TIMELINE-U.S.-Iran relations from coup to sanctions relief - U.S. law goes into effect giving Obama the power to sanction. US jury finds Turkish banker guilty of helping Iran dodge sanctions Zarrab's business and ties to government officials in and US mayor dies in Afghanistan; Iran's plan to dodge sanctions; Somalia Council on Foreign Relations: The region's fast-growing but fragile.
He quietly cut a plea deal last month and admitted to defrauding the United States, money laundering, and bank fraud, according to court documents. On Thursday, Zarrab testified in federal court about Erdogan's alleged role in Zarrab's scheme, which involved laundering funds from Iranian oil and gas sales through Turkish banks, including the state-run bank, Halkbank.
Read More Zarrab testified that when the amount of money illegally flowing through Turkey's Halkbank became too much to handle, Erdogan approved getting two more Turkish banks involved: Zarrab said he received this information from the government official he claims to have bribed to take part in the scheme, former Turkish economy minister Zafer Caglayan.
Caglayan denied all allegations in a Turkish probe into these allegations that started in CNN has sought comment from the Turkish government on Zarrab's testimony and is awaiting response. In their court filings, the US government has not alleged that Erdogan cooperated in the scheme.
Recep Tayyip Erdogan, President of Turkey. Caglayan denied all allegations in a Turkish probe into the claims, which started in That probe was shut down after Turkish police and prosecutors in charge of it were accused of being supporters of Fethullah Gulen. Gulen is the Muslim cleric in self-imposed exile in the US whom Erdogan has accused of being behind a failed military coup to overthrow him in Gulen denied any involvement. One of the police officers in the Turkish probe has since fled Turkey and will now serve as a witness in the US government's case, prosecutors said in court earlier this week.
For years, US and United Nations sanctions on Iran have kept that country from accessing billions of dollars stored in banks around the world. The tactic is meant to punish Iran for its attempts to develop nuclear weapons and threatening Israel and the United States.
Zarrab's detailed testimony, which surprised those in the courtroom, brings the criminal case's focus to top levels of the Turkish government — and may help explain why Erdogan has lambasted the American investigation. The Turkish government has sought the return of Zarrab. Erdogan loyalists view the Zarrab case being tried in New York as a political move against the President and his party.
TIMELINE-U.S.-Iran relations from 1953 coup to 2016 sanctions relief
Zarrab recalled how he paired up with a jeweler in to devise a scheme in which they would trade gold for cash in order to launder billions of dollars for Iran. He told the court how money would traverse through nearly a dozen banks and shell companies and sometimes wind up in American banks — including Standard Chartered and others.
They did this so that Iran could conduct international business through proxies and circumvent international sanctions. When a top official at Turkey's Halkbank refused to let Zarrab do that, Zarrab said he went to Caglayan -- then the economy minister -- to pressure Halkbank to play along.
But the returns have not been as rewarding as these companies expected. The United States failed to get the Iraqi parliament to pass an energy law that it favored, and the contract conditions that have been offered by the Baghdad government—based not on profit sharing but on remuneration-per-barrel fees—have dampened enthusiasm. As a result, the KRG has concluded dozens of contracts with international energy companies on its own.
They have sold or abandoned contracts with the central government and signed contracts under more lucrative terms with the KRG in the north. This strained Baghdad-Erbil relations over energy, but there appear to be signs of improvement. In DecemberIraqi Oil Minister Abdul Kareem al-Luaibi announced that the KRG had agreed to let the central government in Baghdad control the amount and quality of crude that Erbil exports through the Turkish pipeline and manage revenue from its sale.
In addition to oil, Iraq also has large natural gas reserves of around 6 trillion cubic meters, distributed fairly equally between the KRG and the rest of Iraq. Iraq produces around 1, million cubic meters per day, but about 60 percent of gas from fields in the south is being burned off by flaring, while the KRG has a no-flaring policy.
Erdogan helped Iran evade US sanctions, witness claims - CNN
Furthermore, there are no pipelines or liquefied natural gas LNG facilities to undertake major exports. The main gas pipeline project is a planned one between Iran, Iraq, and Syria. The Iraq—Syria section of the project is on hold until the Syrian conflict comes to an end; Iran and Iraq have explored with Jordan the possibility of routing their section of this gas pipeline through Aqaba. The Iran—Iraq—Syria pipeline, in the long run, could also enable Iraq to pump gas east and hook up with proposed Iranian pipelines that would go from Iran to Pakistan and then to the vast markets of China and India directly.
While the idea of a gas pipeline through Turkey has been broached, no concrete steps have been taken in that direction. The government in Baghdad has also commissioned feasibility studies for an LNG facility off its narrow southern shore for future consideration. Its main sources of water are the Tigris and Euphrates Rivers, both of which originate in Turkey. The Euphrates flows through Syria before reaching Iraq, and some tributaries of the Tigris and other smaller rivers that irrigate parts of eastern Iraq originate in Iran.
