March 11, 2008 (the date of publication in Russian)
Konstantin Cheremnykh
THE CRACKDOWN ON THE DWARFS
The EU has found a foe hardly visible on the map
A DUET OF MEDIA AND INTELLIGENCE
Though reputed as the mouthpiece of the leftist flank of British establishment, The Independent rarely rises to a castigatory intonation of Karl Marx's Neue Rheinische Zeitung. The arrogance of the filthy rich on the background of the socially deprived majority bothers its authors only on very special occasions, like a scandal with Russian oligarchs relaxing in Courchevel. However, as soon as those oligarchs find themselves under the iron heel of the Russian Prosecutor's Office, compassion with an ordinary Russian is operatively replaced with politically correct bemoaning of fallen angels.
In early March, the respectable paper experienced a new fit of social indignation. Surprisingly, this time the subject was not Russia but a different, homogenously filthy rich and arrogant political regime, conveniently parasitizing on the common European home. The streets of this country's capital, according to the paper, are "flooded by luxurious Chryslers and BMWs every morning", while the local powers, involved in shadowy deals along with businessmen, don't bother about this disgusting vanity fair.
The European capital that The Independent this time chose to descend upon is populated by not more than five thousand people. The only common feature of a huge Russia and the tiny parasite, named Liechtenstein, is their once coexistence in the same "black list" of nations that are "unwilling to combat money laundering".
The list was composed nine years ago, in the happy times when the White House was still run by Bill Clinton and Al Gore. The latter, preparing for his personal race, convened a conference declaring war to money laundering and therefore demanding that all the offshore and similar jurisdictions disclose their books to the supreme judges of the West. A special body of judges and bookkeepers, dubbed FATF (Financial Action Task Force), was built up as a universal financial watchdog, while the blacklisted countries were urged to establish special bodies of financial intelligence.
With a surprising speed, FATF found most skilled executive officers in Germany, namely in the Federal Intelligence Service (BND). A sophisticated surveillance device, hidden on a mountain slope of in Schwartzwald, was focused on financial operations of the adjacent Liechtenstein. As soon as in February 2000, the materials, conveyed to the General Chancellor, provided sensitive information on suspicious financial turnover occurring in the tiny state, and linking it both to Russia and Latin America. The sleaze appeared to be surprisingly timely, as some of the traces were reportedly leading to Saint Petersburg, where the almost-President Vladimir Putin originated from.
Quite naturally, the initial materials for the research came from interrogation of a Russian-linked Italian mafioso caught in a US airport. Quite naturally, the accumulated material was promptly explicated in a timely detective book with excessive quotes from rather FBI than FATF. Authored by renowned crime researcher Juergen Roth, the book traced a direct connection between drug barons from Central America and the so-called Tambov Group, allegedly controlling the whole economy of Vladimir Putin's native city.
A chain of demonstratively massive searches in German offices of the Tambov partners eventually brought no judicial result. The BND officials, touchingly sensitive to signals from beyond the Atlantic, could satisfy themselves with the pleasure of searching the office of the largest bank of Liechtenstein, one of its directors being a brother of the ruling Prince Hans Adam II.
The scandal was since half-forgotten, as the US elections were won by George W. Bush, who did not display eagerness of combating offshores, and even favored offshore trade. Thus, the abovementioned sleaze rather inspired fugitive financier Boris Berezovsky, whose major fortune emerged from sale and re-purchase of the same Volga cars from Germany and backwards, the physical cars never moving a meter from the storages of the Volga Auto Plant. The plausibility of the research, conducted by him and two of his pocket detective writers, Alexander Litvinenko and US-based Yury Filshtinsky, was a bit questionable due to the fact that during his last unofficial trip to Saint-Petersburg, Mr. Berezovsky was seen in the car of the very boss of the Tambov mafia who was the main character of Mr. Roth's writings.
Mr. Litvinenko's death visibly encouraged Mr. Roth, who started digging in links leading to Saint Petersburg. The result was again miserable, Mr. Roth's reliable partner in Italy, Mario Scaramella, being jailed for blackmail. When Mr. Roth's friend, specializing in technical surveillance, was finally released, the main character of the timely book, the supposedly almighty boss of the Tambov mafia, was packed into Lefortovo jail by the Russian Prosecution that thus made Mr. Roth's conclusion of his influence and top Kremlin connections perfectly groundless.
