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Turkey aiming to mend relations with US after years of

strain

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Halkbank accused of helping Iran evade US sanctions

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US Supreme Court allowing case to go ahead

By Humeyra Pamuk and Jonathan Spicer

WASHINGTON/ISTANBUL, Oct 7 (Reuters) - Turkish officials

proposed settling a U.S. legal case against state lender

Halkbank for some $100 million during a meeting between

President Donald Trump and Turkish President Tayyip Erdogan at

the White House last month, two sources told Reuters.

Under the proposal that was discussed, which included

additional conditions, the bank would not admit guilt in the

case - a key priority for Ankara - the sources familiar with the

conversations said.

Halkbank is facing fraud, money laundering and

conspiracy charges in the United States for allegedly helping

Iran evade U.S. economic sanctions related to its nuclear

program. The bank has pleaded not guilty.

Erdogan's office declined to comment on any settlement

talks, when contacted by Reuters. The White House did not

respond to a request for comment. Halkbank, Turkey's

fourth-largest lender by assets, did not immediately comment.

U.S.-TURKEY RELATIONS WARMING AFTER YEARS OF STRAIN

Any settlement could bolster Ankara's efforts to mend its

relationship with Washington, which was undermined by Turkey's

decision to purchase S-400 missile systems from Russia in 2019

during Trump's first term.

The U.S. cancelled a planned sale of F-35 fighter jets to Turkey

in response and ousted it from a joint production programme for

the planes. It also imposed sanctions on Turkey's top defense

procurement body. The case against Halkbank was brought later

that year.

Bilateral relations between the two NATO allies are now

warming due in part to the two leaders' friendly personal ties,

though the state visit failed to secure Trump's prompt blessing

to overcome U.S. sanctions and buy F-35s, as Turkey had hoped.

Reuters was unable to determine what specific conditions

were discussed as part of last month's White House talks over a

possible Halkbank settlement.

It was not clear how the U.S. side reacted to the Turkish

proposal or whether discussions continued after the meeting,

which took place between Trump, Erdogan and their top

secretaries and ministers.

ERDOGAN SOUGHT TO DISCUSS BANK WITH TRUMP

The U.S. Supreme Court declined to hear Halkbank's latest appeal

on Monday, upholding a lower court's ruling that the U.S.

government's criminal case should proceed.

The decision sent Halkbank shares down 10% and, barring a

settlement, clears the way for a possible trial, though the bank

said efforts were under way to reach a solution.

"Initiatives to find a legal ground of conciliation within

the framework of the understandings between the United States

and Turkey are also ongoing in a positive direction," the bank

said following the ruling.

Erdogan, seated next to Trump after arriving at his first

White House reception in six years, told reporters that they

would discuss Halkbank among other matters. He has previously

called the charges "unlawful" and "ugly".

Gonul Tol, director of the Washington-based Middle East

Institute's Turkish program, had flagged the potential $100

million fine on X shortly after the White House meeting, calling

it a possible "concrete step" in otherwise mixed talks.

The Supreme Court decision "does not mean an agreement

cannot be reached between Ankara and Washington," she wrote on X

on Monday. "The courts can grant the administration the right to

decide on cases that concern foreign policy like this."

ALLEGATIONS BANK EVADED U.S. SANCTIONS ON IRAN

Prosecutors with the Manhattan U.S. Attorney's office have

accused Halkbank of using money servicers and front companies in

Iran, Turkey and the United Arab Emirates to help Iran evade

U.S. sanctions.

According to prosecutors, Halkbank secretly transferred $20

billion in restricted funds, converted oil revenues into gold

and cash to benefit Iranian interests and documented fake food

shipments to justify transfers of oil proceeds.

In its appeal to the Supreme Court, Halkbank had argued

that, as a Turkish state-owned entity, it should be immune from

legal actions in another country's courts.

Some analysts have speculated that any settlement could be

higher than the $100 million that the sources said had been

floated at the White House.

Between 2009 and 2015, eight European banks - including

HSBC, BNP Paribas, Standard Chartered, and Credit Suisse - were

penalized over $14 billion for, among other offenses, violating

various U.S. sanctions programs.

France's BNP Paribas alone agreed to pay almost $9 billion

to resolve accusations that it violated U.S. sanctions against

Sudan, Cuba and Iran. The bank had pleaded guilty.