Is a Deal in the Works for Turkish Businessman Implicated in Iran Sanctions Case?

Before he was accused of masterminding a multibillion-dollar sanctions-busting scheme involving gold sales to Iran in exchange for oil and gas, Reza Zarrab was one of Turkey’s most visible businessmen. With his vast real estate holdings, private plane, and pop star wife, Zarrab was a symbol of the country’s new elite, with connections at the highest levels of the Turkish government.

Now, his fall from grace has become embroiled in the deteriorating relations between Turkey and the United States. Indicted by federal prosecutors for his role in evading American sanctions on Iran, Zarrab now faces trial in a federal courtroom in Manhattan.

But in recent days his case has taken a bizarre turn, as Zarrab’s whereabouts have become unknown and his lawyers have missed key filing deadlines. The developments have some observers wondering whether Zarrab could be part of a deal between the Turkish government and Washington to secure his release — possibly in exchange for a group of detained American consular employees in Turkey. Such a deal is still just speculation, but reflects the high-level machinations that have marked the Zarrab case since his arrest in Miami in March of 2016.

“I think there’s a potential for a really big, global deal on Zarrab,” said Henri Barkey, a former State Department official and professor at Lehigh University.

Among the Turkish government’s potential concerns about the case is the possibly that Zarrab’s testimony could point the finger at high-level officials, including President Recep Tayyip Erdogan, in the sanctions-busting scheme.

These allegations have made Zarrab a major liability for Erdogan. If Zarrab talks, “he’s going to implicate a lot of people in the Turkish government — maybe Erdogan and his family, maybe his son,” Barkey said.

Whether those concerns are driving a deal is unclear, but in recent days Zarrab’s lawyers have given indications they are pursuing some sort of agreement with prosecutors. His lawyers haven’t submitted questions to potential jurors in the trial, which is set to begin on Nov. 27, and lawyers for one of Zarrab’s codefendants, Mehmet Hakan Atilla, have said in court filings that it is “likely that Mr. Atilla will be the only defendant appearing at trial.”

The outlines of a possible deal, which could involve a guilty plea and a possible fine, remain unclear. Zarrab’s attorney, Ben Brafman, declined to answer questions on Friday about his negotiations with prosecutors, but members of his legal team have said in court filings that they have attempted to resolve the case through diplomatic channels between Washington and Ankara.

With his trial set to begin in a matter of days, Zarrab’s whereabouts are currently unknown.

A Bureau of Prisons database lists Zarrab as having been released, and federal prosecutors in New York are refusing to answer questions about his exact whereabouts. “Zarrab is in federal custody,” is all James Margolin, a spokesman for the U.S. Attorney’s office in the Southern District of New York, would tell Foreign Policy.

This mystery over Zarrab’s whereabouts comes amid a crisis in U.S.-Turkey relations. American support for Kurdish forces in Syria has drawn outraged protests in Ankara, where government officials fear that a resurgent Kurdish movement in Syria will embolden separatists in southeast Turkey. Turkish government forces are currently carrying out a violent crackdown on individuals allegedly associated with the Kurdish PKK.

The State Department refused to respond to questions about Zarrab, including whether he has been subject of negotiations between Washington and Ankara. A spokesperson directed queries about his case to the Justice Department, which did not respond to a list of questions about Zarrab’s prosecution and a possible plea deal.

The Turkish government has loudly protested Zarrab’s prosecution and has demanded that he be returned to Turkey.

According to transcripts of wiretapped calls that are part of the case, Zarrab claimed to have personally spoken to Erdogan about the sanctions busting scheme and pitched his scheme as a way to mitigate Turkey’s trade deficit. “We have to do our best to achieve this $4 billion goal” in exports Zarrab allegedly told one of his co-conspirators in 2013. “I promised the prime minister.”

At the time, Erdogan was serving as Turkey’s prime minister, and since then has accumulated vast power by systematically eliminating his enemies and rewriting the country’s constitution.

Exposing the government’s role in a vast bribery scheme would resonate deeply with the Turkish public at a time when the country’s economy is slowing.

Last week, the Turkish foreign ministry presented a formal demand for information about Zarrab, a possible indication, Barkey said, that the gold trader has been isolated from his Turkish lawyers ahead of a guilty plea feared by Ankara.

Turkish prosecutors attempted to unravel Zarrab’s gold-for-gas scheme, which allegedly included bribes and kickbacks to senior government officials in Turkey, but Erdogan appears to have intervened to protect the business mogul. Following Zarrab’s arrest in Turkey in 2013, Erdogan purged the government of thousands of prosecutors and policemen that he claimed were linked to the cleric Fethullah Gulen, who is living in exile in Pennsylvania and Erdogan claims is trying to unseat him. Following the purge, Erdogan appears to have used his additional power to push officials to drop charges against Zarrab.

But when Zarrab traveled to Miami in March of 2016 — a decision that confounds observers of the case — U.S. officials were at the ready and promptly arrested him upon his arrival.

Since that arrest, Zarrab has hired the best lawyers money can buy.

His legal team is led by Brafman, a brash New York lawyer who has featured in some of the city’s most prominent criminal prosecutions in recent years. He represented the rapper Sean Combs on weapons charges, took on former IMF boss Dominique Strauss Kahn as a client to combat sexual assault claims, and this year defended the pharmaceutical executive Martin Shkreli notorious for price gouging. The Hollywood mogul Harvey Weinstein recently signed up Brafman to defend him against a slew of sexual assault allegations, which prosecutors are reportedly examining as part of a criminal probe.

Other lawyers on Zarrab’s defense team include former New York mayor and Donald Trump confidante Rudy Giuliani and former Attorney General Michael Mukasey, who have attempted to broker a deal between the U.S. and Turkish governments for Zarrab’s release. In February, shortly after Trump’s inauguration, Giuliani and Mukasey traveled to Turkey to meet with Erdogan in an attempt to broker the gold-trader’s release.

“Senior officials in both the U.S. government and the Turkish government remain receptive to pursuing the possibility of an agreement,” Mukasey wrote in a court filing earlier this year.

Earlier this month, Turkish Prime Minister Binali Yildirim met with Vice President Mike Pence, fueling speculation that a deal for Zarrab was in the works. The White House readout of the meeting said that Pence “expressed deep concern over the arrests of American citizens, Mission Turkey local staff, journalists, and members of civil society” but made no mention of Zarrab.

A spokesperson for Pence’s office did not answer repeated questions about whether Yildirim took up Zarrab’s case.

For now, the U.S. government isn’t saying what it plans to do with Zarrab. As the trial approaches, lawyers for Zarrab’s co-defendants have pleaded with the judge in the case, Richard Berman, to tell them whether Zarrab will be one of the defendants.

“The one perk of being a judge is you don’t have to answer questions, as witnesses or lawyers do,” Berman said. “So I would say, ‘Just keep your eye on the docket.'”