Heart of the Darkness

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Inside Men

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What do Russia’s oligarchs h= ave to do with the war in Ukraine? Miranda Patruci=C4=87 o= n the global consequences of grand corruption.

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Craig Whitehead

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In the chaos of the days a= fter the invasion last year, Alexei Mordashov—the co-owner o= f the steelmaking company Severstal and the richest person in Russia—= expressed both opposition to the attack on Ukraine and bewilderment that We= stern countries were responding with sanctions directed at him personally. = “I have absolutely nothing to do with the current geopolitical tensio= ns,” Mordashov said. “I don't understand why sanctions have= been imposed against us.” Mordashov is one of Russia’s busines= s oligarchs, who’ve made billions through their connections with the = Russian state since the fall of the Soviet Union. But they’re not par= t of the Russian state. There must, Mordashov implied, be some misunderstan= ding.

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Altogether, Russia’s oligarc= hs 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 co= ntinuing sanctions. As of March, the U.S. government is coordinating new ef= forts 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 littl= e sympathy for the oligarchs; it’s no secret, after all, that they ma= de their money through corruption. But that alone doesn’t tie them to= the war. What does?

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Miranda Patruci=C4=87 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 Patruci=C4=87 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.

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This article is part of a <= a href=3D"https://c19gz9zr.r.us-east-2.awstrack.me/L0/https:%2F%2Fsendy.the= sgnl.co%2Fl%2F47QrwdESMr6NDlbHE4k9mA%2FTYJSn4IWn5OIliX763fBmgrQ%2FKbgr10biG= t7TKcpxlie3AA/1/010f01887370f9ba-220cfdd8-f5de-43f2-a5bc-2cafbf7a0ada-00000= 0/KvTig_ReKuZzZHxK9hCYau8Ga4w=3D109" style=3D"-webkit-text-size-adjust:none= ;-ms-text-size-adjust:none;mso-line-height-rule:exactly;text-decoration:und= erline;color:#B7985E;font-size:16px">series in partnership wi= th the Human Rights Foundation. Patruci=C4=87 will be a speaker at the Oslo Freedom Forum in June.

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J.J. Gould: When Putin firs= t came to power, part of his message and appeal was that he’d bring a= n end to the corruption of the oligarchs and a victory for the rule of law = in Russia. What happened?
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Miranda Patruci=C4=87: Earl= y on, Putin spoke about opposing corruption, but he essentially told the ol= igarchs, If you play my game, you will do well; if you don’t&mdash= ;and certainly, if you try anything against me—I will crush you. = Which is exactly what happened in the case of Mikhail Khodorkovsky, for exa= mple, who was extremely wealthy and prominent in Russia but opposed Putin a= nd lost everything in the country, was imprisoned for a time, and now lives= in exile.
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The combination of rhetorical anti= -corruption and actual corruption has been a crucial element of Putin&rsquo= ;s playbook from the beginning: He speaks the language of law and order, an= d 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.
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This is kleptocracy. It’s no= t just corruption; it’s a sustained, strategic use of corruption to d= evelop and maintain power. It’s a mechanism of control within a machi= nery of control—which also includes neutralizing the independent judi= ciary, closing down independent media, and ultimately overpowering every in= dependent voice or sector of society. It’s part of a relentless push = away from democratic freedoms and toward authoritarian dominance. And it&rs= quo;s been very impressive and influential among dictators everywhere&mdash= ;especially those in countries close to Russia or otherwise under Russian i= nfluence.
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Gould: How much of that inf= luence would you say has to do with Putin—with other dictators seeing= his strategic success in using corruption and wanting to replicate it&mdas= h;and how much has to do with inherited practices of corruption in the post= -Soviet world? How do you see the pattern there?
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Patruci=C4=87: 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 g= ift to your teachers. When you’re older, if you need medical services= , you bring a gift to the doctor. You get accustomed to it.

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And one of the things that pattern= leads to, when it comes to instances of grand corruption, is that people d= on’t tend to see them as shocking in these countries in the way peopl= e do in countries where they aren’t accustomed to paying bribes&mdash= ;and aren’t expected to pay them.

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What that ends up meaning is that = there’s a cut in everything: If you want a telecom license, you&rsquo= ;re expected to pay a bribe. If you want to establish a mining business, yo= u’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 expe= ct their cut. Or they may want you to turn your business over to them altog= ether—and if you don’t, it’ll be taken from you through t= ax inspections or some other mechanism.

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Across the post-Soviet world, as i= n Russia, dictators and those favored by them use these mechanisms of state= power to pressure and force businesspeople to give them what they want. An= d 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.

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One of my earliest investigations = was in the former Soviet republic Uzbekistan. The investigation had to do w= ith 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. =09=09=09=09=09=09=09=09=09=09=09=09=09=09=09

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In places like Azerbaijan, it&rsqu= o;s often members of the ruling family, or people close to the ruling famil= y, who’ll end up doing business with big international companies as t= heir “local partners.” Or even in countries across the broader = region—as in the Balkans, where I’m from, which wasn’t pa= rt of the Soviet Union—corruption and the expectation to pay bribes a= re also widespread. Putin’s style of using these cultural tendencies&= nbsp;works by drawing them into the machinery of autocratic control.

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Aleksandr Popov

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More from Miranda Patruci=C4= =87 at The Signal:

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“Corruption has been= a massive factor in Ukraine. When the former president Viktor Yan= ukovych was removed from office in the Revolution of Dignity after the Euro= maidan protests in 2014, and reporters were able to come in and see the est= ate where he lived—the Mezhyhirya Residence, just north of Kyiv&mdash= ;it was remarkable: the mansion, the art collection, the ivory desk, the go= lden 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 an= d someone who’d never steal from the Ukrainian people. You can see th= is as an example of how corruption has been embedded in Ukrainian society s= imilarly to how it’s been embedded in Russian society. The key differ= ence 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 o= n it.”

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“For a long time, th= e way things worked for Putin in Ukraine was that the Ukrainian ru= ling elite was fundamentally pro-Russian; and in collusion with them, a ran= ge 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 Uk= rainian ruling elite with Moscow and allowed Russia effectively to control = large parts of the Ukrainian economy. … The protests were about citi= zens saying no to corruption, no to the terrible consequences of corruption= for democracy and life in Ukraine, and no to the Russian influence over th= e country that corruption enabled.”

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“The world makes a b= ig mistake when it assumes that kleptocracy can be contained&mdash= ;or that the use of corruption extends only within the societies it origina= tes in. … The dirty money that’s come into the U.K. from Russi= a hasn’t been limited to buying apartments or establishing holding co= mpanies, or what have you. It’s been used to bribe members of parliam= ent. 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 t= hat.”

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