Unless Iraq maintains good relations with these neighbors, its already-low water levels could even go lower. The birthplace of agriculture and once the breadbasket of the Middle East, the country is suffering from severely declining river inflows as well as several years of below-average rainfall. The declining river flows have several impacts: Iraqi officials report that less than half of arable Iraqi land is under production—down from percent in previous decades—and the land being used is producing inferior yields.
In the aftermath of the U. Several factors—the workforce shifting toward state employment, a lack of government subsidization, and the lingering effects of long years of severe drought—took their toll on agriculture. From toIraq witnessed its driest winters on record. The decline in agriculture has pushed hundreds of thousands of peasants, already ravaged by war and instability, into poverty or into the city slums, looking for work.
The water decline has hit the southern marshlands particularly hard, drying them up and sending up tomarshland residents on the move to look for work or sustenance. Early efforts to negotiate with Turkey and Syria have fallen victim to crisis and worsening relations, and tensions between Baghdad and Erbil make cooperation over water even harder.
Tensions between Turkey and Iraq over water are long-standing, particularly as Turkey has pursued dam construction and irrigation projects in its eastern provinces.
TIMELINE-U.S.-Iran relations from coup to sanctions relief | Reuters
An agreement between the two countries signed in committed Turkey to allowing a minimum of cubic meters per second of water to flow into Iraq, but officials in Iraq insist that levels have fallen below that and might drop further.
Iraq has turned to Iran for major food imports, and many farmers have resorted to digging expensive wells, which in turn negatively impact water tables and soil salinity.
Tensions with Syria over water have been high in the past, as Syria pursued dam and irrigation projects on the Euphrates. Iraq and Syria almost went to war over water in InIraq, Turkey, and Syria announced an agreement to establish a common water institution to manage the shared resource, but with the war in Syria this project is currently on hold.
Water tensions are also a source of conflict between the Kurdish and Arab regions of Iraq. The Kurdish authorities in the north are proceeding with the construction of eleven dams, mainly along the Tigris, that will further restrict flows to the south and increase regional and ethnic tensions. The northern provinces are the driest in Iraq, and these KRG dam projects aim to boost agricultural potential and electricity generation.
Meeting Electricity Demand Ten years after the fall of the Saddam regime, Iraq is still unable to meet its domestic electricity consumption needs. This deficit is a massive drag on all sectors of the economy. Current domestic production stands around 5, megawatts MWwhile demand is around 12, MW. There are 28 power plants operating in the country, and another 41 are under construction or contract.
By that time, it is estimated that demand will have increased to 20,—21, MW.
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Iran is also constructing, at its own expense, a MW power plant in the holy Iraqi city of Najaf. Notably, Iran has great ambitions as an electricity exporter and already provides electricity to other neighbors, such as Turkey, Armenia, Afghanistan, and Pakistan.
The KRG is even beginning to sell electricity to several neighboring Iraqi provinces. From the beginning, Erbil accepted the principle of privatization in this sector and has given successful contracts for power generation to major international companies.
Only in did the central government open the door for serious outside help and begin awarding major contracts to foreign companies. With its massive oil and gas resources, Iraq has more than enough fossil fuel resources to generate the electricity needed to meet its domestic demand and to eventually become an electricity exporter.
Until then, and if the domestic energy production sector remains as dysfunctional as it has been, Baghdad will continue to be dependent on electricity imports from Iran, Turkey, and other neighbors, and its foreign policy will have to reflect those imperatives.
Many of them are themselves—or are closely linked to—new business elites who benefit from these economic opportunities. A pattern of crony capitalism has emerged in which politicians and businessmen come together in mutually beneficial alliances.
The new elites have embraced this change. Despite the instability and insecurity of the past decade, the Iraqi economy is one of the fastest growing in the region and has provided tremendous opportunities for trade and investment. The growth rate for is estimated at a robust 9 percent. This trade is still dominated by energy exports. In the Kurdish north, Turkey dominates the economy—55 percent of companies in the KRG are Turkish, and 80 percent of imports come from Turkey. As a sanctions- and war-ravaged country, Iraq has massive reconstruction, infrastructure, and development needs.
Sincewhen a measure of limited stability began to return to Iraq following the surge in U. The largest sector of foreign investment and operation remains that of oil and gas. But other major sectors include construction and real estate, electricity, defense, transportation, telecommunications, agriculture, education, and healthcare.
To attract foreign investment into Iraq, the central government has offered various incentives: Iraq and the United States signed a Trade and Investment Framework Agreement inwhich the Iraqi parliament finally ratified and brought into force in The explosive growth in foreign investment and contracting has occurred despite a very low level of governance, particularly at the central government level.
