PART FOURTEEN
THE WAVE
Francis from his position at Trinity College had seen more of the world in the ten or so years since he had become the bank’s advisor than in the previous twenty five. It was not as if he had not travelled the world before, he had, but not with the same intensity, or with the same means. In the past it had been conferences, research programmes, exchanges and the like, paid for by different institutions. From time to time he had undertaken work for banks and businesses, not forgetting events organised by his publishers. However, although he had travelled in various degrees of comfort, he had never enjoyed the luxurious style offered by INI.
To say he was very pleasantly surprised when he discovered the bank’s limitless means would have been an understatement: travelling with Fitzwilliams or Kennedy was akin to travelling with royalty. That said he soon got used to it and ended up joyfully riding the gravy train.
As an academic his world had been one of intellectual reflection, at times far removed from real life. With Fitzwilliams he had learnt to see the world with another eye: how the mechanisms of economic reality were oiled; how the rich really lived; and how the poor survived in the kinds of places he would have never normally travelled to.
As a young man he had been oblivious to many of the realities of life. In his student days he had adhered to the idea the world’s sufferings were the fault of the rich and their corrupt political fellow travellers. Those illusions were now far behind him. The world was a much more complicated place and a few good intentions were not about to change its dangerosity.
In his lifetime the population of the underdeveloped world had exploded and were now threatening Europe, it was a thought he would have abhorred in the past, now it was a tangible reality.
The flow of migrants had become a torrent. The populations of the southern and eastern Mediterranean nations multiplied; those of Africa expanded with explosive force, growing to threes times greater that of the EU in less than a couple of short generations. At the same time the pressure of war, strife, hunger and disease undermined the fragile foundations of nations unable to confront the social and economic challenges that faced them.
Against this catastrophic backdrop Europe became a magnet, an oasis in the wilderness, one that would be engulfed unless politicians acted, abandoning the sterile hackneyed ideas that had borne them along them since 1945.
Refugees cross Balkans
Only a solid unified Europe could offer hope to those benighted regions, but Europe’s political establishment and its institutions were rarely capable of anticipating geopolitical and economic events of importance. In the case of Russia, Vladimir Putin with all the means at his disposal had not seen the collapse of oil and had embarked on his dangerous adventure in the Ukraine followed by his invention in Syria, policies that would cost the ordinary Russian dearly.
Political events were settled by negotiation, compromise and on occasions by force. But how could the millions of individual migrants in search of a better life be persuaded from embarking on the perilous journey to Western Europe’s shores. They sought economic security, not the kind of passing pride Mr Putin offered to his people. The proof was there to see: no one was heading for Russia, in fact young Russians were moving West, joining the growing numbers of their compatriots already in London and Berlin.
The flow of migrants had already reached unsustainable proportions. A stroll through the streets of almost any European capital was sufficient to convince even the most fervent believer in Europe’s capacity to offer a home to the world’s poor had been reached.
The UK, France, Germany and Italy could not provide adequate homes for their own poor let alone a new flood of migrants. Europe’s health, education and benefits systems were folding under the strain imposed by the constant flood. As for gainful employment for the new arrivals there was little hope in economies already stricken by high levels of unemployment.
The implications for governments were enormous. European voters, who suffered the consequences of politicians refusal to act by securing borders and transforming the EU into a viable union, expressed their discontent by voting in increasing numbers for extremist parties across Europe.
CASHING OUT
Tarasov, thanks to his association with Fitzwilliams, had succeeded in putting a large part of his fortune beyond the reach of the Kremlin, as had other Russians before him, including Roman Abramovich, Len Blavatnik, Eugene Shvidler, Alexander Knaster, Konstantin Kagalovsky and Abram Reznikov to cite a few. They, who had made fortunes on the backs of their fellow countrymen, were the lucky ones.
A quarter of a century had passed since the dissolution of the Soviet Empire. Following a simply declaration by Mikhail Gorbachev the Soviet Empire disintegrated into its component parts, with Russia becoming the Russian Federation, which was not exactly the kind of rump state Austria became at the end of the Austro-Hungarian Empire.
