Recep Tayyip Erdogan of Turkey personally ordered that two Turkish banks be allowed to participate in an oil-for-gold scheme that violated United States sanctions on Iran, according to testimony on Thursday by a Turkish-Iranian gold trader in a federal trial in Manhattan.
The gold trader, Reza Zarrab, who helped orchestrate the billion-dollar scheme, recently pleaded guilty to conspiring to evade the sanctions and has become a witness for American prosecutors.
On Thursday, Mr. Zarrab testified that in 2012, a senior Turkish official told him that Mr. Erdogan -- now Turkey's president, at the time its prime minister -- and a second official, the treasury minister, had given orders for the banks "to start doing this trade."
Mr. Zarrab's testimony marked the first time Mr. Erdogan has been implicated in the alleged sanctions busting, which first surfaced when the Turkish police uncovered the activity in 2013 -- only to have their investigation quashed by Mr. Erdogan's government.
Mr. Erdogan has consistently condemned the American investigation into the scheme, raising the matter repeatedly with American officials, including President Trump in September. On Thursday, before Mr. Zarrab, 34, told his story to jurors in Federal District Court in New York, Mr. Erdogan said, "We did not breach the sanctions."
"Whatever the verdict is, we did the right thing," he said at a closed meeting with his deputies, Turkish state media reported. "We have never made commitments to the U.S. on our energy ties with Iran."
"The world is not only about the U.S.," he said. "We also have trade and energy relations with Iran."
Mr. Zarrab's testimony about Mr. Erdogan was relatively brief, coming in the first week of the trial of a Turkish banker, Mehmet Hakan Atilla, 47, who was also charged in the scheme.
Mr. Zarrab testified that it was Zafer Caglayan, Turkey's economy minister at the time, who said Mr. Erdogan had directed the two banks, Ziraat Bank and VakifBank, to participate in the scheme. Mr. Caglayan "told me that Mr. Prime Minister had given approval for this work," Mr. Zarrab said through an interpreter, referring to the Iranian trade.
On Wednesday, Mr. Zarrab testified that he had paid tens of millions of dollars in bribes to Mr. Caglayan; he said Mr. Caglayan asked for 50 percent of the profits generated by the scheme, which prosecutors say was being run through a Turkish state bank, Halkbank. On Thursday, Mr. Zarrab said he had also paid bribes to the general manager of Halkbank, Suleyman Aslan, whom he described as being critical to the arrangement.
Mr. Caglayan and Mr. Aslan, who have also been charged in the case, remain at large, prosecutors have said.
Mr. Zarrab testified that he had never paid a bribe to Mr. Atilla -- the defendant being tried, who was the deputy general manger of Halkbank.
In Turkey, reaction to Mr. Zarrab's allegations was muted. Mainstream television and news outlets have largely kept to the government line that the trial is a plot against Turkey, and have not reported the potentially most explosive allegation: that Mr. Erdogan was involved.
Many Turks have turned instead to social media, which has been buzzing about the trial. But some fell quiet after Mr. Zarrab seemed to implicate the president. One Turkish user said on Twitter that he did not dare write what he was hearing -- and then deleted even that tweet.
Mr. Zarrab maintained his respectful tone in a second day of testimony on Thursday, but one aspect of his appearance did change: his clothing.
On Wednesday, Mr. Zarrab testified while wearing tan-colored jail clothes. But after the jury was sent home for the day, Judge Richard M. Berman asked whether there was any reason the witness could not appear in civilian clothes.
"It's hard enough to appear in court," Judge Berman said. "There is certainly no reason to make things more difficult by not providing, for example, a shirt and a tie or jacket or whatever." He said he would sign an order to that effect.
Even Mr. Atilla, the defendant, who is being held in jail, was granted permission to wear a suit during the trial -- a common courtroom practice.
On Thursday, Mr. Zarrab testified in a sport coat and white dress shirt, though no tie.
When the prosecutor, Sidhardha Kamaraju, asked why he had changed his clothing, Mr. Zarrab said it had been done "with the permission of the honorable judge."
Judge Berman then interjected. "I may be overly sensitive to the clothing issue," he said wryly. "And the reason is that I'm always hearing in the back of my head my wife saying, 'What are you wearing?' So, anyway."
Mr. Zarrab's testimony continued.