Turkey risks acting as a sanctions ‘safe haven’ for Russians

ISTANBUL, March 28 (Reuters) – Since Russia’s invasion of Ukraine sparked a wave of Western sanctions against Moscow, at least one oligarch and thousands of other Russians have arrived in Turkey, seen as a safe place to stay, invest and hold assets despite its NATO membership.

Acting as a safe haven increases the risks for the Turkish government, banks and businesses which could face tough rulings and sanctions if the US and others increase pressure on Moscow with more “secondary” sanctions. wide.

Here’s what’s at stake:

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WHY IS TURKEY ATTRACTIVE FOR RUSSIANS?

Turkey has said Russian President Vladimir Putin’s decision to invade Ukraine was unacceptable, but opposes sanctions on principle and does not enforce them.

Turkey’s economy, already battered by a currency crisis and runaway inflation, is heavily dependent on Russian oil, gas, trade and tourism.

Some 14,000 Russians are believed to have arrived in Turkey since the war began on February 24, many carrying wads of cash due to blocks on their US credit cards and difficulties with basic banking. Estate agents say many are using cash and converted cryptocurrency to buy property as a safe investment.

Roman Abramovich, one of several Russian oligarchs blacklisted by the West, also visited Turkey and two of its superyachts worth a combined $1.2 billion moored in Turkish resorts last week . The oligarchs could invest more, sources familiar with the private talks told Reuters.

Turkish Foreign Minister Mevlut Cavusoglu said on Saturday that Russian oligarchs and citizens are “of course” welcome and can do business in Turkey in accordance with international law.

CAN THE SAFE HAVEN LAST?

Western governments have already seized the assets of some oligarchs, frozen Russia’s reserves and forced it out of the SWIFT banking system, and they could press Ankara to tighten the loopholes. Analysts say they could impose secondary sanctions on those doing business with the main target, Russia.

“If the humanitarian tragedy persists and Putin has no intention of backing down, I think secondary sanctions are inevitable,” said Hakan Akbas, founding partner of Istanbul-based Strategic Advisory Services, which handles penalties.

“The West will pay more attention to all potential escape countries so that they don’t become havens,” he said. “Ankara’s hands would be tied…and it would inevitably have to take a tougher stance against Russia.”

This could give a chill to Turkish banks and companies dealing with Russian customers or doing business abroad. In 2020, the US Treasury applied secondary sanctions to Turkey’s Defense Industry Directorate, its head and others for Ankara’s purchase of Russian S-400 missiles. Read more

Yet, given Turkey’s efforts to mediate between Moscow and Kyiv, it could avoid the sanctions crossfire. Another round of peace talks are due to take place in Istanbul this week. Read more

Dutch Prime Minister Mark Rutte praised Ankara’s diplomatic role, while adding “we would very much like Turkey to implement all sanctions”.

HOW ARE BANKS AND COMPANIES PREPARING?

Faced with an influx of new Russian customers, Turkish banks have resisted some deposit and transfer requests and stepped up compliance checks for fear of breaching sanctions.

This frustrated some Russians. But it reflects caution across the industry as it seeks to avoid a repeat of the years-long U.S. lawsuit against Turkish state lender Halkbank, accused of helping Iran evade U.S. sanctions. Read more

Banking regulator BDDK said it had given no instructions to restrict citizens of any country. But a senior banking source said the sanctions were nevertheless “perceived as a new risk” and that companies had met several times to discuss them since the start of the war.

Akbas said large Turkish companies and conglomerates have more than $10 billion in assets in Russia, and Moscow is now urging them to continue operating and pay workers or risk bankruptcy.

Many of them are doing much more business in the West and may have to make a “binary decision” to leave Russia as several major American and European brands have done, he said. Read more

Any fallout from sanctions could further tarnish Turkey’s reputation with foreign investors after years of unorthodox monetary policy and capital outflows.

That reputation took another hit last year when an international watchdog, the Financial Action Task Force, downgraded Turkey to a so-called gray list for failing to prevent money laundering and financing. of terrorism. Read more

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Reporting by Jonathan Spicer; Additional reporting by Ebru Tuncay and Can Sezer in Istanbul Editing by Gareth Jones

Our standards: The Thomson Reuters Trust Principles.

Sharon P. Juarez