Corruption, Sanctions, and the War in Ukraine: A Short Interview in Harvard Law Today

My home institution’s in-house publication, Harvard Law Today, recently interviewed me on some of the topics we’ve been covering on this blog (see, for example, here, here, here, here, and here) and on the KickBack podcast (here and here) related to Russia’s attack on Ukraine. As I tried to emphasize in the interview itself, I am very far from an expert in many of the specific issues at the intersection of corruption and the Russia-Ukraine war, but I tried to pull together succinctly some of what I’d learned from conversations with actual expert over the last couple of weeks. For those who are interested, you can find the interview here.

Why Has Ukrainian Military Corruption Been a Non-Story in the Current Conflict?

In my post two days ago, I noted that one reason that the Russian army’s progress in Ukraine has been slower than expected—notwithstanding Russia’s overwhelming numerical superiority—may be the corruption that has been rampant in the Russian military and defense sector for years. (See, for example, here, here, and here.) While I don’t want to attach too much importance to this factor, it does seem at least plausible to me that widespread corruption has undermined Russian military effectiveness, particularly with respect to things like supplies, maintenance, and equipment quality, and possibly also with respect to training and the competence of the leadership.

But if we think that widespread defense sector corruption has played a non-trivial role in Russia’s under-performance on the battlefield in the current war, this naturally invites a question: Why haven’t we also seen reports suggesting that Ukrainian defense sector corruption has hampered the effectiveness of the Ukrainian defense against Russia’s invasion? After all, while corruption has long been recognized as a serious problem in the Russian military, many commentators—including many Ukrainian analysts—have been saying for years that the Ukrainian military also suffers from serious corruption problems, and that those problems threaten to undermine Ukrainian military effectiveness (see, for example, here, here, and here). And yet the news out of Ukraine suggests that the Ukrainian armed forces are fighting quite effectively, without reports of equipment or operational problems that might plausibly be due to corruption.

Why is this? I have no idea—so this is going to be one of those posts where I raise a question rather than trying to argue for what I think is the most likely answer. I may try to do more research and address this in a future post, but for now let me throw out three hypotheses. I would welcome comments from readers who know more about this topic as to which of these seem most plausible, or whether there might be another explanation that I have overlooked: Continue reading

The Maldives: No Safe Haven for Oligarchs’ Yachts

Contrary to recent reports (here, here), Russian oligarchs’ yachts harbored in the Maldives are by no means safe from confiscation. As a party to the United Nations Convention Against Corruption (UNCAC), the Maldives has made bribery, embezzlement, and money laundering crimes under its domestic law (here).  Pursuant to article 46, it pledges “to afford [other UNCAC parties] the widest measure of legal assistance in investigations, prosecutions and judicial proceedings” to enforce their laws against bribery, embezzlement, and money laundering.

These provisions put the oligarchs’ yachts at risk of confiscation in two ways. 

One, Maldivian authorities could initiate an action under the domestic antimoney laundering law. Given the evidence on the public record, there is certainly reason (what American law terms “probable cause”) to believe that the yachts were acquired with the proceeds of a crime, likely embezzlement from the Russian state. (Remember, there need not be a conviction for embezzlement in Russia or elsewhere to launch the related prosecution for money laundering.) The yachts’ presence in the Maldives appears to be more than sufficient grounds for its courts to assert jurisdiction under article 13 of the penal code and therefore to issue a “freeze” order which would prevent the yachts from pulling anchor until a final decision on a seizure action issued.

Alternatively, Maldivian courts have the power under UNCAC and domestic law to issue a freeze order at the request of another UNCAC party.  A country where one was built, for example, could open a case to see whether the shipbuilder was paid with the proceeds of a crime, a money laundering offense, and request that the Maldives prevent the yacht from leaving until its case were concluded. 

Some say will say that whatever the law, the Maldives is a small island nation without the guts to stand up to Russia.  Not so. During the UN General Assembly debate on the resolution denouncing Russian aggression, the government not only backed the resolution but its ambassador left no doubts where its stood: “The Maldives has always taken a principled stand on violations of the territorial integrity of a sovereign country, [a] position based on a bedrock belief in the equality of all States and unconditional respect for the principles of the United Nations Charter.”

Others will be claim that confiscating the oligarchs’ yachts is not possible legally for ownership is obscured by layer upon layer of shell of corporations headquartered in countries.  But those layers can be stripped away by the determined efforts of police and prosecutors, a determination surely stiffened by magnitudes given the yacht owners’ complicity in the appalling events daily unfolding in Ukraine.

