Turkey’s embattled President Recep Tayyip Erdoğan’s massive personal and family wealth, which has been accumulated over the span of two decades since he became the mayor of İstanbul, the largest city in the country, is the most important dynamic in making him the key player among movers and shakers in Turkish politics.
In fact, that is how he is able to muster significant leverage in the presidency even though he had to abandon control of the Treasury and parliamentary oversight power over the budget, which is accorded to the government according to the Constitution. Although he still exerts influence in swaying decisions on the legislative agenda as well as government contracts and tenders through loyalists he left behind, Erdoğan has increasingly found himself isolated and insulated from the decision-making process that controls big money. This is where personal wealth comes to play a role in compensating for Erdoğan’s weakness in the government, which has to tackle significant political challenges financed by the well-oiled machinery of Erdoğan’s company.
Erdoğan first set up what is now known as the “pool system” — a term widely used to describe the collection of proceeds from bribes, embezzlement, kickbacks and other illegal activities — when he became the mayor of İstanbul in 1994. At the time, insiders referred to the scheme of collecting cash as the “hidden safe” — equivalent to today’s “pool system” — in order to stash money Erdoğan and his cronies were collecting from businesspeople who had been conducting a significant amount of dealings with the municipality. The goal was to finance Erdoğan’s political ambitions and set up an alternative political party when the time came.
Erdoğan and his band of political Islamist brethren used the conflict in Bosnia in 1994 and 1995 as a pretext to raise funds through unofficial channels. Many Islamists have come to acknowledge the disbursement of funds in kickbacks in exchange for contracts and tenders awarded by the municipality purportedly for the bigger “cause” and kept mum on this machinery. When the political Islamist party, the Welfare Party (RP), was shut down in 1998, Erdoğan continued running slush funds until March 1999. There were 18 separate corruption charges filed against him during the four-and-a-half years he served as mayor of İstanbul. The most famous cases were the “Mercümek scandal” and the “missing trillions” case in which claims emerged that donations collected from Turkish citizens to be sent to Bosnia and Herzegovina were stolen.
When Erdoğan helped establish the Justice and Development Party (AKP) in August 2011 he had significant cash to finance the political party, which put him in the lead among the other heavyweights who were co-founders. Rahmi Mustafa Koç, then-chairman of Turkey’s largest conglomerate Koç Holding, told the Hurriyet daily on Aug. 5, 2001 that Erdoğan had accumulated some $1 billion and had no monetary problems starting a new political party. Thanks to the well-financed political campaign, Erdoğan’s AKP won the elections in November 2002 and formed the government.
During his first and second terms in power, Erdoğan was unable to move large amounts of money in the dragnet he set up in the government due to fear of the then still powerful military, adoption of the EU-oriented reforms and rigorous monitoring by the International Monetary Fund (IMF) regarding stand-by agreements. He had to content himself with small figures that would not raise red flags, draw the ire of generals or irritate the EU and IMF officials. Nevertheless, he was able to amass more wealth.
In the US State Department cables released by Wikileaks in 2010, the former US ambassador in Ankara, Eric Edelman, told Washington on Dec. 30, 2004 that Erdoğan had eight Swiss bank accounts based on the accounts provided by two embassy sources. Edelman also questioned Erdoğan’s justifications, stating: “His explanations that his wealth comes from the wedding presents guests gave his son and that a Turkish businessman is paying the educational expenses of all four Erdoğan children in the US purely altruistically are lame.”
Abdüllatif Şener, one of the four founding fathers of the AKP and who served as finance minister and deputy prime minister before resigning from the government and the party, says that Erdoğan has always had a major weakness for money. “I had come to recognize that character flaw of Erdoğan in the days we were setting up the AKP. That irritated me greatly back then,” he admitted. Following the 2007 elections, during which time the military was pushed back and the grip of IMF was loosened, Erdoğan felt increasingly comfortable moving forward with a more comprehensive scheme to take commissions from government business awarded to private companies. He started eyeing the big-ticket projects worth billions of dollars and that were reportedly steered to companies owned by his family members as well as political and business associates.
