The Factory (13 page)

‘Loves me,' insisted the woman, indistinct through cupped hands. ‘Harry loves me.'

‘Always the innocent who suffer,' said the Director General. ‘Your guess about why the Americans did it looks right, incidentally.'

‘What about Patricia Hall?' said Walker.

‘She is going to be charged. She'll go to jail. No alternative,' said Bell. ‘There was never any marriage intention, of course.'

‘And Harry Myers?'

‘Diplomatic immunity. Withdrawn to Washington,' said Bell. ‘Now Washington has got to try to repair the damage.'

‘How are they going to do that?' asked Walker.

‘With the most incredible difficulty,' said Bell. He'd allow himself an extra whisky tonight, to celebrate.

7

The Moneychanger

Intelligence – the gathering of it and use of it and most particularly what are later regarded as sensational intelligence coups – is not quick. It is timed in months rather than weeks: sometimes years rather than months.

By the early 1980s international Western banks and financiers confronted a nightmare. To explore mineral discoveries that never materialized and oil deposits that never actually brought black gold bubbling from the ground, they had loaned more money to developing Third World and Latin American countries than any of those countries could possibly pay back. By 1982 the combined debt was $626 billion. It was so much money, in fact, that the banks could not declare any one country in default: the loss would have been so enormous that the banks themselves would have gone bankrupt. One bankruptcy would have spread to another and from one financial centre to another and inevitably toppled the Western world's financial structure. Those of Asia – Japan and Hong Kong – would have collapsed as well. The incredible resolve was to lend more money to the debtor countries so they could meet the interest payments on money they had no hope and sometimes no intention of paying back: the situation was of borrowers controlling the lenders, not the lenders dictating to the borrowers.

It was a situation from which the KGB saw great benefit. It took them several years before they were in a position to achieve it.

*

Everyone employed at the Factory was an expert intelligence officer but some were more specialized than others. Ian Sinclair was the financial guru. He actually looked like a banker. He was a tall, studious man who dressed in the conservative greys and blues of a financial manager. He rarely spoke before giving careful thought to what he was going to say; his party trick, however, was mentally making arithmetic equations faster than an opponent could operate a calculator.

The story of the Director General's drinking was widespread throughout the department by now and when he entered the man's office Sinclair decided Samuel Bell was certainly getting the appearance of someone who liked whisky too much. His face was a strangely permanent red colour and there was an uncertainty about his movements and sometimes his speech, as if he had difficulty in remembering what he was doing or saying halfway through.

‘I had an intriguing lunch with the Governor of the Bank of England,' announced Bell. ‘All our leading banks have to make loan details available, as you know. It seems nearly all have started making substantial loans to Latin America and the Third World again.'

‘I would have thought they'd burned their fingers badly enough the first time around,' said Sinclair.

‘So did he.'

‘Why doesn't he order them to pull back?' questioned the financial expert. ‘He's got the authority: that's why the banks have to provide details of their international loans. It's the English law.'

‘He's considering it,' said Bell. ‘But the curious thing is that the new confidence is based upon all the indebted countries not only meeting their existing interest payments on time but in some cases paying off proportions of the original debt itself.'

‘With additional money the banks themselves have provided?' predicted Sinclair.

‘There's been no re-financing of the original loans by any English bank to make that possible,' refuted Bell.

‘So they're borrowing from banks of another country, to build up confidence here to get more money.' It was obvious.

‘Prove it,' ordered the Director General.

Yuri Pavel had been a child mathematical genius discovered very young by the KGB. His financial instruction in KGB schools began in Moscow but because Pavel was being groomed for a specific purpose he was entered into the Harvard Business School and infiltrated under an assumed Swiss identity into the United States when he was eighteen. He became expert in all details of Western monetary structures and practices. He graduated with honours and moved to Switzerland. There Pavel joined a carefully chosen international bank based in Zurich and for a year put into practical daily use the theories he had been taught for so long. He was recognized as a brilliant and innovative financier and his employers tried desperately to keep him when he tendered his resignation. Pavel refused every inducement, of course. He was ready to begin his real work. Which was to undermine the international financial structure of the West.

Ian Sinclair commenced his investigation convinced that his guess in the Director General's office, that the debtor nations were achieving respectability by juggling money from one lending nation to another, was the simple explanation for what was happening. To confirm it he flew to Washington with a letter of introduction from the Bank of England governor to the chairman of the Federal Reserve Board, the controlling and monitoring body for American financial institutions. And encountered his first doubt. The chairman, a bluff, quick-smiling man named Phil Brady, said he and all his officials were delighted at the turn-around in Latin America. The heaviest-indebted countries like Mexico and Brazil were not only maintaining their interest payments on schedule but each had paid off substantial amounts on their existing borrowing, apparently from internal resources, without any more loan applications to achieve it.

With more introductory letters from Brady, Sinclair spent a week pacing Wall Street, the New York centre of American banking, checking every US finance house. Not one had lent money to fund interest repayments. All, however, were advancing money on fresh loans for specific development purposes. Interestingly, Sinclair discovered that many of the new US loans were made in conjunction with English, German, Japanese and French banks. The myriad consortia meant the risk of non-payment could be spread so that none was individually over-committed, as most had been in the early 1980s.

Still reluctant to abandon his money-juggling suspicion, Sinclair flew back to Washington to confront the chairman of the International Monetary Fund, the global body maintained by donations from Western governments to prevent unsettling jumps in world economies disturbing the stability of Western financial centres. As it is an international organization, the chairmanship revolves between financiers of contributing countries. That year's chairman was René Lebre. Sinclair met the familiar scenario: old loans were being repaid, interest maintained and favourable consideration given to further borrowing.