Hooray for Corruption (in the Russian Military)

As I write this, the tragic unjustified conflict in Ukraine drags on, with anguishing reports of civilian casualties and needless destruction mixed with encouraging news of the valor of the Ukrainian armed forces and the resolve of the Ukrainian people and their leaders. I won’t pretend to have any idea what will happen. I’m just hoping that outnumbered the Ukrainian resistance can hold out long enough for the political and economic pressure to have some effect—if not in changing the Russian leadership’s policy, then at least in undermining its capacity to wage war or maintain a long-term occupation.

In trying to slow the Russian army’s advance and deny Russia control of major cities and other strategic targets, the Ukrainian military may have the help of an unexpected ally: corruption. The corruption, that is, of the Russian military and defense sector. Without taking anything away from the skill and bravery of the Ukrainian armed forces, many analysts have noted that the invading Russian force appears to have been hampered by cheap and poorly maintained equipment, shortages of fuel, rations, and other supplies, and deficiencies in training and coordination. And some of these analysts have suggested that while no one factor can explain Russia’s poor showing in the field (so far), pervasive corruption in the Russian defense sector may be an important contributing cause (see, for example, here, here, and here). Continue reading

New Podcast Episode, Featuring Inna Melnykovska

A new episode of KickBack: The Global Anticorruption Podcast is now available. During the ongoing emergency in Ukraine, as Russia’s unprovoked military aggression throws the region and the world into crisis, my colleagues at the Interdisciplinary Corruption Research Network (ICRN) and I are going to try as best as we can to feature on KickBack experts who can shed greater light on how issues related to corruption relate to the ongoing crisis. And rather than keeping to our usual schedule of releasing new episodes every two weeks, we will release new episodes as soon as they are available. In the new episode, I had the opportunity to speak to Inna Melnykovska, Assistant Professor of Political Science at Central European University. Professor Melnykovska is an expert on state-business relations and crony capitalism in Ukraine and Russia, and is working on a book project tentatively titled Global Money, Local Politics: Big Business, Capital Mobility and the Transformation of Crony Capitalism in Eurasia. Our podcast conversation focuses on her research in this area and its implications for the current crisis. We discuss the similarities and contrasts between the “crony capitalism” systems in Ukraine and Russia, the extent to which Ukrainian President Zelensky was pursuing policies that would reduce the influence of oligarchs on Ukrainian government, whether movement toward cleaner and more democratic government in Ukraine may have been perceived by Putin’s administration as a political threat, and whether (or when) we might hope that economic sanction on Russian elites and oligarchs might have a political impact. You can also find both this episode and an archive of prior episodes at the following locations:

KickBack is a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). If you like it, please subscribe/follow, and tell all your friends. And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

A Message from Ukraine’s Anti-Corruption Research and Education Center

On my previous visits to Kyiv, I have had the opportunity to meet and exchange ideas with several of the outstanding scholars and researchers affiliated with the Anti-Corruption Research and Education Centre (ACREC). This morning, ACREC a message to a list of people in the worldwide anticorruption research community, describing the situation in Ukraine and appealing for more international support. With ACREC’s permission, I am reproducing the message below:

Dear colleagues

Anti-Corruption Research and Education Centre (ACREC) addresses you on the ninth day of the invasion of the russian federation.

All these days we have been trying our best to help the Armed Forces of Ukraine – to transfer funds, organize aid and necessary purchases. We also helped people in need and those who were forced to leave their homes.

Some of us still remain in the hottest spots of today’s war – Kyiv and Kharkiv.

You can see how russian troops are bombing Kyiv and its suburbs, Kharkiv, Sumy, Chernihiv, Enerhodar and it’s nuclear power plant. We are sure that many of you have been to these cities and remember them only for the best. Help us save these cities, their people and Ukraine. Call on your governments to close the skies over Ukraine in order to prevent further casualties and to help neutralize military aggression. This is a war not only against Ukraine, but also against the whole civilized world. Putin’s terror will not stop exclusively on the territory of Ukraine, after some time it may be repeated with other neighboring countries of russia. Ukraine is only the first outpost on the path to a peaceful Europe. Ukraine will fall – Europe will fall.

