Turkey withdrew gold from US for strategy: economists

Ankara might be taking precautions against the prospect of US sanctions against Halkbank for its role in a scheme to get around sanctions on Iran, economists say
Tuesday, 24 April 2018 05:34

Economists Enver Erkan and Mustafa Sönmez commentated the Central Bank of the Republic of Turkey’s (TCMB) withdrawal of 30 tonnes of gold from the Federal Reserve Banks (FED) of the US, stating that this was a strategic preventive move against the possible enforcement and impositions by the US as a result of the confrontations in certain incidents.

Last week, Hürriyet daily columnist Uğur Gürses said citing a central bank report said that Turkey’s central bank withdrew gold reserves it held at the FED and placed them at the Bank of International Settlements and the Bank of England.

Interviewed by Sputnik News Turkey, Sönmez explained that it is a common practice for not only the TCMB but for the central banks of all countries to valorise their values in international markets and finance houses. “One reason for this is to keep the eggs in different baskets; that is, they want to keep (part of) it somewhere safe, rather than in their own countries. Another reason is that they have an income since they keep these reserves various international finance institutions.”

Noting that the TCMB kept part of its reserves in the FED as well as the Central Bank of England and the Bank of International Settlements, Sönmez also stated that the TCMB not only withdrew its gold reserves, but emptied its whole vault in the FED.


Sönmez claimed that there could be two reasons for this. On the one hand, consequences of the case of Reza Zarrab case would cause the banks in Turkey to be fined. Zarrab, an Iranian-Turkish gold trader with ties to Turkey's President Recep Tayyip Erdoğan, pleaded guilty and cooperated with U.S. prosecutors in the criminal trial of a Turkish bank executive accused of conspiring to evade U.S. sanctions against Iran.

Zarrab testified that he believed Erdoğan knew about the plot. The Turkish president personally ordered that two Turkish banks be allowed to participate in an oil-for-gold scheme that violated United States sanctions on Iran, according to testimony by Zarrab.

Also, 30-year-old New York branch of the state-owned Ziraat Bank had been recently closed.

On the other hand, as a result of the confrontations of Turkey and the US in Syria, there is the concern that possible enforcement could be imposed on Turkey by the US.

However, Enver Erkan pointed out that this was not really an unusual act. Reminding that during the World War II, when Hitler threatened the whole Europe, many central banks in the continent moved their values to the US, and that Turkey was one of them, Erkan stated that the TCMB has been gradually taking its gold back since 2002.

Erkan said: “But it is not possible to move the whole reserve at once … The shipment is really hard, and it is a process with a high risk of security. If the ship sank or the plane crashed with which you are carrying the gold, you would lose a significant part of the reserve. This is why it is done gradually.”

Erkan also pointed out that the gold withdrawn from the FED was moved to the Central Bank of England, commenting that the present conditions of the relations between Turkey and the US may have led Turkey to move its gold to another institution. “I think this is a strategic move, though it is questionable how strategically credible England is,” said Erkan.


In recent years, Turkey repatriated 220 tons of gold from abroad, and 28.7 tons was brought back from the US last year. Turkey’s gold reserves are estimated at 564 tons and are worth about $20 billion, pro-government Yeni Şafak reported. This makes Ankara the 11th largest gold holder, behind the Netherlands and ahead of India. 

This meshes with Ankara's efforts to promote "interest-free banking", where lending systems are based on gold. 

On April 11, the Turkish lira hit a record low against the dollar.

Last week, Erdoğan criticized dollar loans and said that international loans should be given in gold instead. "Why do we make all loans in dollars? Let’s use another currency. I suggest that the loans should be made based on gold,” Erdoğan said during a speech at the Global Entrepreneurship Congress in Istanbul on April 16.

"With the dollar, the world is always under exchange rate pressure. We should save states and nations from this exchange rate pressure. Gold has never been a tool of oppression throughout history," he added.