‘It is all very satisfactory,' insisted the Frenchman.

Sinclair didn't consider it to be, finally. He'd changed his mind completely and believed it very dangerous. The problem was deciding exactly what ‘it' was.

Without the modern technology of computers and their ability instantly to tap in to information on the far side of the world from London it would have taken months for Sinclair even to begin to understand: maybe he never would have understood because it would have involved personal visits to every one of the financial centres to study stockmarket movements of commodities emanating from the borrowing countries, together with quoted companies dealing in those commodities. In addition he had to conduct a global survey of fresh loan applications against settlement and maintenance to world banks for those already existing. And having done that, do a further comparison, seeking common denominators. After a week Sinclair believed he'd found one, although it still didn't make sense to him. There were other discoveries, however, which increased his worries.

When Sinclair arrived for the requested interview the Director General appeared distracted, which he was because, having succeeded in burying a mole deep within the Soviet intelligence organization, Bell had expected by now to have received some message guiding him in turn to the KGB mole he was convinced to be operating within the Factory. But there had been nothing and Bell was growing increasingly worried that the man had not, after all, succeeded in penetrating Moscow as successfully as he'd first imagined.

The Director General forced himself to concentrate upon what his financial expert was saying, wishing he hadn't drunk quite so much the previous evening. At the end of Sinclair's report, Bell said: ‘Nowhere in the world has there been a loan application to enable an interest payment, from any one of the debtor nations?'

‘None,' confirmed Sinclair. ‘Which is inconceivable. Maybe one or two could have improved their trading positions and been able to meet a demand or two. But not every single one! That defies any mathematical or trading logic.'

‘What else?'

‘I'm interested in the dates, because they create a picture,' pointed out Sinclair. ‘I've surveyed every indebted country: written my own computer programmes so I can make an immediate comparison. It's like writing patterns on my visual display screen. Mexico meets its payment on the fifth of every month, Venezuela on the sixth, Argentina on the eighth, Chile on the ninth, Costa Rica on the eleventh and so on.'

‘What's the significance of that?'

‘Look at the print-out,' invited Sinclair, indicating the sheets of paper that lay on the Director General's desk. ‘They've been repeated, on precisely the same dates, every month for the past nine months. That's inconceivable, too: there would naturally be variations on the payment dates. And, judging from their past record, sometimes no payments at all.'

‘Anything else?'

‘In the early 1980s the loans that the various countries were unable to service were much more concentrated, mainly among British and American banks and the International Monetary Fund. The new applications aren't. They're spread through hundreds of consortia and those consortia are composed of banks widely apart from each other: Tokyo banks are linked with those in Amsterdam and Copenhagen and Bonn. Hong Kong with London and Chicago. New York with Paris and Frankfurt. And no one country more than once with any same composition of bankers. No one group of banks can know the extent of the lending of another.'

‘I think I can see the danger there,' said the Director General doubtfully. He was not thinking any more about the unknown traitor within his own organization or bothered by his fading hangover.

‘Not completely, you can't, not yet,' challenged Sinclair. ‘I've done another computer analysis. In 1982, the accumulated debt was $626 billion. Now it's around $1,000 billion. And getting larger.'

‘And no one has realized it yet!'

‘I've spoken to dozens of bankers and financiers, waiting for someone to tell me. No one has. No one has a clue.'

‘Oh my God!' said Bell. ‘What would happen if there were a repeat of what happened before!'

‘If there'd been a sudden drying up of money the first time it would have been calamitous. Hundreds of banks would have collapsed: economies brought near to breaking point. But I don't think there would have been a universal disaster. If it happened now, it would be impossible to avoid a complete and utter universal disaster. There wouldn't
be
any economy or commerce left in the West or in Asia. Everyone would be back to the barter system.'

‘But how?' demanded the Director General. ‘How has it become possible!'

‘I don't know,' conceded Sinclair. ‘It's been manipulated but I can't understand how. Or by whom.'

‘We must issue warnings,' insisted Bell. ‘Advise the Bank of England and the International Monetary Fund and see what can be done to stop it going any further. Devise possible rescue operations.'

‘And cause utter panic?' accused Sinclair. ‘Panic that would get worse when the banks and the financiers recognized that it's too late. That there is nothing they can do.'

‘Oh my God,' said Bell again, helplessly.

Yuri Pavel was a dedicated communist with the mind and the attitudes of a capitalist. And the tastes of a capitalist, too. He enjoyed the West and particularly the luxuries unknown in the Soviet Union: as the international banker and financier he had become he was able to enjoy them all. He did actually own a bank, a discreet, inconspicuous building in the Swiss city of Basle. It was concealed far more than by its hidden-away position in the Freiestrasse, however. On no official document was Pavel shown as a director or to be in any way connected. The bank was owned by a holding company incorporated in Zurich – where Pavel's name did appear – and then further concealed by that holding company's controlling shares being held by another anonymous company in Liechtenstein. Both the Zurich and Liechtenstein companies were created under the banking system known in those countries as an
anstalt;
it protects absolutely under the banking secrecy laws the identity of any officer or shareholder. It was through this secure route that the KGB millions were channelled to fund the bank with sufficient reserves publicly to operate as a finance house according to Swiss fiscal regulations and privately to create the worldwide financial disaster that Pavel had been concocting for more than two years.

Pavel did not confine himself to Switzerland. He had established linked companies in nearly all the secrecy-tight tax havens, mostly in the Caribbean, with its convenient proximity to Latin America. He had operations in the Bahamas, Bermuda, the Cayman Islands and the Netherland Antilles. He chose to live and work a great deal of the time in the Caymans, in a beachside apartment, because he liked the climate there better than anywhere else. It was to be a mistake.