The 58 percent of the vote he received during the public referendum on constitutional amendments in 2010 and the 50 percent of the vote he received in the 2011 parliamentary elections gave Erdoğan a freehand to do as he pleased with this scheme. He reportedly tapped former Transportation Minister Binali Yıldırım, who has been with him since his days in the İstanbul municipality, to coordinate this dragnet. They placed priority on major construction and contracting works worth billions of dollars in order to extract maximum commission fees. These deals were often overpriced and created especially for a fatter cash cow to milk commissions.
To bypass the hindrance originating from local ordinances and regulations, in 2011 the Erdoğan government authorized the Ministry of Environment and Urban Planning to draw rezoning and construction projects centrally from Ankara, thereby bypassing opposition from local governments. In 2012, another executive order was issued requiring prior government approval for the lease and sale of all public properties — land and buildings. Hence, obtaining permission to lease land tracts for mining or building a major housing project was only possible after paying a commission to Erdoğan-designated ring leaders who manage the pool. Cuts from securing licensing for investment and industrial production were also added to the pool.
The fees Erdoğan and his people extracted from moving Iranian state funds in violation of the financial sanctions imposed on Iran using the “gas for gold” scheme and fictitious trade were significant. Erdoğan also facilitated the travel and investment activities of the shady Saudi businessman Yasin al-Qadi who was on the UN and US terrorist list for allegedly financing al-Qaeda. In exchange, his son benefited from al-Qadi’s business dealings in Turkey.
There are rumors circulating in Ankara that Erdoğan and his cronies held back a significant amount of cash from the money provided by the Gulf patrons to secure arms for the opposition in Syria. Rumors have it that he might have even taken a slice from the late Libyan leader Muammar Gaddafi’s hidden wealth stashed by his daughter, according to some insiders. On top of that, the commissions from Kurdish oil and Iranian and Russian energy deals have reportedly all ended up in this pool.
In a voice recording leaked last year, Erdoğan was heard ordering his son Bilal Erdoğan to hold out for more money from a businessman identified as Sıtkı Ayan, the chairman of the İstanbul-based transportation company Turang. Apparently displeased with Ayan for coming up short on a promised commission, Erdoğan instructed his son not to take the money unless Ayan paid the agreed amount in full. The conversation was reported to be about some government incentives Turang was granted for a business deal in Iran. Turang received the license in 2010 to build part of a pipeline intended to carry gas from Iran and Turkmenistan to Europe through Turkey. It was granted incentives including tax exemptions on investments of up to some $5 billion from the government in December 2013.
The two major corruption investigations that were exposed in December 2013 revealed that Erdoğan is the one who has been sitting at the nexus of this corruption ring. In a digital audio file leaked on Feb. 24, 2014 — which was analyzed by independent specialists who confirmed that it had not been spliced or edited — Erdoğan reportedly told his son to quickly get rid of enormous sums of money stashed in the houses of several family members. The amount was reportedly some $1 billion and was taken out of family homes under the cover of night on the day corruption suspects were rounded up by the police.
Since then Erdoğan has been moving his wealth through shell companies and firms linked to his family members and associates. He desperately wants to vindicate himself and legitimize his ill-gotten gains. He was rumored to have his wealth concealed in properties, bonds and stock shares and to have diverted cash to foreign countries such as Malaysia, Switzerland, Singapore, Qatar, Russia and Iran. Nobody knows for sure how much wealth he has today, but his fortune is reputed to approach an estimated figure ranging from tens of billions of dollars to a little over one hundred billion.
For Erdoğan, flaunting his wealth discreetly sends a stern message to his challengers within the ruling party. More importantly, he threatens his associates — who have also amassed wealth and power — that his departure could endanger their ill-gotten gains as well. In the post-Erdoğan era, an independent investigation will likely shed more light on all of these rumors and speculations that have been circulating in the Turkish capital for years.