Turkey's
gold exports continued to surge dramatically in October, confirming
Ankara is still using the commodity to pay for Iranian gas and
circumvent sanctions as U.S. lawmakers consider a package that could
specifically target the complex trade.
According to data from the Turkish statistics agency on Friday, Turkey's
gold exports rose 14-fold on the year to $1.2 billion in October,
albeit slightly down from $1.3 billion in September. This year's total
gold exports have now risen to a record $12 billion; a tenfold rise on
the $1.2 billion expansion in 2011.
Turkey
last week acknowledged that the rapid rise of gold exports was related
to payments for imports of Iranian natural gas, spotlighting the most
striking example of how Iran is using creative ways to sidestep Western
sanctions over its disputed nuclear program, which have largely frozen
it out of the global banking system.
The latest figures come as the U.S. Senate is set to consider a
broader set of economic sanctions on Iran's energy, port, shipping and
shipbuilding sectors that could also include trading in gold, as
lawmakers look for new ways to pressure Tehran to stop efforts to enrich
uranium to levels that could be used in weapons.
That prospect could raise tensions between Washington and
Ankara at a time of instability in the region, and take the shine off a
trade that has flattered Turkey's
economic performance this year, helping to speed a rebalancing which
has boosted investor confidence and spurred investment, analysts said.
"The Turkish gold deal is providing Iran a lifeline and the
U.S. now seems more eager to stop it," said Atilla Yesilada of
Istanbul-based research consultancy Global Source Partners. "This trade
definitely flatters our economic figures so we look better for investors
but it doesn't make Turks richer or create jobs," he said.
Turkish policy makers have this week struck both defiant and
conciliatory tones over gold exports to Iran. Economy Minister Zafer
Caglayan on Wednesday said that Turkey
would continue to export gold irrespective of U.S. action while Energy
Minister Taner Yildiz on Thursday emphasized that Ankara and Washington
were discussing the issue and he envisioned that there would be "no
conflict."
Turkey
began to export huge quantities of gold directly to Iran in March, the
month Tehran was cut off from the Swift global payments network,
effectively blocking the country from performing international financial
transactions. Analysts said that although the trade with Iran wasn't
illegal, Ankara wanted to keep details out of the public eye for fear of
raising the ire of Washington, which is leading the international push
against Tehran for its alleged movement to develop nuclear weapons. Iran
says its program is for peaceful purposes including medical treatments.
Tehran has sought alternative means of payment for energy
exports--its main foreign currency earner and economic
lifeblood--including renminbi and rupees, as well as gold, in an attempt
to skirt international sanctions and pay for its soaring food costs.
Friday's data confirmed how the trade has become more
diversified in recent months. Almost $500 million in gold was sent to
Dubai on behalf of Iranian buyers in October, continuing a trend that
began in August. For the first time, the data suggested trade could also
be being routed through Switzerland, which is not a signatory to
European Union-wide sanctions banning gold trading with Iran. Swiss
imports of Turkish gold rose to a record $460 million in October,
marking a four-fold rise on the month.
Iran provides 18% of Turkey's
natural gas and 51% of its oil. But since U.S. and EU sanctions ban
Tehran from receiving payments in dollars or euros, Ankara pays Iran for
the gas in Turkish liras. The lira is of limited value for buying goods
on international markets but ideal for purchasing Turkish gold. The
government hasn't specified how it pays for Iranian oil.
The gold exports deal with Iran has offered a significant fillip for Turkey,
helping Ankara to reduce its current account deficit, considered the
key weak point of the emerging economy. Moderating growth and tighter
monetary policy have provided the prime driver for a rebalancing that
was rewarded last month as Turkey secured its first investment-grade credit rating in more than two decades. But economists stress that Turkey's
gold trade has also helped: narrowing the current account deficit by
7%, or around $4 billion of the total $56 billion finance gap.
"Turkey
has successfully navigated a soft landing, but market perceptions have
been affected positively by the gold trade," said Nilufer Sezgin, chief Turkey
economist at Erste Securities in Istanbul. "If gold exports suddenly
stops or falls to lower numbers I would expect the current account
deficit to increase towards the end of the year," she said.