The Development Response to Kleptocracy and Strategic Corruption - Josh Rudolph, Fellow for Malign Finance January 19, 2022
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The Development Response to
Kleptocracy and Strategic Corruption
Josh Rudolph, Fellow for Malign Finance
January 19, 2022
alliance for
securing
democracyTable of Contents
Introduction and Summary................................................................................... 2
Domestic-Foreign Coherence............................................................................... 3
Kleptocracy............................................................................................................................. 3
Strategic Corruption............................................................................................................... 3
Russia .................................................................................................................................... 4
China...................................................................................................................................... 6
United States.......................................................................................................................... 8
Past and Future Development Strategies.......................................................... 10
Informed by Political Analysis..............................................................................................12
Responsive to Political Shifts..............................................................................................13
Coordinated across Borders................................................................................................16
Integrated across Sectors....................................................................................................18
Conclusion............................................................................................................ 19
Endnotes............................................................................................................... 20
Alliance for Securing Democracy 1Introduction and Summary
Kleptocracies do not stop at their own borders. The First, aid should be informed by local political analysis.
same actors, networks, tactics, and resources that More important and less used than technical reviews
they wield to prevent democracy and rule of law from of laws and institutions, political analysis should center
sprouting at home are also repurposed for foreign anti-corruption efforts around known corrupt activity.
aggression. While cronies, oligarchs, and lesser opera- That starts by asking sensitive questions about which
tives do get rich in the process, “strategic corruption” individuals, institutions, and sectors are the most
is chiefly a geopolitical weapon directed by autocratic corrupt, how extensively their networks of wealth and
regimes to secretly undermine the sovereignty of other power span, and which corrupt figures must be held
countries. The three most common manifestations of accountable to thoroughly purge grand corruption.
strategic corruption vary on a spectrum of how di-
rectly and boldly they violate sovereignty and subvert Second, aid should be responsive to political shifts,
democratic processes. scaling up and down, respectively, in response to win-
dows of opportunity for anti-corruption reform and
Starting with the most indirect and chronic form of times of backsliding toward kleptocracy.
strategic corruption, Russia and China invest “corro-
sive capital” throughout Eastern Europe and the Belt Third, aid responses to kleptocracy should be coor-
and Road Initiative, respectively. They use corrupt dinated at the regional and global levels, similarly to
patronage networks and opaque business dealings to how grand corruption operates across borders through
spread their kleptocratic model of authoritarian gover- transnational networks of actors and tools.
nance.
Fourth, anti-corruption programming should be deep-
Those corrupt investments are usually also supported ly integrated across the traditional sectors of assistance,
by tactics of “malign influence,” like when a minister particularly health, infrastructure, energy, climate, and
or politician receives bribes or economic threats until security.
they censor their political speech, advance a foreign
Some of these new approaches are already being pri-
policy initiative, or otherwise subordinate the legit-
oritized under the Biden administration’s new strategy
imate sovereign interests entrusted to them by their
to combat corruption, particularly coordinating across
own people in favor of the interests of a foreign power.
tools and sectors to fight transnational corruption. But
Finally, the most direct and acute form of strategic operationalizing this mission will be no small endeav-
corruption involves financial methods of election or, given that anti-corruption assistance is delivered
interference and other tactics of corrupting democratic through a notoriously technocratic and apolitical
processes. Often funded with the proceeds of klep- bureaucracy built during the Cold War to aid socio-
tocracy, election interference through covert political economic development in individual countries steadily
financing has become the bailiwick of Kremlin-direct- over decades. But getting this right offers the key to
ed oligarchs. defending democracies from autocratic aggression,
showing how democracy can deliver, and even helping
Separate from those three manifestations of strategic bring foreign policy and domestic politics into align-
corruption—corrosive capital, malign influence, and ment for the first time in a generation.
election interference—China and Russia try to hide
their dirty money and malign activities by pressuring
foreign journalists into silence through surveillance,
thuggery, and lawsuits.
Western foreign assistance has not yet offered a coher-
ent response to kleptocracy and strategic corruption,
but that is starting to change under the Biden adminis-
tration. Building resilience to this transnational threat
through foreign aid will require four new approaches
that are more political and coordinated than tradition-
al development assistance.
Alliance for Securing Democracy 2Domestic-Foreign Coherence
To sustainably tap into a country’s resources and public office for private gain, “strategic corruption” has
talents, foreign policy must achieve coherence with a geopolitical objective. The ultimate perpetrator is a
the domestic political situation. Historically, foreign government that aims to exert influence over the pol-
policies that have been backed by the highest total icy or politics of a target country. Strategic corruption
amounts of social effort—from the French Revolution often operates through public and private intermedi-
to the ideological struggles of the 20th century—have aries who are looking to make a buck on the side, but
been underpinned by truly national and popular do- they are beholden to a ruling regime that is trying to
mestic consensus about matters of justice.1 exert state power by deploying corruption as a weapon
to undermine another nation’s sovereignty. As such,
In the 21st century, kleptocratic regimes such as Russia the goals are political rather than economic, or are at
and China have emerged with a powerful degree of least part of an authoritarian agenda that is inseparably
overlap between the tactics, actors, networks, and political and economic.4
resources deployed to buy elite loyalty at home and
exert influence abroad.2 The foreign and domestic sides Strategic corruption manifests through a range of tools
of this coin—kleptocracy within autocratic countries that differ greatly in how directly and acutely they wea-
and strategic corruption to undermine the sovereignty ponize corrupt dealings and undermine sovereignty
of other countries—are rooted in the political exploita- to further specific foreign policy objectives sought by
tion of corruption, making them internally coherent authoritarian regimes.