The Federation covered a territory of seventeen million square kilometres, almost double that of the USA, could count on vast reserves of gas, oil and minerals. In additional were industries as varied as space, aeronautics, armaments, automobiles, iron, steel, and all the products of a modern state, be it many of which were seriously run down and certain on the verge of bankruptcy.
Russia, a Communist run state for three quarters of a century, had literally been metamorphised overnight, the only problem was the ways and means to transform its loss making state run industries into profitable private enterprises.
The collapse of state institutions inevitably led to a chaotic handover, and handover it was, given the successive devaluations of the rouble. In a reversal of Lenin’s Bolshevik Revolution, one of the greatest transfers of wealth the world had ever seen had taken place, one which gave birth to a clique of hugely rich individuals, soon to be known as oligarchs. These along with their minor peers, divided the cake, that is the entire state owned industrial and distribution apparatus, under the patronage of a corrupt class of politicians and leaders.
It took a quarter of a century and Vladimir Putin to rein in the oligarchy and business classes, who were effectively transformed into the Kremlin’s marionettes. Ownership and dynastic succession depended entirely on Putin’s whims with no effective system of transferring wealth from one generation to another and little or no legal framework to protect the assets of Russia’s nouveaux-riches.
Mikhail Gorbachev and Boris Yeltsin
The Russian tradition of dynastic wealth ended when the Bolsheviks seized power almost a century earlier and the aristocracy was destroyed, notably under Stalin’s reign of terror. The new post-Soviet economy was shaped by Putin with his system of rewards and punishment, where the prosperity of Russia’s rich depended on their continued good relations with the Kremlin and its network of lawmakers, regulators and tax authorities.
Those whose whose loyalty was in doubt saw their wealth seized, were imprisoned or even murdered.
Khodorkovsky of Yukos Oil was an example. Convicted of tax evasion, money laundering and embezzlement, he spent a decade in prison. Others like Mikhail Guryev, whose fortune was estimated at more than four billion dollars, were luckier. Guryev was one of the few who succeeded in passing the control of his London-listed company to his son.
Putin’s system not only held the power of life and death over Russia’s oligarchs, it kept the tens of thousands of middle sized businesses under surveillance, the owners of which faced the constant threat of losing control of their assets, their only hope being to sell their businesses and put their capital out of the system’s reach.
A SETBACK
The news felt like a body blow. The shock of Wang’s decision to postpone the start of his transoceanic canal construction came out of the blue. Pat had been aware of the rumours circulating about Wang’s losses, but he had not realised the tycoon’s situation had been so dramatic.
The Chinese stock market crash had laminated Wang’s fortune which at the start of the year had been estimated at over ten billion dollars,
since then it was estimated to have fallen by ninety percent, a spectacular reversal of fortune. If his information was right, Wang was worth a mere one billion dollars, not much more the Pat’s own personal fortune and he was not about to finance the gigantic canal project.
The news news of Wang’s astonishing reversal of fortune came just as Sandinista lawmakers overwhelmingly approved a motion that granted the HKND Group a concession to design, build, operate and manage the canal and a whole series of linked projects, including two deep water ports, airports, an oil pipeline, six tourist complexes and free trade zones.
With the environmental study just being approved and excavation on the canal scheduled to start toward before the end of the year, the project director spoke of fine tuning, but the announcement of a twelve month delay was a bad omen.
As usual bad news never came alone and before Pat could absorb the implications, which in reality was not more than a loss of effort and face, the Shanghai stock market index took another dive. After regaining a little ground in August it plunged five and a half percent, which meant more pain for Wang.
It had been a lousy year and as things were going, thought Pat, it was heading for an even lousier end.
Ominous cracks were appearing in China’s financial markets with the announcement its biggest brokerage, Citic Securities, part of China Citic Bank, the seventh biggest in China, was in trouble. It seemed that a stupendous error on their part had been the cause of China’s stock market turmoil.
The bank was was founded in 1979, under Deng Xiaoping, by Rong Yiren, a so-called Red Capitalist, whose family of industrialists was one of the few of the pre-1949 period to have survived Mao’s revolution.
