According to journalists from The Wall Street Journal, after launching a criminal war against Ukraine in 2022, the aggressor country Russia used an operation to circumvent US financial sanctions using an "offshore reserve" under the guise of building a nuclear power plant in Turkey.
Points of attention
- Russia utilized a nuclear power plant project in Turkey as a means to circumvent US financial sanctions, with Gazprombank secretly investing in the project.
- The collaboration between Russia and Turkey in the nuclear power plant construction aimed at creating an offshore dollar reserve to evade sanctions and launder money.
- Despite the US Department of Justice accusing Russia and Turkey of using the project to evade sanctions, the Biden administration refrained from seizing the blocked funds to maintain delicate diplomatic relations.
- This case sheds light on the complexities involved in using sanctions as an economic warfare tool and highlights the challenges of protecting the financial system while navigating diplomatic relations.
- The cat-and-mouse game between the involved parties showcases the limitations of sanctions as an effective tool of economic warfare and underscores the trade-offs faced by the US in upholding financial integrity amidst diplomatic intricacies.
What is known about Russia's attempt to circumvent US sanctions under the guise of building a nuclear power plant in Turkey?
It is noted that Russia has reached an agreement with Turkey on the provision of a loan by Gazprombank in the amount of $9 billion for the construction of a nuclear power plant under the leadership of Rosatom.
At the same time, the Russian bank was supposed to be a secret investor in this project.
It is emphasized that Turkey was interested in this offer because it sought to replenish its own dollar reserves.
The Kremlin wanted to create an offshore dollar reserve to finance its own interests, bypassing US and allied sanctions.
Under Moscow’s plan, the nuclear plant could transfer dollars to Russian firms that also had accounts at Turkey’s largest bank, state-owned Ziraat Bank. This would eliminate the need to bring money in and out of the United States, which could be detected, the newspaper’s journalists note.
At first, the plan worked. In the summer of 2022, Gazprombank sent $3 billion through the US-based Citigroup to the nuclear power plant’s deposits at Ziraat. A little over $2 billion went through JPMorgan.
However, according to the publication's journalists, the US Department of Justice accused Russia and Turkey of using the nuclear facility construction project to circumvent the imposed anti-Russian financial sanctions.
The next $2 billion in Russian funds turned out to be blocked in accounts at JPMorgan.
What did the US want to do with the blocked Russian money?
In 2024, prosecutors wanted to seize this money on the grounds that it was proceeds from sanctions evasion, money laundering, and bank fraud.
However, according to informed sources, these actions were blocked at the last stage by the Biden administration because the White House wanted to avoid the wrath of Turkey.
American officials feared undermining cooperation with Erdogan's government on everything from prisoner exchanges and counterterrorism work to efforts to stabilize Syria and end the war in Gaza.
However, according to some sources, the Justice Ministry also suspected that one of Erdogan's top aides, intelligence director Ibrahim Kalin, was involved in the payments in 2022.
The cat-and-mouse game shows the limitations of sanctions as a tool of economic warfare and the trade-offs the US faces in trying to protect the financial system from alleged abuses while manipulating delicate diplomatic relations, the material emphasizes.
