Weaponizing kleptocracy: the four circles of ‘Russia’s Crony Capitalism’


Russia’s political shift to an authoritarian kleptocracy started with Vladimir Putin’s prosecution and jailing of Mikhail Khodorkovsky, according to Bill Browder, CEO, Hermitage Capital, and author of “Red Notice: A True Story of High Finance, Murder, and One Man’s Fight for Justice.”

“We should be scared of Vladimir Putin we should do everything possible to contain his evil intentions,” Browder told NPR today, prior to testifying before a U.S. Senate committee this week.

For Russia’s students, the price of protesting against corruption can be high, writes Vladislav Lobanov, a Natalia Estemirova fellow at Human Rights Watch. Students have featured prominently in Russia’s latest wave of anti-corruption protest, and now they’re facing repression as a result, he writes for Open Democracy.

It’s that generation that’s increasingly saying, “No. Enough. We’re fed up with your corruption, with your nepotism, with your kleptocracy, with your arrogance, with the lack of the rule of law, with the disregard for basic rights and freedoms, with the lack of opportunities, with the lack of a future under this regime,” analyst Benjamin Parker writes for The Weekly Standard.

The domestic role of corruption is to control the elite and to maintain its loyalty, according to Brian Whitmore, Senior Russia Analyst at Radio Free Europe.

“Members of the Russian political elite effectively have the license to seek rents, to monetize their positions, so long as they remain politically loyal and politically useful to the Putin regime. Only those who prove disloyal … are ever prosecuted for corruption,” he told a recent Helsinki Commission hearing. “Internationally, corruption has been weaponized and used as a tool of statecraft. The Kremlin seeks to capture elites and establish networks of influence abroad by ensnaring officials in corrupt deals.”

“Russia’s Crony Capitalism” comprises four different circles, said Dr. Anders Aslund, Senior Fellow at the Atlantic Council:

  • The first circle, that is state power, FSB, and judicial power. There are no independent courts in Russia, therefore, there are no real property rights. …
  • The second part is the state corporations. Russia’s state sector 12 years ago, according to official Russian statistics, generated 35 percent of GDP. Today, it is 70 percent of GDP. …
  • And at the third circle, that is cronies. Four of them have been sanctioned by the U.S. government: Gennady Timchenko, Arkady and Boris Rotenberg, and Yury Kovalchuk. This is the real Putin circle. ….
  • But what I will shock you with is the fourth circle – that is the West. This would not happen in the way it does without the West. After this money goes through Cyprus – but Cyprus is only a channel – and then it goes normally to some Caribbean Island. British Virgin Islands is typical for this. But when it goes to two places – London and New York – or the U.S. more broadly….


State capture

Putin’s regime weaponizes kleptocracy, and it’s not only about foreign policy. It’s not only about certain goals of foreign policy, said Marius Laurinavicius, Senior Analyst, Vilnius Institute for Policy Analysis.

“We’re not dealing with a normal authoritarian state. We’re dealing with a mafia state,” he told the Commission for Security and Cooperation in Europe.

The Kremlin aims “not just to achieve some foreign policy goals, [but also] to capture institutions. And the ultimate goal is, if it’s possible, to capture the entire state,” he told the hearing, “Kleptocrats of the Kremlin: Ties Between Business and Power in Russia.”

A forthcoming research paper – “Neo-Gulag Values and Their Influence in the West” – emphasizes the influence of non-state actors or supposed non-state actors coming from post-Soviet space, said Ilya Zaslavskiy of the Free Russia Foundation.

“The biggest difference with the Soviet Union is that not only there is this seeming sort of business interactions between supposedly private sector in post-Soviet space and in the West, but the nature of transactions has changed considerably,” he said. “And there is little understanding, in my view, in the West, despite ample evidence that really from Soviet times we now see a fusion of three different worlds and values coming from post-Soviet space in one elite.”

“The West, and especially the U.S. as leader of the democratic world, has been so negligent and appeasing of post-Soviet Russia corruption and subversion of democratic values and institutions under Putin over the last 18 years,” he said. “Even under the best-case scenario, Russian kleptocracy will not be eradicated in the foreseeable future.”

What, then, do we do? Ambassador Daniel Fried (right), an Atlantic Council Distinguished Fellow, asks.

“First of all, as was the case during the Cold War, nothing will work if we lose the political and, may I say, ideological struggle. We need to have faith in our own democratic system, in ourselves in the free world,” he told the hearing. “And when we do that, we have a foundation from which to proceed. I say this because now that very foundation is also under attack, both from without – from the Russians – but principally from within, from people not necessarily at all connected with Russia. So this is a different kind of a struggle.”

“Secondly, a U.S. policy designed to push back against Russian kleptocracy and corruption needs to be integrated in a complete Russia policy,” said Fried. “There is nothing incompatible between pushing back on Russian aggression in various forms and seeking those areas of common grounds where it may be possible. I wouldn’t be too hopeful about the positive agenda, but you don’t rule it out,” he added, endorsing a Global Magnitsky Act.

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