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Turkish Lira, Stocks Lose As NY Trial Implicates Erdogan

In this courtroom sketch Judge Richard Berman, second from right, and prosecuting Assistant U.S. Attorney Sidhardha Kamarju, far right, listen as Reza Zarrab, second from left, shows how his scheme worked.

The Turkish lira and bank stocks fell on Friday, affected by testimony in New York, implicating President Tayyip Erdogan in a scheme to help Iran evade U.S. and international sanctions.

The Turkish economy has felt the effect of an ongoing trial in New York of two individuals who are accused of planning and participating in a complicated scheme of money laundering for Iran.

One of the suspects, Reza Zarrab started to cooperate with U.S. prosecutors and in testimony on Thursday told jurors that Erdogan, who was prime minister at the time, personally authorized a transaction, which in effect violated sanctions. The sanctions-evading operation took place from 2011-2013.

In the last one year, Turkish lira has lost more than 25 percent of its value against the U.S. dollar and fell sharply on November 20, days before news about Zarrab’s cooperation with U.S. prosecutors surfaced.

There are also fears of fines on Turkish banks, pushing Istanbul’s bank shares index percent lower.

The Turkish government and Erdogan himself have seemed very concerned about the trial and have made numerous statements in the last two weeks, demanding the trial to be stopped and labeling it as politically motivated.

On Friday, Turkish Prime Minister Binali Yildirim said he hopes Zarrab will “turn back from his mistake”, insisting that the Iran sanctions-related case targets Turkey and its economy.

"This court case has stopped being judicial and became completely political, with the sole aim to corner Turkey and its economy," Yildirim said in Istanbul.

With reporting by Reuters, AFP