11 - Russia's Grand Corruption
Russia is a vastly corrupt land, and has been for decades. Putin did not initiate the rampant corruption that now permeates his decadent country, but he and his associates (“the oligarchs”) certainly profit immensely from wave after wave of outright theft, over-invoicing and kickbacks, influence peddling, pay for play, and all of the myriad menacing methods of grand corruption. Putin’s devastating war in Ukraine is enabled by persistent corruption. Indeed, and ironically, it is likely that the underwhelming performance of Putin’s land army so far in Ukraine also reflects corrupt self-dealings by his officer corps.
Corruption is the use of an official position to facilitate personal gain. It is the abuse of a public trust for personal advancement. It encompasses stealing from the state, awarding government contracts for a cut of the expected profits, using state funds to build private dachas, diverting official budget monies to cover housing or living expenses for mistresses (even in distant parts of Europe), and skimming military food and equipment allotments. Those who benefit are generals, other security officials, oligarchs, and even Putin himself. Avarice knows hardly any limits.
Huge sums were made by a series of well-placed individuals in the 1990s and after as state-owned Russian enterprises were sold off cheaply. Russia’s oil, gas, aluminum, steel, coal, and many other industrial establishments were penetrated by groups later organized and controlled by Putin. The defrocked Chelsea Football Club owner Roman Abramovich, for one, paid only $250 million for major aluminum producer Sibnet in the 1990s and then sold it back to Russia for $13 billion in 2005. In the 1990s, too, he managed through nefarious criminal doings to gain control of Slavnet, an oil company. Later, that too was sold back to the government at an inflated price. He went on to control a big chunk of Russia’s largest steel company. He has big nickel holdings, too. Earlier this year, Bloomberg pegged his net worth at $13.5 billion. Britain took hold of one of his big personal jets this week. Arkady (Putin’s judo buddy) and Boris Rotenberg have also done well for themselves, owning large construction firms in Russia and more than 200 money-laundering shell companies elsewhere in Europe.
These and the other thirty or so kleptocrats cited recently by imprisoned Alexei Navalny enjoy wealth and privilege only with Putin’s permission. To the extent that he has for many years received the boss’ portion of every manner of proceeds is not known. But like the Mafia dons, Putin gets his cut. Otherwise deals cannot be made and those who act independently soon find themselves, as Mikhail Khordokovsky did, tossed into the gulag.
. The web of interlocking reciprocity is tightly woven by Putin. What is called “friendship,” in the press is a complex set of mutual dependencies that has enriched oligarchs and Putin, doubtless deprived the state (and the people of Russia) of immense resources and economic growth over several decades, and now famously handicaps the effectiveness of his military.
Throughout the globe, grand corruption always harms innocent populations. Academic studies show that 2 to 3 percent of GDP is forfeited annually across the world because of such peculation. The World Bank a few years ago estimated that $1 trillion had been wasted over ten years in the developing world alone. Corruption distorts and immiserates. Putin, in the manner of his Soviet predecessors (and emulating the really venal corrupters of Africa, Asia, and Latin America) has been as proficient in this regard as other kleptocrats. We hardly know how much Putin personally has salted away, and where those stashes are, but units of the U. S. Treasury and the U.S. Department of Justice are presumably on the hunt.
According to the well-respected Corruption Perceptions Index of Transparency International, a Berlin-based NGO, in 2021 the least corrupt countries in the world (of 180 ranked) were Denmark, Finland, New Zealand, Norway, Singapore, Sweden, Switzerland, the Netherlands, Luxembourg, and Germany -- in that order. The United Kingdom ranked 11th; Canada 13th; Australia, Belgium, Japan, and Uruguay 18th; Bhutan 25th; the United States 27th; Barbados 28th; and South Korea 32nd. Ukraine scored in 122nd place. Russia was way down, in 136th place along with Mali, and just before horrendously corrupt Myanmar (Burma) and Pakistan. It also ranked lower than such paragons of virtue as Paraguay, Angola, and Liberia. Indeed, Russia has for long scored toward the bottom of corruption indexes of all kinds, just as the Nordics, New Zealand, and Singapore have always crowded the top of these lists. The U. S. has fallen in recent years, reflecting the tragic Trump epoch, but it is Russia that is the portrayed according to these systems as by far the most corrupt of the globe’s major industrial powers. China is at place 66 and Brazil at 96.
The war in Ukraine will only drain Russia more thoroughly, compounded by sanctions. Already, even Putin has acknowledged some of the damage caused by boycotts and bans, by Western companies pulling out of business in Russia, and by the sclerosis imposed by Europe and the U.S. on Russia’s Central Bank and its commercial financial sector. Russia’s willingness to do business with India in rupees is an indication of banking problems and arbitrage advantages. Western investigators and prosecutors are also closing in on Putin’s corrupt cronies like Abramovich and the Rotenbergs, but conceivably not fast enough. Nor is the United Arab Emirates cooperating to close its major oligarchical haven.
There is still much to do to expose the full contours of Putin’s corruption and to confiscate as much as possible of his wealth and the ill-gotten gains of co-conspirators, whether generals, security officials, bureaucrats, or oligarchs. Doing so should help bring the war to a close by reducing Putin’s ability to distribute patronage and thereby purchase support and elite following. Clearly, the allies are hoping to “turn” as many “enablers” as possible against Putin. Perhaps any defectors will include the generals (or even colonels) who now obey orders. Ultimately, they can’t all crowd into the desolate corner that Putin occupies and controls. Optimistically, we can hope that the futility of his and their assault becomes apparent well before Ukraine is reduced to rubble and many more thousands of civilians are bombarded in their apartment blocs. Faint hope, perhaps, but this is Putin’s war, based as much on greed as on ambition, to lose.