and self-reinforcing threats to U.S. national security
interests. Starting on the indirect and chronic end of the spec-
trum, the Center for International Private Enterprise
Kleptocracy uses the term “corrosive capital” to describe financing
that lacks transparency, accountability, and market ori-
Within its own country, a “kleptocracy” maintains entation flowing from authoritarian regimes into new
power by stealing on a grand scale and buying the and transitioning democracies.5 Western institutions
loyalty of powerful elites. While kleptocrats and their treat these investors as private companies, even though
inner circle become fabulously wealthy—they are they are opaquely controlled by foreign governments,
reportedly the richest people on earth3—their objec- from Russian energy majors buying up energy assets
tives are also political: controlling the levers of power across the Western Balkans to Chinese state-owned
throughout the political and economic system, while companies building public works in Argentina. In
also drawing resources away from potentially inde- addition to exploiting preexisting governance gaps
pendent-minded businesspeople who could establish that enable corruption in recipient countries, corrosive
alternative power centers. Importantly, these political capital makes those gaps wider, leaves citizens with
objectives also extend abroad to geopolitical adven- no information or voice in large deals, crowds out
tures, as the same corrupt organizations, cronies, and constructive capital, and gradually corrodes the rule
oligarchs used by kleptocrats to consolidate power and of law, fair market competition, and fiduciary account-
fend off democratic elements at home are also tasked ability. Kleptocracies increasingly join forces to funnel
with implementing deniable foreign policy operations corrosive capital to fellow autocrats in need of a life-
to exert power and undermine democracy abroad. line, like how Belarus is enjoying discounted energy
Combatting democracies also helps maintain domestic and cheap loans from Russia, is home to China’s largest
power by highlighting an enemy at the gates as justifi- overseas industrial park, and is rapidly expanding ties
cation for repression, by tarnishing liberal democracies to Iran and Cuba.6
to make them appear unattractive as alternatives to
authoritarianism, and by persuading domestic citizens Taking a step toward a more directly pernicious form
that aggression abroad creates space on the world stage of strategic corruption, “malign influence” aims for a
for the restoration of national greatness. more advanced stage of political and economic pene-
tration. Foreign powers secretly offer corrupt induce-
Strategic Corruption ments to powerful individuals—politicians, ministers,
business executives—to sway their behavior and warp
Whereas classic corruption refers to the abuse of the critical institutions that they run into advancing
Alliance for Securing Democracy 3foreign interests ahead of the legitimate sovereign Group to hack the phones of reporters, human rights
interests of their own citizens. More than just making activists, business executives, and the two women
opaque investments and conditioning the background closest to Jamal Khashoggi, the Saudi journalist and
environment toward corruption, foreign powers mobi- Virginia resident who was assassinated on the orders
lize compromised officials to deliver specific outcomes, of Saudi Crown Prince Mohammed bin Salman.9 The
like getting a German chancellor to authorize a Rus- deadly nature of reporting on grand corruption has
sian pipeline during his last days in office or an Austra- been shown by the 2017 and 2018 murders of anti-cor-
lian senator to take Beijing’s side in a dispute over the ruption journalists Daphne Caruana Galizia and Ján
South China Sea.7 Kuciak.10 Short of murder, the Chinese government
kidnaps and permanently detains the family members
Thirdly, the most aggressive weaponization of cor- of foreign journalists, including some who are U.S.
ruption involves actively undermining democratic citizens based in Washington, D.C.11 But the most
processes, such as through financial forms of election common pressure tactic used by oligarchs is threaten-
interference. While kleptocracies often have economic ing to sue journalists and their publishers. The threat
interests in propping up corrupt politicians who can of libel tourism—whereby people named in books and
be bribed into providing access to natural resources, stories file lawsuits in whatever jurisdiction offers for-
the Kremlin has also taken up election interference eign plaintiffs the best legal prospects—was explained
as a form of political warfare meant to inflict societal in a chapter of Oliver Bullough’s Moneyland, so it is no
damage, bankrolling populist politicians deep within small irony that the unexplainably wealthy Angolan
the West to hurt liberal democracies from within by vice president mentioned in another chapter of the
sowing chaos and undermining institutions. To make same book is suing Bullough in Portugal, where he has
these operations covert and deniable, political dona- never been and does not speak the language.12 When
tions are made by proxies who are a couple of degrees kleptocrats sued the publisher and author of another
removed from the perpetrating regime but still funded book, Kleptopia, they used court filings to publicly
with the proceeds of its grand corruption. For example, reveal the time and physical location of a meeting that
three top donors to the U.K. Tory Party—Alexander the author had with a source, as well as the messag-
Temerko, Lubov Chernukhin, and Viktor Fedotov—are ing app they used for confidential correspondence, a
elite Russian expatriates who reportedly accumulated disclosure presumably meant to show that anyone who
their wealth by exploiting ties with Russian security reports on these particularly odious Central Asian
agencies, striking a corrupt deal for property in Mos- mining billionaires—known as the Trio—will be fol-
cow, and siphoning funds from a Russian state pipe- lowed, watched, and sued.13
line.8 Over the past seven years, whereas the Kremlin
has taken to undermining democracies all over the Russia
world, China has largely limited itself to meddling in
countries where it faces particularly high stakes and Throughout his two decades as president of Russia,
lower risk of blowback, like in the Asia-Pacific and Vladimir Putin has built an elaborate kleptocracy
throughout the Belt and Road Initiative. managed by loyal cronies and oligarchs.14 Putin in-
stalled his close associates from St. Petersburg as the
All three of these manifestations—corrosive capital, CEOs of Russia’s largest companies, while putting
malign influence, and election interference—are strate- his former KGB colleagues in charge of the judicial
gic corruption because they involve exploiting official and enforcement verticals. Businessmen who Putin
positions, resources, and processes for geopolitical perceives as too critical or potentially political—like
purposes in violation of the trust that communities Mikhail Khodorkovsky—get convicted on trumped-
