Is Russian mafia financing Icelandic expansion abroad? Skip to content

Is Russian mafia financing Icelandic expansion abroad?

TV-station Stöd 2 asked yesterday on its evening news broadcast if it is Russian mafia money that’s financing Icelandic expansion abroad.

The question was provoked by an article that appeared yesterday in the British daily Guardian titled “Next-generation Viking invasion” by Ian Griffiths (

Prompted by rumors about Icelanders preparing a bid for British retailer Marks & Spencer, Griffiths, who was selected Business Journalist of the Year at the 2005 British Press Awards, asks “They’ve got the cash to buy big UK groups like M&S. But where does it come from?”

Griffiths finds the rags to riches story of three Icelanders in post-communist Russia incredible. While their competitors in St. Petersburg’s mafia-ridden brewing business were being murdered or having their factories mysteriously burned down during the 1990’s, Björgólfur Thor Björgólfsson, Björgólfur Guðmundsson and Magnús Thorsteinsson escaped not only unscathed out of Russia but also, they claim, with piles of money after selling their Bravo International brewery to Heineken for USD 400 million in 2002.

Returning to Iceland in 2002, the threesome purchased a controlling share in state bank Landsbanki in a controversial sale.

(For background on the banks and the privatization, see Iceland Review, Daily News, May 31, “Privatization of banks draws heavy fire“; June 14, “Prime Minister’s feelings hurt but announces he has been exonerated“; and June 15, “Icelandic banks are vulnerable“.)

Griffiths points out that inflows of foreign capital into Iceland from the offshore centers Luxembourg and the Channel Islands, where Landsbanki has subsidiaries, grew substantially from 2002 to 2003. He also observes that Icelandic “predators” bought GBP 894 million worth of British companies last year, up from only GBP 26 million in 2002. Meanwhile in Iceland, Landsbanki and affiliated parties have engaged in several takeovers and acquisitions, and the Icelandic stock index, ICEX-15, has risen by almost 300 per cent.

Griffiths notes that Björgólfur Guðmundsson, who now reigns as Chairman of the Board at Landsbanki, was sentenced to 12-months’ imprisonment, suspended for two years, when a shipping company under his management went bankrupt in the late eighties. He, his son, Björgólfur Thor Björgólfsson, Iceland’s first dollar billionaire, and their St. Petersburg business partner, Magnús Thorsteinsson, now wield direct or indirect control over many of the largest companies in Iceland. Griffiths refers to the holdings of the two Björgólfs as a “powerful empire that takes in pharmaceuticals, telecommunications and financial services.”

(For coverage of the ongoing takeover attempt of Íslandsbanki by parties related to Landsbanki, see Iceland Review, Daily News, June 10, “Deadlock at Íslandsbanki?”)

Griffiths observes that around the same time as the three gained control of Landsbanki, Icelandic companies have increasingly started striking out abroad. In the UK Baugur has been most visible, acquiring several British retailers. Griffiths names several, including Big Food Group, Oasis, Karen Millen, Goldsmith’s and Hamley’s.

Griffiths acknowledges that the persistent rumors of Russian money driving Icelandic expansion are “persistent but unsubstantiated.” He goes on to write about the country’s economic development, calling it a “miracle that has allowed Icelandic businessmen to march into the British high street and the City of London, capturing assets along the way – even though Iceland’s output is about the same size as Mark & Spencer’s market capitalization. Iceland’s corporate cheerleaders have been swift to attribute their success to economic performance and dismiss the mafia money speculation as unfounded.”

Stöð 2 did not draw any conclusions but ended its report yesterday by observing that Griffiths’s Guardian story must reflect what British financial circles are talking about these days.

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