• President Biden released a National Security Study Memorandum (NSSM) on June 3, that establishes the fight against weaponized corruption as a core national security interest of the United States.
“We will take special aim at confronting corruption, which rots democracy from the inside and is increasingly weaponized by authoritarian states to undermine democratic institutions…We will crack down on tax havens and illicit financing that contribute to income inequality, fund terrorism, and generate pernicious foreign influence.”~ White House NSSM, June 3, 2021
Under Vladimir Putin, Dictator for Life, Russia is conducting a ”new” and more insidious type of anti-democratic aggression toward nearby countries as well as Western Europe and the United States. China and other traditional adversaries are aggressors too.
• Corruption is purposefully being used as a tool of statecraft to interfere with, co-opt, weaken, and destabilize democratic institutions and processes.
• U.S. domestic laws, regulations and practices enable foreign weaponized corruption.
• The threat is new to national experts trained to analyze more traditional challenges (such as China’s military posture in the South China Sea or Russia’s violations of nuclear arms control treaties).
• President Biden’s ambition requires both defensive measures to prevent the enabling of foreign weaponized corruption in the U.S., and offensive actions to take the fight to authoritarians in order to disable and defeat their transnational crony networks.
• In Russia, ”mob rule” has become an organizing principle of governance. Formal government decision-making is captured by informal networks of political and business patrons who control the allocation of public resources.
Vladimir Putin manages patronage networks in government agencies, state-owned enterprises and private businesses. These elements govern together as an oligarchy with the authority and protection of law.
In the early 1990s, the KGB and Communist Party leaders moved billions in state resources and financial assets abroad; privatized the most profitable enterprises for themselves and their close associates; and began engaging deeper in criminal activity.
As former KGB agent Putin took control of the national government in 2000, he leveraged his power to form interlocking networks with current and former members of the security services, and private-sector surrogates. They manipulated law and institutions to privatize the cash flow from public assets for their personal benefit and erected high barriers to market-based competition.
Putin’s Kremlin is driven to expand, export and embed this state-sponsored oligarchy in the USA.
The most challenging dimension of this threat assessment is to discern and establish intentionality in the use of corruption.
In 2009, alarmed leaders from Eastern and Central Europe wrote an open letter warning the United States that Putin was engaged in activities targeted to capture energy and other key industry sectors, [like in Kentucky, 2018*], acquire control of media, and bribe national officials in their countries.[One of the targets, according to TIME, was Kentucky’s own Mitch McConnell, the Senate majority leader, who helped thwart a bipartisan push to keep the sanctions against the Kremlin in place.]
— Other Western democracies have learned that such bonds can carry consequences. Oligarch-owned companies have helped the Kremlin influence politics across Europe. Since Putin came to power in 2000, Russia has used economic leverage to “force a change in policy” or undermine governments in at least 19 European countries, Laura Rosenberger, a former National Security Council official under Obama, told a House committee last May.
On rare occasions, Russian oligarchs have even described how this strategy works. “What is a factory in a one-factory town? It’s what all life revolves around,” the billionaire Dmitry Firtash, a longtime ally of the Kremlin in Ukraine, told TIME in a 2017 interview. “We don’t just pay wages. We provide the social safety net. So people believe us.” When he and his factories put their support behind a political cause or candidate, “that influences people,” Firtash explained. “That’s what ensures electoral support.” ~ TIME, 2019.
• In order to launder and secure illicit gains in western financial institutions, Russians move tens of billions offshore each year. At the same time, the Kremlin builds patronage networks in other nations that can help Russia’s leadership both legitimize and expand its power. To consolidate this oligarchic control beyond its borders, the Kremlin exploits the relative openness of U.S. legal systems.
The Kremlin has a range of corruption techniques perfected at home that it can use to seek specific policy outcomes and the destabilization of democracies in other nations.
• For purposes of identifying Russian tactics, it is important to consider Russia’s 2013 “new generation warfare” doctrine, in which Russian Gen. Valery Gerasimov articulates the view that a modern military power has become increasingly integrated with nonmilitary measures, including cyber warfare, disinformation and covert action.
• How do Putin’s personal interests affect his cost-benefit as the key decision-maker in Russia’s foreign policy?
On the one hand, Putin may calculate that the more wealth that he and his transnational oligarchic networks can extract, the longer he can stay in power. Currently, he pays no price for illegality at home and incurs few risks for facilitating corruption abroad. On the other hand, if Putin has accrued as much wealth as is claimed, then a change in government could result in criminal prosecution and confiscation of his assets.
In practice, as the 2018 Senate Foreign Relations Committee minority staff report finds, Russia seeks to capture foreign elites through offers of partnership, cash payments and other financial inducements. For these purposes, it uses state-owned enterprises in the energy and defense sector, private business surrogates, money laundering, and financing of political campaigns.
As described in U.S. Treasury Department reports, Moscow exerts a malign influence through local oligarchs who use control of the energy, banking and media industries to interfere with elections and institutions such as courts, prosecutors and the central bank.
• While the Russian state seeks to weaken the rule of law, Russian oligarchs require it to function effectively abroad. Hence, the Kremlin takes advantage of other countries’ adherence to the rule of law to further its agenda. The oligarchs increasingly use foreign courts to secure and legitimize their control of key domestic business assets while also damaging their adversaries. In the United Kingdom, there is an entire industry of enablers, including private intelligence firms and lawyers, that help Russian elites exploit the openness of the British legal system to facilitate more favorable legal outcomes, freeze a defendant’s assets, introduce questionable evidence and place increased pressure on opponents. Such abuse of the Western rule of law-based system also extends to the United States. As oligarchs from Russia (as well as Central Asia, China and other nations) increasingly depend on foreign courts, it will be important to assess when such conduct constitutes state-sponsored use of corruption to undermine the rule of law or a defensive maneuver to secure power and position at home while laundering assets and reputation abroad.
Russia’s interference in the 2016 U.S. presidential elections raised the specter of corruption being used tactically to capture American leaders.
Assessing the Threat of Weaponized Corruption
A Kremlin-linked firm invested millions in Kentucky