Croatia — a Member of NATO and the EU Ranked as Most Corrupt Country in Eastern Europe — Vladimir Putin’s Russia falls behind
Research Reveals Hemorrhaging of Billions in Illicit Financial Outflows Via Crime, Corruption and Tax Evasion and Its Adverse Impact on GDP.
Washington, DC /Rijeka , Croatia— While the Western world’s top justice officials and leadership focus on rampant corruption in Russia, the Balkan country of Croatia, a member of the European Union and NATO has the dubious honor of being ranked the most corrupt Eastern European nation. Vladimir Putin’s Russia falls behind.
Based on reports presented by Global Financial Integrity, International Leaders Summit, the International Monetary Fund and World Bank — Croatia’s illicit financial outflows via crime, corruption and tax evasion was more than $35.6 billion for the years 2005–2014, amounting to 62% of the country’s 2014 GDP. During the same period (2005–2014), Russia’s illicit financial outflows were at $1.1 trillion, amounting to 53 % of the 2014 GDP.
The European Union has led a robust campaign to address corruption in Romania. On July 27, 2019, a report stated, “Romania has made “very little progress” to prevent corruption in its government, the Council of Europe’s anti-corruption body said in two critical reports released on Tuesday.”
Romania’s illicit financial outflows via crime, corruption and tax evasion for the same period amounted to $27.7 billion, 14 % of the nation’s 2014 GDP. Croatia’s population stands at 4 million while Romania has 19.5 million citizens.
Focusing on Rampant Corruption in Croatia
Ivo Sanader is the only highest-ranking official tried for corruption in Croatia and was sentenced to jail for other corruption related crimes.
However, the rest of the HDZ and SDP politicians with unexplained wealth their private partners in crime have not been convicted by Croatia’s politically influenced prosecutors and a parlous judicial system.
Since Croatia’s independence in 1991, the country’s two major political parties Croatian Democratic Union — Hrvatska demokratska zajednica (HDZ) and Social Democratic Party (SDP) have rotated in power, brazenly blocking fundamental judicial reforms and falsifying progress and other reports to Western and EU institutions monitoring the Balkan nation.
The Economist’s Edward Lucas stated, “Soggy bottom: Croatia’s sullen and obstructive approach to pluralism, media freedom and the rule of law remains an alarming pothole on the road to further EU enlargement. Nobody wants to upset the murky and convenient status quo.”
The observation appeared in the The Economist’s print edition of January 4, 2007.
The Failure of the West’s “Trust and Verification” Process
Croatia, a nation of 4 million people, entered the North Atlantic Treaty Organization (NATO) on April 1, 2009 and joined the European Union (EU) on July 1, 2013. Both NATO and the EU communicate a commitment to the rule of law, freedom and democratic principles. The EU taxpayer aid package to Croatia for the years 2014–2020 totals €12.7 billion.
An anti-corruption trial, named “Fimi Media” focused on a PR agency which was used by then-Prime Minister Ivo Sanader and the HDZ political party embezzling millions of euros from state-owned companies to finance the party and enrich its politicians. These funds benefited senior HDZ politicians. Kolinda Grabar-Kitarovic, now president of Croatia and running for re-election, has been a top HDZ official.
On the HDZ — Fimi Media trial, the presiding judge Ivana Calic stated,
“This sentence is a message that political corruption is evil, that abuse of power to extract personal material or other benefits is shameful, is not tolerated and, in the end of the day, does not pay back. The first defendant [Sanader], with his behaviour, showed an attitude which is not an exception today in the political and public life, which is that there is a perception that politicians are above the law. In the period of the crime [the end of 2003 — January 2009], the legal entity HDZ was in power which means that because of a majority in the Sabor [parliament] it adopted laws, governed the state and its repressive apparatus among others. When this and such a legal entity violates the laws, it undermines the foundations of the rule of law because everyone should ask themselves what message is this to the citizens when those in power violate the laws but those who have elected them are required to obey them”.
In the first Fimi media trial in 2014, Sanader’s prison sentenced was overturned by the Supreme Court ordering a retrial.
Croatia’s Parlous Judicial System
- Over 600,000 back-logged court cases for a nation of 4 million, some stuck in the system for over a decade.
