Inside Men

What do Russia’s oligarchs have to do with the war in Ukraine? Miranda Patrucić on the global consequences of grand corruption. Inside Men What do Russia’s oligarchs have to do with the war in Ukraine? Miranda Patrucić on the global consequences of grand corruption. Craig Whitehead In the chaos of the days after the invasion last year, Alexei Mordashov—the co-owner of the steelmaking company Severstal and the richest person in Russia—expressed both opposition to the attack on Ukraine and bewilderment that Western countries were responding with sanctions directed at him personally. “I have absolutely nothing to do with the current geopolitical tensions,” Mordashov said. “I don't understand why sanctions have been imposed against us.” Mordashov is one of Russia’s business oligarchs, who’ve made billions through their connections with the Russian state since the fall of the Soviet Union. But they’re not part of the Russian state. There must, Mordashov implied, be some misunderstanding. Altogether, Russia’s oligarchs have had more than US$58 billion frozen by Western authorities since the outset of the war, and they’ve lost more than twice that amid the continuing sanctions. As of March, the U.S. government is coordinating new efforts to liquidate their property, expand financial penalties against them, and close legal loopholes that have allowed them to use shell companies to move their money through the American financial system. There may be little sympathy for the oligarchs; it’s no secret, after all, that they made their money through corruption. But that alone doesn’t tie them to the war. What does? Miranda Patrucić is the editor in chief of the Organized Crime and Corruption Reporting Project, a global network of investigative journalists with operations on six continents. As Patrucić explains, the oligarchs aren’t just beneficiaries of corruption in Russia; they’re key players in a whole system of corruption that Vladimir Putin continues to depend on—both to hold power at home and to extend influence abroad. Without this system, there is no Putin. And without systems like it, autocrats around the world are lost. This article is part of a [series]( in partnership with the [Human Rights Foundation](. Patrucić will be a speaker at the [Oslo Freedom Forum]( in June. J.J. Gould: When Putin first came to power, part of his message and appeal was that he’d bring an end to the corruption of the oligarchs and a victory for the rule of law in Russia. What happened? Miranda Patrucić: Early on, Putin spoke about opposing corruption, but he essentially told the oligarchs, If you play my game, you will do well; if you don’t—and certainly, if you try anything against me—I will crush you. Which is exactly what happened in the case of Mikhail Khodorkovsky, for example, who was extremely wealthy and prominent in Russia but opposed Putin and lost everything in the country, was imprisoned for a time, and now lives in exile. The combination of rhetorical anti-corruption and actual corruption has been a crucial element of Putin’s playbook from the beginning: He speaks the language of law and order, and then he gives money, access, and power to those who do what he needs and wants them to do—and squashes those who stand in his way. This is kleptocracy. It’s not just corruption; it’s a sustained, strategic use of corruption to develop and maintain power. It’s a mechanism of control within a machinery of control—which also includes neutralizing the independent judiciary, closing down independent media, and ultimately overpowering every independent voice or sector of society. It’s part of a relentless push away from democratic freedoms and toward authoritarian dominance. And it’s been very impressive and influential among dictators everywhere—especially those in countries close to Russia or otherwise under Russian influence. Gould: How much of that influence would you say has to do with Putin—with other dictators seeing his strategic success in using corruption and wanting to replicate it—and how much has to do with inherited practices of corruption in the post-Soviet world? How do you see the pattern there? Advertisement Patrucić: The pattern is that corruption is already inside every pore of society, it’s true. In post-Soviet countries, people are pervasively brought up with it from a very young age. You know, when you’re a school child, you bring a gift to your teachers. When you’re older, if you need medical services, you bring a gift to the doctor. You get accustomed to it. And one of the things that pattern leads to, when it comes to instances of grand corruption, is that people don’t tend to see them as shocking in these countries in the way people do in countries where they aren’t accustomed to paying bribes—and aren’t expected to pay them. What that ends up meaning is that there’s a cut in everything: If you want a telecom license, you’re expected to pay a bribe. If you want to establish a mining business, you’re expected to pay a bribe. If you already have a thriving business and someone in the ruling elite decides they like your business, they expect their cut. Or they may want you to turn your business over to them altogether—and if you don’t, it’ll be taken from you through tax inspections or some other mechanism. Across the post-Soviet world, as in Russia, dictators and those favored by them use these mechanisms of state power to pressure and force businesspeople to give them what they want. And the only way for businesspeople to operate and thrive in these countries is by paying into a number of pockets—above all, the pockets of those at the top of the power chain. One of my earliest investigations was in the former Soviet republic Uzbekistan. The investigation had to do with more than a billion dollars that telecom companies paid to the daughter of the Uzbek president. Why did they pay her? Because there was no way to get a telecom license in Uzbekistan unless she was your business partner. In places like Azerbaijan, it’s often members of the ruling family, or people close to the ruling family, who’ll end up doing business with big international companies as their “local partners.” Or even in countries across the broader region—as in the Balkans, where I’m from, which wasn’t part of the Soviet Union—corruption and the expectation to pay bribes are also widespread. Putin’s style of using these cultural tendencies works by drawing them into the machinery of autocratic control. Aleksandr Popov More from Miranda Patrucić at The Signal: “Corruption has been a massive factor in Ukraine. When the former president Viktor Yanukovych was removed from office in the Revolution of Dignity after the Euromaidan protests in 2014, and reporters were able to come in and see the estate where he lived—the Mezhyhirya Residence, just north of Kyiv—it was remarkable: the mansion, the art collection, the ivory desk, the golden toilet seat. He had this unimaginable collection of luxury items, some of them quite incredible, that cost millions and millions of dollars. And this was a president who presented himself as having integrity in office and someone who’d never steal from the Ukrainian people. You can see this as an example of how corruption has been embedded in Ukrainian society similarly to how it’s been embedded in Russian society. The key difference is that, in Ukraine, people wanted and were able to choose a different life. They wanted the kind of life they saw in Europe, and they insisted on it.” “For a long time, the way things worked for Putin in Ukraine was that the Ukrainian ruling elite was fundamentally pro-Russian; and in collusion with them, a range of oligarchs working in both countries fed the state machinery by paying large sums of money in bribes. Under this system, Ukraine was favored and supported by Russia. Corruption was the enabling factor that aligned the Ukrainian ruling elite with Moscow and allowed Russia effectively to control large parts of the Ukrainian economy. … The protests were about citizens saying no to corruption, no to the terrible consequences of corruption for democracy and life in Ukraine, and no to the Russian influence over the country that corruption enabled.” “The world makes a big mistake when it assumes that kleptocracy can be contained—or that the use of corruption extends only within the societies it originates in. … The dirty money that’s come into the U.K. from Russia hasn’t been limited to buying apartments or establishing holding companies, or what have you. It’s been used to bribe members of parliament. Money that’s come in from Saudi Arabia has been used to launder its image by paying celebrities to appear as its glamorous faces. The real danger is that when you have dirty money from kleptocratic governments come inside your borders, you get corrupted. Very few countries are immune to that.” [Continue reading ...]( [The Signal]( explores urgent questions in current events around the world—to support it and for full access: [Subscribe now]( The Signal | 1717 N St. NW, Washington, DC 20011 [Unsubscribe {EMAIL}]( [Constant Contact Data Notice]( Sent by newsletters@thesgnl.email