By that time, the largest of world's country, as well as the tiny princedom in the Alps were free from FATF's special supervision. Still, Liechtenstein, along with Monaco and Andorra, is still mentioned in another black list, composed by OECD.
In this year, Liechtenstein was going to be adopted into the Maastricht non-visa zone. Surprisingly, the princedom – unlike the larger Baltic States – did not bang into the doors of the European Community. Prince Hans Adam, who had since conveyed his power to his son Prince Alois, even claimed that membership in PACE is too costly for his nation.
These politically incorrect remarks are today reminded to the tiny monarchy – again with assistance of the vigilant BND. The German service managed to acquire four CDs with financial documentation involving names of top officials that had a habit to use the merciful Liechtenstein legislation for tax evasion – or, according to the popular Russian business expression, for "minimization of tax expenses". The only disclosed name, Klaus Zumwinkel, belongs to the chairman of Deutsche Post. The search in his Cologne villa aroused a hullabaloo not only in Berlin but also in London, where financial analysts promptly calculated that Liechtenstein's "tax paradise" services is bringing as much damage to the UK as to Germany – around 23bln Euro per year. The analysts failed to calculated the efficiency of other tax paradises, protected by the British crown and therefore safe from FATF scrutiny and BND espionage – namely, Gibraltar, Man Isle, and Virgin Isles.
Though the second crackdown on the same dwarf monarchy is performed by the same agency and targets the same LGT Bank, the underlying motivation is not quite the same. The difference starts from the timing.
While the first Liechtenstein-bashing effort was timed to the Russian presidential elections, the second one was scheduled to the summit of EU Finance Ministers, dated March 4. The series of smearing articles in major European media surfaced on the eve of this event, identifying the common European scapegoat, pretending to have been unaware of the existence of the tax paradise, and blacking out the convenient existence of alternative paradises. While FATF's anti-money-laundering venture echoes Mao Zedong's campaign against sparrows, the present attack is more focused and targets officials from the same European species along with the royal family, starting from the far history of its origin – thus rather reminding Mao's ostracism of Ling Biao and Confucius.
The imperative of "smashing dog's heads" suggests mounting all kinds of faults upon the victim. The Independent tells an ordinary Londoner that the arrogant princes have not even built a railway station in Vaduz, as every local citizen has got an auto and therefore doesn't need proletarian means of traveling. The reading audience is not supposed to ask themselves whether railroad construction in the mountainous area is expedient and affordable.
THE INCORRECT PRINCES
The Princedom of Liechtenstein irritates the European bureaucracy not only for economic reasons. In 2003, when Prince Hans Adam initiated a political reform, granting him a right to dismiss the cabinet, the whole European press was overwhelmed with ideological exasperation, denouncing the Prince's move as "absolutist". Actually, the "outdated" Prince introduced the reform by means of a national referendum in which he was supported by three thirds of his people. This kind of political behavior was regarded as incredible, as the spirit and letter of liberalism does not regard people as a branch of power.
The princedom is also ridiculed for its national traditions, like the Milk Day, when herds of cows descend to Vaduz from mountain grasslands. For the EU bureaucrats that give up supporting their agroindustry, such sentimentality is one more ideological challenge. These "deviations", notoriously enough, coincided with a challengingly even wealth of the citizens, comparable to that of the inhabitants of Kuwait or Bahrain.
Curiously, the March 4 gathering of Finance Ministers was focused on inflation in the EU, spreading from the food market to all kinds of services, particularly private education. The budget problems were exacerbated with the rapid extinction of gold currency reserves due to a sharp decline of incomes from exports to the United States. The major document of the event was a collective address to the Federal Reserve, urging to undertake measures for supporting the dollar.
The participants were equally annoyed with the price hike for energy resources. The problem, however, was discussed exceptionally in the context of the Russian-Ukrainian tensions, while the much more essential US-Arab disaccord and the relevant effects of the Iraq war were downplayed. After all, is it expedient to criticize the same White House that you just addressed with a humble petition?
