Iran Feature: Which Tehran Officials Are Buying Up Turkish Gold? (Pamuk)

Humeyra Pamuk writes for Reuters:

To see one of Iran's financial lifelines at work, pay a visit to Istanbul's Ataturk International Airport and find a gate for a flight to Dubai.

Couriers carrying millions of dollars worth of gold bullion in their luggage have been flying from Istanbul to Dubai, where the gold is shipped on to Iran, according to industry sources with knowledge of the business.

The sums involved are enormous. Official Turkish trade data suggests nearly $2 billion worth of gold was sent to Dubai on behalf of Iranian buyers in August. The shipments help Tehran manage its finances in the face of Western financial sanctions.

The sanctions, imposed over Iran's disputed nuclear program, have largely frozen it out of the global banking system, making it hard for it to conduct international money transfers. By using physical gold, Iran can continue to move its wealth across borders.

"Every currency in the world has an identity, but gold means value without identity. The value is absolute wherever you go," said a trader in Dubai with knowledge of the gold trade between Turkey and Iran.

The identity of the ultimate destination of the gold in Iran is not known. But the scale of the operation through Dubai and its sudden growth suggest the Iranian government plays a role.

The Dubai trader and other sources familiar with the business spoke to Reuters on condition of anonymity, because of the political and commercial sensitivity of the matter.

Iran sells oil and gas to Turkey, with payments made to state Iranian institutions. U.S. and European banking sanctions ban payments in U.S. dollars or euros so Iran gets paid in Turkish lira. Lira are of limited value for buying goods on international markets but ideal for a gold buying spree in Turkey.

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In March this year, as the banking sanctions began to bite, Tehran sharply increased its purchases of gold bullion from Turkey, according to the Turkish government's trade data.

Direct gold exports to Iran from Turkey, long a major consumer and stockpiler of gold, hit $1.8 billion in July - equivalent to over a fifth of Turkey's entire trade deficit in that month.

In August, however, a sudden plunge in Turkey's direct gold exports to Iran coincided with a leap in its sales of the precious metal to the UAE.

Turkey exported a total $2.3 billion worth of gold in August, of which $2.1 billion was gold bullion. Just over $1.9 billion, about 36 metric tons, was sent to the UAE, latest available data from Turkey's Statistics Office shows. In July Turkey exported only $7 million of gold to the UAE.

At the same time Turkey's direct gold exports to Iran, which had been fluctuating between $1.2 billion and about $1.8 billion each month since April, slumped to just $180 million in August.

The Dubai-based trader said that from August, direct shipments to Iran were largely replaced by indirect ones through Dubai, apparently because Tehran wanted to avoid publicity.

"The trade from Turkey directly to Iran has stopped because there was just too much publicity around it," said the trader.

Dealers, jewellers and analysts in Dubai said they had not noticed any large, sudden increase of supply in the local gold market during August. They said that suggested the increased shipments to the UAE were sent straight on to Iran.

It is not clear how the gold is moved from Dubai to Iran, but there is substantial trade between the two economies, much of it conducted by wooden dhows and other ships crossing the Gulf, a distance of only about 150 kilometers (100 miles) at its narrowest point.

A trader in Turkey said Tehran had shifted to indirect imports because the direct shipments were widely reported in Turkish and international media earlier this year. "Now on paper it looks like the gold is going to Dubai, not to Iran," he said.

Iranian gold buyers may want to conceal their Turkish gold deliveries for fear of attracting attention from the United States, which is pressing countries around the world to shrink their economic ties with Iran.

The buyers may also want to make their purchases less vulnerable to any possible interference by Turkey's government. Turkey's close relationship with Iran has begun to sour as the two states find themselves on opposite sides of the civil war in Syria, with Turkey advocating the departure of President Bashar al-Assad and Iran remaining Assad's staunchest regional ally.

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