Crime may thrive after Turkish crackdown on police

Commercial Crime International

http://www.icc-ccs.org/

Istanbul (Ben Morlok)

 

Law enforcement and the judiciary are under threat in Turkey amid political wrangling and corruption probes. Thousands of police officers have been reassigned, the deputy of a financial crime unit has been dismissed, and the independence of the judiciary has been brought into question. Crime, smuggling and corruption are all likely to increase unless the political situation improves. Paul Cochrane reports.

Turkey, like much of the Middle East, is experiencing political turbulence and uncertainty. In early 2013, massive demonstrations erupted in Istanbul, ostensibly over the redevelopment of Taksim Gezi Park into a shopping mall, but expanded into protests against the government of the ruling Justice & Development (AKP) Party, which has been headed by Prime Minister Recep Erdoğan for 11 years.

Following the Istanbul protests, the political temperature rose further in December, 2013, when police financial crime units arrested some 50 people for graft, including the sons of three cabinet ministers, the mayor of Istanbul's Fatih district, a construction mogul, the general manager of partly state- owned Halkbank, and Iranian- Turkish businessman Reza Zerrab.

All those arrested had links to the ruling party. Erdoğan claimed the crackdown was a “dirty operation” to smear his administration, and dismissed members of the police force, the head of Istanbul police, and the chiefs of the financial crimes, anti-smuggling, cybercrime and organised crime units. “Nearly 5,000 police officers of different ranks were assigned different duties, and police chiefs of big cities were replaced,” said a Turkish criminologist who wanted anonymity.

Critics accuse Erdoğan of taking advantage of legitimate investigations to install pro-AKP supporters in the police and judiciary. “The rule of law is under threat, and the separation of powers is under threat as the government wants to keep legislative power, especially, under its control,” added the source.

In January however, the Speaker of Parliament Cemil Çiçek claimed there was no independent judicial review of Turkish legislation, while the government passed a law restructuring the Supreme Board of Judges and Prosecutors (HSYK) in February. “Everything is on ice right now due to the current (fraud) controversy. Erdoğan is decimating the judiciary, and there is a lot of collateral damage, with many careers and businesses up-ended if they are suspected of being an ally [of the US-based opposition movement led by cleric Fethullah Gülen]. It's all about power and who runs the AKP and subsequently Turkey,” said Atilla Yesilada, an Istanbul-based analyst at Global Source Partners Inc.

Three elections are to take place over the next two years, starting with local elections in March, but the outcome for judicial independence does not look optimistic given the tensions on both sides of the political divide. “If the Gülen movement wins, many innocents will be put in prison because of corruption accusations, and if the AKP wins, the corruption cases will be dropped,” added Yesilada.

Crime on the rise

With an undermined police force and judiciary, crime looks set to increase. “It is difficult to estimate crime and the sources of new crime that we will come across in Turkey, but definitely it will increase, as will white collar crime and corruption,” said the criminologist.

Of particular concern is that the deputy of the Financial Crimes Investigation Board (Mali Suçları Araştırma Kurulu or MASAK) was replaced in December. “Normally people can inform MASAK of financial crimes but as the root of these financial corruption probes goes back to information provided to MASAK, which is supposed to be independent, this is now under threat with the government interfering in bureaucratic operations. Confidence within the police and public confidence in the police is decreasing,” said the criminologist.

Smuggling concerns

Such enforcement concerns could play into the hands of smugglers, with Turkey a major crossroads between Europe and Asia in the narcotics and human trafficking trades, as well as counterfeit goods, while the country has porous borders with conflict-riven Syria, a turbulent Iraq, and Iran, which remains under heavy international sanctions. Indeed, the Office of the US Trade Representative (USTR) in its 2013 annual review placed Turkey on its 'watch list' for ineffective and inadequate protection of intellectual property rights. “US rights holders continue to raise serious concerns regarding the export from, and trans-shipment through, Turkey of counterfeit and pirated products,” the report stated. Turkey has also regressed in Transparency International's Corruption Perceptions Index 2013, dropping from 49th position in 2012, to 53rd out of 177 jurisdictions. “The commercial crime that is most frequently investigated and therefore that occurs most frequently is bribery, followed by bid rigging, malversation and malfeasance,” said Ms Olgu Kama, a Partner at law firm ELIG in Istanbul.

