* Most dealers in Dubai's gold souk shun Turkish gold
* Banks irked due to Turkey's booming gold trade with Iran
* Traders in Dubai edgy over possible local government probe
By Humeyra Pamuk
DUBAI, Jan 30 Trade in Turkish gold bars to Iran
via Dubai is drying up as a growing number of banks and dealers
refuse to buy the bullion to avoid the risks associated with
Turkey's gold-for-gas trade with Iran.
U.S. officials say they are concerned the trade between the
two countries provides a financial lifeline to the Iran, which
is largely frozen out of the global banking system by Western
The U.S. State Department said in December that diplomats
were in talks with Ankara over the flow of gold to Iran after
the Senate approved expanded sanctions on trade with Iran's
energy and shipping sectors, which would also restrict trade in
That increasing U.S. pressure has already started to create
troublesome repercussions for exporters of Turkish gold.
Many dealers in Dubai's crowded and boisterous gold souk now
refuse to take gold bars produced in Turkey. Some ask for a deep
discount, saying their clients such as banks and other traders
had suspended dealing with Turkish bullion over the past couple
The media spotlight on the gold-for-gas exchange has already
helped push Turkey's gold exports to the UAE to $621 million in
November from nearly $2 billion in August, according to the
latest official trade data.
Turkey, Iran's biggest natural gas customer, has been paying
the Islamic Republic for oil and gas imports with Turkish liras,
because Western sanctions prevent it from paying in dollars or
euros. Iranians then buy gold in Turkey, and couriers carry the
gold worth millions of dollars in their hand luggage to Dubai,
where it can be sold for foreign currency or shipped to Iran.
A Turkey-based industry source said the fact that Iranians
are buying Turkish gold and shipping it via Dubai has worried
international banks and traders and prompted them to suspend
trading in Turkish gold bars.
"This is not something declared. It has been going on very
quietly for the past month. Some international banks have taken
the lead in this and they are simply staying away from any gold
bullion that is coming out of Turkey," he added.
GLOBAL ISSUE FOR TURKISH GOLD
A London-based spokesman for Standard Bank, which
is active in Dubai's gold market, said it was not trading any
Turkish-branded gold currently and had not regularly traded in
Turkish bullion in the past.
He said, however, that the bank continued to trade gold bars
registered by the London Bullion Market Association (LBMA),
whose Good Delivery List sets the quality standard for physical
Gold bars produced in Turkey's two refineries - Nadir Metal
and Istanbul Gold Refinery - are both registered in LBMA's Good
"In general we see a decline in the pace of demand from
Dubai. After the latest U.S. sanctions, Turkish gold suppliers
might have become more cautious too. The market is not as hectic
as it was three months ago," an Istanbul-based gold trader said.
Sources based in Dubai and Turkey said representatives from
Turkey's jewellery makers visited Dubai Multi Commodities Center
(DMCC), a government-run commodities platform, in December as
part of efforts to disperse the clouds over the reputation of
The DMCC is a commodities platform that provides the
infrastructure for the parties to trade and does not control who
trades with whom.
"This is not a Dubai-particular issue. It has started here
due to the flows of Turkish gold, but this has now become a
global issue around Turkish gold," said a source with knowledge
of the discussions between DMCC and Turkish officials.
The direct and indirect shipments of gold to Iran do not
breach existing Western sanctions imposed over its disputed
nuclear programme, but they help Tehran manage its finances.
In Dubai, majority government-owned bank Emirates NBD
, an active player in the local bullion market, said in
a note to clients in November, "Emirates NBD will, as a pure
measure of precaution, stop buying and selling all gold bars
from Turkish refineries, even though they might be an accredited
refinery by the London Good Delivery or by the Dubai Good
A source in the Dubai office of major bullion dealer
ScotiaMocatta, a division of Bank of Nova Scotia, said
it was currently not dealing with Turkish gold bars.
Turkey's gold bullion exports to the United Arab Emirates
jumped in August as Turkish exporters re-routed gold destined
for Iran to Dubai, following increasing pressure from the United
Turkish ministers have acknowledged the "gold-for-gas" trade
but say it is carried out entirely by the private sector and is
not subject to U.S. sanctions.
"We do not feel legally bound by any unilateral sanctions by
any country, except if they are endorsed by the U.N. Security
Council under Chapter 7," a Turkish government official said.
"We have a huge (natural gas) consumption requirement from
within Turkey ... On the gold issue ... If they (Iranians) go to
the market, we cannot prevent them. If they buy gold here and
send it somewhere else, that is up to them ... It is not
government or government agencies selling gold."
In Dubai, the government has also increased pressure on
traders, forcing them to be cautious about taking Turkish gold,
several industry sources said.
"We also know that the local government have their eyes on
this. They have the news and they are collecting information;
they are also doing a back-door investigation," said a
Dubai-based gold industry source, who requested anonymity due to
the sensitive nature of the issue.
"If they get to the conclusion that something is really
going wrong, maybe they will investigate a few companies. But it
will all be done secretly, so if that's proven they will not
harm the reputation of the companies," he added.