Panama Papers give glimpse through keyhole of kleptocracy


The Panama Papers are a glimpse through a keyhole of an orgy of tax evasion, money laundering and kleptocracy – amid the legitimate financial planning – hosted by the world’s tax havens, notes analyst Richard Brooks. Seven years after world leaders came together at a post-financial crisis G20 summit in London and committed to end tax haven abuse, it is clear from these papers that no such end is in sight, he writes for The Guardian:

To tackle the cancer of corruption at the heart of the global financial system, tax havens need not just to reform but to end. Companies, trusts and other structures constituted in this shadow world must be refused access to the real one, so they can no longer steal money and wash it back in. No bank accounts, no property ownership, no access to legal systems. The anti-corruption summit being hosted by David Cameron in May is an opportunity to start the international team effort that this would require.

Chinese President Xi Jinping’s ruling Communist party has a compelling incentive to censor reports of the papers’ revelations, analysts add.

The Papers are “evidence that the anti-corruption campaign, on which [Xi’s] reputation stands, is actually less thoroughgoing than he has claimed,” Willy Lam, an expert on elite Chinese politics at the Chinese University of Hong Kong, told The Los Angeles Times:

Lam added that although the financial dealings of Xi’s brother-in-law come as no surprise — the New York Times documented them in 2014 — the leak could still effect Xi’s standing. In recent weeks, a spate of open letters and domestic media articles criticizing Xi have suggested growing resistance to his authoritarian leadership style.

“The timing of this is significant, in that Xi’s enemies, who are still lurking beneath the airwaves — and who we cannot exactly identify — can use this,” Lam added. “This seems to be a god-sent opportunity to use against Xi Jinping.”

Panic in the Kremlin

Dmitry Gudkov, a rare voice of opposition in the state Duma, insisted that — in exposing Russian elites’ shady financial practices — the report had elicited, in his words, “panic in the Kremlin,” VOA reports.

“After this, it’s clear that no quiet old age awaits the kleptocracy: their money will be seized, and with it, a widening ring that ends in handcuffs overseas,” Gudkov wrote online.

It’s inconceivable, though, that the network could have existed without the knowledge and support of Putin, said Karen Dawisha, a U.S. political scientist who has written extensively about Putin and his regime:

After the fall of the Soviet Union in December 1991, Putin signed the documents bestowing ownership of the [Rossiya] bank on a newly formed joint venture created by Kovalchuk and others, according to Dawisha, author of “Putin’s Kleptocracy: Who Owns Russia?”

“Putin’s function was to make legal what would otherwise have been illegal,” Dawisha said.

“He takes what he wants,” she said. “When you are the president of Russia you don’t need a written contract. You are the law.”

The first time a large amount of information was leaked about Russia’s power system was in 2010, when a trove of US diplomatic cables obtained by WikiLeaks described a “virtual mafia state” and a system in which the Russian president allegedly used proxies to hide “illicit wealth” notes analyst Natalie Nougayrède. These documents were damaging enough, detailing a kleptocratic authoritarian system where Russian officials, oligarchs and organised crime came together to amass large fortunes, she writes for The Guardian:

Because of this context, it’s likely the Panama Papers will be used by Moscow’s propaganda machine as another illustration of western attempts to discredit and damage Russian power. Casting Russia as a fortress resisting external onslaughts has become a key feature of Putin’s domestic political narrative. There will also be attempts to minimise, if not silence, media coverage of the scandal inside Russia itself. Putin’s spokesman, Dmitri Peskov, who is himself mentioned in the papers, clearly tried to pre-empt the fallout by recently warning that Russia was “in a state of information warfare” with the west.

A pamphlet written four years ago by the late liberal leader Boris Nemtsov detailed the huge state-property empire, including yachts and palaces enjoyed by Putin and his entourage, but stopped short of accusing the Kremlin leader of having a secret, private fortune. Others, including Moscow political pundit Stanislav Belkovsky, have suggested Putin may hold offshore bank accounts worth up to $40 billion, CSM reports.

But it is too easy simply to see Russia as a kleptocracy or, more misleading yet, a mafia state,” says analyst Mark Galleottti. Yes, corruption is endemic to the system, not a byproduct but a central feature of Putin’s methodology of power. But this doesn’t fully explain why there is such corruption in Russia today, he writes for Vox:

Assuming those $2 billion are Putin’s, how did he get them? Did people hand him suitcases of cash? Highly unlikely. Rather, he takes or is given stakes in assets, rights to shares in profits. This is not so much for the money itself — anything he could want, he can get the state or the oligarchs to buy, from a palace on the Black Sea to a $35 million yacht — but rather for the political power they give him.

“The real currency in Russia is not money but power — and the latter can buy the former, but not necessarily the other way around. You can be rich today, but the state can impoverish you tomorrow,” Galeotti contends. “Conversely, if you have power, you can always get money, as we are likely seeing with the Panama Papers, or else simply don’t even need it.”

“The thing is, this is not news to Russians. Nobody doubts that the system of power here is completely corrupted,” says Georgi Satarov, a former Kremlin aide and head of the InDem Foundation, a Moscow think tank that specializes in researching political corruption.

“Average Russians would actually think it strange if a high official wasn’t stealing money. This is what’s expected. So, does anybody really think Russia will be overturned because of $2 billion of Putin’s?” he says.

“If you’re waiting for some big impact in Russia, don’t hold your breath,” says Anton Pominov, Russia director of the global corruption watchdog Transparency International. “Most Russians will be inclined to accept that accusations against Putin are hostile propaganda. And, as for the rest of it, it’s a sad fact that these files show that Russia is far from unique in the world; this system has been used by politicians from all over.

“The main hope is that these revelations may lead to greater international efforts to curtail these offshore zones, force greater transparency upon them, and that may have a positive effect on the behavior of Russia’s elites down the road.”


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