have bestowed upon these people and organizations. up charges, while their companies are sold at bargain
prices, often to Putin’s old friends who have become
Finally, beyond strategic corruption per se, autocrats billionaires. The head of Alfa Bank told Special Coun-
use a separate but related toolkit to keep their dirty sel Robert Mueller that he is one of 50 oligarchs who
money and bad behavior hidden: surveillance, thug- meet quarterly with Putin in the Kremlin, where Putin
gery, and lawsuits meant to pressure and deter foreign makes suggestions that really are implicit directives,
journalists who look into their corruption. Starting and that there would be consequences for not follow-
with surveillance, autocratic governments that lack ing through.15 Importantly, these taskings can include
the intelligence capabilities of Russia or China have overseas missions, like making contact with Don-
leased military-grade spyware from Israeli firm NSO
Alliance for Securing Democracy 4ald Trump’s inner circle, and are often implemented in 2013.23 It is inconceivable that so many covert oper-
through corrupt means, like reaching Jared Kushner ations would be possible without the perpetrators ever
by dangling a lucrative investment opportunity to his having left any evidence—whereas Russia has gotten
hedge fund manager friend.16 caught funneling covert money into foreign elections
more than 100 times—but this conspiracy theory
Up until roughly 2014, Russian strategic corruption nevertheless lives in Putin’s mind as justification for his
manifested mostly in the form of corrosive capital and own weaponized corruption.24
some cases of malign influence, usually limited to for-
mer Soviet republics and a few European financial cen- At the same time as “little green men” flowed into
ters. In Ukraine, Dmytro Firtash made billions buying Ukraine in 2014, Putin’s cronies and oligarchs start-
natural gas cheaply from Russian state-owned energy ed donating the proceeds of Russian kleptocracy to
conglomerate Gazprom and selling it at marked-up Western populists.25 When the Kremlin sought to
prices to Ukrainians, a corrupt fortune that—togeth- “thank” Marine Le Pen for publicly endorsing Russia’s
er with loans from bankers close to Putin—enabled annexation of Crimea, her political party received
Firtash to bankroll the 2010 campaign of pro-Russian €9.4 million from a Czech bank ultimately owned by
Ukrainian President Viktor Yanukovych and allegedly Gennady Timchenko, an alleged former KGB opera-
bribe officials in Kyiv.17 Researchers led by Heather tive from St. Petersburg who worked closely with Putin
Conley showed how the “Kremlin Playbook” in Bul- and became the sixth richest Russian by trading oil
garia, Hungary, Latvia, Serbia, and Slovakia begins bought at a discount from Russian state-owned suppli-
with either political or economic penetration, expands ers.26 Also in the spring of 2014, the Internet Research
and evolves through corrupt patronage networks, and Agency troll farm started ramping up its operations
sometimes develops into state capture.18 A follow-on targeting the United States.27 It was funded and run by
report showed how companies owned or controlled by Yevgeny Prigozhin, a convicted thief known as “Putin’s
Kremlin-linked cronies deepen business ties with large chef ” who rose from a St. Petersburg hotdog seller to
corporations in Austria, Italy, and the Netherlands, po- become a billionaire thanks to lucrative state contracts
sitioning Moscow to cultivate proximity to politicians to feed Russian schoolchildren and soldiers.28 After
and receive tacit support and protection from those his successful interference in the 2016 U.S. election,
governments as dirty Russian money flows Westward Prigozhin interfered in some 20 African countries,
through their financial systems.19 But it was mostly a offering package deals—including backpacks of cash,
regionally contained threat. tailor-made news outlets, troll farms, and armed
forces—to help the Kremlin’s preferred leaders and
That changed in 2014, when Putin decided to drive presidential candidates obtain and hold on to power.29
weaponized corruption deep into the heart of Western In a failed effort to prevent Montenegro from joining
politics. In a classic case of mirroring, Putin sees this NATO, Oleg Deripaska—who owes his wealth to his
activity as reciprocating the kind of covert political company not paying taxes in Russia30—and another
interference that he assumes the West has long used Russian oligarch spent some €16 million bankrolling
against Moscow. As a KGB officer in Dresden, Putin the pro-Russian opposition bloc in Montenegro’s 2016
ran agents in German neo-Nazi groups and the far-left elections.31 The Kremlin tried to bankroll Matteo Salvi-
Red Army Faction, while also serving as a handler for ni’s Italian far-right League party in the 2019 European
sleeper cells blending into everyday civilian life.20 He Parliament election by funneling discounted oil flows
thinks the Berlin Wall fell because the West similarly to a company controlled by the Italian government;
orchestrated political revolution in Eastern Europe in although, the operation appears to have been abort-
the 1980s.21 Putin refers—without any proof—to “the ed after it was exposed by journalists.32 In the 2020
fact” that many Americans who came to Russia in the U.S. election, the Russia intelligence services tried to
1990s on technical assistance projects run by Harvard launder disinformation meant to tarnish Joe Biden by
University secretly worked for the CIA, just as the KGB passing it through a chain of corrupt individuals linked
assigned Putin to work at Leningrad State University.22 to Trump by way of Ukraine.33
His frustrations reached a breaking point throughout
the decade from 2003 to 2013, during which Putin While the Kremlin uses the full range of tactics against
assumes the West secretly fomented color revolutions journalists in Russia—calling them foreign agents,
in Georgia and Ukraine, the Arab Spring, anti-Putin throwing them out windows, shooting them to death
protests in Russia, and then another crisis in Ukraine in Africa, etc.—its weapon of choice against journal-
Alliance for Securing Democracy 5ists who are foreign nationals not located in Russia is he previously served as party boss.41
known as a SLAPP, or “strategic lawsuit against public
participation.” These are baseless lawsuits that are not At the same time that Xi was consolidating control
meant to be won in court, but instead aim to intimi- over Chinese kleptocracy, he launched two geopolitical
date, silence, and deter journalists and their publishers projects that have harnessed Beijing’s proficiencies in
by forcing them to spend time and money on legal corruption as a strategic tool to secretly influence and
defenses. Such a pressure campaign typically opens undermine the sovereignty of other countries: the Belt
with the oligarch’s legal and public relations teams and Road Initiative (BRI) and United Front work.
sending aggressive letters threatening to sue unless the
First, in 2013, Xi launched the BRI through a pair of
publishers remove unwanted content, like referring
speeches during visits to Kazakhstan and Indonesia.
