Money laundering trial could further chill already tense US-Turkish relations

Key Points
  • Experts say U.S.-Turkish relations are the lowest since the 1974, when Congress imposed an arms embargo after Turkey invaded Cyprus.
  • Things could actually worsen with a New York trial starting next month involving a Turkish financier with ties to Ankara's political elites.
  • "It is going to be very embarrassing to the Turks," according to an insider close to the case.
  • At risk are future military ties between two NATO allies and American access to Turkey's Incirlik air base.
President Donald Trump (L) welcomes President Recep Tayyip Erdogan (R) of Turkey outside the West Wing of the White House May 16, 2017 in Washington, DC.
Getty Images

U.S. and Turkish relations are already severely strained, and an upcoming trial in New York involving a businessman with links to Ankara's political elite could see the situation worsen.

The trial is likely to result in "a lot of dirty laundry getting aired," according to an insider close to the case. "It is going to be very embarrassing to the Turks."

"There's bad blood on both sides," said Bulent Aliriza, founding director of the Turkey Project at the Center for Strategic and International Studies, a Washington-based conservative think tank.

At risk are future military ties between the two NATO allies and continued access to Turkey's Incirlik air base, a strategic facility used by the U.S. since the 1950s. Experts suggest U.S.-Turkish relations are at the lowest point since 1974, when Congress imposed an arms embargo after Turkey invaded Cyprus.

"Incirlik would be a big loss but one that over the course of time could be offset," said Thomas Donnelly, a defense policy analyst and co-director of the Marilyn Ware Center for Security Studies at the conservative American Enterprise Institute think tank.

"What used to be a pretty good strategic partnership with the Turks is unraveling and evolving; it's not going to be quickly restored."

The Incirlik air base has served as a hub in the U.S.-led fight against Islamic State, to support coalition missions in Afghanistan, and is the location of the largest stockpile of American nuclear weapons in Europe. However, Turkey back in January questioned U.S. and coalition military operations at Incirlik, and it cut off power at the facility in 2016.

A NATO official told CNBC: "Turkey is a vital NATO ally. Turkey makes important contributions to NATO operations, including in Afghanistan, Kosovo and the Aegean Sea, and hosts airfields that are crucial to operations against ISIS. Differences of opinion between Turkey and the United States have had no effect on NATO operations. Robust debate and mutual respect are at the heart of our alliance."

Still, some believe it's time for the U.S. to look for an alternative base in the region and maybe to reconsider whether Turkey can be trusted with the advanced stealth F-35 fighter jet. Turkey is scheduled to get 100 F-35 jets, with the first aircraft delivery expected in 2019.

"We should publicly question some of the basic tenets of the relationship, and included in that is our basing at Incirlik and whether Turkey is fit to be a partner in the F-35 program," said Steven Cook, a senior fellow for Middle East and Africa studies at the Council on Foreign Relations, a Washington think tank. "When the pressure is put on the Turks they tend to alter their approach."

Adding to current tensions is a diplomatic row between the U.S. and Turkey, which includes the suspension of visa services to each other's citizens. Also, two locally employed staff at U.S. diplomatic missions in Turkey remained detained Thursday, according to the State Department spokeswoman Heather Nauert.

Nauert was asked on Thursday about the Turkish situation and expressed concern about "the trend of curbs on free speech, detentions, the overall erosion of democratic society there."

Last week, Turkish President Recep Tayyip Erdogan said he didn't recognize the current U.S. ambassador. Erdogan also blasted the outgoing ambassador, John Bass, in what some saw as a strategy to deflect attention from the upcoming Manhattan trial of Reza Zarrab, a Turkish financier accused of money laundering and bucking American sanctions on Iran.

There's a possibility Zarrab could testify that some prominent Turkish officials knew of the alleged scheme, including Erdogan or persons in his inner circle. The case also alleges a connection to a Turkish state-owned bank that could prove troublesome to Ankara.

The defendant has pleaded not guilty, and the trial is scheduled to begin Nov. 27.

Zarrab reportedly hired Rudy Giuliani earlier this year to try to get the charges dismissed, and the former New York mayor held a secret meeting with Erdogan to possibly arrange a prisoner swap with Americans held in Turkey. In April, The New York Times reported that court filings revealed Giuliani attempted to also meet with Trump administration officials to discuss the Zarrab case.

At least a dozen American citizens have been detained in Turkey since the 2016 failed coup attempt against Erdogan's government, according to reports. Erdogan blames the West for helping alleged coup plotters and their sympathizers, and he's upset Washington won't hand over an exiled religious leader in Pennsylvania he accuses of being the mastermind of the coup attempt.

Another irritant for Turkey is the U.S. alliance with the YPG-led Syrian Democratic Forces to defeat ISIS. The Kurdish YPG militia are a branch of the outlawed terrorist group PKK (or Kurdistan Workers' Party), which is accused of killing some 1,200 Turkish security forces and civilians.

Meantime, Turkey has been warming to Russia and recently agreed to buy the S-400 air defense system from Moscow despite U.S. concerns. There were concerns raised that the Russian equipment wasn't compatible with NATO military hardware.

"The U.S.-Turkish relationship needs to be reviewed," said Aliriza. "It was born in the Cold War when both sides, for different reasons, wanted to cooperate against the Soviet Union and the Warsaw Pact. Well, the Soviet Union is no more. Turkey is cooperating with Russia. The U.S. does not need Turkey for the same reasons that it did during the Cold War."

Turkey considered buying a system from China a few years ago but then backed out of the deal after pressure from Washington and NATO.

"We're not expecting Turkey to switch course again, but further estrangement from U.S./NATO and closer ties with Russia could create risks around existing programs like the F-35," Wolfe Research analyst Hunter Keay said in a research note this week.

According to the analyst, Turkey projects it will spend just over $12.3 billion this year on defense, ranking it seventh among the NATO member nations. Turkey fields NATO's second largest army.