Turkish President Recep Tayyip Erdogan prepares for an interview in New York City. Photo: Reuters / Brendan McDermid

Turkish President Tayyip Erdogan personally signed off on a scheme that aimed to skirt sanctions placed on Iran, Reza Zarrab said in court on Wednesday.

Zarrab, an Iranian-Turkish gold trader involved in the alleged scam to smuggle gold for oil, has been cooperating as a witness for US Federal prosecutors after pleading guilty to conspiring to evade the sanctions.

“The prime minister at that time, Recep Tayyip Erdogan, … had given instructions, had given an order, for [Ziraat and Vakif banks] to start doing the trade,” Zarrab was quoted as testifying.

Washington DC-based Al-Monitor broke down Wednesday’s courtroom drama, as well as the reaction in Turkey.

Zarrab told the court in minute detail, complete with flow charts, how the scheme worked. He admitted to bribing top Turkish government officials with tens of millions of dollars, saying former economy minister Zafer Caglayan was among the chief beneficiaries.

Pro-Erdogan Turkish papers ignored the story entirely, or dismissed the court proceedings as a show supported by Fethullam Gulen, the man accused of planning a failed coup attempt against Erdogan last year.

As the court proceedings continue in New York, pressure on the Turkish opposition party is now growing. Ankara’s chief prosecutor’s office launched a probe Wednesday into political leader Kemal Kilicdaroglu’s accusations of corruption against Erdogan. Denying any wrongdoing, the Turkish president has accused Kilicdaroglu of “treason.”

“There is a simultaneous effort to ignore and discredit the Zarrab case, while invoking it as needed to accuse Kilicdaroglu of acting on behalf of foreign powers,” senior fellow at the Bipartisan Policy Center, Nicholas Danforth, told Al-Monitor. “My fear is that if [the corruption claim] pushes him [Erdogan] to intensify his crackdown on domestic opposition — as suggested by the rhetoric and charges against Kilicdaroglu — it could further erode his veneer of democratic legitimacy and make an already volatile situation worse.”

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now.