Zarrab’s role as do-gooder to help close CAD inflames debate

Reza Zarrab, the Iranian businessman who was detained in the Dec. 17 corruption probe operation and later released pending trial, says, “I closed 15 percent of the current account deficit [CAD],” in his serial interviews in pro-government media outlets. He says he financed $10 billion of the $65 billion deficit of the last year. How? Through exporting gold to Iran, he says. You can’t see gold trade to Iran at such a hefty annual amount of $10 billion in either Iran’s own foreign trade figures or in the numbers released by the Turkish Statistics Institute (TurkStat). Who would sell gold to Iran through registered normal trade while this country is levying a 50 percent tax on imported gold?

Besides, the price of gold is well known as well as how narrow the profit margin is in the gold trade, which raises the question of how he could rake in such big profits — after taxes — to help Turkey close its deficit. Those who are in the gold trade business say that the trade barrier of Iran in gold trade is surmountable only through bribes and special privilege.

While trying to portray himself as a deft businessman by throwing out some numbers, Zarrab stumbled into making errors. “Look, Iran’s annual trade volume with Turkey is 3.5 billion euro,” he said, for instance. The actual figure is almost three times the number he proffered. Against $4.2 billion in exports to Iran, Turkey paid $10.38 billion to this country for its imports (10.5 billion euros combined). What adds insult to injury is that the largest decline in exports to Iran was in the category of “precious and semi-precious minerals, precious metals, pearls, imitation jewelry and coins.”

Turkey earned $6.5 billion on this item line in 2012 and it receded sharply to $1.68 billion last year. Since Turkey purchases large amounts of oil and natural gas from this country, we are talking about a trade relationship which always ends up in a deficit to the detriment of Turkey. Zarrab brought the Turkish CAD down by $10 billion while Turkey has the fifth highest deficit in trade with Iran, did he? Let’s ask him a question similar to one that Nasreddin Hodja once asked his wife: “Where is the $10 billion you claim you earned for Turkey, if we were able to make only $4.1 billion by selling a bunch of goods from needle to thread to this country?”

Let none of these numbers confuse you. Neither did Zarrab sell that much gold to Iran nor did Iran ask it from him. At a time when international sanctions were at their strictest level, Iran was converting its receivables from its energy trade with Turkey into gold since it was impossible to make money transfers through banks. The gold posted to Iran also caused diminishing numbers in the net errors and omissions items on the central bank’s balance sheets because the money in return for the gold sales to this country was not coming to Turkey.

Also, the money in return for our oil and gas purchases was not going to this country; instead, Iranians were purchasing gold with this money and transporting it to their country. That is to say, the revenues from the gold trade were not flowing into Turkey’s coffers. As we were registering the gold trade to accounts as export and as no money was coming in return, large discrepancies arose between the trade deficit and the cash inflow to finance it. For instance, the gold exports in the 12 months after March 2013 amounted to $16.6 billion in total, whereas the net errors and omissions fell to $7.7 billion in the red. This stands for an unaccredited cash outflow.

According to allegations, Zarrab was representing the Turkey leg of the scheme to dodge sanctions. Babak Zanjani (the wealthiest man in Iran and who is now under arrest in his country and whose properties were under injunction) was the person on the other side of the border. What they were doing seemed to be gold trade but the official numbers simply fall short of verifying this. If the gold was really sold and the corresponding money was earned, their traces would easily be detected in the numbers released by the central bank and TurkStat. What else could the sharp reduction in the gold trade between Turkey and Iran after the US-led international community included oil-for-gold trade into the coverage of sanctions mean?

They offered questions for Reza’s answers

The Sabah daily and the A Haber channel, two flag-bearers of the pro-government press, ran interviews with Zarrab. In these interviews, the questions were almost cherry-picked to let Zarrab speak about the topics he liked to talk about. The style of the interviews was reminiscent of live interviews with Prime Minister Recep Tayyip Erdogan with journalists known to be loyal to the government. Social media users frequently tease that such programs resemble a football match on a pitch with only a single keep. A popular statement on Twitter said that in such interviews “journalists provided the questions for Erdogan’s answers rather than Erdogan answering their questions.”

In these interviews with Zarrab there was not a single question about the alleged bribe list, which included the names of some Cabinet ministers, or the photos taken as part of the investigation surveillance showing Zarrab’s man sending money-loaded boxes to certain people, or donations to a foundation where Erdogan’s son Bilal is a board member, the audio recordings purportedly of Zarrab talking with people close to the government, arranging women to escort guests from Dubai, etc. There was a question regarding an extremely expensive luxury watch gifted to a former minister and a piano, but Zarrab avoided answering them on the grounds of the “confidentiality of an ongoing investigation.” He contented himself with saying that documents were given to judicial bodies about the high-priced watch.

‘They took me from my bedroom’

Iranian businessman Reza Zarrab claimed in his interviews with pro-government TV station A Haber and the Sabah daily that he faced pressure from “them” to libel the government with corruption in return for an acquittal on all charges, but that he refused. “I was detained in the most private place [of my home], from by bedroom,” he said, adding that he realized that it was a “coup d’etat” going on the moment he saw “20 cameras at the door.”

About the 1.5 tons of gold confiscated at the airport on a plane from Ghana, he said, “We learned that the plane lacked documents when we applied to the customs agents for the import. We gave up the import. They didn’t even take testimony [about this], they did nothing, but it was in the headlines for days.”

Zarrab responded to a question about an assertion in the graft probe that he bribed former Interior Minister Muammer Güler to naturalize some of his family members. “I became a Turkish citizen in 2006 or 2007. The interior minister was Abdülkadir Aksu back then. Would you think that it was abnormal for a person who has been living in Turkey since 1984 to have his elder brother naturalized?” asked Zarrab.

Zarrab also denied that he had a business relationship with Babak Zanjani. “My meetings with him don’t exceed four minutes in total. There is no arrest warrant in Iran for me. I can go there and come back any time I want to. I have companies there and my father is there at present,” said Zarrab.

The businessman also denied any wrongdoing in trade on the grounds that: “Smuggling is impossible in gold. Because there is no tax, no value-added tax (VAT) in the gold trade,” he said, adding that even the judge was surprised upon hearing this information during the trial.

The interviews were widely criticized on social media. People accused the journalists of avoiding addressing troubling questions and not pressuring him enough when he gave wrong or irrelevant answers.

Some Twitter users objected to the Turkish flag displayed behind Zarrab during his interview with A Haber. Some mockingly apologized for all their unkind thoughts about him in the past. İdris Bal, an independent deputy who resigned from the ruling Justice and Development Party (AK Party) after the graft probe was exposed in December, said the interviews were a perception management operation.

The vice president of the elite business club, the Association of Turkish Industrialists and Businessmen’s Association (TÜSİAD), Memduh Boydak, was among those who made snippy comments about Zarrab. Boydak, the chairman of Boydak Holding, wrote “Reza Zarrab has a furniture company named Royal Mobilya. I wonder if he was contributing to Turkey and to [lessen] the current account deficit by exporting through this company.”