The Senate Foreign Relations Committee’s closed hearing on Wednesday, February 7, “Turkey and the Way Ahead,” is almost certainly a reaction to the deterioration in U.S.-Turkish ties. Much like the last-minute trip to Turkey by Secretary of State Rex Tillerson and National Security Advisor General H.R. McMaster is an attempt to prevent outright hostilities.
The U.S.-Turkish alliance is, at this point, largely mythical, eroded over the last decade by diverging U.S. and Turkish interests in the Middle East and growing Turkish authoritarianism at home.
Relations between Washington and Ankara have been souring for a while now, but recently reached a new low with Turkey’s “Operation Olive Branch,” an attack on the Syrian enclave of Afrin. That region is controlled by the Kurdish Peoples’ Protection Units (YPG), a group that is the primary U.S. partner in prosecuting the Syrian campaign against ISIS. But Turkey is concerned because the YPG is an offshoot of a Turkish Kurdish terrorist organization, the Kurdistan Workers’ Party (PKK), that has been fighting the Turkish state for decades.”
Turkey’s President Recep Tayyip Erdogan has threatened that Turkish troops might soon turn their attention from Afrin to Manbij, another YPG-controlled town which is regularly patrolled by U.S. special operations forces. This could put American troops in Turkish crosshairs, an unthinkable and unprecedented potential conflict between NATO partners.
What is surprising about the SFRC hearing is the inclusion of a representative not just from the State and Defense departments, but also Treasury.
What is surprising about the SFRC hearing is the inclusion of a representative not just from the State and Defense departments, but also Treasury. The participation of a Treasury Department official, particularly one that specializes in “disrupting financing of national security threats” through “sanctions, anti-money laundering/counter-terrorist financing (AML/CFT) policies,” suggests a new-found interest by U.S. policymakers in considering punitive financial and economic measures against Turkey.
Any action would have to be considered carefully to ensure that it can achieve the intended purpose of changing Turkey’s behavior, rather than merely hardening Turkish anti-Americanism. But there are a number of areas in which existing U.S. laws and Turkish actions coincide to create grounds for sanctions. In particular, senators may want to consider these three sanctions against Turkey:
Iran Sanctions Evasion
Ironically, the most blatantly sanctionable activity that Turkey has engaged in has been the evasion of U.S. and international sanctions against Iran. The conviction last month of Turkish Banker Hakan Atilla for financial crimes may provide the basis for sanctions against Turkey—particularly against Halkbank, the Turkish state-owned lender that was the focal point for the billion-dollar sanctions busting scheme. Punishment for Halkbank could include fines which, based on precedent set by other sanctions-busting cases, could amount to billions of dollars: BNP Paribas, a French bank, was ordered to pay $8.9 billion in May 2015 as a penalty for violating sanctions against Iran, Cuba and Sudan. A more severe penalty that the U.S. Treasury’s Office of Foreign Assets Control could levy is designating Halkbank as a Foreign Sanctions Evader, pursuant to Executive Order 13608, which would effectively cut Halkbank off from the U.S. marketplace and financial system.
A designation on Halkbank could have drastic impact on Turkey’s economy: Halkbank’s worth is estimated to be just under 10 percent of Turkey’s entire $791 billion financial sector.
Russian Defense Contracts
Turkey’s planned purchase of Russian S-400 anti-aircraft missile batteries could also run afoul of U.S. sanctions. Section 231 of the Countering America’s Adversaries Through Sanctions Act, which was signed into law in August 2017, aims to penalize governments that purchase military equipment from Russia.
However, Turkey appears to be proceeding with the purchase, announcing in September that it had signed a contract with Moscow and paid a deposit for the $2.5 billion missile system. The CAATSA provision stipulates sanctions against those that unknowingly engage in a “significant transaction” with the Russian defense sector. Whether or not Turkey can be subjected to sanctions now as a result of its deposit, rather than in 2020 when S-400 shipments are slated to begin, depends on the definition of “significant,” which a State Department official described as meaning not only monetary value, but significant adverse impact to U.S. national security—a standard Turkey’s S-400 purchase could well meet.
Another lever at U.S. disposal is the Global Magnitsky Act, passed in 2016, which allows the executive branch to impose visa bans and targeted sanctions on individuals responsible for committing human rights abuses or government officials or senior associates of government officials engaged in significant corruption.
The Halkbank case in the United States, which built upon a larger corruption scandal in Turkey in 2013, exposed the extent of corruption in Turkey, and implicated officials in the highest levels of government as complicit. As BPC wrote in Power and Corruption in Erdogan’s Turkey: Context and Consequences, “corruption, particularly in matters of economy and commerce, has become an instrument of policy and rule in the hands of Erdoğan and his Justice and Development Party (AKP).”
In Erdogan’s Turkey, access to state resources has increasingly become a mechanism for Erdogan and his government to maintain the support of his base, which includes influential leaders in business and media. Targeting Erdogan’s cronies and clients through the Global Magnitsky Act could have a significant impact on Erdogan’s ability to maintain that support—especially as Turkey heads into an election cycle, including presidential elections, in 2019.
Application of Sanctions
In choosing whether or not to apply relevant sanctions, U.S. policymakers must weigh the risk that sanctions may have the opposite intended effect: pushing Turkey even further down its current path rather than reversing its course. However, with Turkey and the United States consistently working at cross-purposes in the region, and with the current risk of direct U.S.-Turkey confrontation in Manbij, doing nothing should no longer be an option.