Why Iran and the UAE ate up a ton of Turkish gold last year

Quartz

Iran and the United Arab Emirates love Turkish gold. In fact, those two countries received so much Turkish gold last year that the trade affected their export data, according to Standard Chartered research.

Although it’s clear that Turkey is slowly nurturing closer economic ties with its Middle Eastern and North African (MENA) business partners—particularly Iraq—a 2012 spike in exports with the region was all about bullion. Believe it or not, gold accounts for a full 9% of Turkey’s exports to MENA, with the UAE and Iran the biggest “buyers.”

That’s because of sanctions that prevent Turkey from buying Iranian oil with euros or dollars. Turkey is exempt from certain US sanctions on trade with Iran because it is dependent upon Iranian natural gas. But Iran, which has effectively been locked out of the global financial system, needs to launder that money in order to make foreign purchases. As Reuters explains, Turkey pays Iran for natural gas in Turkish lira. Iranians then buy gold in Turkey and send it to Dubai via couriers, who import the yellow metal in hand luggage. Once in Dubai, they can exchange gold for foreign currency, or ship it back to Iran. Interestingly, this turns up as “exports” in Turkey’s data.

This trend may not last long, however. A US bill that exempts Turkey from the sanctions on trade with Iran has to be renewed every 180 days, and Turkey has meanwhile been trying to reduce its dependency on Iranian energy. Part of that has involved nurturing closer ties with Iraq, and specifically with the autonomous region of Iraqi Kurdistan.

What’s more, Dubai’s gold dealers are on to the Iranian money-laundering scheme. The US has been stepping up scrutiny of the gas-for-gold trade between Turkey and Iran, and banks or dealers in Dubai’s gold souks don’t want to get caught in the crossfire. They’ve reportedly either been refusing to buy bullion or doing so only at a steep discount.