- Associated Press - Wednesday, October 20, 2010

Turkey said Wednesday that U.S. and EU sanctions have led to hesitation by Turkish banks in doing business with Iran.

But Turkish Deputy Prime Minister Ali Babacan told reporters in Washington that he expects overall Turkish trade with the Islamic republic to increase.

Mr. Babacan said his government has let Turkish banks make their own decisions in the face of sanctions aimed at isolating Iran from the global financial sector.

The sanctions target individuals and institutions deemed to be helping Iran develop its nuclear and missile programs.

“Turkish banks are hesitating,” Mr. Babacan said.

“Some of them are doing business with Iran, some are pausing to decide what to do.”

The deputy prime minister said the sanctions were hitting the Iranian economy but doubted that they were making Tehran rethink its nuclear program.

Turkey has opposed sanctions as ineffective and damaging to the Turkish economy because they target an important neighbor.

Mr. Babacan stressed the importance for Turkey of trade with Iran, especially in the energy sector. He pointed out the volume of Turkish exports to Iran is about the same level as exports to the United States.

Mr. Babacan said he expects that trade with Iran, excluding oil and gas, will increase at a moderate pace.

His boss, Turkish Prime Minister Recep Tayyip Erdogan, has said he would like to triple trade volume in the next five years while still respecting the limits set by United Nations sanctions.

That push, along with Turkey’s vote against sanctions in the U.N. Security Council, has raised tension with the West.

But with a booming economy, Turkey has growing energy needs, particularly for natural gas. It has said that it plans to increase domestic consumption of natural gas from Iran and to export Iranian gas to Europe.