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Iran dealings put Turkey's Halkbank in spotlight

Türkiye Materials 5 January 2012 09:04 (UTC +04:00)
Turkish lender Halkbank, little known outside Turkey, has gained a reputation in the oil market over the past 18 months for handling transactions that other banks fear to touch - trade deals with Iran, Today`s Zaman reported.
Iran dealings put Turkey's Halkbank in spotlight
Turkish lender Halkbank, little known outside Turkey, has gained a reputation in the oil market over the past 18 months for handling transactions that other banks fear to touch - trade deals with Iran, Today`s Zaman reported.

Now a new law signed by President Barack Obama last Saturday, which imposes US sanctions on financial institutions dealing with Iran's central bank, has put the bank squarely in the spotlight.

Halkbank's stance toward Iran largely has reflected the attitude of the Turkish government, which owns 75 percent of the bank, towards international sanctions against Tehran over its nuclear program.

Heavily dependent on imports of oil and gas from its neighbor, Muslim NATO member Turkey opposed the imposition of UN sanctions on the Islamic Republic in 2010 but says it is abiding by those measures.

Officials have repeatedly said, however, that there is no obligation for Turkey to enforce tougher unilateral sanctions subsequently announced by the United States and European Union.

US Treasury officials have visited Turkey several times since to advise banks that doing business with proscribed Iranian entities runs the risk of being frozen out of the US financial system.

That appeared to hold little threat for Halkbank given its profile as a state-controlled bank with few direct links to the United States. But the new US law could turn up the pressure.

The sanctions, according to a senior US official, would target private and government-controlled banks -- including central banks -- and would take hold after a warning period of two to six months, depending on the transaction.

Obama could grant waivers to institutions in countries that significantly reduce dealings with Iran.

On Wednesday an Energy Ministry official confirmed Turkey would seek such a waiver for its sole oil refiner, Tüpraş, a major customer for Iranian oil.

Halkbank handles payments to Iran by Tüpraş, which is owned by the Turkey's largest conglomerate Koç Holding, according to industry sources with knowledge of the transactions.

Indian refiners, unable to pay Iran for imported oil through their own banking system for fear of US retribution, turned to Halkbank in mid-2011 to make payments.

In December, Halkbank refused to open an account for an additional Indian refiner, BPCL, for that purpose. No reason was given, though there was speculation that Turkey wanted to avoid further antagonising Washington.

Halkbank was contacted over the status of the bank's dealings with Iran, but senior officials were unavailable for immediate comment.

Halkbank has limited operations overseas.

Its website lists a branch in Bahrain and four in Turkish Cyprus, which cater for Turkish Cypriots living in the state recognised only by Turkey.

It also has a representative office in Tehran that it inherited in 2004 when it took over Pamukbank, once a jewel of Turkish tycoon Mehmet Emin Karamehmet's business empire.

Customers cannot open accounts there, but the Tehran office does help handle interbank deals and issues with Iranian banks.

According to a banking source in Tehran, the Halkbank office used to also help others including European banks make payments to Iran, but those activities ended after the EU and US sanctions were imposed.

"Business has become much tougher these days," the source said.

Now, according to that source, the Tehran office deals only with trade and payments between Turkey and Iran, and checks are made to ensure that it does not violate UN sanctions.

Most of Halkbank's business involves lending to domestic companies as Turkey's economy boomed over the past decade.

"The bank is working with chamber unions and local cooperatives. It's a different model compared to other Turkish banks, a much more defensive structure," according to an İstanbul-based banking analyst, who requested anonymity while speaking about a state-controlled bank.

"During the global crisis in 2008-2009, non-performing loans of Halkbank were much lower compared to peers."

Halkbank has grown to become the country's sixth-largest bank based on unconsolidated assets and held a domestic market share of nearly 8 percent by end-September, according to Fitch Ratings.

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