We, as a think tank at the Kyiv-Mohyla Academy, appeal to you to call on your governments to support Ukraine in every possible way and to prevent further losses among the military and civilian population of our country by:

  • closing the skies over Ukraine as it was done during the 2008 Russian-Georgian war;
  • further implementation and strengthening of sanctions against russia, its leadership and its satellite countries, family members of the russian leadership;
  • sanctions against those associated with the leadership of the aggressor country should be sought separately: https://putinwallets.org/
  • depriving Russia of the status of a member of the world’s leading organizations, such as the UN Security Council and the UN General Assembly.

If you have friends and / or colleagues from russia, please spread the truth about their military aggression against Ukraine by their state.

We also sending you the links on:

  • website for fundraising for the needs of the Ukrainian army: https://savelife.in.ua/. In addition, we encourage you to join the volunteer initiatives in your countries to help Ukrainian citizens in need;
  • website with news in English about the course of military aggression in Ukraine: https://edition.cnn.com/; https://www.bbc.com/russian;
  • website for the search for prisoners of war and victims of military aggression: https://gdemoysyn.com/.

If you have any questions, you can contact us – we will help with any kind of information.

Best regards,
ACREC Team

Guest Post: The Ukraine Crisis Demonstrates (Again) that the U.S. Must Crack Down on Illicit Finance

GAB is pleased to welcome back Shruti Shah, the President of the Coalition for Integrity, to contribute today’s guest post:

Like so many of us, I am shocked and horrified by Russia’s invasion of Ukraine and unforgivable attacks on civilian targets. At the same time, I have been encouraged by the resistance to Russia’s unprovoked aggression—most obviously and importantly by the brave Ukrainians defending their homeland, but also by the response of the international community. The United States, the European Union, Canada, the United Kingdom, and other nations have announced coordinated sanctions against Russia, including cutting off major Russian banks from the SWIFT system and preventing Russia’s central bank from drawing on foreign currency reserves held abroad. In addition to sanctions targeted at Russia’s financial system, Western nations have also sought to use targeted sanctions aimed at oligarchs close to President Putin. The Biden Administration also announced a transatlantic task force to ensure the effective implementation of financial sanctions by identifying and freezing the assets of sanctioned individuals and companies and an interagency law enforcement group called KleptoCapture.

This renewed focus on the corruption of the Russian political and economic elite is welcome. Russia’s deep-rooted corruption is one of the reasons that Putin has been free to engage in such outrageous acts. He relies on the security services and corrupt oligarchs to protect him. Oligarchs also serve as his personal wallet. Yet for far too long, these corrupt oligarchs have lived lives of luxury off of ill-gotten wealth, which they have used to purchase luxury property in places like New York and London. Yet while some oligarchs and Russian political figures were already the subject of targeted sanctions prior to the recent attack on Ukraine. Overall the West had been far too complacent. The Ukraine tragedy seems to have prompted Western governments to pay more attention to this problem. Indeed, the new sanctions are significant in both scope and size, and they welcomed by the Coalition for Integrity and most other anticorruption activists around the world.

But there’s more work to be done. It’s time for Western governments to ask some hard questions about how these corrupt elites were able to use their ill-gotten gains to buy luxury property and assets and enjoy their wealth in places like New York and in London for so long, and about the role of Western “enablers” in hiding the sources of their wealth and shielding questionable transactions from scrutiny. And, to turn to more specific priorities for policy reform in the United States, there are three specific things that the U.S. government should do to crack down further on illicit finance and thereby advance the agenda laid out in the White House’s Strategy On Countering Corruption: Continue reading

The UK’s Promised War on Kleptocracy: Reinforcements Needed

Putin’s invasion of Ukraine has created a new-found resolve among the world’s financial centers. They are now committed to seizing the money Putin and oligarchic cronies have stolen from the Russian people and hidden in their territories. Given the enormous media attention on where it is stashed (examples here, here, and here), that may sound straightforward.

It is not.  Even bad guys have rights, and as Radha Ivory reminds, that includes the right to their property. To confiscate the assets Putin and cronies have squirrelled away outside Russia will require proof that (a) no matter what ownership records show, the assets really do belong to one of them and (b) the assets were acquired with the proceeds of corruption or other criminal activity.

London has been one of the premier destinations of dirty Russian money. James Mather, a barrister of the U. K’s Serle Court, explains below what the British government must do to fulfill its pledge to confiscate every shilling of stolen Russian money hidden in its territory.

