UPDATE 2-Turkish gold trader tells U.S. jury he bribed official

(New throughout, adds to Zarrab's testimony)

NEW YORK, Nov 29 (Reuters) - A Turkish-Iranian gold trader on Wednesday told jurors in a Manhattan federal court that he bribed a former Turkish government official to set up a deal aimed at helping Iran evade U.S. sanctions.

Reza Zarrab, who has pleaded guilty and is cooperating with U.S. prosecutors in the criminal trial of a Turkish bank executive, said he agreed in 2012 to share half of his profits from the deal with Zafer Caglayan, who was then Turkey's economy minister. Turkey's government has previously said that Caglayan acted within Turkish and international law.

Zarrab's testimony came on the second day of the trial of Mehmet Hakan Atilla, an executive at Turkey's state-owned Halkbank, in a case that has strained diplomatic relations between the United States and Turkey.

U.S. prosecutors have charged nine people in the case, including Caglayan, although only Zarrab and Atilla are known to be in American custody.

Prosecutors have said the defendants ran a complex money laundering scheme that involved smuggling gold and faking purchases of food to give Iran access to international markets, violating U.S. sanctions.

Zarrab said he paid Caglayan bribes amounting to more than $50 million. In exchange, he said, Caglayan helped broker a deal in which Zarrab worked with Halkbank to help Iran use its money abroad through gold transactions.

Zarrab said that before Caglayan intervened, Halkbank's general manager at the time, Suleyman Aslan, refused to work with him because he was too famous. Aslan also is charged in the U.S. case.

Zarrab also testified he first began handling transactions involving Iran through Turkey's Aktif Bank. He said the bank initially refused to let him open an account but relented after Zarrab asked Egemen Bagis, then Turkey's minister of European Union affairs, for help.

Zarrab said Bagis set up a meeting between him and Aktif Bank's general manager and that he was then allowed to open an account. However, Aktif Bank later shut down the account after receiving a warning from the United States, Zarrab said.

Reuters was not immediately able to reach anyone for comment at Aktif Bank after working hours on Wednesday.

Zarrab said Wednesday that Atilla helped engineer transactions to avoid sanctions, although he has not yet provided any details.

Turkish President Tayyip Erdogan's government has said the U.S. case was fabricated for political motives, adding to tensions between NATO allies Ankara and Washington. (Reporting By Brendan Pierson in New York; Editing by Jonathan Oatis and Bill Trott)