Eurasia Press & News
On March 22 of 2021, several of the world’s most dangerous men descended on Beirut’s historic seaside Summerland Hotel — not to swim in the Mediterranean or explore the sumptuous resort’s “Le Beach Pop Up,” but to talk Turkey.
The meeting was a secret one, between a delegation of senior Iranian military and government officials and a business group from Turkey led by a confidant of President Recep Tayyip Erdoğan. Both sides were keen to deepen their partnership smuggling Iranian oil to buyers in China and Russia to raise funds for Tehran’s terror proxies, according to Western diplomats.
A little more than a year after the meeting, all of the key attendees would find their names on U.S. sanctions lists, with one important exception: Turkish businessman Sıtkı Ayan, a friend of President Recep Tayyip Erdoğan — the two men attended the same high school — and the man at the center of it all.
The collaboration between a member of the Turkish president’s inner circle and Iran’s power elite is detailed in hundreds of pages of documents, including business contracts and bank transfers, reviewed by POLITICO, many of which have also been posted on WikiIran, an opposition website.
The U.S. sanctioned Ayan and his company late Thursday following the publication of this article, reversing months of inaction in the face of reams of evidence detailing the Turk’s dealings with the Iranians, including signed contracts and bank transfers. The U.S.’s reluctance to sanction Ayan, diplomats say, was driven by his close association with Erdoğan, a key American ally in the Middle East and beyond.
“Ayan’s companies have established international sales contracts for Iranian oil with foreign purchasers, arranged shipments of oil, and helped launder the proceeds, obscuring the oil’s Iranian origin and the [Quds Force’s] interest in the sales,” the U.S. Treasury, which oversees the implementation of American sanctions, said in a statement.
Neither Ayan’s nor Erdoğan’s offices responded to multiple requests for comment.
The case offers a window into the complicated dynamic between Iran, Turkey and the unique and influential role Erdoğan plays in the region as he oscillates from self-interested powerbroker to would-be mediator between the West, Russia and the Middle East, creating dependencies that often leave the United States and other allies with little choice but to let him have his way.
At a time when there’s a war in Ukraine and instability in the broader Middle East, Turkey’s relationship with Iran is also a reminder that the Turkish leader isn’t shy about using his leverage when and where he sees fit.
The Beirut gathering attracted a rogue’s gallery of Iranian officials — including Rostam Ghasemi, a former oil minister and senior commander in Iran’s Islamic Revolutionary Guard Corps (IRGC), and Behnam Shahriyari, a gun runner for the Quds Force, the guards’ affiliate that trains and finances Iran’s terror proxies in the Middle East.
Yet the key figure was Ayan, a bespectacled Turkish businessman. The Iranians were keen to deepen their burgeoning cooperation with Ayan, the chairman of Istanbul-based ASB Group, a globe-spanning energy conglomerate that buys, sells and transports oil, gas, electricity and much more.
With the help of ASB, Tehran’s regime has circumvented U.S. sanctions to funnel about $1 billion to its terror proxies since 2020, according to Western diplomats and documents detailing his company’s dealings reviewed by POLITICO. The primary beneficiary of the oil sales is the Quds Force, which uses the money to pay mercenaries and fund groups such as Lebanon’s Hezbollah, which has been designated as a terrorist organization by both the U.S. and EU, the diplomats said.
“Sitki Ayan serves currently as the head of Quds Force’s largest financial network in Turkey and possibly the entire world,” one of the officials said.
Shared background
What makes Ayan’s entanglement with the Quds Force even more surprising, however, is his close relationship to Erdoğan.
Erdoğan and Ayan hail from the same background. They both attended Istanbul’s İmam Hatip religious high school and developed a relationship that would prove beneficial for both men as they navigated their careers in politics and business, respectively. It was Ayan, for example, who helped his old friend conceal his ownership of the “Agdash,” a $25 million oil tanker Erdoğan and his family received as a gift from a wealthy benefactor in 2008, according to confidential Maltese financial records uncovered by European Investigative Collaborations, a reporting consortium, in 2017.