To address such concerns, in July 2012, Turkey criminalised private- to-private bribery and broadened the scope of both domestic and foreign bribery offences in its legislation to abide by the OECD’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

However, the OECD's Phase 3 anti-bribery review of Turkey, which is to occur this month, may be affected by the ongoing corruption scandal. “The implications of these allegations may be reflected in the report, as Turkey is currently undergoing Phase 3 examinations,” added Kama.

Corporates take care

Away from the current fraud scandal, Kama said that multinational companies (MNCs) are “extremely careful” about their actions in Turkey, primarily due to the need to be compliant with multinational treaties such as the UK Bribery Act.

Assuming the independence of the judiciary and law enforcement survives the current political crisis, Kama said a key reform that would help legitimate businesses work in Turkey is protection for whistle-blowers. And companies can take steps themselves. “MNCs merely using global corporate compliance policy is not enough. Adaptation to the local context should be made. To that end, we advise companies to retain local counsels who are familiar with the Turkish culture,” she argued. Notably, any whistle- blower protection system lacking anonymity “may not work in Turkey, simply because other employees may regard the employee who blew the whistle as a snitch.” As a result, setting up anonymous telephone hotlines for whistleblowers “would be good idea,” said Kama.

However, whistleblowing and journalists investigating commercial crime could be thwarted by government interference in the media. Some 100 journalists have been fired or reassigned since December, while Erdoğan admitted in January that he had made a call to a media outlet to change headlines.

Furthermore, a draft internet bill has been proposed that critics say will censor journalism and social media. "This bill is all the more disturbing for seeming to be an integral component of a series of draconian statements and initiatives by the authorities in recent months,” said Reporters Without Borders in a January statement, while ranking Turkey 154 out of 179 jurisdictions in its Press Freedom Index 2013.

Syria’s Civil War Stagnates Oil Production

Oil tanks in the hotly contested city of Deir Ez Zour, with murals of President Bashar Assad (centre), his late brother Bassel Assad (left) and his father and former President Hafez Assad (right). Source: Richard Messenger

http://www.energyinst.org/information-centre/ei-publications/petroleum-review

Petroleum Review

As peace talks finally got underway in Geneva, aimed at ending Syria’s bloody civil war, one economically devastating consequence is all too clear – Syria’s energy sector has come to a near standstill. The government has lost control of key oil producing areas to the rebels, international oil companies have left the country, and the regime has had to resort to roundabout methods to secure energy imports to offset production losses. Paul Cochrane reports.

In May 2013, Syrian Oil Minister Suleiman Abbas told the parliament that output was down 95% from the 380,000 b/d produced prior to the start of the uprising in March 2011, to 20,000 b/d, and that gas production had halved to 15mn cm. In November, Abbas gave the parliament worse figures for the

sector, with output at 772,540 tonnes (105,374 barrels) in 1Q2013, down 37.1% from 1,299,100 tonnes (177,197 barrels) in 4Q2012, according to a report in Syrian daily Tishreen. This would be a steep fall to just over 1,000 b/d for oil in government-controlled areas.

Natural gas output – which is still held largely in government hands – had declined from 2,020,800 cm to 1,558,760 cm during the same period, a drop of 22.9%. OPEC’s December 2013 monthly oil report was more upbeat, estimating Syria’s output to average 90,000 b/d in 2013. This almost certainly has to include rebel-controlled area production, although OPEC did not clarify this and added a health warning: ‘The lack of production data from Syria due to the ongoing political situation might bring a large revision once the numbers become available.’

Indeed, knowledge of what is happening inside Syria’s oil sector is scant. One prominent international energy consultancy firm turned down an inter-view with Petroleum Review, stating: ‘The situation is still unclear and it’s very difficult to assess the impact on oil and gas infrastructure. We do not provide speculative commentary.’

Estimating damages to infrastructure is clearly difficult to quantify, although the regime has estimated it at some $70mn. Damage to the country’s 6,000 km of pipeline has been minimal, how- ever. ‘There are clearly losses in terms of production, and determinate costs on what it will cost to re-start production, as to whether damage to facilities is due to the conflict or because it was not maintained or used. There is no idea what the scale is,’ says David Butter, Associate Fellow at the Middle East and North Africa Programme at Chatham House.

Losing oil control

What is clear is that Syria’s energy sector is in bad shape. Abbas stated to the Syrian parliament that 40,000 barrels of oil were being stolen every day from across the country, losing the industry $1.4bn directly and $17.7bn indirectly up to the end of 3Q2013. Meanwhile, $500mn was being spent monthly on imports of oil and derivatives to meet demand.

