The US government halted a $2 billion JPMorgan transfer from unsanctioned Russian bank Gazprombank to Turkey’s biggest bank, state-owned Ziraat, meant for the construction of a Rosatom nuclear plant in Turkey.
The true aim of the payment was to conceal avoiding sanctions, the Wall Street Journal (WSJ) reported.
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Russia transferred more than $5 billion to Turkey shortly after the country invaded Ukraine, according to WSJ’s sources. For an outsider, the money would appear to pay for Turkey’s first nuclear-power plant.
“The investigators found that Russia and Turkey used the nuclear project in 2022 to dance around US sanctions imposed on Russia’s central bank, according to people familiar with the matter,” WSJ wrote.
Two prominent American banks, JPMorgan Chase and Citigroup, acted as intermediaries – correspondent banks – to handle the payments. This attracted the attention of Justice Department investigators, who tasked the banks to freeze the money transfer until they finished an investigation.
“US prosecutors in 2024 prepared to try to seize the money on the grounds it was the proceeds of sanctions evasion, money laundering and bank fraud. But they were blocked in the final stretch of the Biden administration, the people said, because the White House wanted to avoid angering Turkey, a vital but sometimes contentious ally,” the article writes.
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A representative from the Trump administration told WSJ that “the US government will keep reviewing its sanction regimes and act against people who try to evade them.”
How Turkey and Rosatom plotted to avoid sanctions
Russia’s state energy giant Rosatom operates around the world and acts as an umbrella for numerous organizations that form divisions producing nuclear fuel, reactors, electricity, nuclear ammunition, equipment for the nuclear industry, and chemical products.
The “umbrella” method is used to help Russia avoid sanctions. Approximately 4% of companies within the Rosatom structure fall under sanctions, Olena Lapenko from think tank DiXi Group told Kyiv Post in an interview. Some of these legal entities can call themselves research institutes but import dual-use components for the military, she added.
A spokeswoman for Rosatom told WSJ that “all funds allocated to the nuclear plant have been used to finance the project and pay for contractors and other social and financial commitments in Turkey,” not connecting it to the US Justice Department investigation.
The US froze Russia’s sovereign central bank reserves right after the invasion, a move by Western governments in response to Russia’s 2022 full-scale invasion of Ukraine, Kyiv Post previously wrote.
But Elvira Nabiullina, Russian central bank governor, and other senior Russian officials established a route to create an offshore dollar reserve to fund Russian interests beyond America’s gaze, WSJ sources reported.
Any dollar money transfers require operations through intermediary banks.
“Russia and Turkey agreed unsanctioned Gazprombank, the banking arm of Russia’s state gas company, would lend about $9 billion to the nuclear plant being built by Rosatom, which also wasn’t under sanctions, the people said. What they didn’t disclose: The Bank of Russia would secretly fund the loan, and the nuclear project wasn’t its only purpose,” WSJ wrote.
From Gazprombank, the transfer was sent to Turkish state-owned bank Ziraat through American intermediaries.
“Under Moscow’s plan, the nuclear plant could hand dollars to Russian firms that also had accounts at Turkey’s biggest bank, state-owned Ziraat,” the article wrote.
“In the summer of 2022, Gazprombank sent $3 billion through Citi to the nuclear plant’s deposits at Ziraat. A bit more than $2 billion ran through JPMorgan,” WSJ reported.
The US State Department noticed the payments, started an investigation and blocked the $2 billion from reaching Turkey, freezing the funds.
“The White House and State Department were nervous” because Biden’s administration feared the freeze could undermine cooperation with Erdogan’s government in efforts to stabilize Syria and the war in Gaza.
“A big reason for the trepidation, some of the people said: The Justice Department suspects one of Erdogan’s top lieutenants, intelligence director Ibrahim Kalin, was involved in the payments in 2022,” the article wrote.
The White House asked the Justice Department to stand down under Biden, but WSJ reported it’s unknown what the Trump administration will decide regarding the case.
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