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GEIR HAARDE, Iceland's prime minister, is a jolly chap. At a business lunch in London, he was asked when the tidal wave of investment coming into the UK from his tiny country might be balanced to give British companies a shot at his markets. "As the Russians used to say," Mr Haarde replied, "come and visit us before we visit you!"
There was laughter, but it was muted. Mr Haarde had touched a raw nerve.
Allconquering Icelandic investors are one thing, but when they are spoken of in the same breath as "The Russians" a certain nervousness can be expected. |
The reason is that no one can quite work out where Iceland's money comes from. How does a country with 304,000 people - not much more than the population of Wandsworth - generate the billions spent in Britain in the past few years?
The deal by an Icelandic consortium to buy West Ham United is just the latest in a number of high-profile acquisitions that have seen Icelandic business punching way above its perceived weight. How do they do it? For years there have been rumours that Iceland became a handy offshore receptacle for Russian mafia money in the roller- coaster years that followed the collapse of the Soviet regime.
But no one has ever found real evidence to prove this and there is no suggestion of suspect Russian money going anywhere near the West Ham transaction.
Indeed, major investors in the East End football club made their money at the height of the Russian boom in the 1990s and witnessed at firsthand how foreign businessmen were intimidated and even murdered by the all-powerful mafia.
Happily, no such fate befell Bjorgolfur Gudmundsson. He is the former football player who is now Eggert Magnusson's financial backer in the West Ham takeover. These days, Gudmundsson is thought of as a billionaire financier and philanthropist, but in the early 1980s, he found himself entangled in Iceland's biggest business corruption inquiry. He and other executives involved in the collapsed shipping concern Hafskip faced more than 400 charges following a six-year investigation. In 1991 Gudmundsson was convicted of only five minor bookkeeping offences and received a 12- month prison sentence, suspended for two years.
The heaviest penalty, though, was that the former footballing hero, who played for Iceland's oldest club, was an outcast as far as the country's business community was concerned. Gudmundsson decided to rebuild his fortunes in Russia, then undergoing the painful transition from a Soviet command economy to something approaching capitalism.
Gudmundsson and his son Bjorgolfur Thor Bjorgolfsson set out for St Petersburg in 1993 with their friend and partner Magnus Thorsteinsson. They went into the brewing business.
In Russia in the early 1990s beer could be extremely bad for a person's health. One brewing executive was walking through the kitchen of his apartment when a hail of bullets came through the window and killed him outright. Another was cut down as he stepped out of his Mercedes.
A gunman walked up to him and coolly fired three bullets into his head.
Other assassinations in the business and political sphere rocked St Petersburg, but Gudmundsson, his son and their tner stood their ground.
Indeed, their vo brewery flourished, even as a raiser put paid to one of their main petitors.
he partners eventually sold out to neken and, pocketing $400 million, urned to Iceland to increase their lth. While Mr Thorsteinsson went off nvest in an airline, Mr Gudmundsson his son Thor (always known as Thor rgolfsson, using his patronymic as is Icelandic custom) set about the busis of becoming billionaires.
nd what better way than to buy a bank?
hey were expanding their interests a years ago, Iceland was privatising anking industry. Father and son had spered with their investment vehicle, mson, and expressed an interest in dsbanki, the country's second biggest k.
make sure the bank sales were ond reproach, Iceland's government ointed an Executive Committee on vatisation to oversee the process and y honest broker.
When Mr Gudndsson - a longstanding supporter of ruling Independence Party - ressed an interest in Landsbanki, govment ministers also took a keen intercording to one observer, the ministers an assuming the role of the privation committee. Three suitors were cted for the banks and Samson, Mr mundsson's firm, was placed in line Landsbanki.
contemporary report said Samson ght a 45.8 per cent controlling stake for million. The value of Samson's shareding increased by 400 per cent in just r three years.
some quarters, the sale of the banks sed outrage. A member of the priisation committee, economist igrimur Ari Arason resigned in test, saying he'd never seen "such aordinary practices".
gibjorg Slorun Gisladottir, chair of and's Social Democratic Alliance, said privatisation rules had been "grossly ated". It was, she said, just like Russia.
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