to the oligarch as an oligarch.34 The Kremlin’s hope is
that the publisher will self-censor, like in 2014 when Billed as investments in infrastructure—ports, roads,
rail, airports, etc.—to facilitate trade between Asia
Cambridge University Press refused to publish Karen
Dawisha’s book, Putin’s Kleptocracy, which was later and Africa and Europe, the actual purpose of the BRI
proved to be spreading Beijing’s corrupt model of au-
published in the United States by Simon & Schuster.35
thoritarian governance.42
Sometimes oligarchs actually file lawsuits, even though
they typically fail to win any damages, cost recover- At a minimum, BRI projects are funded by corrosive
ies, or gag orders, which was the result when Roman capital. Dozens of developing countries have taken out
Abramovich and others settled their lawsuits with loans from Chinese state-owned banks to fund pur-
Catherine Belton and HarperCollins for publishing Pu- chases of overpriced infrastructure built by Chinese
tin’s People.36 Thanks to the First Amendment, SLAPP state-owned construction companies without the legal-
cases are typically dismissed by U.S. courts, like when ly required competitive bidding processes, disclosures
Oleg Deripaska sued the Associated Press in 2017 of terms, environmental and labor protections, inde-
for reporting on his relationship with Paul Manafort pendent oversight, or other governance procedures
or when three Russian oligarchs who own Alfa Bank and checks and balances that are vital to democracy
sued Christopher Steele and his company.37 But again, and rule of law.43
instead of trying to prove that journalists “acted with
malice or reckless disregard of the facts,” which is the But beyond just opaque mood music, enough cases of
high bar for public figures to win in U.S. courts, Rus- malign influence and election interference have now
sian oligarchs often aim to chill future reporting with been revealed to show that the standard operating
the specter of costly lawyer fees and time-consuming procedure for BRI investments is to secretly line the
proceedings. pockets of key officials, heads of state, and their family
members with widespread bribes and off-book cam-
China paign donations. One of the earliest BRI projects—a
railway in Kenya that cost triple the international
Like Putin during his first couple years as president,
standard price for the track alone—has resulted in
Xi Jinping stepped to the helm of the Chinese Com-
indictments of high-level officials on both the Kenyan
munist Party (CCP) in 2012 projecting an image of an
and Chinese sides for making millions by defrauding
anti-corruption reformer and launched a crackdown
the government, demanding kickbacks for compen-
that ended up being largely a pretense to consolidate
sation payouts to landowners, and paying bribes to
power.38 The top targets turned out to be Xi’s leading
political rivals, Bo Xilai and Zhou Yongkang, and those derail investigations into corruption.44 China was
given extremely lucrative stakes in Malaysian railway
who publicly flaunt their ill-gotten gains so outra-
and pipeline projects in exchange for bailing out the
geously as to pose political risks to CCP authority.39
1Malaysia Development Berhad (1MDB) fund that the
Meanwhile, favored elites in the red aristocracy—the
former prime minister used for personal enrichment
wives and children of top CCP officials like Xi and
and election spending, while China also promised Ma-
Wen Jiabao—went on quietly splurging vast fortunes
laysia it would surveil The Wall Street Journal to identi-
that were amassed through grand corruption.40 Like
fy its sources and pressure the United States to drop its
how Putin installed his cronies from St. Petersburg to
investigation.45 During the 2015 Sri Lankan elections,
run Russia’s biggest companies, Xi replaced officials
the Chinese state-owned company that was building
accused of corruption with hundreds of his own close
a strategically important port diverted at least $7.6
associates from the coastal province of Zhejiang, where
million of project funds directly to campaign aides and
Alliance for Securing Democracy 6promotional activities for the incumbent president, work, was implicated in multiple cases of channeling
who had reliably agreed to Chinese terms and was seen money to New Zealand political parties and candi-
in Beijing as a key ally to tilt influence away from India dates.52 Ahead of Taiwan’s 2019 election, the United
in South Asia.46 In the Democratic Republic of Congo, Front allegedly exerted influence through media exec-
Chinese state enterprises took over the world’s largest utives and journalists, while the Chinese government
supply of cobalt by secretly funneling at least $55 mil- paid at least five media groups for positive coverage
lion in apparent bribes to then-president Joseph Kabila of China and endorsements of a Beijing-friendly
and his entourage by way of a shell company with ac- presidential candidate.53 United Front influence tac-
counts at a bank run by the president’s brother.47 While tics in the Asia-Pacific also range from monopolizing
strategically important sectors of the Czech Republic Chinese-language media outlets to collaborating with
were being acquired by CEFC China Energy—a nom- Triads and pro-Beijing activists to violently disrupt
inally private company with ties to Chinese military pro-democracy activism.54
intelligence—the company installed its chairman as an
honorary adviser to Czech President Miloš Zeman and Finally, while China is not known to have funneled
went so far as to put civil servants and public figures money into a U.S. election since 1996, it regularly
on its payroll, repurposing key government institutions conducts malign influence operations on U.S. soil. FBI
like the Czech presidency to serve Chinese interests.48 Director Christopher Wray warned that China uses
When the head of CEFC’s think tank was convicted of “bribery, blackmail, and covert deals” to bully U.S. offi-
paying bribes of $2 million to the president of Chad cials and sway public discourse.55 China’s targets com-
and $500,000 apiece for the president and foreign min- monly include U.S. governors, state senators, members
ister of Uganda, his defense was that he was advancing of Congress, celebrities, corporate titans, sporting gi-
“the Chinese state’s agenda” and that such payments ants, media enterprises, and others. A typical pressure
are perfectly normal on BRI projects.49 campaign begins as soon as Beijing catches wind that a
prominent individual or organization is making plans
Beyond the BRI, Xi’s second influence project that contrary to the CCP’s perceived interests, such as vis-
has advanced strategic corruption is China’s United iting Taiwan, meeting the Dalai Lama, or speaking out
Front, which is the arm of the CCP that co-opts and about the genocide in Xinjiang or repression in Hong
neutralizes sources of potential opposition through the Kong. Wray illustrated with a hypothetical example of
corruption or subversion of Chinese organizations and an elected official first receiving an open warning that
personages at home and abroad. Xi elevated the Unit- China would retaliate for such behaviors by punishing
ed Front in importance through a series of speeches, companies in their home state—such as by withhold-
conferences, new bureaucratic structures, and redi- ing licenses to manufacture in China. If that does not
rection of resources in 2014 and 2015.50 In addition to work, China identifies people trusted by the prominent
thwarting critics or opponents within China, United U.S. figure and co-opts them—knowingly or not—to
Front work includes managing overseas narratives and convince the figure to bow to Chinese pressure, using
policies about China by mobilizing ethnic Chinese “smoke, mirrors, and misdirection” to influence Amer-
