Reykjavík Grapevine - 24.06.2005, Blaðsíða 24

24
Screaming Viking,
Ignoring the Volcano
The flashy new Icelandic economy has fundamental difficulties,
overlooked in favour of superficial speculation.
The announcement that Victoria Beckham and her arm-
candy husband will be flying in to attend a fashion show
without a named designer is the clearest sign under the stars
that your country is officially nouveau riche. On Friday,
June 10, Iceland got just such an announcement, and
throngs of upper middle-management locals stormed out to
an ice skating rink to see and trade notes with the couple.
That their majesties the Beckhams did not turn out was only the first
of the ominous signs of the evening. The complete lack of fashion also
suggested something was wrong. The amateurish production values,
described by a local magazine editor off the record as “like a nightmare
kiddie talent show” set a certain mood. The many in attendance had
gotten dressed up and were being photographed purely at the whimsy
of Jón Ásgeir Jóhannesson, CEO of the Baugur Group, and they took
notice of the more powerful people following his whim: the first lady of
Iceland, a number of fashion designers, who of course weren’t displaying
anything in Reykjavík, and a surprisingly large number of wealthy foreign
businessmen.
One friend came back from the show aghast: “You finally knew where
the money in Iceland was coming from,” he told me, wiping his hands
together as though under a sink. “They’re washing their money here. This
is the new Cayman Islands.”
Warnings about mafia ties in Iceland are nothing new and they are
almost always exaggerated. For an amusing example, I can turn to the
behaviour of a local novelist and cultural critic who, upon seeing the
opening of an Eastern fast food restaurant, The Purple Onion, in close
relation to a Mercedes Benz, informed me that this was the obvious sign
that the mafia had moved in, and that there were fleets of Mercedes
coming by this restaurant every night. The restaurant is next door to our
offices, and the owner, a gregarious Persian-American from Birmingham
Alabama, brought the car that he earned starting Dominos franchises in
America with him to Iceland. The novelist had taken typical symbols—a
flashy car and a non-Icelander—and made a reactive assumption.
But the novelist can be forgiven for having Russians on the brain.
Since Iceland got their first member in the Forbes 500 wealthiest people
in the world list, they have been waiting for the allegations.
This requires some explanation, but I’ll start with the attack that the
country was fearing: a June 16th Guardian article titled “Next-Generation
Viking Invasion” warned that there was “persistent but unsubstantiated
whispering that the country’s economic miracle has been funded by
Russian mafia money rather than growth and liberalization.” The
Guardian had opened by talking about Baugur, which has been purchasing
large stakes in British businesses. But in explaining the Russian ties,
it switched focus to Iceland’s wealthiest businessman, Björgólfur Thor
Björgólfsson and his father.
As The Guardian correctly points out, Björgólfur Thor and his
father had financial difficulties in Iceland, then went to St. Petersburg in
1993 and invested in a soft drink venture, then sold that business for a
brewery, which would do outstandingly good business. Without naming
any specific mafia ties or any improprieties, The Guardian points out that
other businessmen who went into the brewery business in Russia didn’t
have the connections the Icelanders had: “One [investor] was shot dead
in his kitchen from the ledge of a fifth-floor window. Another perished in
a hail of bullets as he stepped from his Mercedes. And one St Petersburg
brewery burned to the ground after a mishap with a welding torch…But
the Bravo business, run by three self-confessed naives, suddenly found
itself to be one of Russia’s leading brewers.”
In four easy sentences, a few Icelandic businessmen—all Icelandic
investors here labelled later in the article as “the Icelandic predators”
— quickly look like Mafiosi.
The Grapevine doesn’t look to prove that the Mafiosi aren’t involved
in the new economy of Iceland. With nothing but rumours and with
not one specific incident or investor to investigate, we have nothing to
refute. Björgólfur Thor has explained that he and his father were able to
succeed in Russian industry because they were foreign investors who got
into the market early and Russia then, like Iceland today, needed foreign
currencies.
While there are no confirmed mafia ties, we can say that the business
environment here is welcoming to foreign investors with shady pasts.
The Grapevine did an informal survey of local businessmen and business
students. When asked whether they would mind if a businessman who
did illegal business abroad should be allowed to invest in Iceland. 80% of
those surveyed felt the investment should be allowed, as long as no other
criminal activity were taking place within Iceland’s borders.
Outside of our survey, we can refer to the recent immigration of a Mr.
Bobby Fischer, who, when being offered citizenship, was commended
publicly for the more than 3 million dollars he bragged about keeping in
the United Bank of Switzerland. Even when a federal grand jury in the
US was indicting Fischer on tax evasion and money laundering, secondary
and less political offences than his violation of a UN trade sanction, locals
were proud that their newest citizen had so much disposable income.
Mafia ties are sexy, and using stereotypes of various nationalities, as
The Guardian hints at in its portrayal of Icelanders and Russians in a
charming nod to England’s colonialist past, does make for compelling
reading, but these topics skirt the scary points to Iceland’s economic
boom. For one thing, take a look at the reason Icelandic businessmen
had to go to Russia in the first place. As commonly discussed and
aggressively argued if poorly documented in a popular history book by
former Dagblaðið newspaper editor Illugi Jökulsson, Ísland í aldanna rás:
1976-2000, Iceland’s wealthiest entrepreneur played a role in the largest
bankruptcy in the nation’s history, that of Hafskip, in 1986. Were it merely
a case of fraud or mismanagement, perhaps The Guardian’s Viking raider
analogy would fit, but common assessment today is, as Jökulsson explains,
“the most humiliating incident for the Icelandic justice system in recent
years.”
According to Jökulsson, Björgólfur Guðmundsson had established a
respected shipping company and was suddenly undercut when his bank,
Útvegsbankinn, responding to rumours in the local press, declared his
company in default on their loans, forcing the company to immediately
go bankrupt and have all assets sold at auction. Immediate sale of assets
allowed for a 75% payment of claims against debts, which would suggest
Hafskip was not in serious financial trouble. Still, criminal charges were
pressed against the company, with around 450 landing on the shoulders
of Mr. Guðmundsson in 1986. Four years later, Guðmundsson would be
cleared of 430 charges and would serve seven months in jail, before setting
out for Russia.
The banking and investing public were so disappointed in
Guðmundsson’s conduct, that he was the most respected businessman in
the country even before he left.
The explanation Jökulsson makes for Guðmundsson’s prosecution is
political differences and political corruption: the Progressive Party had
a Prime Minister, City Prosecutor and Chief of Police who were after
By Bart Cameron with reporting from Paul Nikolov, Jóhannes Kjartansson,
Oddur Óskar Kjartansson and Jón Trausti Sigurðarson