Turkey’s illicit gold imports look set to reach 50 tonnes in 2024, local business daily Ekonomi has reported.

“Turkey imported 88 tonnes of gold in January-September while the local jewellery industry used an average 132 tonnes of raw gold across the same [nine-month] periods of the last 30 years,” Mustafa Atayik, head of the Istanbul Chamber of Jewellers (IKO), told the publication.

“The difference there is 44 tonnes. But our industry, meanwhile, keeps working and producing despite all problems,” he added.

“Where does the difference of 44 tonnes come from?” Atayik also remarked, posing a rhetorical question.

Syrian-Afghan gangs a new phenomenon

In 2023, bne IntelliNews wrote: “Some say there is actually a wellspring under [the Grand Bazaar in Istanbul]. Sometimes, FX banknotes well out, sometimes gold. The late Nasrullah Ayan gives some hints about this mysterious source in his autobiographical book The Bourse King.”

Smugglers that were concentrated on other goods have switched to gold given attractive price differentials, according to Ekonomi.

In October, Sedat “The Botox” Peker, a fugitive mafia boss, told daily Sozcu that gangs initiated by Syrian and Afghan immigrants had attained a 50%-market share in smuggled gold arriving at the Grand Bazaar.

According to data from Turkey’s trade ministry, a total of Turkish lira (TRY) 2.5bn ($72mn) worth of gold was caught at customs in January-October, up from TRY 909mn in 2023 as a whole and TRY 156mn in 2022 as a whole.

When customs officials catch undeclared gold, they seize it and deliver only TRY 3,000-25,000 in administrative fines.

Since the penalties amount to comical figures and are simply cash fines, smugglers are said to be applying a "profit sharing" method in smuggling gold into Turkey.

MPs and diplomats in the business

On November 25, bne IntelliNews reported that an Azerbaijani military attaché, Colonel-Lieutenant Gahraman Shamiloghlu Mammadov, was caught in Istanbul with 70 kg of gold during a police operation targeting smuggling.

On November 22, local news portal Duvar reported that three MPs of the Nationalist Movement Party (MHP, a member of Turkey's ruling coalition), namely Hasan Basri Sonmez, Ismail Akgul and Mustafa Demir, had resigned from the party since they were caught in an anti-smuggling operation at Istanbul Airport (IGA).

MPs in Turkey are not only engaged in gold smuggling, they are knee deep in other dodgy goods flows too. In September, Ahmet Zenbilci, a ruling Justice and Development Party (AKP) MP, resigned from the party after his son was caught with 20 kg of synthetic drugs in a car registered in his father's name.

Also in September, Ediz Un, a Republican People’s Party (CHP) MP, resigned from his party after illicit cigarettes were caught in his official car.

But, hold on one minute. These smuggler MPs may resign from their parties, but they remain sat tight in parliament.

On November 29, Halk TV reported that an official vehicle of Turkey’s disaster and emergency management authority (AFAD) was caught with 12 kg of gold and 188 mobile phones at the border with Syria.

On November 7, Mustafa Kemal Turnaci, head of Turkey's mobile communication devices and information technologies association (MOBISAD), said that 3-3.5mn of a total of 10-12mn mobile phones annually sold in Turkey were illicit.

Tweet: Turkey is dubbed "Europe’s Mexico" when it comes to the smuggling business.

Simsek solves current account headache

In August 2023, Turkey’s "orthodox" finance minister Mehmet Simsek—a man who, lest we forget, is indulged with a certain "golden glamour" by financial media analysts determined that this ex-Wall St banker is the long-sought answer to the country's economic horror show—introduced a monthly quota of 12 tonnes for gold imports.

Despite the quota, official gold imports came in above the limit in the last four months of 2023. However, the recorded imports have remained at levels significantly below 12 tonnes across 2024.

Consequently, Simsek has solved the country’s current account deficit problem. If he also introduces a quota on crude oil imports, Turkey would post significant current account surpluses.

It would not be a problem as the country already has a sovereign wealth fund (TWF/TVF) to manage the excess cash.

It pains us, but since August this year, bne IntelliNews has been parroting the sound advice that the shifting of gold imports from the current account to "net errors and omissions" via the gold import restrictions, along with inflated official tourism income figures, should be taken into account when it comes to Mr Orthodox's current account “success”.

$4,000 profit per kilogram

The difference between the price of gold in Turkey and abroad is hovering around $3,000-5,000 per kilogram, making the country an attractive market for smugglers.

Turks pay TRY 20,500 for a 7.126 gram coin produced by the state mint Darphane rather than TRY 19,500.

TRY 1,000 goes to the smuggler, according to Mustafa Kamar, head of the Jewellery Exporters’ Association (TUID).

Darphane produced 69 tonnes of gold coins in January-October after producing 112 tonnes of coins in 2023 as a whole.

So, the lucky beneficiaries of Simsek’s 12-tonne monthly quota enjoy $48mn in profits per month, just over the $4,000 per kilogram difference between prices in Turkey and abroad.

In April, Ekonomi reported that the quota was distributed to 10-15 people.

Mehmet Ali Yildirimturk, a goldsmith at the Grand Bazaar, has called for the list of quota beneficiaries to be published, according to Ekonomi.

The price differential currently stands at $3,700 and it can rise to $4,500 through the end of the year, Yildirimturk told the daily.

More than 50 tonnes?

According to Yildirimturk, Turkey consumes 250-300 tonnes of gold per year. This would bring the total smuggled gold volume to about 150 tonnes, rather than 50 tonnes.

In 2023, Turkey officially imported 319 tonnes of gold, up from 265 tonnes in 2022. The 2023 figure is the second highest figure registered behind the 361-tonne record set in 2017. 

As of November 29, the price of one ounce of gold stood at about $2,660, suggesting a price of about $93,826 per kilogram.

Fifty tonnes of smuggled gold, as a result, suggests an annual trade volume of $4.7bn while $4,000 profit per kilogram amounts to $200mn in profits for smugglers.

Atayik, meanwhile, complains about the purity of smuggled gold. It means having to re-refine the smuggled gold at a 60-70% recycling ratio.