WHO ELSE PROFITS?
Barack Obama’s presidency would be largely dominated by the results of ethically-challenged bankers who drove the world into a global economic crisis. He noted that there needed to be a shift in ethics in business and that “everybody from CEOs to shareholders to investors are going to have to be asking themselves, not only whether ‘Is this profitable?’ and will it boost my bonus?, but ‘Is it right?”.677 During the same period, Thomas Friedman wrote that “We don’t just need a financial bailout; we need an ethical bailout. We need to re-establish the core balance between our markets, ethics, and regulations.”678
The banks and motor companies, airlines and others, received their financial bailouts. So did global economies and we learned a new term “quantitative easing”679 and the corporate world was, supposedly, rebooted. As stability returned, the financial world started to turn again. Things got back to normal. Almost.
Engineering an ethical bailout will take longer. Efforts would be made to draw the corporate world into line and to engender a greater sense of social responsibility. Today, corporate credentials run far beyond turnover, growth and profits. They extend deep into ethics, integrity, credibility, track record and corporate governance.
Increasingly, in addition to “what a company does,” it is equally important to focus on “how it does it.”
On March 24th, 2016, the United Nations General Assembly Human Rights Council adopted Resolution 31/36, which instructed the High Commissioner for Human Rights to prepare a “database” of “business enterprises that have directly and indirectly, enabled, facilitated and profited from the construction and growth of the settlements.”680
The Human Rights Council was, it seemed, intent upon ratcheting up the pressure on Israel and its corporate allies. Corporate complicity was set to become an increasingly important issue, one which would target those who were active in supporting Israel’s illegal activities in the West Bank and Gaza.
The inextricable link between settlements and negative human rights impacts was reaffirmed in the Human Rights Council’s February 2018 update on its database, which stated: ...violations of human rights associated with the settlements are pervasive and devastating, reaching every facet of Palestinian life, owing to settlement development and infrastructure, Palestinians suffer from restrictions on freedom of religion, movement and education; their rights to land and water; access to livelihood and their right to an adequate standard of living; their rights to family life; and many other fundamental rights...681
Today, 600,000 Jewish Israelis live in about 140 colonies682 constructed on land belonging to another people, the Palestinians, either in the West Bank or east Jerusalem. These settlements are land theft, nothing more. Article 49 of the 1949 Geneva Convention remains explicit on this issue: ‘The occupying power shall not deport or transfer parts of its own civilian population into the territory it occupies.’683
Israel pursues its expansion blatantly in the face of international law.
But hang on. The international community, via the United Nations General Assembly Human Rights Council, had decided it has the will to challenge the corporate complicity of those firms who will support Israel’s efforts to annex occupied Palestinian territory. Good.
A noble cause.
What then about the some half a million people of the Sahrawi Arab Democratic Republic, which is partially Moroccan-occupied? And a thought for Northern Cyprus? Is the United Nations prepared to do the same for Tibet? The Spratly Islands? Crimea?
The parallels are clear, but not the international response.
To date, the Human Rights Council’s focus has been singular upon Israel and Palestine. The pursuit of international law and corporate maleficence in that regard is strangely monochromic.
Says the Jerusalem-based Kohelet Policy Forum: Such an activity – making blacklists of private organisations – is absolutely unprecedented for the Human Rights Council. And the current “research” programme is focused on only one context: companies working in areas designated as being under Israeli civil jurisdiction in the West Bank under the Oslo Accords...
The clear goal of the Council in producing such a list is to create negative reputational consequences for the listed companies, and ultimately to trigger sanctions against targeted companies through subsequent action by the Security Council or national governments.684
Global bodies have quite rightly harangued Israel for its activities, and the international corporates which support that nation. Yet at the same time almost nothing has been done to stop the same activities elsewhere in the world.
Kohelet Policy Forum is an Israeli non-profit think tank that aims to anchor the Jewish People’s right to an independent sovereign state in law and state policy. When the aforementioned United Nations General Assembly Human Rights Council resolution was passed, Kohelet Policy Forum’s response was not to defend Israel’s occupation, but to go on the offensive and highlight the hypocrisy of the decision.
Kohelet Policy Forum’s report, ‘Who Else Profits’, goes on to say: The majority of the population in these territories now consists of settlers, fundamentally undermining the possibility of self-determination or a political solution. There are also settlers in Armenian-occupied Nagorno-Karabakh and the Occupied Ukrainian Territories. In all these cases, foreign companies, quite commonly European ones, actively support the settlement enterprise. These activities include extracting natural resources from the territories, providing infrastructure support to the occupying power, and in general, making the settlement enterprises more economically viable.
