Turkey has economically benefited so far from its neutral status on the invasion of Ukraine, while every other NATO country and several other nations severely cut down their relations with Russia. Given that Turkey has shied away from taking a stand against Russia and imposing sanctions, many Russians ponder Turkey as a way to circumvent Western sanctions.
Turkey indeed presents an excellent opportunity for Russian oligarchs who want to evade sanctions, given its notoriety for money laundering. As Ankara failed to address serious supervision issues in its banking and real estate sectors for many years, the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, downgraded Turkey last year to a grey list. This so-called grey list inter alia includes some other safe havens for money laundering, such as Barbados, Cayman Islands, Malta, and the United Arab Emirates. This decision was taken after a presidential decree in 2018, which restricted jurisdiction over money laundering and autonomy of the Turkish Financial Crimes Investigation Board, and Ankara’s failure to follow FATF’s recommendation to amend this decree. In this context, it is highly unlikely that Turkish authorities will ask troublesome questions to Russian oligarchs about the legality and source of their investment in Turkey.
The statements of high-ranking Turkish officials who point out that Russian citizens are "of course" welcome and could do business in Turkey are of utmost importance for the oligarchs. In this regard, “We implement U.N.-approved sanctions, so if any Russian citizens want to visit Turkey, of course, they can visit Turkey. So if you mean that these oligarchs can do any business in Turkey, then of course if it is legal and it is not against international law, I will consider,” Turkish Foreign Minister Cavusoglu said at the Doha Forum, Qatar. “If it is against international law then that’s another story,” he added.” According to this reasoning, Russian oligarchs can do business in Turkey unless they are sanctioned by the UN. Considering Russia is a permanent member of the UN Security Council and wields veto power on any resolution about sanctions, it is obvious that there will never be any U.N.-approved sanctions on Russia within the context of the invasion of Ukraine. As a confidence-building measure for the Russian oligarchs, Ankara also let Roman Abramovich, a Russian oligarch who has enjoyed a close relationship with Turkish officials since the outbreak of war, dock his two large yachts in Turkey’s sanction-free waters.
It should be noted that this is not the first time Turkey has been accused of sanctions-busting. Regarding a corruption scandal involving several high-profile Turkish officials, and Iranian middlemen, the U.S. prosecution made a strong case that a Turkish state bank, Halkbank, was employed to whitewash tens of billions of dollars of Iranian money to evade U.S. sanctions. The case is now put on hold pending the U.S. Supreme Court appeal.
There are also allegations that Russian businesses try to circumvent the sanctions by posing as Turkish companies. “There [has] been some focus on reflagging of Russian aircraft as Turkish aircraft ... There has also been concern that Russian companies, entities trying to export or trade with Russia, are repackaging themselves as Turkish entities.” remarked Timothy Ash, an emerging-markets analyst with London-based Bluebay Asset Management.
On the other hand, it is not just Russian oligarchs who enjoy Erdoğan’s welcome in Turkey. Other Russian citizens have also decided to settle down in Turkey, though their motivation is somehow different from the oligarchs. Instead of making a scheme to bring their wealth from the West, these Russians are looking for ways to avoid sanctions by acquiring Turkish citizenship. Under the Turkish law, foreigners who buy a property worth $250,000 in Turkey and keep it for at least three years are entitled to Turkish citizenship with their families. In this regard, wealthy Russians are pouring money into real estate in Turkey in the wake of Western sanctions and driving a property boom in some Turkish cities.
The USA and the EU pay attention to any potential breach of the sanctions and loophole countries so they do not undermine Western efforts to isolate Russia. Without the collaboration of a government with geographical proximity to Russia, such as Turkey, these efforts would prove futile. To this end, U.S. officials made their displeasure clear to their Turkish counterparts and warned Turkey not to agree to schemes that might help the Russians evade the effects of sanctions. It would be a fool’s errand to guess when the war in Ukraine will end, but it is evident that the sanctions on Russia are not transient and at least some of them are to stay as long as Russia continues to occupy the Donbas region. As the Western sanctions have reached their limits on primary, the US is considering imposing secondary sanctions on Russia, thus pushing countries to choose between continuing to get access to Western financial institutions and doing business with Russia.
Turkey will doubtlessly want to avoid secondary sanctions and may implement Western sanctions on Russia where it cannot evade them. Yet, it is not also doubtful that Turkey will not jeopardize its neutral status until the very last moment and will endeavor to deflect the pressure from the West. Nonetheless, it seems that the Western countries are tolerating, for now, Turkey’s stance considering its arms supply to Ukraine and being a venue for peace talks between Russia and Ukraine. However, the prolongation of the combats or brutal atrocities committed, as in Bucha, can act as a catalyst that could force Ankara’s hands to take a side sooner than it expects.