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…

6 thoughts on “Of fish, flowers, AKs, offshore banking, and now horsemeat

  1. Pingback: Of fish, flowers, AKs, offshore banking, and now horsemeat | Fifth Estate

  2. Pingback: Sunday Linkage - Lawyers, Guns & Money : Lawyers, Guns & Money

  3. Pingback: [LINK] “Of fish, flowers, AKs, offshore banking, and now horsemeat” | A Bit More Detail

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  6. ‘Now, it would probably be wrong to assume that Bout was behind the horse meat racket or that some huger interest controlled both.’

    Some huger interest most definitely controlled both

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