since 2014, has been looking at the Zarrab and Caglayan case from the beginning. We have yet to understand why a recusal has not been made to the judge who stated that Zarrab’s defense group went to Istanbul in the first session.

What does the prosecution office say?

Zarrab’s team has constantly been emphasizing that this trade relation has nothing to do with the US. Zarrab is not a US citizen and the money transfers have not been taking place in the US. Thus, the argument that this has nothing to do with US is put forward. The FBI and prosecution office, which have both investigated claims in the December 17 case in their own means, refuse these claims put forth by the defendant. The prosecution office, which has been stating that they have several evidence of money transfers, have finally included some of them in the new accusation that includes Caglayan. According to the prosecution office, Zarrab and his team use the money they gain from the gold export in the US financial system to make payments to the state of Iran. The prosecution also alleges that acquisitions for basic Iranian needs, which are not part of the US sanctions, are used to cover up the actual money transfers, suggesting that money was transferred to Iran by providing access to the international financial system through fraudulent documents.

The main problem here is that Zarrab used the US banks as informants during these transfers and most of these transfers were intervened because of suspicion. Hence, the Turkish-Iranian businessman is not only accused of going against the sanctions by continuing his trade deals with Iran despite the warnings, but also money laundering and deceiving the US banking system. The accusation states that these took place within the knowledge of “high-ranking Turkish officials” and Zafer Caglayan. Therefore, the trade between the Republic of Turkey and Iran is considered a crime.

Of course, in this accusation Zarrab is only a means and is part of the many other financial transactions that do not have anything to do with trade between Turkey and Iran. This is why the prosecution office refuse the argument made by Zarrab and his lawyers that this is “not the US’s business,” since they believe that they have evidence proving that Zarrab and his team used the US financial system and banks in order to make business transactions with Iran with dollars. What is more, they also claim that the complex financial movements that took place during these transactions were methods to deceive the US banking system.

What will happen?

Despite Turkey’s objections the case will continue in the US. It is not surprising to see that Zarrab has changed his statements in November when the jury trials start. This is normal since there is the possibility that Zarrab and other detainees could be sentenced to prison for a long period of time and thus, would try to negotiate with the prosecutors. Sources state that the prosecution office had previously sent an arrest warrant to the EU for more than 150 people. Although, the exact number is uncertain, most of them are the same names that FETO placed in the December 17 files.

It is unlikely that Turkey will manage to terminate this case, which they consider as interference to their sovereignty, by pressuring the Trump management since they are already struggling with their own affairs including the Department of Justice investigation and the harsh media criticism that limit their area of work. It is almost impossible for Trump to interfere with an ongoing case. However, he does have the authority to forgive those who have been charged once the case ends. Another way out can be through mutual agreement. But this is also unlikely given the state of relationship between the two countries.