You may have thought the Geneva deal struck last month between Iran and the P5+1 nations (the five permanent members of the United Nations Security Council plus Germany) was a sweet one for Tehran — getting billions in sanctions relief in exchange for mere promises to halt its nuclear program.
But Turkey may be an even bigger winner. It just needs to open its doors and wait for Iranian funds to pour in.
Iran was Turkey's third largest export market in 2012. In fact, Turkey is reportedly exporting more than 20,000 products to Iran right now; among them gold and silver. It turns out that the Geneva deal also loosened sanctions on precious metals.
The White House estimates that this, along with the easing of sanctions in the automobile and petrochemical sectors, could generate $1.5 billion in government revenues for Tehran. But that's a lowball estimate. Turkey exploited a "golden loophole," as Roubini Gobal Economics and the Foundation for Defense of Democracies reported earlier this year, and helped Iran evade sanctions for about a half a year. Gold imports from Turkey to Iran in 2012 reached as high as $1.6 billion per month. In other words, if gold sanctions relief is given for six months, using the past as a guide, Iran has the potential to pocket an estimated $9.6 billion if gas-for-gold resumes.
The Geneva deal does not permit Turkey to restart gas-for-gold. It does, however, allow Iran to buy Turkish gold with available cash. Questions remain as to whether Iran will look to be paid in gold and how much gold Turkey is prepared to sell after effectively emptying its coffers to Iran the last time around.
As luck would have it, the Turks will have at least one month to prepare for another run. The Geneva agreement will not be implemented until late December or early January at the earliest.
This means that Turkey can continue to pay for its discounted Iranian oil in Turkish lira. The lira, however, must remain in Turkish bank accounts and be spent on Turkish products.
Ankara has already stated its intention to increase oil imports from Iran by 30 percent (which could be sanctionable under U.S. law). Practically speaking, this means that Turkey plans to increase its oil imports from Iran to 130,000-140,000 barrels per day (bpd), from roughly 105,000 bpd, Turkish Energy Minister Taner Yıldız said recently on television. This is still sharply below the pre-sanctions levels, to which an energy-hungry Turkey would love to return at some point.
In addition, all Turkish banks may soon be able to carry out transactions with Iran, according to Zafeg Caglayan, Turkey's minister of the economy. Among other things, the uptick in Turkish-Iranian trade could even help Turkey bring down its current deficit.
To be sure, all is not perfect between Iran and Turkey. The two countries have differed sharply on the future of Syria. Specifically, Iran has backed the Assad regime, while Turkey worked to topple it. But with the United States now warming to Tehran and having ruled out a military response to the slaughter in Syria, it looks like Ankara is now hedging its bets in preparation for the emergence of Iran as a regional power.
Ankara is now signaling a willingness to cooperate with Iran at the Geneva II conference in January to arrive at a mutually agreed-upon fate for Syria. While surprises may still be in store, this looks like a Turkish surrender. As the columnist Abd al Bari Atwan predicts, "we would not be surprised if the coming days or weeks see [Turkish Foreign Minister Ahmet] Davutoglu packing his suitcase once more and heading for Damascus to meet [President Bashar] al-Assad."
The Turkish hedge also reportedly includes closer intelligence cooperation — including Ankara burning high-value Israeli assets that were working to undermine the Iranian nuclear program — and now high-level bilateral diplomacy. For example, Davutoglu met last month with Iranian President Hassan Rouhani in Tehran, and announced that the Iranian leader would visit Turkey in January. Caglayan also plans to visit Iran in January, to finalize a "preferential tariffs agreement."
Elsewhere the Iranians have embarked on a charm offensive to placate their Sunni neighbors, assuring them that, despite their fear of an Iranian nuclear weapon, the Geneva deal is one from which all will benefit. The Emiratis, Kuwaitis, and Saudis are not convinced. But the Turks are willing to go along, at least for now.
It probably doesn't hurt that Turkish-Iranian trade volumes could reach $30 billion per year if the sanctions regime crumbles.
Jonathan Schanzer served as a terrorism finance analyst in the Treasury Department from 2004-2007. He is now vice president for research at the Foundation for Defense of Democracies and author of the new book, "State of Failure: Yasser Arafat, Mahmoud Abbas and the Unmaking of the Palestinian State."