The companies involved have a global profile and valuable brands, and they pride themselves on a respect for human rights. Moreover, many of these companies have significant links to governments of their home countries, often being partially owned or controlled by the state. If commercial support for settlement enterprises is a human rights issue, it implicates the leading executives around the world, and in many cases the home states that support them, the investors who fund them, and more.685
The Hague Regulations specify that a “territory is considered occupied when it is actually placed under the authority of the hostile army.”686 Occupying powers often dispute the status of the territory they occupy, undermining the ability to identify when the laws of occupation apply. However, in the case of Nagorno- Karabakh, international law is clear. United Nations Security Council resolutions 822, 853, 874 and 884 are unambiguous in this regard. The principle of territorial integrity underpins international law norms.687
There has been growing recognition that companies must respect human rights. The Bruges Declaration on the Use of Force gives rise to firm principles in this area688 and perspective was institutionalised and codified when the United Nations Human Rights Council approved the United Nations Guiding Principles on Business and Human Rights in 2011.689
The Bruges Declaration dictated that an occupier can utilise the resources of an occupied territory only “to the extent necessary for the current administration of the territory and to meet the essential needs of the population.”690
A growing awareness, and the codification of these principles, has led to a widening number of international decisions that support the Bruges Declaration and United Nations Guiding Principles on Business and Human Rights.
In Africa, for example, Uganda would find itself rebuked when it unlawfully allowed exploitation of natural resources during a partial occupation of the Democratic Republic of Congo.691 In the Middle East, the pressure points between occupation and commerce are even better known. As early as 1977, United States State Department memorandum cited this principle to oppose Israel’s use of Egyptian oilfields during its occupation of the Sinai Peninsula.692
Since that time controversy has reigned over Israeli use in the Occupied Territory. The United States and Britain committed to abide by this principle following the occupation of Iraq in 2003. And these fundamentals have gained increasing traction. One very visible example of this came in January 2018 when an Israeli-
Palestinian news site reported that online real estate rental firm Airbnb was listing homes in Israeli settlements in the occupied West Bank. When this story was picked up by The New York Times693 and Washington Post,694 Airbnb came under sustained pressure for trading in an area under military occupation.
Oslo-based pension fund Kommunal Landspensjonskasse Gjensidig was one of the first major corporates to take a firm stance on the issue, blacklisting ten companies trading in Moroccan-occupied Western Sahara and Israel-occupied Palestinian Territories.695
It is all about what the Diakonia International Humanitarian Law Resource Centre calls “The Unsettling Business of Settlement Business”.
Prominent, particularly in Stepanakert, are Yerevan’s banking brands, names like Araratbank696 and Ameriabank.697
Another interesting name, perhaps, amid the rampant money laundering of the territory’s financial market, is ArmSwissBank, owned by Armenian businessman Vartan Sirmakes.698 While being privately owned, its tangled ownership structure has links into Holland and Luxembourg, that bastion of banking secrecy.
Co-founder and CEO of the Franck Muller Group,699 Sirmakes descends from a family of Armenian jewellers and has proven to be one of the most active and well-connected Armenian businessmen in the territory. Indeed, Sirmakes would find himself be charged by INTERPOL700 for his activities — and for his widening investment portfolio in Nagorno-Karabakh, one that includes caviar production and a gold mine.
Seemingly unconcerned by then-President Serzh Sarkisian’s corruption-tainted leadership, Sirmakes was happy to enjoy close relations and accepted an appointment as a Consul General in Marseilles, France.701
The United Nations, as stated in General Assembly resolution 62/243, regards Nagorno-Karabakh and the surrounding region as Armenian-occupied territory.702 This view is shared by the United States, 703 the European Court of Human Rights,704 and the Organisation for Security and Co-operation in Europe Minsk Group, which reports on what it calls the ‘Occupied Territories of Azerbaijan Surrounding Nagorno-Karabakh.’705
In 2001, PanARMENIAN.Net reported that Sirmakes was switching production of some lines of Franck Muller’s ‘Swiss’ watches to Armenia. The same news story hailed a decision that local gold would be used for the company’s high-end 18-carat gold watch lines.706
With local mines being allocated to the political elite and whose ownership is murky, at best, and Nagorno-Karabakh’s mining sites being exploited in defiance of international law, Sirmakes’ apparent patriotism brought Franck Muller into the realms of corporate disrepute of those firms who utilise blood diamonds or child labour.
While Sirmakes pursues profits in the territory, one million people are denied the opportunity to return home.707
As the international spotlight on corporate complicity moves away from its focus on Palestine, the co-founder and CEO of a luxury brand such as Franck Muller Group will find himself guilty of violating the international law, the Geneva Convention and Additional Protocols, and dealing with illegal exploitation of the natural resources in an occupied territory where the granting of mining rights is notoriously corrupt.