And with high costs and the longest time required to export and import, Iraq ranked out of countries in the Trading Across Borders subcategory. The ruling elites in both Baghdad and Erbil are closely integrated with—or in many cases part of—the emerging Iraqi private sector and hence have a great interest in maintaining and increasing these international economic ties and potentially doubling or tripling the size of the Iraqi economy.
There are common interests and threads that run through these bilateral relationships, but each relationship also has its own political and economic contexts. In many instances, the relations pursued by Baghdad differ from those pursued by Erbil. Friends Bordering on Allies After the U. Many of the current leaders in both Baghdad and Erbil have a history of good relations with Tehran, and the Shia-led government in Baghdad sees Iran as a long-term strategic friend in a potentially hostile Sunni-dominated rest of the region.
Iran pursued an ambiguous policy toward the U. But later Iran used its political and intelligence influence to undermine the prospect of a long-term U. Erbil and Tehran shared a common enemy in Saddam Hussein and developed strong economic relations after As the date of the U.
The Maliki government nevertheless went ahead with a strategic agreement with the United States despite Iranian objections. The deals will bring fairly advanced U. But Tehran gained considerable influence over Maliki by leaning on its Sadrist allies to enable him to form a government after the parliamentary elections.
Nevertheless, Maliki initially attempted to maintain an independent foreign policy, balancing close ties to Tehran with good relations with Washington and Ankara; Baghdad even sought to reclaim a central role for itself in the Arab world by hosting the Arab League meeting, first scheduled for but postponed and finally held in late March The war in Syria polarized the region, however, and as the crisis progressed, Baghdad moved more clearly into an axis that includes Iran, the Assad regime, and Hezbollah and is backstopped internationally by Russia and China.
This included allowing Iran to ferry support over Iraqi air and land routes to the Assad regime and allowing some Iraqi Shia militias to cross the border and fight for Assad in Syria. For now, Iraq has voiced strong support for a proposed UN-backed peace conference, referred to as Geneva II, to help resolve the Syrian crisis. Alongside similar interests in Syria, Baghdad and Tehran share energy interests.
Although Baghdad has repeatedly insisted that it has respected international economic sanctions against Iran, there is a large black market across the Iraq-Iran border, and Iran has likely been using Iraq as a main conduit for circumventing the sanctions. If these sanctions are gradually lifted, legal trade between the two countries could supplant black market trade, fostering wider and deeper economic exchange in various sectors.
Iranian companies have won major construction and infrastructure contracts in Iraq, and Tehran has also offered loans to Baghdad to aid in reconstruction. Iran has a particular interest in the southern Shia region of Basra and the holy sites of Najaf and Karbala, which hundreds of thousands of Iranian pilgrims visit every year. Iran has offered infrastructure and housing projects in these sites in addition to its substantial electricity project in Najaf.
Despite this collaboration, there are a number of challenges in the Baghdad-Tehran relationship. The virtually landlocked and multicommunal Iraq cannot pursue the same radical policies that Tehran often does. The two countries have had border differences over water, oil, and security as well. Iranian damming of rivers and tributaries that flow into Iraq has caused protests among Iraqi farmers.
A dispute over ownership of the Fakka oil field in the Misan Province almost led to minor armed clashes in Although there is considerable trade and political closeness between Baghdad and Tehran, cooperation in other areas—for example, energy, water, or military purchases—is surprisingly limited. Also, there are tensions over several significant issues. The two countries also disagree over whether Qom in Iran or Najaf in Iraq is the true center of Shiism.
Turkey was also drawn toward the enormous economic benefits of reconstruction in post-Saddam Iraq, seeing opportunities to grow Iraq as a major market for Turkish exports and access its vast oil and gas resources. Ankara made numerous attempts to bolster its relations with both Sunni and Shia leaders in Iraq. But this pattern of good relations between Ankara and Baghdad dramatically changed around the turn of the decade.
Relations deteriorated further as the Syrian uprising was met by bloody repression. And as Turkey moved to support the Syrian rebels, Baghdad was allowing Iran to move support across Iraqi land and airspace to the embattled Syrian regime.
Geostrategically, the American withdrawal quickened the regional scramble for power—Ankara saw Baghdad drifting closer to Tehran and waging war to protect Iranian and Shia alliances in Syria; Baghdad saw Ankara siding with Sunni rebels in Syria and Sunni powers in the Gulf and Egypt and feared partial encirclement. From toAnkara and Erbil viewed each other virtually as enemies. Indeed, Turkish relations with those three countries were partly based on the Adana Protocol of in which Syria renounced its support of the PKK.
Inhowever, Ankara opposed opening a northern front against Saddam, partly to prevent U. Turkey feared that Kurdish control of Kirkuk would give the KRG further economic grounds for power and independence; in this position Ankara had common ground with Baghdad. And all this put Turkish-KRG relations on tense footing. As long as U.