The gloves have come off in the United Kingdom’s effort to cleanse itself of ‘dirty money’, or so we are told.  To signal its commitment, the UK government has sped up new legislation, but its contents seem unlikely to advance matters very far.  There is amendment of the legislation for Unexplained Wealth Orders (totemic but misunderstood powers that are of quite limited practical use) and new requirements to register the beneficial ownership of property (as always easily evaded by clever structuring or simple lies).  What has really been lacking all these past years is harder to legislate for: the adequate enforcement of the asset recovery laws that exist. 

Continue reading

Guest Post: Did Putin Invade Ukraine to Expand State Corruption?

Today’s guest post is from Matthew Murray, currently Adjunct Professor at Columbia University, who previously served as U.S. Deputy Assistant Secretary of Commerce for Europe, the Middle East, and Africa.

When President Putin began Russia’s expanded military invasion of Ukraine on February 24, the imprisoned Russian anticorruption activist and political opposition leader Alexey Navalny was on trial once again over fabricated charges of embezzlement. Though Mr. Navalny faces another 15 years in a penal colony, he seized the opportunity during his February 24 hearing to publicly state his opposition to Russia’s war on Ukraine. “This war between Russia and Ukraine was unleashed to cover up the theft from Russian citizens and divert their attention from problems that exist inside the country,” he said.

Mr. Navalny’s statement reflects a deep understanding of the causes of war. Throughout history rulers have started wars to divert and distract attention of their citizens from growing domestic problems and restiveness. And this pattern fits the Russian situation well. In recent years, Putin’s popularity has declined due to failure to modernize Russia’s economy, his flawed management of the Covid-19 pandemic, and—not least—the corruption of his regime and his inner circle. Indeed, last February, when Russian courts initially sentenced Navalny to over two years in prison, tens of thousands of Russian citizens from 109 cities across the country went to the streets to demonstrate against Putin’s rule. In ordering the invasion of Ukraine, Putin may well have been seeking to divert attention from failures at home, including his autocratic control of the political economy for the benefit of himself and the Russian oligarchy.

But it’s more than that: Putin’s aggression may also be aimed at legitimizing his rule at home by installing a new state-sponsored oligarchy in Ukraine. He may be seeking to kill the idea, which took hold in Ukraine during the 2014 Revolution of Dignity at the Maidan. The Maidan Revolution started when Ukrainians took to the streets of the Maidan in central Kyiv to protest then-President Victor Yanukovych’s sudden decision to reverse the nation’s course to join the European Union and engage in free trade with the world’s largest economic bloc. But the Maidan Revolution was not just about one decision or one administration. The Maidan uprising was a revolution against the system of corrupt rule of Yanukovych and the oligarch class that was choking the nation’s potential—and it was also about the idea: the idea that every individual should have the freedom, the right, and the path to fulfill their human potential. This idea fundamentally threatens Putin’s personal authority and autocratic rule. As Ukraine’s reformers have begun to take concrete steps to embed this idea in independent institutions, they set an example for Russian citizens, who may be inspired by Ukraine’s example to demand that their government suppress official corruption and respect for human rights. Continue reading

New Podcast Episode, Featuring Oksana Huss and Joseph Pozsgai-Alvarez

A new episode of KickBack: The Global Anticorruption Podcast is now available. During the ongoing emergency in Ukraine, as Russia’s unprovoked military aggression throws the region and the world into crisis, my colleagues at the Interdisciplinary Corruption Research Network (ICRN) and I are going to try as best as we can to feature on our podcast experts who can shed greater light on how issues related to corruption relate to the war, the larger political context, and the international response. In this episode, I had the opportunity to speak to two ICRN members: Oksana Huss, a research fellow at the University of Bologna, and Joseph Pozsgai-Alvarez, Associate Professor at Osaka University. Our conversation begins with Oksana explaining Ukraine’s transformation since the Maidan Revolution in 2014, particularly democratic and anticorruption reforms under President Zelensky’s administration, and the cultural, political, and economic threat that developments in Ukraine posed to Russian elites and the Putin regime. Joseph then discusses Russia’s use of so-called “strategic corruption” to extend Russian influence in the West. Then, after recognizing the heroism of the Ukrainian army in slowing the Russian advance, our conversation turns to the impact of sanctions on Russia and Russia’s political and economic elites, and the extent to which cracking down on the dirty money may help counter Russian aggression. You can also find both this episode and an archive of prior episodes at the following locations: KickBack is a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.