Interesting times when this happens.
Yet its not just Armenian companies and ethnic Armenian businessmen who have established themselves in Nagorno-Karabakh.
We see plenty of evidence of United States construction machinery giant Caterpillar, whose name appears on a United Nations High Commissioner for Refugees blacklist for its Israel-connected activities. Baku complained to the United Nations for Caterpillar’s willingness to undertake the same in Nagorno- Karabakh.708
Chairman and CEO Jim Umpleby heads a firm considered the world’s largest construction equipment manufacturer. Yet the search for profits has been enough to take it further than Israel and Nagorno-Karabakh. In March 2017, United States Federal authorities searched its corporate offices, after years of controversy surrounding suspect accounting practices.709 By 2018, the Internal Revenue Service had increased Caterpillar’s tax penalty to $2.3 billion,710 more of a concern in Deerfield, Illinois, perhaps, than the morass it is helping dig in Nagorno-Karabakh.
Other multinationals are also profiting. Also blacklisted for its activities in Palestine was Airbnb. Under international pressure the firm withdrew from Israeli-Occupied Territories, but continues to list properties in Stepanakert, Shusha and others. The company allows bookings in ‘Artsakh’, while the map shown in its website is Nagorno-Karabakh.711
A host of Western telecommunications giants have also claimed Nagorno- Karabakh’s airwaves at various times. Orange Armenia began commercial operation in 2009 and referred to the territory as “Artsakh”, providing roaming services through a special agreement with Nagorno-Karabakh telecom. Paris headquartered Orange also operates in Western Sahara.712
Britain’s Vodafone would prove as ethically challenged as its French competitor, indeed more so. In Armenia, MTS-Vodafone operates through VivaCell-MTS. In addition to providing services, VivaCell-MTS supports nationalist events and fundraisers.713 Vodafone CEO Nick Read does not just see his company succumbed to the ‘Is it right? test but allows it to become a corporate cheerleader for defiance of United Nations Security Council resolutions and international law.
Armentel, a subsidiary of Russian brand, Beeline, is another. It began providing mobile and Internet services to Nagorno-Karabakh in 2002.714
The application of the Bruges Declaration and United Nations Guiding Principles on Business and Human Rights with regard to Nagorno-Karabakh is also an active issue. In March 2017, the Prosecutor General’s Office of Azerbaijan announced that it had launched an investigation into foreign companies operating in the breakaway region over illegal economic activity.715 In April 2018, it was announced that Baku was pursuing criminal charges against companies that were engaged in illegal mining in the territory.716
It is clear that occupying powers and, indeed, individual companies have humanitarian law obligations related to economic activity in situations of occupation. White collar activities in the territory strengthens the occupation and defies human rights. The latter relates to the one million Internally Displaced People in Azerbaijan, those driven out of Nagorno-Karabakh, and, ironically also to those living in the territory today as the proceeds from mining and other economic activities are retained almost exclusively by a political and business oligarchy.
“Is it right?”, was Obama’s litmus test. And on that measure, and indeed the Hague Regulations and United Nations Guiding Principles on Business and Human Rights in 2011, some giants of the corporate world are still found wanting. They are hypocrites.
Two of those content to ignore international norms and the law are Crédit Agricole’s chairman Dominique Lefebvre and CEO Philippe Brassac. While there has been a clear shift towards companies that can create the highest business value while maintaining the highest ethical and governance standards, their organisation is understood to have paid a $800 million fine to settle charges over Iranian sanctions-busting.717 Others report a major “suspicious transaction case” is diplospeak for something untoward, as does a European Central Bank fine for breaching its rules on “how certain capital items should be classified.”718 These cases and others, well reported in the international media, suggest a certain chicanery.
The link between Montrouge and Yerevan began with Crédit Agricole becoming the largest shareholder of the Armenian ACBA Crédit Agricole Bank, along with another subsidiary Crédit Agricole Leasing & Factoring.
The relationship, as Kohelet Policy Forum observes, has rolled across the border into Nagorno-Karabakh: Through its Armenian companies, Crédit Agricole actively aids Armenian settler initiatives. ACBA Crédit Agricole sponsors the Hayastan All-Armenian Fund telethons in support of “both Armenians” and collecting funds for infrastructure development and settlements in Nagorno-Karabakh. The fundraisers helped to collect tens of millions of dollars. Crédit Agricole has been involved in numerous other projects to help Karabakh settlers.
