The Rise of Strategic Corruption

How states weaponise graft

PART 1

By Philip Zelikow, Eric Edelman, Kristofer Harrison, and Celeste Ward Gventer

GRAFT is nothing new; it may be the second-oldest profession. Powerful people and those with access to them have always used kickbacks, pay-to-play schemes, and other corrupt practices to feather their nests and gain unfair advantages. And such corruption has always posed a threat to the rule of law and stood in the way of protecting basic civil and economic rights.

What is new, however, is the transformation of corruption into an instrument of national strategy. In recent years, a number of countries—China and Russia, in particular—have found ways to take the kind of corruption that was previously a mere feature of their own political systems and transform it into a weapon on the global stage.

Countries have done this before, but never on the scale seen today.

The result has been a subtle but significant shift in international politics. Rivalries between states have generally been fought over ideologies, spheres of influence, and national interests; side payments of one kind or another were just one tactic among many. Those side payments, however, have become core instruments of national strategy, leveraged to gain specific policy outcomes and to condition the wider political environment in targeted countries. This weaponised corruption relies on a specific form of asymmetry. Although any government can hire covert agents or bribe officials elsewhere, the relative openness and freedom of democratic countries make them particularly vulnerable to this kind of malign influence—and their nondemocratic enemies have figured out how to exploit that weakness.

The fight against corruption has generally been marginalised in public and academic discussions of foreign policy. The problem is usually treated as a law enforcement challenge or a good-government issue—something that holds back political or economic development but that does not rise to the level of national strategy. Today, however, weaponised corruption has become an important form of political warfare. Defences against it must move into the mainstream of international policy work in every vulnerable government, including in the United States.

CORRUPTION ERUPTION

Strategic corruption differs in important ways from the more traditional forms that scholars call ‘bureaucratic corruption’ and ‘grand corruption’. Bureaucratic corruption is the pervasive conversion of ordinary public service into a ‘bid for service’: for example, in many countries, simple steps such as getting a driver’s licence or passing a building inspection require paying a bribe. This is the sort of graft that hobbles economic development by allowing well-connected insiders to profit from investment at the expense of genuine growth.

Grand corruption occurs when business leaders or major criminals (or oligarchs, who are a combination of the two) directly pay off top government officials in exchange for favours, such as a preferential position or control of a key economic sector that presents opportunities for high-margin plunder—often banking, telecommunications, or natural resources such as oil and gas. Both forms of traditional corruption erode weak states, leading to breakdown and civil conflict—a process playing out right now in countries such as Algeria, Bolivia, Iran, Iraq, Lebanon, and Venezuela.

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. Sometimes, but not always, these schemes entail violations of the law, including by citizens of the target country. In other cases, the conduct may be technically legal but still involves “the perversion or destruction of integrity in the discharge of public duties,” as the venerable Oxford English Dictionary’s definition of corruption puts it. For that reason, some corrupt acts are punishable by law; other kinds must be left to the judgment of citizens, if they are brought to light.

The first great effort to counter strategic corruption in the United States sought to do just that. The Foreign Agents Registration Act (FARA), signed into law in 1938, arose from congressional investigations into communist and Nazi propaganda in the United States. The law required representatives of foreign sponsors to register, allowing what the legislation’s authors called “the spotlight of pitiless publicity” to do its work.

In the 1960s, more congressional investigations led to a set of major amendments to FARA, which focused the legislation more on foreign sponsorship of political lobbying rather than propaganda. For the next few decades, foreign influence peddling remained a relatively marginal phenomenon, characterised by the efforts of a handful of dictators and their cronies to buy influence in Washington and other Western capitals.

Things began to change in the 1990s. Suddenly, there were many more buyers. The collapse of communism put more than 20 new governments into the marketplace. All of them, and many more, were eager to make friends and influence people in Washington, the capital of the world’s sole remaining superpower. There, they found many consultants and lawyers ready to offer high-priced advice. A particularly lucrative new line of business was helping funnel U.S. or global investment to countries newly opened to business. And as the United States and others leaned more on economic sanctions as a policy tool, foreigners needed more and more help navigating the regulatory machinery.

Meanwhile, because of the deregulation of the global financial system during the 1970s and 1980s, it was much easier to move and invest money in all directions and be able to get it back out again. Open and prosperous countries such as Canada, the United Kingdom, and the United States were becoming the preferred shelters for the billions of dollars that every year are laundered through anonymised companies, real estate investments, and other schemes. As early as 2001, the Organisation for Economic Cooperation and Development identified anonymised companies as a primary means for hiding illicit transactions around the world. The United States, lacking national legislation that requires transparency about the “ultimate beneficial owner” of corporate entities, gradually became a financial haven for money launderers, terrorist financiers, kleptocrats and smugglers. For that reason, the striking growth of transnational criminal networks during the post–Cold War era has aided not just traditional corruption but also the strategic kind; after all, as the journalist Oliver Bullough memorably put it, “the evil money always mixes with the naughty money”.

The cumulative result of all these shifts has been an exponential increase in the scale of U.S. commerce involving foreign interest groups. Americans with connections (real or merely claimed) to decision-makers now enjoy opportunities that can lead to all sorts of corrupt behavior. Political consultants and former U.S. officials who spend time in the large, lucrative, and lightly regulated marketplace of influence peddling face frequent tests of their ethics, integrity, and patriotism. Some handle these challenges with care and dutiful propriety. Others do not.

*Part 2 continues in our next edition