communities and influencing foreign government icans. To take a separate ongoing example, China uses
officials. In collaboration with Chinese embassies and access to its large consumer market to retaliate against
intelligence services, United Front work is carried out NBA players and executives who use their personal
through a thousand points of darkness—by funding social media accounts to sympathize with the peoples
and controlling cultural, academic, media, and other of Hong Kong, Xinjiang, Taiwan, or Tibet—imposing
organizations pretending to operate independently hundreds of millions of dollars in losses on Daryl Mo-
from the CCP. rey’s 76ers and Enes Kanter’s Celtics by refusing to air
their games in China.56 Chinese influence operations
In the Asia-Pacific, United Front work has includ- in the United States also include funding of Confucius
ed brazen election interference. Huang Xiangmo—a Institutes, disinformation about issues like the origin of
Chinese property developer who moved to Australia in Covid-19, and apparent harassment of Chinese dissi-
2011 and led several groups tied to the United Front— dents through break-ins and strange car accidents.57
funneled millions into political donations, retainers,
gifts, and charitable contributions meant to influence With regards to foreign journalists based outside
Australian foreign policy toward China’s liking.51 of China, Beijing wields all three common pressure
Zhang Yikun, another leader in China’s United Front tactics: surveillance, thuggery, and lawsuits. Starting
Alliance for Securing Democracy 7with surveillance, China helped Malaysia identify who Plan invested in trading markets for the U.S. economy,
was leaking information to The Wall Street Journal by kept the Soviets out of Western Europe, and laid the
bugging the homes and offices of reporters in Hong groundwork for European integration. A similarly
Kong, including “full scale residence/office/device broad view of U.S. moral, economic, and strategic
tapping, computer/phone/web data retrieval, and full needs motivated President John F. Kennedy to estab-
operational surveillance.”58 China also uses technol- lish the United States Agency for International Devel-
ogy to disrupt reporting: for example, journalists for opment (USAID), which swiftly partnered with re-
Radio Free Asia in Washington D.C. have their phone form-oriented governments like Taiwan, South Korea,
calls to China get cut off within a minute, even if they Chile, and Indonesia while also helping to eradicate
use burner phones, suggesting that Beijing deploys smallpox, promote family planning, lift literacy among
voice-recognition technology against certain foreign girls, and save children with oral rehydration therapy.
reporters.59 Those who still have relatives in China— Food aid advanced both domestic U.S. agricultural
even after the journalists have lived in the United interests and strategic interests in countries suffering
States for decades and become U.S. citizens—have food insecurity like India, because as American aid
had their entire extended family swept up and held in experts cautioned, “Where hunger goes, Communism
permanent detention unless their critical reporting on follows.”64 Of course, the mobilization of foreign as-
China stops.60 In another recent case, the author of a sistance to contain communism also resulted in disas-
book about corruption in China received a phone call ters when not sufficiently coherent with U.S. political
from his ex-wife—who had been unreachable ever support, like when USAID workers were forward-de-
since she was snatched off the streets of Beijing four ployed in rural Vietnam to support doomed pacifi-
years earlier—begging him not to publish the book.61 cation efforts.65 In major aid recipients like Vietnam,
Finally, a Chinese-Australian billionaire—whose links Egypt, Liberia, the Democratic Republic of Congo,
to the CCP are worrisome enough that Australian in- and El Salvador, rampant corruption was tolerated to
telligence agencies warned political parties against ac- secure short-term strategic advantages over the So-
cepting his donations—successfully sued an Australian viet Union, inadvertently fueling long-term strategic
media organization and journalist for identifying him fiascos—a mistake that the United States would repeat
as the previously unnamed businessman who bribed a later in different contexts, including most recently in
president of the United Nations General Assembly to Afghanistan.66 But more often than not, U.S. foreign
support Chinese interests at the UN.62 aid during the Cold War was geared toward advancing
both domestic and foreign interests by winning over
United States hearts and minds for liberal democratic capitalism and
the rule of law through support for economic develop-
If kleptocracies feature domestic-foreign coherence ment.
because their corrupt actors, tools, and money cross
borders fluidly while the regimes shape narratives of Unfortunately, during the three decades since the
global power, democracies draw strength at home and end of the Cold War, U.S. foreign policy has failed to
abroad from their appealing ideals. For a nation that deliver a new organizing principle that coheres with
was born fighting back against great power spheres of domestic political sentiments and responds to the new
influence dominated by closed imperial preferences, way in which previously communist regimes are now
it came naturally for Americans to organize domestic organized: as kleptocracies wielding strategic corrup-
and foreign policies around free, rules-based politi- tion. The most recent three or four U.S. presidents
cal and economic competition on level playing fields. have each come into office intent upon tacking in the
As democracy and the rule of law became associated opposite direction on foreign policy as their immediate
with the security and economic interests of the free predecessor. And while the socioeconomic drivers of
world—making a better world and getting rich in the partisan division and susceptibility to populism have
process—U.S. policy was often built around the notion been percolating for several decades, the difficulty
that the United States prospers when other nations do of establishing a broad domestic consensus around
as well.63 foreign policy became even harder under Trump, who
convinced his supporters of mendacious lies that the
This domestic-foreign coherence was central to U.S. national security establishment is a hostile “deep state,”
foreign assistance strategy during the Cold War. By Russian election interference is a “hoax,” foreign aid is
helping to rebuild war-shattered Europe with free-mar- for “suckers,” and the truly “corrupt” people are those
ket policies and economic cooperation, the Marshall
Alliance for Securing Democracy 8who caused him to lose a “rigged” election. Through- root causes that extend beyond corruption, pushing
out Trump’s four years in office, the perceived level for a level playing field in business environments at
of corruption in the United States swung sharply to home and abroad provides more than just political
its worst point on record, driven by Trump attacking benefits; it also supports U.S. economic interests by
Covid-19 relief oversight, whistleblowers, oil compa- positioning U.S. companies to win business contracts
ny disclosures, anti-bribery laws, and the truth about without having to compete against bribes paid by Chi-
election integrity.67 nese state-owned companies or bids underwritten by
the laundered money of Russian oligarchs.70 As such,
The good news is that combating corruption and klep- organizing U.S. policy around fighting corruption will
tocracy offers the best chance since the containment remain as well-suited to domestic political economy as
of communism to bring U.S. foreign policy into align- it is to the challenge of foreign kleptocracy.
