Seeking to hamper the progress behind Iran’s nuclear program, sanctions have been imposed in the West to choke the Iranian financial system. One country who’s been resilient on ending ties with Iran has been Turkey, who relies on their neighbor for natural gas. The United States has given nations dependent on Iran for natural resources a 6 month waiver, which is set to expire in July of 2013.
The way the business is conducted usually involved Turkey paying for the natural gas in Turkish Lira, which is processed by Turkish banks, and is then used by couriers to buy gold and place inside suitcases with commercial airlines taking the couriers to the United Arab Emirates where it can be sold or where it can further be forwarded to Iran. The United States has been keen to halt this trade which helps provide a lifeline to the Iran economy and had taken steps to put pressure on Turkish banks helping in the operation. Many of the Turkish banks with presences inside the United States has stayed away from the proceedings.
Exports of gold to Iran in January suffered due stakeholders being wary of the February 6 implementation of the US sanctions. However exports have picked up in February with 17.34 tons of exports, putting the total of the first two months to 28.62 tons. This is considerably higher than the same period last year in which the total exports to Iran in the first two months amounted to 5 tons but that was before banking sections were placed to disallow EUR and USD payments to Iran. If we look at more recent data however, we can see that gold exports are still much lower than the peaks experienced in the middle of 2012, especially in July where $1.8 billion worth of gold was exported which is around 10 times the amount in February 2013.
As the July deadline approaches it will be interesting to see where Turkey will get its natural gas needs from and whether the extra cost will be insignificant for them to truly abandon doing business with Iran. Regardless, gold’s role in this politically crucial situation must not be pleasing to Western authorities.