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'No and No Again': The Rocky US Relationship with Little Austria

Part 2: Profit Seeking and Pacifism

Photo Gallery: The Austrian Thorn in America's Side Photos
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The business relationships of Austrian banks -- particularly Raiffeisen Bank -- regularly appear on the radar screens of American's global strategists. According to an American memo from February 2006, about three-quarters of a total of 292 "suspicious activity reports" since the late 1990s, including those with "shell companies used by criminal groups" were tied to the financial institution, which has its roots in Christian-conservative political circles.

The Americans were especially upset about Raiffeisen Bank's contacts with Iran, which led the Americans to ask to meet with Austrian bankers in Washington and Vienna. The US delegation in Austria refused to accept the Austrians' assurances that Raiffeisen was not a major player in Iran. The US ambassador wrote in a report that the bank was taking "serious reputational risks."

Indeed, it is precisely Austria's interactions with Iran that US diplomats see as the crux of the country's approach to politics. Austria, the US believes, combines a pronounced profit-seeking motive with an underlying pacifist stance. As the Americans see it, it's hard to take action against a country in which "Austrian business leaders believe they are well within their rights (in trading with Iran), and indeed exemplify the country's neutralist tradition." Viennese officials went on record in 2008 as saying that "maintaining ties with Iran will be more effective in influencing its behavior than attempting to 'strangle' the regime in Tehran." As early as 2005, US diplomats concluded that the Austrians will not back away from any business deals or support any diplomatic initiatives "on our say alone. They need to be convinced."

Saying It Like It Is

An employee at Austria's Economics Ministry provided assistance in the effort to convince. In the case of arms manufacturer Steyr-Mannlicher, US envoys issued sharp protests against the company's dealings with Iran. The state-owned energy company OMV merely shrugged after it had signed a memorandum of understanding to jointly develop the South Pars natural gas field with Iran's state-owned oil company despite UN sanctions against Tehran. A fuming US ambassador described this decision as a "propaganda victory" for the Iranians.

Still, there were also a number of curious controversies that saw members of the Austrian government put on the spot. For example, in January 2009, when outgoing US Ambassador David F. Girard-diCarlo was making his farewells in Vienna, he issued a rather undiplomatic though veiled threat in the presence of Foreign Minister Michael Spindelegger. "It is simply not credible," Girard-diCarlo said, "if you tell us that the government has no sway over major private sector companies in Austria. Such statements are not well received in Wasthington."

Likewise, anyone who tried to turn a profit with countries belonging to President George W. Bush's "axis of evil" was likely to be called out. Austrian Finance Minister Karl-Heinz Grasser was personally questioned on the issue of why, beginning in 2001, the Bank Austria Creditanstalt (BA/CA) completed a dozen "mostly nuclear related" transactions in Iran, as well as having business ties with North Korea. Grasser grudgingly agreed to look into the matter. In February 2006, American diplomats reported that the BA/CA had agreed to sever its business ties "with North Korean entities."

'Unappetizing Arrangements'

US Embassy dispatches on the company RosUkrEnergo (RUE) also offer interesting insights into a gas deal plagued by corruption. The highly profitable Russian-Ukrainian joint venture, registered in the Swiss canton of Zug, was being discussed as a possible middleman for gas deliveries from Central Asia. RIAG, an Austrian subsidiary of Raiffeisen Bank, was the trustee for the initially unnamed owners of the Ukrainian part of the company.

In March 2006, while the rest of the world was still wondering whether the alleged Russian mafia boss Semion Mogilevich could be involved, US Embassy representatives in Vienna had begun questioning Raiffeisen executives. According to the US Embassy's report, Raiffeisen Central Bank (RCB) general director Walter Rothensteiner and Raiffeisen Bank International (RBI) CEO Herbert Stepic had claimed that "senior Ukrainian and Russian government officials, including Presidents Putin and Yushchenko, were aware of all the details behind the RUE gas deal." Stepic also said that it "would be extremely naive to think otherwise. Putin and Yushchenko know everything about RUE."

The statements the Austrian bankers made to the US ambassador are particularly remarkable given the fact that that Russian Prime Minister Vladimir Putin had complained that Ukrainian politicians were siphoning money away from the deal while then-Ukrainian President Viktor Yushchenko offered merely monosyllabic statements in support of RUE.

Still, the American ambassador sharply rebuked the Austrians for their role in the Russian-Ukrainian gas deal, writing: "It was hard not to suspect that the Trusteeship was simply a fig leaf to cover an unsavory arrangement." As other cables from the US embassy in Kiev suggest, it apparently emerged in 2007 that a partner in the deal was a "close friend and confidant" of then-President Yushchenko. At the same time, this individual was identified as a person with contacts to the presumed Russian Mafia boss Mogilevich, whose "permission" was needed "when he established various businesses."

Where Do Austria's Political Values Really Lie

Raiffeisen Bank's business dealings are just one example of US suspicion of Austria. "It is a tenet of Austria's national mythology" US diplomats concluded in 2007, "that the country's ability to maintain ties throughout the world constitutes a real contribution to peace and stability." But was little Austria really a broker on a grand stage? And could it not be that political neutrality was merely a catchphrase for the art of always being involved but never having any real responsibility? In the American's eyes, this general criticism also includes the fact that Austria took considerable pains to be perceived as a site of international conferences -- irrespective as they derisively note, of the "substance" of such events.

In fact, the Americans apparently had a real hard time figuring out the exact political views the Austrians represented. "Austria continues to maintain close political and commercial ties to countries of concern to the US, including some which we have designated as state sponsors of terrorism," they wrote in a 2005 cable. For the Americans, the "bridge building role as a continuing legacy of Austria's Cold War neutrality," had become practically second nature to the citizens of the Alpine republic. "Austria's approach makes it prone to take a benign view of activities which give us pause," the cable added.

The Price of Rejection

What's more, the Austrians did not look as charitably on things that were of great importance to the Americans. American attempts at all levels to soften "early and total rejection" of former Guantanamo detainees by the Austrian government repeatedly went nowhere.

The US was desperately trying to find homes for former Guantanamo detainees -- and treating every success as proof of loyalty. According to a US Embassy cable from January 2009, the response from Vienna was clear: "No, and no again ... and again."

As Austrian Foreign Minister Michael Spindelegger put it: "Whoever causes a problem must also bring about its solution." It was a position that is difficult to contest, but was also unlikely to improve US-Austrian relations.

As the US Embassy wrote in an August 2009 memo: "The Austrian government wants contact with the Obama administration at cabinet level and higher. We are making it clear that such contact requires real US-Austrian partnership."

Translated from the German by Christopher Sultan

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