Of fish, flowers, AKs, offshore banking, and now horsemeat

The horsemeat scandal has taken an unexpected, and possibly very significant, turn. So the Cyprus company controlled by Dutch meat merchant Jan Fasen, who was caught last year passing off South American horsemeat, and which is accused of doing the same with horses from Romania and the British Isles, turns out to have a single director, which is itself a company. (Fasen’s firm, if you haven’t heard, is named Draap, or the Dutch word for “horse” spelled backwards.)

This second company, Guardstand, also controls something called Ilex Ventures, which was used by…ahem…the international arms dealer Viktor Bout to buy some aeroplanes. Oh. Guardstand, for its part, is controlled by something called Trident Trust, which is a company-formation agent in Cyprus, which mostly serves Russian customers.

Now, it would probably be wrong to assume that Bout was behind the horsemeat racket or that some huger interest controlled both. It is probably more useful to look at this from a horizontal, functional perspective. Both Bout and the horsemeat guy made use of Cyprus’s role as a Russian-speaking offshore financial services centre with access to the eurozone.

There’s quite a lot more information at Reporting Project, which speaks to this point. The corporate structure is more complicated than the Guardian piece suggests. Draap’s sole shareholder is Hermes Guardian Ltd. in the British Virgin Islands, its sole director is Guardstand, and the company secretary is Trident Trust. Hermes Guardian is a shareholder in numerous other Cypriot companies, and one of its directors is the head of the Cypriot Fiduciary Association. And both Guardstand and Trident were also used during a half billion dollar acquisition of a steel mill in Donetsk.

All this originated because of the existence of a tax treaty between the Soviet Union and Cyprus. Russians and Russian money have been very obvious in Cyprus in the euro era.

It is often suggested that this treaty, like the similar one with Iceland, was intended by the Soviet side to help finance their intelligence agents in the West. If true, it’s possible that Bout would have been aware of it, having worked for the GRU (Soviet/Russian Military Intelligence) in Africa in the 1980s. As he used the Sharjah Airport free-trade zone as the trading and aviation centre of his business, he may have used Cyprus as the financial centre. These are the places where the rubber meets the road of globalisation, and they tend to build up a layer of secrets over time.

This immediately reminds me that his alleged financial manager, Richard Chichakli, has recently surrendered to Australian police after eight years on the run. He’s been extradited to the United States, where Bout is serving his sentence, still protesting to Russia Today that he only ever dealt in fish and flowers.

Now, for the other significant bit. Cyprus has a lot of the same economic problems as, say, Greece. Notably, its banks are in trouble and the sovereign may have to bail them out and the sovereign itself will end up bust, so on and so forth, we all know the story by now. One of the reasons the Cypriot sovereign is on the hook for quite so much money is that Cyprus has surprisingly big banks. Of course, they’re linked up to the rest of Europe via TARGET 2, so if the big depositors spook*, it’s an instant run on the bank.

Big depositors, you say? And who might they be? I think it is fair to say that nobody is particularly keen to bail out Viktor Bout or Horsemeat Guy. As a result, it’s politically very possible that the whole idea of a bail-in might get tested. And whether it does, and the exact terms, are increasingly linked to things like “how far into the maze the journalists get” and “whether Richard Chichakli starts singing in jail”.

And we may be going to see what happens when an offshore financial centre goes bust.

*surely the right word here…

Kurds

A serious Iraqi newspaper is saying openly that it may be time to give up the Shia-Kurdish alliance that has run Iraq since Saddam, and let the Kurds move on to independence.

Shots fired at an Iraqi army helicopter to keep it from reconnoitoring Kurdish positions, while Jalal Talabani is seriously ill.

Exxon Mobil is giving up on its contracts with Iraq to concentrate on Kurdistan.

Old story, but good: the Turks have a backchannel from their secret service to the Kurds. This caused a major demo round the corner from here today.

The Kurds have, of course, staked out a big chunk of Syria after the government withdrew to fight more worrying rebels. What if this was the year they got what they wanted? I remember blogging years ago that putting a tough and well organised mountain guerrilla army between Turkey and Iraq seemed a fine idea from a Turkish point of view.

Some French links

Here’s a really interesting piece about French interior minister Manuel Valls and the network of friends around him from his days as a student activist. They include Alain Bauer, Nicolas Sarkozy’s security adviser and the man who got the contract to install Vitrolles’ CCTV surveillance network for its FN mayor.

Hubert Vedrine, former minister, was asked to prepare a report on NATO and France’s return to the integrated command structure. Olivier Kempf blogs it. The recommendations are that NATO stays very much in its classical form, a military alliance with a nuclear dimension centred in Europe and the North Atlantic, that France assert itself in the alliance more, and that the European Defence Agency and NATO Supreme Allied Command-Transformation, which are both headed by French officers, should coordinate more closely on industrial and scientific issues.

He seems to be more suspicious of the UK than of NATO as such, and is very critical of the EU defence initiatives as mostly creating duplication, committees, and complexity.

History is made at night records the moment when “discotheque” became a word in English.

ECB board member: Euro-bashing is Anglophone overload

Germany’s man at the ECB, Jörg Asmussen, in a speech about monetary policy communication today:

For the euro area and the ECB, the situation is even more peculiar, because the influential “commentariat” comes predominantly from outside the euro area. The big English-language newspapers, the news agencies and wire services that shape opinions in the economic and financial sphere on the Continent are all writing from outside the euro area. There is, of course, nothing wrong with friendly outside advice. And I certainly do not wish to come across as whining and complaining.

But it simply remains a fact: the analysis, discourse and policy prescriptions that are propagated come from the outside. Maybe inevitably, they come with a certain disinterested detachment. As if the outside “spectators” are not affected by what is happening.