ment with domestic politics and values around matters
of justice. But if combating corruption offers the natural heir
to neoliberalism as an element of grand strategy that
Starting with the international side of this coin, klep- could advance both domestic and foreign interests,
tocracy could offer an even clearer opponent than carrying out this mission will necessitate more than
communism ever did, because the old tradeoffs around political posturing. It will require learning new de-
supporting corrupt autocrats who keep communism velopment strategies that are more effective for the
forces at bay are less salient, because their stolen mon- current challenge than the technocratic policy agen-
ey is stashed in Western asset markets, and because das—and accompanying institutions of foreign assis-
kleptocrats have no good moral or ideological argu- tance—developed for individual countries transition-
ment. That final point—that nobody likes being stolen ing toward democracy during and after the Cold War.
from—is most important and illustrates how the ap-
pealing ideal of clean capitalism under the rule of law
is a powerful arrow aimed directly at the Achilles’ heel
of kleptocracy, the biggest vulnerability in the domes-
tic-foreign coherence of rule by theft. In the year be-
fore the pandemic, a majority of the record number of
protests around the world were against corruption, and
many led to changes in government.68 That means that
actively aiding anti-corruption movements is a natural
way to both reinforce democracy and align the United
States with the aspirations of peoples around the world,
a valuable use of and gainful accretion of U.S. soft pow-
er. Kleptocrats’ lack of compelling ideals—as opposed
to during the Cold War, when the leading authoritar-
ian regimes were organized as communists and could
at least claim some moral high ground against suppos-
edly cutthroat capitalists—was most recently displayed
in Russia and China’s joint response to Biden’s Summit
for Democracy, which was to absurdly claim that they
too offer forms of democracy.69
As for U.S. domestic interests, fighting corruption is
one of the only issues that could receive support from
most Americans, whether they hear Biden elevate
anti-corruption as a “core national security interest,”
Trump boast that he will “drain the swamp,” or Ber-
nie Sanders castigate a “rigged system.” The extent
to which messages about corruption resonate with
Americans is unfortunately unlikely to change soon,
as it is ultimately driven by levels of income inequality
that remain at historic highs. And while inequality has
Alliance for Securing Democracy 9Past and Future Development Strategies
Today’s anti-corruption movement was born around tion laws and procedures on the books while training
the time the Cold War ended—ushered in by a historic professionals on how to administer them, but without
wave of democratization that toppled several corrupt squarely addressing the underlying political power
regimes, starting with Portugal and Spain in the mid- structures, corruption persists. More than three-quar-
1970s, expanding internationally with several tran- ters of U.S. aid disbursed since 2005 has gone to
sitions toward economic and political liberalization countries that still today remain ranked among the
throughout the 1980s, and culminating with the col- bottom half of TI’s corruption perceptions index. And
lapse of the Soviet Union.71 In countries that had been even some top aid recipients that are not ranked in
geopolitically contested during the Cold War, Western the bottom half by TI probably should be, like Jordan,
aid providers lost a key excuse to overlook corruption whose king spent more than $100 million on extrava-
among recipients (“He may be a crook, but he’s our gant homes over the past decade while U.S. aid money
crook”). Gone too were the pessimistic assumptions poured in and the public grew frustrated over corrup-
that poor countries were forever condemned to cor- tion.73 The single largest aid recipient has been Afghan-
rupt authoritarianism or that any Western criticism istan, where U.S.-funded corruption has not been lim-
of such corruption was just a cover for geopolitical ited to security assistance, a challenge exemplified by a
plotting. As countries escaped from Moscow’s or- third of the money—$63 million of $190 million—that
bit—particularly in Central and Eastern Europe—they USAID disbursed to the Afghan Ministry of Health
emerged with overwhelming political will to reform going missing sometime between 2009 and 2013.74
and requested Western assistance. Likewise eager to
demonstrate an ability to take on new post-commu- The dismal results extend well beyond corrupt coun-
nism issues and generate more results with smaller tries that are showered with U.S. dollars thanks to
budgets, the donor agencies providing international security partnerships. TI says its latest data “paints a
development aid became active promoters of democra- grim picture [of] most countries [making] little to no
cy and more concerned about corruption. progress in tackling corruption” during the past de-
cade, and many are backsliding.75 While the reasons for
In 1993, former employees of the World Bank founded persistent corruption are of course not limited to faulty
a watchdog called Transparency International (TI), foreign aid, it is difficult to argue that the anti-corrup-
giving anti-corruption advocacy a degree of focused tion objectives set out since the 1990s are being met,
visibility and international presence like never before. and now that kleptocracy and strategic corruption
In response to TI’s criticism that the World Bank and present top national security challenges, this is an
the IMF fund corruption in recipient countries—as important time to substantially rethink anti-corruption
aid money was diverted to corrupt officials—as well aid.
