Germany reported to attempt financial sanctions on Turkey

TURKEY - In Brief 26 Oct 2017 by Atilla Yesilada

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Dark clouds are gathering on Turkey’s financial system very quickly. I’ve reported last week that U.S. Treasury Department might be conducting a probe on several Turkish banks on suspicion of violating financial sanctions on Iran. On Wednesday, Bloomberg.com reported that Berlin is using its influence on EIB, EBRD, KfW and German commercial banks to reduce loans to Turkey. This may not be the end of bad news. In a trial on 27th of November concerning Turkish citizen and gold trader Reza Zarrab, a former Turkish economy minister and potentially state-owned commercial lender Halkbank might be named as defendants. Implications on F/X borrowing costs and Turkey’s reputation as a good place to do business could be potentially very negative. The critical paragraph in the a.m. Bloomberg article is as follows: “At Germany’s urging this summer, the EIB has put its Turkey projects on hold, people said. KfW has also tightened funding procedures, with approvals having to come directly from the government in Berlin, a person said. Commerzbank AG is altering its relations with some Turkish banks to mitigate reputational risk that could occur through those links, according to one person. Officials for KfW and Commerzbank declined to comment”. The Turkish financial broadcaster BloombergHT (its operations are independent of Bloomberg TV) interviewed EBRD officials who denied any decision to freeze or reduce funding to Turkish projects. I can report from the grapevine the following rumors: EBRD had indeed reduced funding to Turkey, but reasons might be non-political such as lack of suitable investment opportunities. One source claims to have talked to top bureaucrats who have allegedly ...