And they come with a dangerously narrow and exclusive perspective on the economics of the monetary union. But if the profound political commitment of Eurozone countries to the historical project of “ever closer union” is neglected, the assessment remains superficial and partial. And the suggested policy responses may be biased or naïve.

Why does it matter? Because the discourse influences some of the most important financial markets for the Eurozone. If expectations that have been built up are not fulfilled, if alleged certainties do not materialise, if actions from politicians or central bankers are not forthcoming as anticipated by the “market consensus”, the reaction can be grave: volatility, contagion, all the way to complete market dysfunction. The systemic impact can be major, driving financial institutions, as well as sovereign borrowers into real difficulties.

It doesn’t take much extrapolation of what he says to envisage that at least in the ECB’s mind, there is a SPECTRE-like entity of cackling pundits consisting of Paul Krugman, Martin Wolf, Simon Johnson and others, though who exactly has the white cat sitting in their lap as they press “Publish” is not specified. More substantively. there is a strange symmetry between this view and the pre-crisis gloating of the European Commission that the single currency’s American critics had been all wrong.

NHS in “worse than unlimited budget for single patient” shock

The Wall Street Journal Europe uncorks an instant classic in explaining the longevity of Lockerbie bomber Abdel Baset al-Megrahi:

Karol Sikora, a leading cancer specialist who examined Megrahi shortly before his release, explains that predicting how long a patient with end-stage prostate cancer has to live is “a value judgment of probability,” not an exact science. But Dr. Sikora also writes that his initial three-month prognosis was “based on his treatment as an NHS patient in Glasgow at the time, when not even standard docetaxel chemotherapy was offered.” By contrast, “Mr. Megrahi almost certainly had excellent care in Tripoli.” Think about that one: Get treated for cancer by the U.K.’s National Health Service, and you’ll be dead by Christmas. But get treated for the same cancer in Libya, and you may have years to live. No wonder Americans are terrified of government-run medicine and rationing boards.

It’s painfully obvious but apparently nonetheless necessary to point that Mr al-Megrahi was in this case receiving care as a political trophy in a petro-state with an open-ended government budget available to embarrass his former hosts. So Yes, his care was probably better than  the NHS standard available to him in Glasgow, but as Dr Sikora also explains, there was a lot of variability around the now-notorious “3 months to live” prognosis even at the time it was issued. His care was also a lot better than someone without health insurance in the USA would receive, but who wants to descend to cheap health system point scoring based on a single case. Besides the Wall Street Journal.

My own view is that there’s no big conspiracy theory or undiscovered files behind Mr al-Megrahi’s release. Instead, the issue played into the self-righteousness of the SNP government. Up against that, geopolitics didn’t stand a chance.

Can This Really Be Europe We Are Talking About?

In recent days I have been think a lot, and reading a lot, about the implications of Greece’s recent election results.

At the end of the day the only difference this whole process makes to the ultimate outcome may turn out to be one of timing. If  Alexis Tsipras of the anti bailout, anti Troika, party Syriza won and started to form a government then the second bailout money would undoubtedly be immediately stopped. On the other hand if the centre right New Democracy wins and is able to form a government, as the latest polls tend to suggest, then the country would quite possibly try to conform to the bailout conditions, but in trying it would almost certainly fail, and then the money would be stopped. Before the last election results, it will be remembered, this was the main scenario prevailing. Continue reading

Frelections: roundup

The day after, some French election blogging. A somewhat ambiguous photo from the Sarkozy rally – he’s despairing, she’s…not. Sarkozy gets made to eat his Flamby, an allusion to Francois Hollande’s enemies’ habit of likening him to a wobbly jelly. But in the end, it wasn’t a wobbly jelly but more of an epic blob. Sarko kept throwing punches, but it just kept coming.

The exact details show that the polls narrowed at the last, to 51.6% vs 48.4%, not as decisive as you might have expected earlier in the campaign. However, as the winner said in an interview last week, the nature of the poll is that a win is a win, and the Left’s support, the peuple de gauche, put on a spectacular crowd at the Bastille for Hollande to struggle through with the sixty motorbike cops that were the security state’s own special tribute, today’s version of a bodyguard of lancers.

Transition of power in France is somewhere between the astonishingly swift process in Britain, where the old and new prime ministers’ official cars both park up outside Buckingham Palace while the first has their farewell audience and the second officially accepts the appointment, and the weeks long grind from a US presidential election to inauguration. The handover was fixed this morning for the 15th of May.

It couldn’t be much later, as the president will then have to zap off to the G-8 summit at Camp David on the 18th and then on to the NATO summit in Chicago on the 20th, as well as whatever happens on the European scene in the meantime.

Catherine Ashton

Is it time for AFOE to declare victory on this post about Catherine Ashton’s appointment as EU foreign minister (but we don’t call it that)? Laura Rozen writes that the Iran nuclear talks are making progress for the first time in ages.

The Russians are being constructive. The head of the Israeli military thinks that there has been no decision to build the Bomb, and that the talks are going the right way. David Ignatius sketches some details of a possible agreement, which would combine a halt to uranium enrichment with a promise of regular supplies of 20% enriched uranium and explicit recognition of the right to own the fuel cycle. And it’s been suggested that the Iranian government is trying to prepare public opinion for a deal.

In this context, Laura Rozen profiles the three women at the core of the Western negotiating team, Catherine Ashton from the EU, Helga Schmid from the German Foreign Ministry, and Wendy Sherman of the US State Department. Quote of note:

“She is totally working class,” the European diplomat said. “The criticism from the British press if anything is that she is from northern England, and speaks with a northern accent…

Yeah, well, if you think international understanding is difficult…