In 2014, Ayan’s name made headlines across Turkey after the release of secretly recorded calls, purportedly between the Turkish president and his son Bilal Erdoğan, including one in which the elder Erdoğan said they should demand more money from a “Mr. Sıtkı” than the $10 million they’d been offered. The Turkish leader dismissed the call as an “immoral montage,” implying it was fake, but the recording helped trigger a wave of protests, scrutiny of his ties to Ayan and even calls for his resignation.
At the time, Ayan was still hopeful that a €1 billion contract he’d signed with Iran in 2010 to build a 660-kilometer-long pipeline to transport Iranian gas across Turkey to Europe would come to fruition (It was ultimately thwarted by U.S. sanctions).
While it’s not clear whether Erdoğan was aware of the extent of his friend Ayan’s engagement with the Iranians, Western diplomats say it’s difficult to believe he could not have been, considering the nature of his business dealings and the involvement of high ranking Iranians.
Given the two men’s history — Ayan is also close to the president’s brother, Mustafa Erdoğan — Western diplomats say they do not believe that Ayan would be pursuing his ongoing business with Iran without the tacit knowledge and approval from Erdoğan.
A lawyer for ASB and Ayan declined to comment. The Turkish government did not reply to requests for comment.
Unlikely bedfellows
At first glance, the regional rivalry and religious feuds between Turkey and Iran would make them unlikely bedfellows, especially considering Turkey’s alliance with the U.S. as a member of NATO. The two are also on opposite sides of a number of armed conflicts in the region from Libya to the South Caucasus. Yet as neighbors with deep historic and ethnic ties, the two countries also have many shared interests, from combating Kurdish separatism to keeping Saudi Arabia in check.
Turkey and Iran are also economically intertwined. Turkey is one of Iran’s largest trading partners, for example, and relies on Iranian energy imports. Turkey is also the top tourist destination for Iranians, many of whom also own property in the country.
Highlighting the importance of those ties, Erdoğan traveled to Tehran in July to meet with Iranian President Ebrahim Raisi. The two countries planned to quadruple their bilateral trade to $30 billion, Erdoğan said, adding that the goal could be achieved “with the resolute march of the two countries.” (The Turkish leader also underscored the need to combat “terrorist organizations,” but referred only to Kurdish separatists and the Gülen movement.)
The fluid relationship between Iran and Turkey aligns with a broader dynamic in the region, which is more akin to medieval Europe with shifting alliances, says Behnam Ben Taleblu, an analyst at the Washington-based think tank Foundation for Defense of Democracies. As Washington devotes less attention to the Middle East and big countries such as Saudi Arabia increasingly assert themselves, opportunism has increasingly become the norm.
“The folly here is to see the relationship between Turkey and Iran as one of permanence,” Taleblu said. “It’s a story of change. Sometimes they have shared interests and sometimes they’re on other sides.”
Indeed, Turkey has helped its neighbor circumvent the sanctions pressures it has faced in the past, acting effectively as “a valve to help the Islamic Republic breathe,” Taleblu said.
‘Maximum pressure’
Though Ayan’s engagement with Iran stretches back more than a decade, his recent cooperation with the IRGC and Quds was triggered by then U.S. President Donald Trump’s decision in 2018 to withdraw the United States from a nuclear accord with Tehran, which afforded the regime relief from most international sanctions as long as it allowed the United Nations to monitor its nuclear activities.
Washington’s move meant that Iran again faced the brunt of U.S. sanctions, and its already-flagging economy came under even more pressure. The regime faced particular difficulty in accessing the foreign currency it needed to fund foreign operations.
On its face, the solution sounded simple: Allocate them oil instead. Oil can be sold for hard cash and Iran has plenty of it. The difficulty was setting up a system that could circumvent Trump’s “maximum pressure” sanctions regime.
