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This month has seen a very uneventful conclusion to the criminal case once regarded as the greatest international corruption investigation in US history. In one stroke, the prosecutors dropped about 60 charges of overseas bribery, money laundering, tax evasion, and mail and wire fraud. The individuals under scrutiny are, on the one hand, multinational oil giants, and on the other, the President of Kazakhstan. The allegations involve a labyrinth of numbered accounts in Swiss banks and multi-million bribes being paid to win lucrative contracts. In short, the trial of the century has been cancelled.
The defendant, James Giffen, owns a fairly small investment bank in the U.S., employing just a handful of people. Yet, it was Giffen who personally controlled the flow of oil from one of the largest producers in the world – Kazakhstan – for many years. Until being taken in handcuffs from the JFK airport in 2003, he was known as the “oil consigliere” to Kazakhstan’s President Narsultan Nazarbayev. Among the captains of the oil industry, Giffen was known as “Mr. Kazakhstan.” It was Giffen who arranged oil deals worth billions of dollars, made by multinational companies in Kazakhstan throughout the 1990s.
Needless to say, big business in Central Asia is not always done in spotlessly white gloves. The case was settled, however, with a plea bargain. The consigliere pled guilty to giving inaccurate information about his foreign bank accounts on his 1996 tax return. He will be sentenced in November – six months in prison at most.
The plea bargain relieves Giffen of the obligation of telling his side of the story – a story which, he claimed, is rooted in the dark secrets of the Cold War. His defense lawyers portrayed him as an American super-spy, whose unscrupulous financial operations over two decades were actually intelligence operations authorized officially or unofficially by the CIA, the State Department, and the White House. The case was protracted for seven years because his lawyer applied for disclosure of secret documents from state agencies.
All of this has suddenly become of no interest to the prosecutor and judge. The defendant simply forgot to check a box on a tax form. As for that odd $84 million in frozen Swiss bank accounts, a deal has been made with Kazakhstan and Switzerland whereby the money will be spent on programs for poor children and to improve transparency in the Kazakh oil industry.
This is certainly one of those cases which might be justifiably called a legalized cover up. But there is more to it than just protecting high-ranking officials. It is true that Giffen’s story is deeply rooted in the secrets of the Cold War — and it was in nobody’s interest to have those secrets revealed in an open court. That is why the government fought tooth and nail to keep their secret documents under seal, and eventually chose to let Giffen off the hook rather than open a Pandora’s box.
However, Giffen’s activities have left a document trail in the Soviet secret archives as well as in the American ones. Despite all the efforts of the secretive Russian regime, some of these documents have leaked out. Below, they are made public for the first time.
How could a small investment banker become one of the most powerful figures in the world of global oil trade?
During the Cold War, East-West trade was closely interlinked with Soviet “active measures” espionage. The legendary secret agent businessmen, such as Armand Hammer or Robert Maxwell, were only the tip of the iceberg. Another example was the network of the “firms of friends,” secretly or openly controlled by the Western Communist Parties, which traded with Moscow on beneficial conditions, and was used by the Soviets to channel money for the purpose of subverting the free world. Meanwhile, about 300 large US businesses worked together with the Soviets in the secretive umbrella organization known as US-USSR Trade and Economic Council (TEC). Eminent Hoover Institution historian Anthony Sutton, who investigated the TEC in the 1980s, described it as “a formal joint Soviet-American apparatus to conduit advanced technology with pure military applications to the Soviet Union” and directly accuse its American members of “treason.” The TEC, whose membership list remained secret, was known to be backed by then Vice President George W. H. Bush and Commerce Secretary Malcolm Baldridge.
The president of that organization was none other than James Giffen.
On the Soviet side, the TEC co-chairman was Vladimir Sushkov, the USSR’s Deputy Minister for Foreign Trade.
The 1972-1991 diary of the high-ranking Soviet official Anatoly Chernyaev, now available to researchers in several archives, reveals how he was briefed by Sushkov about the TEC activities in the 1970s.
Sushkov said the American members of the TEC included “the biggest monopolist giants, such as General Motors.” Some of them were willing to provide the Soviets with “badly needed products, including those of military significance,” Chernyaev wrotes on 21 January 1978.
The then legislation barred US banks from lending money to the USSR because of Soviet human rights abuses. However, the American members of the TEC allegedly told Sushkov:
We can give you any loans. You just name a dozen of products you would supply to us in exchange. Let them even be not good enough for the US or West European markets – no problem, we operate all over the world. We have simply coercive markets in the Third World, where we can sell whatever you want.
The diary continues:
Their cynicism: the multi-national corporations, members of the US-USSR Council, organize “positive results” of opinion polls in the US in favour of the development of Soviet-American economic links… They pay good money to all these Gallups for a poll to produce the required result.
Hawks and Jews
As the TEC President, Giffen was in the very heart of that murky world. A top secret report by another high-ranking Soviet official, Vadim Zagladin, now deposited in the Gorbachev Foundation Archive, records his meeting with Giffen in May 1985:
The meeting took place on 17 May on the initiative of Giffen, who shared his considerations in connection with the US Commerce Secretary Baldridge’s upcoming visit to the USSR.
1. Giffen described Baldridge as one of the most reasonable, though not highest-ranking, members of the Administration. Especially in recent times, he firmly advocates the development of relations with the Soviet Union and, in particular, the development of US-Soviet trade. […] You can consider Baldridge, Giffen said, as the friendliest man towards the USSR in the present US Administration.
2. […] The mood in the Administration increasingly favors some kind of “improvement” in the relations with the USSR. The people who take such a view include [State Secretary George] Schulz, [National Security Advisor Robert] McFarlane and Baldridge. There is, of course, the opposite wing ([Defense Secretary Caspar] Weinberger, [Assistant Defense Secretary Richard] Perle, and others), who advocate confrontation. However, although the latter wing dominated Washington’s policies until recently, now they are gradually losing ground to the soft-liners. Giffen is convinced that, in the nearest future, we will see great twists and U-turns in the administration’s policy due to the rivalry between different factions. […]
3. In these circumstances, Baldridge hopes to achieve some positive results in Moscow. Obviously, he cannot return from the Soviet Union with just unilateral results, i.e. having only made concessions to the Soviet Union. He has to get something in exchange, although, basically, he cannot and should not expect anything serious.
The document then goes into some detail as to what concessions the Soviets could expect from Baldridge, and how they could get away with offering some purely symbolic quid pro quo.
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