“Rong went on to become Vice President of China,” Angus MacPherson told Pat. “Which shows anything can anything can happen in China. It’s a story directly out of one of your Lu Xun novels,” Angus added with a wry smile.”
Rong’s family had owned an industrial empire of flour and cotton mills in Shanghai and when the Communists took over rather than flee to Hong Kong or Taiwan as many businessmen did, they stayed. His family continued to run their company until 1956, when all private businesses were nationalised. However, they were compensated and he was appointed the vice-mayor of Shanghai.
Citic Securities, having overstated its over-the-counter derivatives business by a gargantuan one trillion Rmb, explained the errors were the result of technical glitches. But deliberate misreporting was suspected so as to conceal the situation of their clients.
Angus McPherson was not surprised by anything, his long experience in Hong Kong and Mainland China was not just limited to banking, he was also well read in modern Chinese literature which offered numerous tales of roguery in the days when international powers reigned over the Treaty Ports, among those were the classics of the period: Shanghai Morning and Midnight, written between 1930 and 1950, when rich Chinese business brazenly manipulated markets in their race to get richer.
Citic’s chairman resigned and the firm’s executives arrested following the stock market’s when the Shanghai Composite Index fell by over forty percent. Short sellers and fund managers were arrested in classic Beijing style as banks were raided and brokers were accused of insider trading.
PARIS
The last leaves were falling from the trees when Liam Clancy checked into the Pavilion de la Reine on place des Vosges in Paris. It was mid-day and Gisele would be arriving from Cologne at Gare du Nord in another couple of hours. They planned a romantic weekend in the French capital: a visit to the nearby Musée Picasso; a stroll through Le Marais to admire the hôtels particuliers built in the sixteenth and seventeenth centuries by rich nobles; and of course shopping in the district’s many stylish boutiques.
That evening, Liam eager to show Gisele Paris, impress her by meeting Pat O’Connelly and his friends, had gladly accepted O’Connelly’s invitation for a before diner drink at his appartment on quai des Célestines a five minute walk from their hotel before diner at a restaurant near the Bastille.
Gisele had met the writer at the Cartagena Film Festival, but at the time it had been a swirl with so many people that she barely remembered him. This time it would be more intimate, just O’Connelly and his partner.
The weather was unseasonably warm as the couple left the hotel. It was already dark when they crossed the gardens on the place, cut through Hôtel de Sully, and then taking the narrow streets of the historical faubourg made their way down to the quay.
Gisele was excited, her previous visits to Paris had been during her student days, brief and reduced to the main tourist sights. This was different, perhaps it was because she was with Liam. Their lives were hectic and they had to make the most of the moments they could squeeze in together.
Pat O’Connelly’s welcomed them to his penthouse appartment that overlooked the Seine and Île Saint Louis and introduced Claire who took pleasure in pointing out the monuments to Gisele: to the right of Île Saint Louis they could see Île de la Cité and Notre Dame with the Bateaux Mouches making their way along the river, their flood lights illuminating the fine ancient buildings.
The surprise of the evening was the arrival of John Francis and his Russian girlfriend Ekaterina, making it a very international get together, at least as far as the ladies were concerned.
Pat served Champagne and Claire the canapés as they exchanged news. They talked about Tom Barton, Pat Kennedy and Sergei Tarasov. There was a moment of silence when Michael Fitzwilliams was mentioned. A dramatic year was drawing to a close, filled with changes that had affected each of their lives.
They soon made short work of the canapés and Claire apologised for the empty plateaus amongst their protestations, explaining she had not wanted to spoil their appetite for diner.
“I’ve booked a table at a little Colombian place near the Bastille. It’s nothing fancy, but I thought it would remind us of Cartagena,” O’Connelly explained with a laugh. “There’s a good atmosphere Friday evenings with Latino music … a jukebox. The food’s good and there’s a lot of it.”
“Great,” said Liam enthusiastically.
“I’ll take us about fifteen minutes to walk there, so we’d better fill up our glasses, then I’ll show Gisele and Ekaterina the Bastille by night.”
Happy and relaxed they downed the last of their Champagne, the evening promised to be good as they set off for Mi Ranchito Paisa a few blocks past the Bastille.
Cornucopia Page 112