To work around that challenge, Ghasemi, the former oil minister, set up an operation dubbed Pour Ja’afari tasked with selling oil for Quds Force and the IRGC to China, which was in theory happy to buy Iranian oil at a discount.
Getting it there was going to be a problem, however. American sanctions don’t just make it difficult for Iran to find anyone to ship the oil; the reluctance of foreign banks to get anywhere near Iranian transactions, much less those involving illicit oil, meant that the deals would have to go deep underground.
The oil would have to be blended to disguise its provenance; documents forged; and, most important, a mechanism developed to get revenue from the sales to the intended recipient.
That’s where ASB came in. With operations in more than a dozen countries, Ayan’s conglomerate offered the perfect cover.
Destinations: China and Russia
It’s not clear why Ayan agreed to collaborate with Ghasemi and Quds, but according to a “strictly confidential” memo of understanding signed by both Ayan and Ghasemi on November 19, 2020, and seen by POLITICO, he did. (Ghasemi died on Thursday after a “long struggle with illness,” according to Iranian media reports.)
“The parties have agreed to cooperate for the purpose of establishing a shipping operation to transport RG’s crude oil from the ports of North Dubai to China,” reads the document, which uses each man’s initials after first reference. “North Dubai” is code for Iran, said a Western official who has reviewed the documents and determined them to be authentic.
Under the agreement ASB subsidiaries Baslam Nakliyat and Baslam Petrol, which ship oil around the world, were tasked with leasing tankers to send the oil to China.
“Baslam Petrol and/or Baslam Nakliyat shall endeavor to arrange two suitable VLCC tankers to transport various types of crude oil from any port of North Dubai to the nominated discharge port(s) in China,” the agreement says under the heading “Option 1” (“VLCC” stands for very large crude-oil carriers, i.e. tankers that can carry more than 2 million barrels of oil.).
Ghasemi also had discretion to exercise “Option 2,” which required ASB to hire two tankers to ship the oil to Malaysia, where it would be transferred to different tankers, presumably to better disguise the oil’s origin, before final delivery to China.
The Chinese buyer of the oil was a company controlled by the country’s military called Haokun Energy, according to the documents. In late 2020, ASB and Haokun signed agreement for the delivery of Iranian oil worth about $2 billion a year. Of that, about $500 million was earmarked for Quds Force, the diplomats said.
To mask the true nature of the deals, ASB helped route them through a complicated network of international front companies and banks from India to Russia and UAE. It sometimes used its own bank in Istanbul, Vakıf Katılım Bankası, which transferred at least $80 million to accounts controlled by Shahriyari, the Quds Force commander, according to the Western diplomats and bank records viewed by POLITICO. There is no indication that Vakıf knew the money was going to the Quds Force. A representative for Vakıf Katılım Bankası did not respond to multiple requests for comment.
Many of the transfers were denominated in dollars or euros, meaning that they were settled by European banks, such as Frankfurt-based Commerzbank, or J.P. Morgan in the U.S. There’s no evidence that the Western banks involved were aware of the Iranian connection to the deals, which would constitute a violation of U.S. sanctions.
In addition to its business with China, Tehran set up a second pillar for its illicit oil trade with Russian partners who act as brokers for the Iranian crude. Here too, Ayan’s ASB served as the legitimate face of the operation, using its subsidiaries and banks to help unload Iran’s oil and filter back the profits to Quds Force and the IRGC through a network of front companies.
While broadly similar to the Chinese network, the Russia channel, led by a separate Tehran-based office called Resistance Economy, also relied on barter for payment. Staples such as wheat, sugar and sunflower seed oil, are exempt from U.S. sanctions. That made it easier for Russian buyers to camouflage their oil payments, which generally account for half the total bill, as humanitarian aid or other goods that don’t run afoul of the sanctions regime.
The arrangement means Iranian outfits like Quds Force get the foreign currency they need, while also giving the regime better access to foodstuffs and other goods that are in short supply.
Ultimately the cash ended up in accounts in Turkey or UAE, where it could be withdrawn by Quds Force operatives and distributed to the likes of Hezbollah or Yemen’s Ansarallah.
