Making Life Hard for Russia’s Robber Barons

In early 2014, the whole world saw Ukraine’s ousted pro-Kremlin president, Viktor Yanukovych, stashing cash, gold, and other valuables in his helicopter before fleeing to Moscow — the seat of a regime no less brazen than his own in the scale of its corruption. One would think that such an obvious demonstration of the institutionalized criminality at work in both countries would have provided a wake-up call for Western policymakers.

As detailed by Karen Dawisha in her groundbreaking book, Putin’s Kleptocracy, published later that year, the Kremlin shamelessly exploited criminal networks in its invasion-by-proxy of Crimea and eastern Ukraine. This was only further proof that “rule by thieves” had long since become the organizing principle of government in Russia.

The failure of Western leaders to grasp the fact that a major world power was now being run both by and for a ruthless criminal elite may explain why they decided to avoid any serious military or economic confrontation with the Kremlin. Both American and European leaders instead pursued diplomatic solutions while imposing easily circumvented sanctions against fewer than a dozen power brokers from Putin’s inner circle. And the West’s pacification of the Russian elite is only an extreme example of a broader phenomenon: its willingness to tread lightly with other post-Soviet kleptocracies like Belarus, Azerbaijan, and the Central Asian states.

This April, however, the “Panama Papers” leaks made the magnitude of state corruption impossible to ignore. Mountains of new evidence confirmed the existence of an enormous offshore shadow economy and exposed how post-Soviet elites transfer stolen funds and legitimize them in the West.

Not evident in the Panama Papers, however, are the dangerous norms and practices which Putin’s “mafia state” and the other kleptocracies export along with their dirty money. A new project launched yesterday by the Hudson Institute’s Kleptocracy Initiative, called the “Kleptocracy Archive,” promises to illustrate not only the flow of illicit funds from corrupt regimes, but also how they have succeeded at undermining fundamental democratic norms in Western societies and institutions.

The Kleptocracy Archive currently profiles nearly 100 “individuals of interest” from Russia and Ukraine, with more countries to come. These individuals are associated with these regimes in many ways, and their inclusion is an attempt to present a more complete picture of how kleptocracies function, rather than to imply any wrongdoing. More than 3,000 documents, collected from trusted public and private international sources, yield some 100,000 pages of supporting evidence about these individuals.

All this material is curated and catalogued to make it comprehensible and accessible. What it shows, irrefutably and with chilling consistency, is how corrupt rulers have carried their values and practices into the heart of Western institutions: in police reports and interviews, arrest warrants and indictments, evidentiary exhibits, trial transcripts and judgments, financial and business documents, and even in personal correspondence.

After the Cold War, previously black-and-white ideological differences faded to shades of grey. To an extent unimaginable before the 1990s, the ideology of consumerism united Western and emerging economies — though it also masked the very different ways in which wealth is acquired in each system. In the absence of an existential threat from the USSR, Western vigilance against the infiltration of its democratic institutions eased. While we welcomed migration from the former Soviet Union and fresh injections of cash from the region’s new oligarchical class, we failed to detect the corrosive practices that often accompanied this money — and how they started changing our societies, too.

Some of these practices are unquestionably illegal: assassinations, bribes, hacking, blackmail, espionage, money laundering, tax evasion. Others are merely ethically questionable: tax avoidance through offshore banking, the abuse of defamation laws to stifle scrutiny, the use of private wealth to secure public influence. But these are no less harmful in the long term, especially as they are more likely than outright criminal activity to be tolerated or overlooked. Such “softer” forms of exported corruption are usually not the work of the Russian state itself, but of powerful individuals and corporations with strong informal connections to its leadership.

In many cases, the spread of these practices to the West is not deliberate, but has emerged as a side effect of the transmission of values and norms from the post-Soviet space by its elite. Most of these people come from three distinct backgrounds: the KGB, the Communist Party, or the world of organized crime. They are power brokers and tycoons who share a peculiar mix of bureaucratic and criminal slang, a cynical sense of humor, and a conspiratorial view of world politics. Their worldview embodies a lack of regard for human life, the assumption that everything and everyone is for sale or susceptible to manipulation, and a righteous belief that those in power — that is, themselves and their equally wealthy and powerful Western counterparts — are the only real and rightful decision-makers. The rest are, to use their Gulag terminology, “prison dust” — nobodies at the bottom of the hierarchy.

There is plenty of evidence that this coterie has succeeded in exporting these values to the West. The U.K. government did almost nothing in response to the use of radioactive material on the streets of London in the 2006 killing of Alexander Litvinenko (and is possibly overlooking similar circumstances in the ongoing cases of Alexander Perepilichny and Boris Berezovsky). The European Union and U.S. appear happy to tolerate Azerbaijan’s “caviar diplomacy,” and readily accept Kazakhstan’s diplomatic lip service on human rights in exchange for corporate deals.

It has become very clear that Western governments, journalists, and activists need new tools, skills, and knowledge to detect and counteract the penetration of these corrosive practices into areas as diverse as international organizations, media, legal and financial systems, elections, lobbying, think-tanks, universities, and real estate.

The Kleptocracy Archive is just such a tool, providing concrete examples of key actors’ illicit activities by linking them directly to primary and secondary evidence. By approaching kleptocracies as networks of corrupt individuals rather than legitimate governments, it does what Western leaders have failed to do.

To take the most obvious example, Vladimir Putin’s wealth and criminal connections have long been the subject of speculation. The archive provides direct access to reports from Spanish prosecutors that trace specific connections between Russia’s ruling elite and organized crime. It also includes a document, signed by Putin, giving power of attorney over his shares in a German company called SPAG to Vladimir Smirnov, a prominent businessman. Related documents allege SPAG’s connections to money laundering and other illicit trans-border activities in Luxembourg and Spain.

The Kleptocracy Archive also provides copious evidence of how the criminal infiltration of Russia’s law enforcement has undermined legal institutions in other countries. Western law enforcement and security services have been required to deal with their Russian counterparts as legitimate authorities, even as the latter shielded Russian criminals from international investigations. A Swiss intelligence report describes how the FSB and criminal gangs assisted the movement of illicit funds from Russia into Swiss companies, indicating that Western intelligence services have long been aware of the extent of corruption at the highest levels of the Russian government, but have been unable to act against it.

Perhaps most humiliating were the high-profile corporate ownership battles, “libel tourism,” and politically motivated extradition requests that flooded European courts in the 2000s. The Kleptocracy Archive contains summaries, judgements, and other documents pertaining to about 100 such cases in the U.S. and the U.K. The cases show, with astonishing consistency, how the oligarchs’ ruthless drive to protect their wealth and reputation can hollow out the established norms of any jurisdiction foolish enough to entertain them.

That Putin’s cronies bring illicit money to the West is, by now, common knowledge. The kind of research and monitoring made possible by the Kleptocracy Archive will enable a more comprehensive understanding of how they are forcing their anti-democratic norms — not just their money — on many aspects of Western life. When we understand more about this aspect of kleptocracy, effective policy suggestions and practical solutions become possible.

At this stage, however, there are more questions than answers about how to confront the qualitatively new phenomenon of global kleptocracy. Subversive anti-American and anti-EU propaganda, confusion about Western ideals and values, the spread of corrosive practices among elites and institutions, and the undermining of fundamental democratic norms are all weakening Western democracies. Hopefully, the latest initiatives and evidence-based research will begin to guide experts, activists, and the media away from kleptocracy’s more sensational aspects — the palaces, the football clubs, the superyachts — towards a substantive debate about the threat it poses here in the West, and how to confront it.

Photo credit: JOEL SAGET/AFP/Getty Images