While the government of President Bashar al-Assad blames sanctions imposed on Syria in late 2011 by the US and the European Union (EU) for the loss of oil revenues, the reality is that the regime has lost control of the key oil producing areas. ‘While the regime is regaining important areas in the west and north-west of Syria, it has not achieved much in the desert close to the fields of eastern Syria, which has a large presence of the [rebel movement] Islamic State of Iraq and al-Sham (ISIS), some of the most capable fighters. I don’t think the regime will create a new front with ISIS to control the fields because it cannot concentrate on these areas for logistical constraints, as focusing on the east would compromise the western front, which is already fragile,’ comments Ayham Kamel, a senior Middle East analyst at the Eurasia Group. ‘So the oil sector will suffer for a prolonged period of time, mainly because fields are in areas under the control of rebels, and they’re unlikely to lose control for the foreseeable future,’ he adds.

With international oil companies having left Syria (Chinese companies pulled out in 2013) and oil sector workers having fled production areas, the rebels have been forced to extract oil as best they can, utilising very basic methods to refine the country’s heavy crude oil. According to a report in the regional Arabic-language daily Al-Hayat, in the area around Deir Ez Zour in the north-east, rebels are operating some 3,000 small-scale refineries. ‘Anecdotal evidence suggests small amounts are produced and exported to Turkey, and refined in a rudimentary way, probably tens of thousands of barrels a day only,’ says Butter.

Kamel, however, thinks production is just in the thousands of barrels per day, which has been a stumbling block to the April 2013 EU plan of lifting sanctions on oil exports from rebel-controlled areas to help bolster the opposition. ‘It’s been a big fiasco. The plan was unrealistic, to export some of that oil to outside markets and create a sustainable revenue stream for, at that time, the Syrian National Council. It was mainly a tool to boost morale among the opposition, as implementing it was very difficult – the regime has an air force and could attack significant deliveries, and the opposition was always divided. If the opposition had made a coherent front and controlled fields, they could have had volumes in the tens of thousands of barrels – but again, vulnerable to regime attacks,’ says Kamel. ‘Now, many opposition groups control the fields, follow no political authority and they have little or zero experience in operating the fields. It is hard for the fields to be monetised in any significant way, as such small volumes are for local use,’ he adds.

Offsetting losses

To offset domestic losses and keep its military machine running, the Syrian government has had to import fuel. According to Butter, prior to the conflict, Syria was consuming around 320,000 b/d, half of that figure being gas-oil and diesel, while half overall was imported.

‘It is obvious that total consumption is a lot less than it used to be, but there’s no real indication what it may be; perhaps around 150,000 to 200,000 b/d. There are a few indications as to how the regime is meeting its liquid requirements, which appears to be a mix of importing products and crude,’ he says. A key refinery at Homs city in western Syria has ceased operations, or at best is operating at 10% of capacity, notes Butter, leading to most refining happening at Baniyas on the regime- controlled coast, which has a capacity of around 130,000 b/d. International media reported in December 2013 that Syria is being supplied with crude from Iraq and Iran via private traders in Egypt and Lebanon, with shipments routed to Beirut and Baniyas. ‘My reading is Baniyas has four units – two for heavy crude from Iran, and two configured for lighter crudes for Iraqi crudes; but there’s no firm information on it,’ comments Butter.

Indicative of neighbouring Lebanon’s role, mineral (oil, gas and solid minerals) imports have surged, as have exports, going from $3.7bn imports in 2010 and exports of $56mn, to $4.6bn in 2013 and exports reaching $350mn, according to Lebanese customs data. ‘State-owned oil companies are not allowed to sell to Syrians [due to the sanctions], but private traders can,’ notes Lebanon Energy Analyst Roudi Baroudi.

A positive note

While the overall picture for Syria’s energy sector is grim, in December 2013 Damascus inked a 25-year, $100mn concession with Russian firm Soyuzneftegaz to explore for offshore oil and gas.

Although offshore exploration is likely to go ahead because there are no maritime security concerns in Syria, revival of the sector onshore will have to wait for the end of hostilities – assuming the peace talks have any success. ‘The oil industry should be the most important thing to come back on track, as a major aspect of GDP, so it should be up and running very fast [once peace is secured]. It all depends on the EU and US lifting sanctions,’ concludes Baroudi.