No US sanctions trial for Turkish-Iran mogul Zarrab

Turkish-Iranian gold mogul Reza Zarrab will not stand trial in New York for allegedly defying sanctions on Iran, leaving a Turkish banker alone in the dock when opening statements are due to begin Tuesday.

In a case that has inflamed tensions between Turkey and the United States, all signs now suggest that 34-year-old businessman Zarrab has cut a deal with prosecutors and agreed to plead guilty, which could potentially still see him testify.

US District Judge Richard Berman on Monday told jury selection in a federal court in Manhattan that Turkish banker Mehmet Hakan Atilla would be the only defendant in what is expected to be a three to four week trial.

"He is the only defendant in this trial," said Berman of 47-year-old Atilla, charged on six counts of violating US sanctions on Iran, bribery and money laundering.

Atilla, the deputy chief executive of Turkish lender Halkbank, was in court Monday. There was no sign of Zarrab.

If Zarrab has indeed agreed to cooperate with US prosecutors, he could potentially be called as a witness in the case, a potential embarrassment for the government of Turkish President Recep Tayyip Erdogan, which has railed against the trial.

His name was included on a nine-page list of people and entities that could either be mentioned or called to testify at Atilla's trial, listed as "alleged co-conspirator," according to The New York Times.

The case has provoked the ire of Erdogan who has raised the issue repeatedly in official talks with US administrations under Barack Obama and President Donald Trump.

Earlier on Monday, Turkish Deputy Prime Minister Bekir Bozdag urged Washington to drop the case, saying it had "no legal basis" and should be "dropped or terminated".

Bozdag, who is also government spokesman, said the aim of the case was to cause Turkey's economy to collapse with sanctions.

'Conspiracy'

Zarrab was arrested by US authorities in March 2016 after flying with his pop star wife Ebru Gundes and their daughter to Miami for a Disney World holiday. Atilla was arrested this March.

Ankara has called the case a "conspiracy" by the movement run by Pennsylvania-based Muslim cleric Fethullah Gulen.

Gulen is accused of ordering the July 15, 2016 attempted overthrow of Erdogan but strongly denies any involvement.

Analysts say there is potential for embarrassing revelations and the risk of sanctions against one or more Turkish banks which could harm the economy.

Zarrab was one of the main figures of a 2013 corruption scandal in Turkey that Erdogan also sees as a bid by Gulen to bring him down.

US media reports have suggested in recent days that Zarrab may be seeking a plea bargain and shown willingness to testify against Turkey.

Bozdag claimed there was "pressure" on Zarrab to confess to "slanderous" claims.

US media reports have also said that Trump's former national security advisor Michael Flynn is being investigated for alleged talks with Turkey on deporting Zarrab and Gulen, in exchange for money.

Turkey and Flynn's lawyers have denied any such negotiations.

Separately, Turkish authorities were preparing to issue Interpol red notices for three ex-prosecutors on the run who oversaw the 2013 corruption probe, state-run news agency Anadolu reported.

The allegations against Erdogan's inner circle -- which centred on the illicit trading of gold with Iran -- posed one of the biggest threats to his rule.