U.S. Blocks $2B from Russia to Turkey as Loan for Nuclear Power Plant

JPMorgan Chase has blocked $2 billion transferred from Russia to Turkey as a loan for the Akkuyu nuclear power plant (NPP), following an order from the U.S. Treasury Department during the final days of the Biden administration.

This is according to a report by The Wall Street Journal (WSJ).

The decision is part of U.S. efforts to counter Russian attempts to bypass sanctions imposed after the 2022 invasion of Ukraine.

The blocked funds are part of a larger $9 billion loan from Gazprombank to finance the Akkuyu NPP, a project managed by Russia's state-owned Rosatom. The payments, which passed through American banks, raised concerns within the U.S. Justice Department, leading to a freeze on $2 billion at JPMorgan. While the funds have not been confiscated, the bank is uncertain about the next steps, especially after the recent change in U.S. leadership.

Turkish sources, including the ClashReport Telegram channel linked to Turkish intelligence, have criticized the move, stating that the Akkuyu NPP agreement was signed in 2010, long before Russia's military actions in Ukraine and the subsequent Western sanctions. They argue that the project's legality is not in question and accuse the U.S. of using financial measures as a geopolitical tool rather than a legal necessity.

WSJ reports that after Russia's invasion of Ukraine, Moscow transferred over $5 billion to Turkey for the nuclear plant. U.S. investigators believe Russia used the project as a way to move funds outside U.S. financial oversight. While JPMorgan and Citigroup facilitated parts of these transactions, they are not the targets of the investigation. However, the U.S. government considered seizing the frozen funds, alleging that they were linked to sanctions evasion, money laundering, and bank fraud.

Diplomatic concerns reportedly influenced the U.S. government's decision to hold back on formal confiscation. The Biden administration was cautious about straining ties with Turkey, a NATO ally with strategic importance in security matters, including Syria and Gaza. The involvement of Turkish officials, such as intelligence chief Ibrahim Kalin and former finance minister Nureddin Nebati, in the financial transfers has further complicated the situation.

Russian media reported that the U.S. understands Akkuyu's importance to Turkey's energy, with coal, natural gas, and oil making up 25-28% of its energy. Turkey’s power plants have a total capacity of 107 gigawatts.

The freezing of funds affects Turkey’s nuclear program, as Rosatom moves away from Western partners. The NPP will be completed with delays, but no penalties are expected. Turkey will miss its 10% electricity target by 2030, which may hurt its economy and relations with the U.S.

Frozen assets may be used as bargaining chips and unblocked if an agreement on Ukraine is reached.