Gold travels to Iran via Dubai in hand luggage

DUBAI / ISTANBUL - Reuters

A man pays for his purchase in a shop at the gold market in Dubai. An unexpected increase in Dubai’s gold exports from Turkey has put Iran under the spotlight. REUTERS Photo

To see one of Iran's financial lifelines at work, pay a visit to Istanbul’s Atatürk International Airport and find a gate for a flight to Dubai.

Couriers carrying millions of dollars worth of gold bullion in their luggage have been flying from Istanbul to Dubai, where the gold is shipped on to Iran, according to industry sources with knowledge of the business.

The sums involved are enormous. Official Turkish trade data suggests nearly $2 billion worth of gold was sent to Dubai on behalf of Iranian buyers in August. The shipments help Tehran manage its finances in the face of Western financial sanctions.

The sanctions, imposed over Iran's disputed nuclear program, have largely frozen it out of the global banking system, making it hard for it to conduct international money transfers.

"Every currency in the world has an identity, but gold means value without identity. The value is absolute wherever you go," said a trader in Dubai with knowledge of the gold trade between Turkey and Iran.

The identity of the ultimate destination of the gold in Iran is not known. But the scale of the operation through Dubai and its sudden growth suggest the Iranian government plays a role.

Iran sells oil and gas to Turkey, with payments made to state Iranian institutions. U.S. and European banking sanctions ban payments in U.S. dollars or euros so Iran gets paid in Turkish lira. Lira is of limited value for buying goods on international markets but ideal for a gold buying spree in Turkey.

In March this year, as the banking sanctions began to bite, Tehran sharply increased its purchases of gold bullion from Turkey, according to the Turkish government's trade data.

Sudden change of route

Direct gold exports to Iran from Turkey, long a major consumer and stockpiler of gold, hit $1.8 billion in July - equivalent to over a fifth of Turkey's entire trade deficit in that month.

In August, however, a sudden plunge in Turkey's direct gold exports to Iran coincided with a leap in its sales of the precious metal to the UAE.

Turkey exported a total $2.3 billion worth of gold in August, of which $2.1 billion was gold bullion. Just over $1.9 billion, about 36 tons, was sent to the UAE, latest available data from Turkey's statistics office TÜİK shows. In July Turkey exported only $7 million of gold to the UAE.

At the same time Turkey's direct gold exports to Iran, which had been fluctuating between $1.2 billion and about $1.8 billion each month since April, slumped to just $180 million in August.

The Dubai-based trader said that from August, direct shipments to Iran were largely replaced by indirect ones through Dubai, apparently because Tehran wanted to avoid publicity.

"The trade from Turkey directly to Iran has stopped because there was just too much publicity around it," said the trader.

Dealers, jewelers and analysts in Dubai said they had not noticed any large, sudden increase of supply in the local gold market during August. They said that suggested the increased shipments to the UAE were sent straight on to Iran.

A trader in Turkey said Tehran had shifted to indirect imports because the direct shipments were widely reported in Turkish and international media earlier this year. "Now on paper it looks like the gold is going to Dubai, not to Iran," he said.

Iranian gold buyers may want to conceal their Turkish gold deliveries for fear of attracting attention from the United States, which is pressing countries around the world to shrink their economic ties with Iran.

The buyers may also want to make their purchases less vulnerable to any possible interference by Turkey's government. Turkey's close relationship with Iran has begun to sour as the two states find themselves on opposite sides of the civil war in Syria, with Turkey advocating the departure of President Bashar al-Assad and Iran remaining Assad's staunchest regional ally.

No violation of sanctions

There is no suggestion that the gold trade means Dubai is violating international sanctions against Iran. United Nations sanctions ban shipments of nuclear-related materials to Iran and freeze the assets of some Iranian individuals and companies, but they do not prohibit many forms of trade.

Turkish trade data confirms the gold is being transported to Dubai by air. According to the data, $1.45 billion of Turkey's total gold exports in August were shipped through the customs office at Ataturk airport's passenger lounge. Almost all of the rest, $800 million, were shipped from Istanbul's smaller Sabiha Gökçen airport.

Turkey's total exports of all goods to the UAE totalled $2.2 billion in August. Of that amount, $1.19 billion were registered at the Ataturk passenger lounge, while $776 million were registered at Sabiha Gökçen.

A customs broker who does business at Atatürk airport said couriers were boarding Turkish Airlines and Emirates flights to Dubai at the airport, carrying the metal in their hand luggage to avoid the risk of it getting lost or stolen.

50 kilogarams of gold in luggage

The maximum amount of gold bullion which a passenger is allowed to take is 50 kilograms, he said. This suggests that during the month of August, as many as several hundred courier trips may have taken gold to Dubai on Iran's behalf.

"It is all legal, they declare it, they give their tax number and it is all registered so there is nothing illegal about this," the broker said.

"At the moment there's quite a lot of traffic to Dubai. During September and October we have also been seeing this."

The trade data shows almost $1.4 billion worth of Turkey's August exports to the UAE came from a company or companies with a tax number registered in Turkey’s Aegean province of, Turkey's third biggest. Customs officials at Atatürk declined a Reuters request to provide documents identifying the exporters, saying the information was confidential.

The identity of the companies handling the business could not be confirmed. Traders said that because of the risk of attracting unwelcome attention from U.S. authorities, only a few companies were likely to be willing to get involved.