as new research on corruption holding back socio-
economic development, in 1997 the World Bank and The deepest problem with anti-corruption assistance
the IMF adopted anti-corruption frameworks. That stems from the way it was bolted onto the highly
was followed by anti-corruption strategies from other apolitical and technocratic system of delivering de-
multilateral and bilateral aid donors, such as USAID velopment assistance that was developed during the
in 2004.72 These standards were meant to introduce Cold War—an era when the need to work in poor
both mandatory criteria and procedures to prevent aid countries run by corrupt dictators instilled throughout
money from leaking into corruption, as well as volun- the development sector the habits of avoiding polit-
tary monitoring and technical assistance for countries ical sensitivities and sticking to the technical details
that ask for help rooting out corruption. of socioeconomic programs. While that worked for
some problem sets—such as nutrition, where techni-
Whereas the international aid community got re- cal solutions existed and there was political alignment
markably sophisticated and proficient at facing some with ruling governments around saving lives—the
challenges that emerged after the Cold War—like approach was not adapted for the political nature of
peacekeeping and rebuilding within war-torn states— anti-corruption work. The World Bank, IMF, and
efforts against corruption have not, on the whole, other donors have long been wary about interfering in
been successful. Development agencies have helped the domestic politics of their member states, which is
recipient countries put a dizzying array of anti-corrup- both prohibited under their articles of agreement and
Alliance for Securing Democracy 10unlikely to go over well with their many members or- the rule of law and other governance issues did travel
ganized as authoritarian regimes. So, to secure internal to Russia, but they worked independently from the far
legitimacy for adding anti-corruption to their agenda larger and better funded cohort of USAID programs
in 1997, they framed the issue as “governance,” justified dedicated to privatization, which were run by econo-
in economic terms and addressed through technocrat- mists who dismissed the governance specialists as po-
ic advice like how to design transparent procurement litical hacks and bureaucrats obsessed with inefficient
systems or train public prosecutors. Moreover, the state processes like parliamentary oversight.78
multilateral donors made it their policy to only send
anti-corruption assistance to countries that ask for There are endless manifestations of the inattention to
it, which is usually not the countries that need it the politics that plagues anti-corruption assistance. Plans
most. While some bilateral donors like USAID were to rationalize personnel structures and promote mer-
less shy about pursuing goals around governance and itocratic appointments get derailed because nobody
democracy, they implemented it through relatively pays attention to how it would reduce patronage op-
small standalone offices and siloed strategies, which portunities for a powerful minister. Programs to train
were often resisted by mission directors rooted in journalists or write parliamentary rules fail to curb
apolitical approaches to socioeconomic development. corruption because they ignore the sensitive issues of
In recent years, USAID only had one full-time staff media ownership or money in politics. The problem of
member with an anti-corruption portfolio, and its corrupt judges persists despite aid money for modern
2004 anti-corruption strategy was never updated after courtroom equipment, training programs, and case
the sunset of its five-year lifespan.76 management software.79
Like development assistance, the typical approach to To be sure, aid donors have developed a lot of deep
governance assistance involves reviewing how institu- and sophisticated expertise over the decades, includ-
tions such as government ministries are organized in ing three pillars of anti-corruption assistance, that
a given developing country, comparing the technical remains indispensable to fortifying countries against
details to checklists of best practices based on how kleptocracy and strategic corruption.80 The first pillar
Western institutions have developed over the course involves standing up institutions of accountability such
of centuries, and then getting to work filling in gaps as anti-corruption commissions, prosecutors’ offic-
to “bulletproof ” the country from corruption.77 That es, audit agencies, anti-corruption courts, and asset
“supply side” of governance work—transferring the recovery agencies. The second pillar involves publicly
transparent ways of developed institutions—requires opening up government information around who
access to governments in recipient countries, which owns what and how state resources are being spent,
makes it tempting to avoid directly addressing cor- from asset declarations and ownership registries to
rupt activity itself. The “demand side” works with civil transparent systems of public procurement and service
society organizations advocating for transparency and delivery. Third is demand-side support for civil society
accountability. Even though fighting corruption is nec- actors who expose corruption and drive local change
essarily a highly political endeavor, demand-side aid in unpredictable, nuanced, and sometimes dangerous
similarly tends to be insufficiently informed by diag- spaces. Those three pillars of anti-corruption aid form
noses of entrenched structures of political power, such the essential pathways and vehicles that reformers will
as competing kleptocratic and oligarchic networks, ultimately need to drive on the journey toward rooting
complicated histories of constituency loyalties and out corruption. And applying rule of law impartial-
personal animosities, the positions of labor or reli- ly—as opposed to the norm in authoritarian countries,
gious groups with broader political support than elite where anti-corruption campaigns are often pretenses
non-governmental organizations (NGOs), or the many to support loyalists and repress opponents—requires
other power players and opaque dynamics in corrupt institutions administered in apolitical and professional
systems. ways. However, while this apolitical and technocratic
approach to country-by-country programming will
The dangers of this limited, siloed, and technocratic continue to provide the backbone of anti-corruption
approach were evident from the beginning, like when reform, it has proven insufficient to address the global
USAID tried to support the establishment of clean rise of kleptocracy and strategic corruption.
capitalism in Russia in the 1990s but instead contrib-
uted to the birth of an oligarchy. American experts on Before elaborating on approaches to enhance the aid
toolkit, it is important to remember four ways in which
Alliance for Securing Democracy 11existing governance and democracy promotion assis- overlap, which corrupt enterprises are geared
tance has been and absolutely must remain the polar toward pursuing personal enrichment, domes-
opposite of strategic corruption. No matter what Putin tic political power, or the interests of foreign
believes, Western aid after the Cold War is not known powers?
to have served as a front for intelligence operations,
is transparently accounted for in publicly available • Do the main syndromes of corruption take the
budgets, is meant to build capacity for all sides of the form of administrative corruption, plutocracy,
political spectrum to compete on a level playing field, state capture, strategic corruption, cronyism,
and is welcomed and voluntarily accepted by sover- oligarchy, kleptocracy, or something else?
eign nations. By contrast, strategic corruption is often
• Which powerful actors and entrenched nodes
carried out in concert with intelligence operatives or
must be taken down to effectuate a root and
deniable regime proxies such as cronies or oligarchs, is
branch cleansing of grand corruption?
secret and opaque in nature, is directed toward helping
friends and hurting enemies, and is an unwelcome and • Who would win and lose from anti-corruption
illegitimate intrusion in violation of national sover- reform?
eignty.