The US adventure in the Middle East also boosted immigration of Arabs to Europe. In this aspect, the EU bureaucracy is also faced with a dilemma. On the one hand, the broader are the EU borders, the harder it to constrain the flow of immigrants. On the other hands, to restrict the expansion would mean to irritate Washington and NATO. Therefore, the bureaucracy is forced to erect fences with one hand and to beat the breast over adherence to human rights with the other.
In this context, Liechtenstein's behavior looks exceptionally arrogant: along with providing tax minimization services with guarantees of anonymity for clients, the nasty dwarf monarchy strikes a deal with Dubai, the major tax haven of the Arabic community, famous also as the global center of arms trade. Most ominously, the deal was signed by the president of the notorious LGT, once searched in 1999, and today exposed as a means of illegal profiteering for Deutsche Post's chairman Zumwinkel.
In the heated atmosphere of campaign, officials and observers far exceeded the framework political correctness. The Independent's author reminded of the Flick family that once financed Nazi Germany, later hiding their fortunes in Liechtenstein. In his turn, Pierre Mirabaud, chair of Swiss Banking Confederation, protected Liechtenstein by comparing BND's investigative methods with "the practice of Gestapo".
In any case, the objective was reached: the highly demanded image of evil was identified and presented to the European public. It was necessary to find the most convenient scapegoat, without bothering the Big Brother of Washington. Today, every body knows who has stolen the cream – definitely, the sly, arrogant and selfish Princedom.
THE KIEBER OPERATION
However, the tiny monarchy demonstrates unexpected stubbornness. Liechtenstein's Prime Minister Otmar Hassler declares that his country is not going to revise its tax legislation. Meanwhile, Crown Prince Alois denounced Berlin for "replacing law with fiscal interest", accusing BND of intervening into sovereign affairs of another nation – moreover, with assistance of a person with criminal reputation.
It is true that the method of receiving confidential information, used by BND this time, is more doubtful than the 1999 surveillance. The four explosive CDs were purchased by the agency for a sum of 4.300,000 Euro from a certain Heinz Kieber, a former manager of LGT. Back in 1997, Mr. Kieber was accused by Spanish services of large-scale swindle, and in 2001, he was sentenced to a 300,000 Swiss francs for illegal financial scheming... in Liechtenstein.
An ordinary German, trying to make his ends meet under ruthless tax and rent pressure, should inquire the federal authorities on the expenses for providing Mr. Kieber a home in Australia (!) along with a false identity.
The tiny monarchy does not deny that its wealth originates from its tax services. Its citizens sincerely explain the state's policy to foreigners. Edward Rosenthal, an essayist of from the Californian Russian-language Vestnik (Herald) paper, was told the following by a local clerk:
"See, for instance, a wineglass baron from Vienna needs to ship a batch of goods to London. In case the guy sells his glasses for 2 francs with the costs of 1 franc, and 80% of the deal is taxed, he gains 20 centimes from a glass. In my wonderful country, he pays only a 1% investment tax – a thousand francs for a hundred thousand glasses. For mega-companies, that is peas. That's why they crowd here like bees on honey. For Liechtenstein, one per cent from all of them is a nice piece of jack. The guy does not have to drag his stuff here: he exports them directly to London. Besides, nobody knows whom he sells his stinky wineglasses – only the name of the local resident representing his Vienna firm. Liechtenstein may be represented by any adult citizen, and nobody cares who is behind his back – be it General Motors or British Petroleum.
"From time to time, other states get irritated, but scandals promptly calm down", the clerk said. "Why? Because guys sell not only wineglasses but also cannons and aircrafts, and not necessary to those who are allowed to buy this stuff. Both Russians and Americans have a finger in this pie".
These revelations, along with names of mega-corporations mentioned by the co-owner of several Liechtenstein mailbox companies, suggest that BND's costly operation could be related not only to an effort to improve EU's financial affairs by closing the Vaduz shop, but also to banal espionage on a new US order. The timing of the operation too suspiciously coincided with the extermination of FARC leader Raoul Reyez, a friend of Hugo Chavez, by the Washington-loyal government of
Colombia, as well as the arrest of Victor Bout, an earlier elusive citizen of Russia, suspected exactly of selling weapons to FARC.
