A few months after invading Ukraine, Russia sent a series of huge payments to Turkey. In short order, it transferred more than $5 billion with the promise of more to come.
To the outside world, the money was to pay for Turkey’s first nuclear-power plant. Decades in the making and championed by Russian leader Vladimir Putin and Turkey’s president, Recep Tayyip Erdogan , it was being built and financed by Russia’s state atomic conglomerate.
Over in New York, the transfers caught the attention of Justice Department investigators tasked with policing Wall Street. The reason? Two of America’s pre-eminent banks, JPMorgan Chase and Citigroup , handled the flow of money.
The investigators found that Russia and Turkey used the nuclear project in 2022 to dance around U.S. sanctions imposed on Russia’s central bank, according to people familiar with the matter. Technocrats in Moscow slipped billions of dollars through the U.S. banks into a friendly country, from which the money could bankroll Russian state initiatives.
JPMorgan and Citigroup aren’t targets of the investigation, which hasn’t been previously reported. However, $2 billion of the Russian funds are trapped at JPMorgan after the U.S. government halted some of the bank transfers.
U.S. prosecutors in 2024 prepared to try to seize the money on the grounds it was the proceeds of sanctions evasion, money laundering and bank fraud. But they were blocked in the final stretch of the Biden administration, the people said, because the White House wanted to avoid angering Turkey, a vital but sometimes contentious ally.
Different parts of the U.S. government, such as the State Department and National Security Council, often weigh in before the Justice Department takes steps that might have national-security or diplomatic implications. A request to ice a case altogether is rare, according to former prosecutors.
A Trump administration official said the U.S. government will keep reviewing its sanction regimes and act against people who try to evade them. The Turkish presidency referred questions to the energy ministry, which declined to comment.
A spokeswoman for Rosatom, Russia’s state-owned atomic entity, said all funds allocated to the nuclear plant have been used to finance the project and pay for contractors and other social and financial commitments in Turkey. “As for the funds that have been unjustly withheld through third parties’ influence, we expect the matter to be resolved,” she said.
The cat-and-mouse game shows the limitations of sanctions as an instrument of economic war, and the trade-offs the U.S. encounters as it tries to defend the financial system against suspected misuse, while juggling delicate diplomatic relations.
The Justice Department believes the order to sidestep the sanctions came right from the top in Moscow and that the head of the Bank of Russia played an important role, said the people familiar with the matter.
After the U.S. and allies froze the Bank of Russia’s currency reserves in February 2022, the bank’s leader, Elvira Nabiullina , said publicly the government would challenge the move in lawsuits. In private, the central bank and a pair of state-backed companies received instructions from the Kremlin to find a way for Russia to put the funds to work, the people said.
It was a tough assignment. Shifting dollars generally requires interacting with American banks, and they were banned from transacting with the Bank of Russia.
Nabiullina and other senior Russian officials devised a possible route out. It ran through entities that the West had exempted from sanctions to make sure global energy and food markets didn’t break down.
Russia and Turkey agreed unsanctioned Gazprombank, the banking arm of Russia’s state gas company, would lend about $9 billion to the nuclear plant being built by Rosatom, which also wasn’t under sanctions, the people said. What they didn’t disclose: The Bank of Russia would secretly fund the loan, and the nuclear project wasn’t its only purpose.
For Turkey, the incentive was to top up the greenback supply in its financial system. Turkey’s central bank was borrowing dollars from commercial banks at the time so it could shore up the lira without raising interest rates in the face of galloping inflation .
Moscow sought to create an offshore dollar reserve to fund Russian interests outside America’s gaze. Under Moscow’s plan, the nuclear plant could hand dollars to Russian firms that also had accounts at Turkey’s biggest bank, state-owned Ziraat. That would remove the need to ping money in and out of the U.S., which risked detection.
Representatives for the Bank of Russia, Gazprombank and Ziraat didn’t respond to requests for comment.
Unlike other allies in the North Atlantic Treaty Organization, Turkey didn’t impose sanctions on Russia after the invasion of Ukraine and instead expanded its economic relationship with Moscow at a time of financial stress. Turkey has straddled the divide between Russia and the West during the war, sending lethal weapons to Ukraine and leveraging its ties with the Kremlin to broker a prisoner exchange that freed Wall Street Journal reporter Evan Gershkovich in 2024.
Expensive nuclear plants financed in complicated ways offer a convenient way to conceal money moving for other reasons. Russia is building or paying for more than a dozen reactors overseas with plans for many more, part of a push to exert influence through nuclear energy.
At first, the plan worked. In the summer of 2022, Gazprombank sent $3 billion through Citi to the nuclear plant’s deposits at Ziraat. A bit more than $2 billion ran through JPMorgan.
After the alarms went off at the Justice Department, U.S. officials contacted JPMorgan to block the next batch of $2 billion from reaching Turkey. The funds were frozen.
Justice Department officials wanted to seize the money through a civil forfeiture complaint last year. The White House and State Department were nervous.
Officials feared a complaint implicating Turkey could undermine cooperation with Erdogan’s government on everything from prisoner exchanges and counterterrorism work to efforts to stabilize Syria and end the war in Gaza.
A big reason for the trepidation, some of the people said: The Justice Department suspects one of Erdogan’s top lieutenants, intelligence director Ibrahim Kalin , was involved in the payments in 2022.
Kalin was the presidential spokesperson and a powerful national security adviser at the time. He now leads Turkey’s main intelligence agency. Turkey’s then-finance minister Nureddin Nebati was also a key player in the transfers, the people said.
Kalin and Nebati didn’t respond to requests for comment.
Bashar al-Assad’s downfall in Syria at the hands of Islamist rebels added to Erdogan’s clout in the Middle East. In the aftermath, the U.S. feared Turkey might send forces into territory held by American-backed Kurds.
Around that time the White House asked the Justice Department to stand down.
It now falls on the Trump administration to decide whether to reboot the case. In President Trump ’s first term, charges that Turkish state-owned Halkbank violated U.S. sanctions on Iran were a flashpoint in relations with Erdogan.
—Kate Vtorygina contributed to this article.
Write to Joe Wallace at joe.wallace@wsj.com , Costas Paris at costas.paris@wsj.com and Jared Malsin at jared.malsin@wsj.com