• Which local constituencies—religious, ethnic,
To preserve the virtues of Western aid and meet the social, labor, business, or other groups—are the
challenge of strategic corruption, the future of an- most and least corrupt?
ti-corruption assistance should include new program-
ming approaches, tools, and operational capabilities • Are there opportunities to build reform coali-
that are informed by political analysis, responsive to tions endowed with deeper societal legitimacy
political shifts, coordinated across borders, and inte- than elite NGOs in the capital city?
grated across sectors.
• Which potential local partners are truly com-
Informed by Political Analysis mitted to reform, and which are part of corrupt
enterprises that have captured the levers of
Building resilience to strategic corruption starts with state power?
in-depth understanding of the attack surface, and that
means knowing exactly how corruption operates local- • Are existing structures considered legitimate
ly. Rather than a technically-focused checklist around under local social norms?
laws, policies, or institutional capacities, the analysis
should start with a landscape of known corrupt activi- • What entry points for politically powerful
ty. That should include the following questions:81 change are likely to open?
• Which industry sectors and societal institu- These are not questions that were traditionally asked
tions are the most corrupt, and who are their in the field of economic development. That has begun
patrons? to change over the past decade or two, with increas-
ing use of corruption assessments, including tools of
• Which groups and individuals hold the most political economy analysis. At USAID, for example, a
power inside and outside of government, and mission team can ask the democracy and governance
how did they acquire it? experts to help provide a political economy analysis
of a particular country, sector, or problem, leading a
• How extensive are their networks of patronage, team to spend a few months reviewing literature and
and how do they operate with impunity? conducting field work before preparing a final re-
port.82 USAID’s approach to political economy analysis
• Who are the enablers and opponents of the involves asking many of the questions listed above.83
main corrupt power brokers? Moreover, analysis of political-economic dynamics is
• What tactics do crooks use to influence the only one of five steps in USAID’s written methodology
government and pressure journalists and activ- for conducting anti-corruption assessments, which in-
ists? cludes analyzing a country’s legal-institutional frame-
work, stakeholders, sectors, and reform options.84
• Understanding that goals, networks, and actors
Alliance for Securing Democracy 12Too often, though, these analytic service offerings and ming and then monitoring and evaluating results. Too
reference guidebooks provided by a central office of often, anti-corruption assessments by aid donors have
governance experts are not read and operationalized been anchored primarily around technical gaps in the
by field mission teams. Over the past six decades, aid legal-institutional framework—identifying unmet best
practitioners have established a deep culture oriented practices by surveying a country’s laws and regulations,
toward imparting apolitical and technical solutions financial transparency rules and other aspects of public
to enhance economic development, viewing political financial management, and administration of the civil
power dynamics as hazards to be sidestepped rather service, law enforcement, and judicial systems. That
than tools to harness. To the extent practitioners use traditional approach may result in long lists of new
political analysis or corruption diagnostics, it is usually laws passed, regulations adopted, institutions estab-
as a way to spot or work around obstacles to achieving lished, and sometimes even a number of investigations,
their goals, rather than bringing political issues around prosecutions, and convictions. But accountability nev-
wealth and power into the program design process ear- ertheless eludes the big fish in deeply corrupt systems,
ly as a foundational element of driving development. and over time the public becomes even more inured
Because the ranks of social scientists and political to their inevitable impunity—an unfortunate feedback
analysts within bilateral aid agencies are still relative- loop that makes anti-corruption work even harder.
ly thin and siloed, rapidly ramping up efforts against Thus, in addition to professionalizing legal-institu-
strategic corruption will require close collaboration tional structures, aid programs should be customized
with the rest of the government. In the United States, to achieve more ambitious goals, like de-oligarchizing
that means working with the intelligence community a country, dismantling networks of foreign influence,
and the Departments of State, Treasury, Commerce, or delivering justice to the inner circle of cronies in a
and Justice. Securely sharing information across de- kleptocracy. But those inherently political objectives
partments and agencies will also help the government require well-informed political analysis and respon-
develop a frank and shared picture of corruption risks siveness to political shifts, as well as a willingness to
and problematic actors. tolerate the inevitable backlash that such politically
sensitive efforts may incur.
Sharing information and analysis across the govern-
ment also facilitates coordinated action across the Responsive to Political Shifts
many tools that are needed to counter strategic cor-
ruption, which is particularly important when cor- Strategic efforts by Russia and China to spread and
ruption is entrenched at the highest levels of power in build up oligarchies, malign influence networks, and
target countries. Knowing which institutions, actors, kleptocracies are highly political and opportunistic
networks, and nodes play the most important role in endeavors. Whereas Western promotion of democ-
corrupt enterprises is critical for targeting State visa racy and governance is carefully constrained to avoid
bans and diplomatic interventions, Treasury financial interfering in democratic processes such as elections—
investigations and sanctions, and Justice Department instead focused on building capacity for free and fair
prosecutions and asset seizures. For USAID, well-in- political and economic competition—strategic corrup-
formed analysis helps to proactively attack corruption tion involves cajoling perceived political opponents,
where it lies and avoid accidentally granting money to bankrolling favored candidates ahead of elections,
corrupt elements. If poorly informed and uncoordinat- buying the loyalty of powerful figures, collaborating
ed, these policy instruments can work at cross pur- with complicit elements within the target country, and
poses or be counter-productive in other ways, like by helping autocratic leaders dig into positions of authori-
fueling corruption or merely shifting it from one place tarian kleptocracy.
to another. All these government-wide coordination
priorities were set forth in the first-ever U.S. strategy That form of political hardball must be met with
on countering corruption, issued by the Biden White anti-corruption strategies that are similarly nimble,
House in December 2021.85 pragmatic, well-resourced, and most importantly,
politically responsive. Responsiveness entails a subtle
Most importantly, in-depth and hard-hitting assess- but important difference, which is that unlike strate-
ments of the corrupt actors and networks exploiting a gic corruption, it is not meant to proactively influence
given country should provide the basis for designing election outcomes by tipping the scales to one side or
and implementing strategic anti-corruption program- the other. Instead, Western anti-corruption assistance
should respond to what the population and its elected
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