- In the 2019 EU Justice Scoreboard released in May 20, 2019, shows Croatia with the highest number of judges in the entire European Union per 100,000 inhabitants, yet, with the worst results when it comes to gaining the trust of the public, affirming integrity and independence of the courts and standing for the rule of law.
- The poorly funded Croatian State Prosecutor’s Office for the Suppression of Organized Crime and Corruption of Bureau for Combating Corruption and Organized Crime (USKOK) is also hampered by the significant limits imposed on the investigative body through a politically influenced system.
Relevant Graphs from the 2019 EU Justice Scoreboard
In the 2019 EU Justice Scoreboard, Croatia scores the worst within the European Union with the general public stating concerns of the lack of independence within the judiciary:
- The status and position of judges do not sufficiently guarantee their independence.
- Interference or pressure from economic or other specific interests.
- Interference or pressure from government and politicians.
Spotlight on Rijeka: The Most Corrupt City in Croatia, Criminal Enterprises and its Deep Connections to the Local and National Government:
Today, Rijeka’s mayor and its politicians are seeking significant EU taxpayer funds to cover the budget for Rijeka, as the EU designate, to host the European Capital of Culture in the year of 2020. A new name for this city is emerging, “Rijeka — a European capital of corruption.”
Vojko Obersnel, Rijeka’s mayor, and his cadre, have welcomed two specific categories of “foreign” investments:
- Funding by EU and US taxpayers, which does not require much accountability.
- Money of suspicious origin, which does not seek profitability nor accountability in Croatia.
A Case Study of Corruption: Croatia’s City of Rijeka, Mayor Vojko Obersnel, Head of Urban Planning Srđan Škunca, Construction Company GP Krk and Criminal Enterprises
In 2014, the US Justice Department froze more than $458 million stolen by former Nigerian dictator General Abacha, his son Mohammed Sani Abacha, their associate Abubakar Atiku Bagudu and others, in largest kleptocracy forfeiture action ever brought in the U.S.
While the The US Justice Department’s investigations were ongoing, Gabriele Volpi, Abubakar Atiku Bagudu’s trusted friend and business partner and Volpi’s Croatian partner Damir Miskovic, signed agreements with Vojko Obersnel to invest in Rijeka’s soccer club and the City of Rijeka.
According to DoJ, these individuals, “embezzled, misappropriated and extorted billions from the government of Nigeria and others, then laundered their criminal proceeds through the purchase of bonds backed by the United States using U.S. financial institutions.”
For example, I can recall Andrei Illarionov, an advisory board member at the Adriatic Institute of which I am president who was Vladimir Putin’s economic advisor until he parted bitterly with the Kremlin over issues of political freedom, posing a question: “If you have to choose between the rule of law and a favorable business environment, and you cannot have both, which one would you choose?”
To listeners from Western democracies in his audience, including a number of senior politicians and policy experts, the question sounded like contradictory nonsense, since no favorable business environment can exist without the rule of law. But in post-communist Europe, we inhabit this contradiction, and the factor that makes this situation possible is corruption. The law exists, and in a certain sense it rules, but in the manner of its rule it is institutionally subverted.
If we want economic freedom in southeast Europe — and as we learn what it truly means we discover we definitely do — then we need to reprioritize. Yes, we need to see continued efforts to make business environments more conducive to foreign and domestic investment. But we also need to address more overtly the twin legacies of communist rule: disregard for private property rights and the inheritance of institutional power by networks of corrupt government officials and their private partners in crime.
In order to beat back the scourge of corruption we need both to help ourselves, most importantly to be helped by outside forces. Citizens can exert a certain degree of pressure, by resolving not to accept endemic corruption. However, they would benefit greatly from more immediate and more robust support from international partners.
Western taxpayer aid through “government to government transfers,” to Croatia should be frozen. A principled approach applied by the United States, the United Kingdom and strong rule of nations from within the EU is to send visiting judges and prosecutors to Croatia to assist the local USKOK anti-corruption unit, prosecutors and judges in administering justice, tracking down illicit financial outflows and recovering Croatia’s stolen treasury funds.
Recovering Croatia’s $35.6 billion and holding to account Croatia’s corrupt politicians and the private partners in crime will be an important start in combating corruption.