Analysis| Strategic corruption is a threat to democracy. It’s time to confront it.

Kelly McFarland

As part of our New Global Commons Working Group series on emerging diplomatic challenges, funded by the Carnegie Corporation of New York’s Bridging the Gap Initiative, ISD has convened a working group on combatting strategic corruption, building on the findings of its fall working group “Kleptocracy: Confronting Corruption at Home and Abroad.” This blog post, the first in a series on the topic, lays out the main issues at play.

A Russian armored personnel carrier burns amid damaged and abandoned light utility vehicles after fighting in Kharkiv, Ukraine, Sunday, Feb. 27, 2022. (Image: AP Photo/Marienko Andrew on Flickr)

Vladimir Putin’s decision to invade Ukraine is a direct challenge to democracy and an effort to upend the rules of the international order. It has created the most dangerous situation on the European continent in at least three decades, and it underscores the validity of the Biden administration’s fundamental national security organizing principle: that democracy must be bolstered against the threat of authoritarianism. It also did not happen overnight. Over decades, Putin has set the stage for this invasion by building deep kleptocratic networks across Europe and the world, and using dark money in a number of guises to buy sympathetic and pliable supplicants, manipulate financial systems, discredit governance, and, ultimately, undermine faith in democratic structures. He has been quietly — and not so quietly — deploying corruption as a geopolitical weapon.

Putin likely believed that Russia had garnered sufficient leverage over European economies and their governments that he could weather whatever backlash emerged from an invasion of Ukraine. The fact there has been little meaningful response to past actions in Chechnya, Georgia, Crimea, or Syria may well have played into his risk calculations as well. Ironically, it is the very breadth of these corrupt networks, woven into the legitimate global economy, that has been Putin’s fundamental vulnerability as new forms of sanctions threaten to set back the Russian economy more effectively than a bomber strike on conventional infrastructure. Only time will tell whether these sanctions will ultimately prove to be sustainable or effective, but this invasion has made one thing clear: strategic corruption must now be treated as a serious national security threat and even as a weapon of war.

Strategic corruption defined

Strategic corruption can be broadly defined as the exploitation of official positions, resources, and processes for geopolitical purposes in violation of the trust that communities have bestowed upon these people and organizations. It differs from other types of corruption in that “in bureaucratic and grand corruption, the payer and the payee are mainly just trying to get rich. In strategic corruption, by contrast, the greed is still there, for at least some of the players, but the corrupt inducements are wielded against a target country by foreigners as a part of their own country’s national strategy.”

At the same time, deconstructing “corruption” into typologies, such as petty, grand, and political, risks setting up artificial silos and ignores the fact that the three overlap, reinforce, and reflect each other. The tendency, for instance, to hive off petty corruption from other, seemingly greater, forms of corruption may mislead. Petty corruption reflects broader corrosion and ethos, and can feed into a network directly connected to grand corruption. When dealing with corruption, what matters are the networks that work across all sectors from the top-down, not the one-off venal officials. Networks diffuse rewards; government members of the network denature the governance mechanisms through their weaponization, crippling, and/or cannibalization; and networks strike back at challengers, in part, by exploiting identity divides within societies. In the end, these same networks are the building blocks of strategic corruption, so while it is worth studying strategic corruption as a geopolitical weapon, it should not be viewed as an altogether separate form of corruption.

Corruption manifested

While Russia’s invasion of Ukraine offers an immediate and jarring example of strategic corruption being deployed as a weapon of war, the negative effects of corruption overall on global security, stability, and wellbeing, are far more widespread than the headlines might suggest. Security sector corruption undermines multilateral efforts at conflict mitigation and resolution, leading to humanitarian crises, mass displacement, and growing global instability. Corrupt networks exacerbate environmental problems, through overuse of dwindling water resources, illegal logging, and the resultant collapse of biodiversity, exacerbating the effects of climate change in many of the world’s most vulnerable countries. Likewise, corruption in the global public health sector has eaten away at the international community’s ability to combat global disease and keep pandemics in check, causing global harm.

Afghanistan underscores the nature of kleptocratic regimes and their connection to international security. Over the course of twenty years, the United States — with allied contributions — fueled, and fostered a regime that was corrupt to its core, and at every level of government. “Between 2001 and 2020,” according to the Washington Post’s Craig Whitlock, “Washington spent more on nation-building in Afghanistan than in any country ever, allocating $143 billion for reconstruction, aid programs and Afghan security forces.” These sums of money, rapidly injected into a nation ill-equipped to absorb it, guaranteed a boondoggle for corrupt actors, both inside and outside of Afghanistan. Russia, for its part, capitalized on the corrupt landscape to develop its own kleptocratic networks within Afghanistan, using them to sow chaos and undermine U.S. interests in the country.

The health sector is another sector in which generalized corruption is ripe for weaponization: in total, global public health spending accounts for roughly 10 percent of global GDP and is one of the fastest growing sectors. As the COVID-19 pandemic has starkly demonstrated, corruption in global health systems has direct international security, as well as humanitarian implications. The evolving pandemic has prompted a massive and rapid surge in both country-specific and global corruption that undeniably undermines democratic principles. Corrupt and kleptocratic actors were quick to act through illicit financial flows to siphon off healthcare funds.

As these examples demonstrate, corruption is a threat in all its forms, from petty bribery to government-wide kleptocracy, because at every level, corrupt practices and networks can be weaponized and deployed strategically against the interests of democratic countries.

A shifting global battlefield

Today’s international order has changed, and corruption has changed with it. In many ways, the interconnectivity and complexity of our financial systems and the creation of vehicles to evade taxes and hide money enable corruption on an unprecedented scale — something kleptocracies have used to their advantage. The transnational nature of global corruption means that “domestic boundaries have slowly been eroded by an increasingly global network of criminals, kleptocrats, and their enablers.” Corruption of one form or another is more widespread than ever before, made easier due to facilitators in every country, and is causing instability and conflict in many nations.

In the past five years in particular, a number of high-profile exposes have illuminated this dark world of kleptocrats, oligarchs, billionaires, royals, political leaders, and those that enable them. The recent Pandora Papers, a massive trove of over 11.9 million personal financial records, paints a damning portrait of the ways in which this group launder their money around the world to hide it from the prying eyes of the media, government, and their own people. These papers highlighted the role of the United States financial system, and those of other democracies, in the movement of ill-gotten funds.

One — if not the most — important revelation from the recent trove of documents, especially in light of Russia’s invasion of Ukraine and democracies’ attempts to push back, is the public attention it draws to these “enablers” and the ways in which corrupt officials around the world legitimize and hide their stolen cash. The professions that facilitate this type of behavior include hedge funds, private equity firms, real estate title insurers, company formation agents, art dealers, lawyers, accountants, covert public relations firms, real estate agents, luxury car sellers, and cryptocurrency businesses.

A focus on the facilitators of corruption is in many ways the most important aspect in the fight against corruption because it highlights that this is very much an internal, and existential, problem for all democracies. Democratic governments the world over owe their legitimacy to their ability to provide citizens with good governance and quality services. It’s time for them to get serious about cracking down on the networks that enable autocrats and despots to enrich themselves, spread instability and undermine their own democratic ideals.

This publication was made possible in part by a grant from the Carnegie Corporation of New York. The statements made and views expressed are solely the responsibility of the authors.

Kelly McFarland is a U.S. diplomatic historian and the director of programs and research at the Institute for the Study of Diplomacy. Follow him on Twitter @McFarlandKellyM.

More from ISD’s Fall Working Group on Corruption:

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