Moreover, in the last escalation of fighting with Azerbaijan in April 2016, ACBA Crédit Agricole announced that it would annul loan obligations of the families of Armenian soldiers killed in fighting for the occupied territory.719
Judged either alongside United Nations Security Council resolutions 822, 853, 874 and 884, the Hague Regulations, or the United Nations Guiding Principles on Business and Human Rights, Lefebvre and Brassac have allowed their CAC 40 giant to run afoul of Obama’s simple “Is it right?”.
For good measure it has fully established itself in a market where money laundering is inherent to the trading process and with a customer base whose major operators includes arms traffickers, human traffickers and sex barons, global drugs barons and a political elite who are the richest figures in the territory. Good company to keep.
The Kohelet Policy Forum highlights a number of other major corporate partners in Nagorno-Karabakh. One prominent European corporate name is that of Jürgen Schachler, CEO and Chairman of the management board, Aurubis AG, the largest copper producer in Europe and second largest in the world. Hamburg- based Mr. Schachler and his company have been culpable in the rape of natural resources in the territory, undertaken in the face of a wealth of international law which prohibits it. According to the report ‘Who Else Profits’: For almost two decades, Aurubis has been actively involved in copper and other mineral extractions in Nagorno-Karabakh, becoming one of the biggest international partners of the Nagorno-Karabakh/Armenian industrial complex. Annually, Aurubis purchases and imports 10,000 metric tonnes of blistered copper from the Armenian conglomerate Vallex Group...720
Another European mining firm profiting from its association with Stepanakert is Denmark’s FLSmidth, under CEO Thomas Schulz. The group’s own website eulogises its values: Over the past 135 years, FLSmidth has developed a business culture based on three fundamental values: Competence. Co-operation. Responsibility. In strict accordance with these values, we have earned the trust of our shareholders, customers, business partners, co-workers, suppliers, employees and the communities in which we live and work.721
No space there for Schulz’ relationship with the Vallex Group on Nagorno- Karabakh’s most important new mine, at Kashen. Nor the company’s expansive work in Western Sahara.
There is a particular repugnance to people and companies who profit from war. Perhaps the first well publicised and particularly despised profiteers who made fortunes during the American Civil War, were the so-called “Shoddy” millionaires who allegedly supplied the Union army with faulty uniforms made from reprocessed “shoddy” wool and cardboard shoes that would dissolve when the soldiers marched in water or mud.722
There have been plenty of individuals and companies who have negated any ethical concerns in the Caucasus.
In seeking to make a profit in Nagorno-Karabakh, these international firms are each in their own way helping to corrode the international system. They strengthen the resolve of the administration in Stepanakert. They support the kleptocracy of the few who hold all the territory’s major financial assets. And their support upholds a system which, in defiance of international law, continues to hold one million Internally Displaced People in limbo.
In January 2018, the United Nations Human Rights Council published an interim report on companies engaging in business in Israeli occupied territories.723 It did not name all 206 companies that are provisionally listed, stating that, at that point, only 64 of those had been contacted and been invited to respond to the allegations against them. A full blacklist will only be released when full consultations have been completed.
The Council will have no power to apply sanctions or punish those eventually named. However, the list will certainly generate moral pressure with consumers and investors, and in the media. Many major firms have been made nervous by the effort, which has also been condemned by Israel and the United States.
The United Nations has long been perceived as providing something of a bulwark for Palestinians against the might of Israel. This latest United Nations Human Rights Council effort is a tangible effort to prevent Tel Aviv’s further encroachment into a rump Palestine and further impede a future peace.
Yet parallel realities exists in many parts of the world. Nagorno-Karabakh represents one such example. Equal in international law and just as intractable.
Only there is a tangible difference that gives Nagorno-Karabakh an importance that can perhaps be adjudged to merit the attention that Palestine receives. Both occupations have generations of vast numbers of displaced persons. Both cause enormous geopolitical fault lines that inhibit broad international consensus and prevent millions enjoying the levels of socio-economic development that underpins their human rights.
One quite key difference exists though. Gaza is often referred to as the world’s largest open-air prison. The West Bank exists largely under a stage of Israel- siege. Meanwhile Nagorno-Karabakh’s grey area status and willingness of political oligarchs to enrich themselves has created a ground zero for international crime.
The global brands that uphold Nagorno-Karabakh’s status quo through their willingness to trade with the territory are attempting to turn a profit within a situation that has huge international ramifications. In a highly interconnected world, made up of many distinct but related systems – environmental, social, economic, technical and political – the support that these large corporations provide equates to unexpected impacts. That status quo helps Nagorno-Karabakh sustain its isolation and, with it, provide the grey area that feeds the trade in illegal arms, a flood of Afghan heroin across the West, human trafficking, a vast sex industry, money laundering and the profiteering of Yerevan’s criminal elite.
“A man without ethics is a wild beast loosed upon this world,” said French philosopher Albert Camus.
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