Turkish President Recep Tayyip Erdogan shaking hands with Iran's Foreign Minister Javad Zarif (L) in Ankara. Photo: AFP

Turkey’s Halk Bankasi is down nearly 15% over the past week after a former minister of the Turkish government and senior managers of Halk were charged with laundering hundreds of millions of dollars through the US financial system for the benefit of Iran.

According to Bloomberg, “The new allegations Wednesday by federal prosecutors in New York expand on the prosecution of Turkish-Iranian trader and financier Reza Zarrab and the Halkbank executive Mehmet Hakan Atilla…Some of the entities that allegedly benefited from the transactions were alleged to support terrorism, including Iran-based Mahan Airlines, which has allegedly provided transport services to Hezbollah.”

The case has been the subject of high-level political wrangling. Zarrab hired Trump adviser Rudy Giuliani to help on the case, apparently without success. Washington has worried that too much pressure on the Erdogan government might drive it into the arms of Iran and Russia. But it appears that Turkey’s obsession with the prospect of Kurdish independence has become the basis for a tactical alliance with Iran, which also wants to suppress a nascent Kurdish independence movement.

Erdogan may have stretched his neck out too far this time. Turkey’s stock index has lost 2% in the past week, and two-thirds of the loss is due to a fall in bank stocks.