Chapter 241 - 24: Koko’s Alchemy: How West German Marks Are Conjured (Part 2)

Chapter 241: Chapter 24: Koko’s Alchemy: How West German Marks Are Conjured (Part 2)

"What kind of operation?" Werner asked.

Gunter didn’t answer directly. Instead, he took a piece of paper from his drawer and jotted down a few numbers.

"Let’s say the Leipzig Textile Plant produces a batch of fabric. The cost price is 0.8 accounting units per meter." He wrote as he spoke. "We export ten thousand meters to West Germany, for a real value of 8,000 accounting units. But—"

He looked up, a glint in his eyes. "When we declare it at customs, we write 1.5 accounting units per meter, for a total value of 15,000 accounting units."

Werner stared at the numbers, his heart racing.

"The West Germans won’t check every single account in detail," Gunter continued. "They only look at the total sum. As long as it doesn’t exceed the credit limit, they can’t be bothered with how you specifically price things. So on paper, this shipment is worth 15,000 accounting units. It counts toward our export quota and offsets part of our debt against the credit line."

"But in reality—" Werner interjected.

"In reality, the buyer in West Germany only needs to pay the real price of around 8,000 accounting units," Gunter said with a smile. "The extra 7,000 accounting units are our room to maneuver."

He put down his pen and leaned back in his chair. "This price difference can be converted through various channels. For example, we can have the West German buyer deposit the difference, in West German Marks, into a designated account. Nominally, it’s a ’commission.’ But in reality..."

Werner understood.

This was how Koko made its money.

Overstating export prices to burn through the credit line on paper, while actually pocketing the difference in the form of West German Marks.

"Do the higher-ups know about this operation?" Werner asked.

"The higher-ups?" Gunter scoffed. "They only care about how many West German Marks we can get. They don’t ask how we get them. Koko’s entire reason for existing is to acquire foreign currency for the state, by any means necessary."

He leaned in a little closer, his voice dropping. "Besides, you think we’re the only ones doing this? The whole system plays this game. The only difference is who plays smarter and who takes more."

Werner was silent for a few seconds. His mind was racing; the mechanism was more ingenious, and more audacious, than he had imagined.

"There’s another way to play," Gunter said suddenly. "A more advanced one."

Werner looked up at him.

Gunter took out another piece of paper. "Let’s say a factory in East Germany urgently needs some precision instruments from West Germany, valued at 100,000 accounting units. This purchase goes through the inner-German trade channels, using the credit line."

"But the problem is—" he paused, "—the real cost of these instruments might only be 50,000 West German Marks."

Werner frowned. "How can the difference be so large?"

"Because we can arrange it," Gunter smiled. "For instance, through a reliable middleman in West Germany. He buys the instruments on the Western market for 50,000 Marks, then turns around and ’sells’ them to East Germany, quoting a price of 100,000 accounting units."

"The West German Federal Bank will record this 100,000 accounting units on our import ledger and deduct it from the credit line. But in reality, that West German middleman only spent 50,000 Marks."

Werner’s eyes lit up. "The extra 50,000—"

"Can go into our designated account, in the form of West German Marks," Gunter said. "Nominally, it’s ’procurement fees’ or ’consulting fees.’ In reality, it’s converting accounting units into hard foreign currency."

He leaned back in his chair, exhaling a puff of smoke. "This is the exchange rate game between accounting units and foreign currency. Nominally, it’s one-to-one. But in our hands, it can become one-to-two, or even one-to-three."

Werner frowned. "But won’t the West Germans really investigate this kind of operation?"

"They’ll check, but they won’t dig deep," Gunter said with a laugh. "You need to understand what the West Germans care about. What they care about is whether this framework of inner-German trade can continue to function. They care about using this channel to maintain contact between the Two Germanys in exchange for our concessions on certain issues."

He flicked his cigarette ash. "As for whether specific transactions are padded, or if the quotes are inflated, they don’t want to manage it, and they couldn’t even if they did. If they got serious and audited every single transaction, the trade system would get bogged down in endless disputes and eventually collapse. That’s the last thing they want to see."

"So they turn a blind eye?" Werner said.

"Exactly." Gunter nodded. "As long as the total amount doesn’t exceed the credit limit, and as long as it’s not so outrageous that it attracts public attention, they’ll pretend they didn’t see it. This is the art of politics—sacrificing some details for the bigger picture."

"What about our side?" Werner asked. "Do the higher-ups really not care?"

Gunter gave a cold laugh. "The mission the higher-ups gave Koko is simple: get foreign currency. The more, the better. As for how it’s obtained, or whether the books are one hundred percent clean, they don’t want to know, and they won’t ask."

He leaned closer, his voice even lower. "You think the Stasi doesn’t know what we’re doing? They know everything. Von Brown, and the people above him, are perfectly aware of every major transaction we make."

A knot formed in Werner’s stomach. "Then why don’t they intervene?"

"Because of the results," Gunter said. "As long as we can consistently earn West German Marks for the state, as long as the technology and equipment we acquire can keep the factories running, they won’t scrutinize the process. As for the benefits taken by the people handling it, that’s ’reasonable compensation for services rendered.’"

He leaned back against his chair and exhaled a cloud of smoke. "Those are the rules of the game. As long as your operations ultimately benefit the state, and as long as you don’t go so far that they can’t answer for it, the Stasi won’t bother you. They might even protect you, because you’re their tool for earning foreign currency."

Werner was silent for a few seconds, digesting these words.

The entire system rested on a tacit agreement: West Germany tolerated the inflated figures for political purposes; East Germany looked the other way, needing the foreign currency; and the Stasi permitted the corruption in the national interest.

It was a delicate balance from which everyone benefited, and which no one wanted to break.

"Understood," Werner said.

"The key to this operation is having a reliable partner in West Germany," Gunter said. "He has to be willing to cooperate and have the channels and ability to handle these things. Do you have someone like that in West Germany?"

Werner thought of Reynard.

His old partner had always helped him handle various gray-area transactions. He was well-connected and resourceful.

’But this is too big. I need to be sure Reynard won’t sell me out.’

"I have someone in mind," Werner said. "But I’ll need time to make the arrangements."

Gunter nodded in satisfaction. "Good. Then you can start with the textile line to familiarize yourself with the process. Over in Leipzig, there’s a state-owned textile plant, the ’People’s Textile United Enterprise.’ It produces large quantities of fabric and finished clothing every month, part of which is exported to West Germany."

"Your job is to coordinate the export quote and logistics for this shipment." Gunter’s fingers tapped on a document. "I’ll give you the cost price. You report a higher number on the books. As for how much higher, that’s up to you to decide. We split the extra, fifty-fifty."

Werner nodded, already calculating a bigger plan in his mind.

"Understood."

Gunter stood up and extended his hand. "Pleasure doing business with you, Werner. Remember, it’s not the greediest who survive to the end, but the smartest."

Werner shook his hand, the plan in his mind already taking shape.

**************

「Three days later」

Werner was sitting on a train to Leipzig.

Outside the window were monotonous fields and dilapidated small towns, occasionally interspersed with factories, their smokestacks spewing black smoke.

The train car was packed with people, and the air was thick with the smell of sweat and cheap tobacco.

Werner closed his eyes, his mind continually going over the scheme Gunter had taught him.

’Inflating export prices is just the entry-level move. The real money is buried deeper.’

He had thought of a much bolder plan.