Doubling down
By the time Ayan met with Ghasemi and Shahriyari in Beirut in March 2021, the partnership had been so successful that Tehran wanted to double down.
Just a day after the gathering in Beirut, the National Iranian Oil Company (NIOC) and ConceptoScreen, a Lebanon-based company controlled by Hezbollah, signed a new deal with Haokun to send oil to China, according to the documents viewed by POLITICO.
The early success of the arrangement, however, appears to have bred complacency. In an early March 2021 amendment to a previous contract signed between the three, the references to oil from “North Dubai” were replaced with “Iranian light crude oil.”
Several months later, on August 25, Ayan signed a “Sale and Purchase Services Provider Agreement” with Azim Monzavi, Ghasemi’s successor as head of the Pour Ja’afari operation. The contract, signed by both Monzavi and Ayan, makes clear the Turkish company’s obligation to sell Iranian oil “in its own name” in return for a “service fee.”
The force majeure clause (commonly included in contracts to account for events beyond a party’s control, such as a hurricane, that would prevent them from fulfilling their obligation) concludes: “It is fully understood that sanction is not included.”
The arrangement held for less than a year.
On May 25, the U.S. Treasury slapped sanctions on several individuals involved in what it called an “international oil smuggling and money laundering network,” including Monzavi (Ghasemi was already on the sanctions list). A number of the companies in the scheme were also designated, including China’s Haokun and ConceptoScreen of Lebanon as well as several actors and companies working through Russia.
“We will not hesitate to target those who provide a critical lifeline of financial support and access to the international financial system for the Quds Force or Hezbollah,” said Brian E. Nelson, under secretary of the Treasury for terrorism and financial intelligence. “The United States will continue to strictly enforce sanctions on Iran’s illicit oil trade. Anyone purchasing oil from Iran faces the prospect of U.S. sanctions.”
Despite several further rounds of sanctions since May against others involved in Iran’s underground oil business, the one name conspicuously not on the list — until this article was published — was Sıtkı Ayan.
Turkish leverage
The reality is, the U.S. needs Turkish support on multiple fronts, especially in the Black Sea amid the war in Ukraine. Turkey is also blocking the NATO membership applications of Sweden and Finland, demanding concessions from both countries, including the lifting of a Finnish arms embargo against Ankara. What’s more, when provoked, Erdoğan has shown his willingness to strike back, by sending refugees across the border into Greece, for example.
Even so, Washington appears to have determined that Ayan had no intention of halting his dealings, despite the recent crackdown on his business partners.
In late August, he struck a deal on behalf of NIOC, the Iranian oil company, to sell up to four million barrels of crude per month to China’s Qingdao Deming Petrochemical Co. Ltd.
The contract, arranged by middlemen registered in the Marshall Islands, is stamped “Strictly Private & Confidential” in red letters. While it is vague on the provenance of the oil (“Omani light or Abu-Dhabi light or Fujairah light”), the seller betrays its true origin: “NIOC designated company.”
Resistance Economy, the Quds Force smuggling operation focused on Russian brokers, also remained active.
Complicating matters further for the U.S., the Iranians have proved nimble in handling complications in Ayan’s network.
After Greek authorities detained one of the Russian-owned tankers Resistance Economy relies on for its oil trade in April at the request of the U.S., for example, Quds Force responded by sending commandos to hijack two Greek tankers in the Gulf in May and then sailing them to Iran.
In November, Greece agreed release the Russian tanker, known as Lana and flying an Iranian flag, along with the Iranian crude onboard in order to free its own ships. Last Friday, the Lana sailed into the Syrian port of Banias and unloaded its payload of more than 700,000 barrels of Iranian crude.
The episode may help explain why Ayan continued his business with Quds Force amid the intensifying U.S. pressure.
“It’s lucrative and almost risk-free,” one of the diplomats said before Treasury sanctioned Ayan and ASB.
Almost.