German services perform as apprentices by the Big Brother not for the first time – more precisely, playing into one of the Big Brother's rivaling hands. Probably for that reason, scandals around Liechtenstein regularly coincide with the US presidential campaigns.
When the hands of EU bureaucrats are too short even to reach the much more powerful "Swiss gnomes", their agencies declare war to tiny dwarfs in order to report to the Big Brother of their achievements. In exchange, the new US administration may mercifully liberate Germany from troublesome duties in Southern Afghanistan.
Dwarfs are crafty creatures even in anecdotes. Some other explosive CD, delivered to Washington by some friends of Prince Alois or his Dubai partners, may occasion trouble to the paymasters and contractors of the Kieber operation.
A MAN IS THE KING IN HIS HOUSE
It is as hard to refute the legal logic of the Prince of Liechtenstein as to deny the fact that offshore economy is a brainchild of free trade and a tool of especially high demand in the globalization era.
In case the system collapses, as many authors foresee, Liechtensteiners may have to concentrate on cattle-breeding as well as their famous dentist skills. But while it exists, its top bosses will have to nurse and dandle such paradises.
Thus, the campaign against dwarfs resembles a dog's hunt for its own tail. Even in case, hypothetically, General Motors, British Petroleum and other whales of business decide to give away this tax haven, they will use another, e.g. Dubai. Thus, the German market will not gain even indirect incomes from Liechtenstein: Cologne villas will be purchased by sheikhs. Even in case of complete confiscation of Liechtenstein's assets in favor of the European Central Bank, the European problems won't be solved, as this money will be blown out into the same pipe where the savings of EU taxpayers vanish today.
Wishing to solve its problems efficiently and durably, providing at least relative economic self-sufficiency to its member countries, the European Union should give up their dogmas that stall the continent's development and undermine its competitiveness.
The real solution of the energy problem lies in development of more efficient energy generation, instead of ridiculous windmills crowding fields that deserve better use.
The real solution of the food problem lies in fostering physical production. That means that the all-European legislation should be favorable for investments in households, transport, and infrastructure. That means that the money Brussels is wasting from the hyperinflated climatic hoaxes could be used for support of domestic farmers.
The real solution for trade is to open new markets, thus solving the notorious immigration problem as well. Investments in the third world would efficiently return as well. Danish researcher Bjorn Lomborg recently calculated that the current expenses for Kyoto Protocol's programs would be sufficient for healing 150,000 of cases of malaria.
The real pursuit of European interests suggests firmness at least in those aspects of foreign policy that define reliability of transit. Rejecting the role of an apprentice in Ukraine, Europe could have saved more than it is missing in tax havens.
A man is the king in his house. Political performance shapes reputation. Those who curtsey before big bosses should not complain of being bullied. Those who hurry to recognize a criminal offshore named Kosovo should not be surprised with dependence of their economies from human-trading clans. Those who impose austerity policy on their fellow nations (one more subject of the ECOFIN summit was teaching Latvia to tighten its citizens' belts), should not be surprised when the partner seeks for non-European ways of solving his problems. Those who neglect political traditions of other nations can't guarantee respect of their own system.
The tiny monarchy of Liechtenstein is not a good example of fairness and rule of law. However, the scandal around this country reveals an impressing extent of political dependence, economic self-insufficiency, and ideological narrow-mindedness of the unified Europe. When Brussels starts teaching Moscow to live, trade, legislate, judge, and elect according to the allegedly supreme and universal principles, Russians could inquire about the principles that justified involvement in the US export of "colored revolutions", toleration of financing of Albanian terrorism by "Swiss gnomes", and absence of Gibraltar and Delaware in black lists of tax havens. Before labeling Russia as a "Chekist empire" that offends an innocent Kiev, Eurobureaucrats should look back at their own methods of double-standard handling economic problems for expense of their own smaller brothers.
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