Commerce

Money

Commerce

Opaque financial flows from authoritarian influencers undermine the rule of law and democratic governance in recipient countries.

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Overview

The extraordinary growth of international trade and investment is a defining feature of globalization. In this enabling environment, authoritarians wield state-owned and nominally private economic entities as political instruments. The state-capture systems mastered by oligarchs while building power and influence at home are being deployed abroad and used by authoritarian powers to gain a foothold in strategic markets such as energy, telecommunications, and banking. 

Authoritarian “corrosive capital” is enabled by weak legal safeguards and limited accountability and transparency mechanisms. The openness of the international financial system also makes it difficult to identify linkages to authoritarian actors who can easily route funds through firms registered under beneficial ownership accounts in third-party countries.


Sharp Power Influence

Autocratic actors leverage capital to exaggerate governance gaps and influence economic, political, and social developments in recipient countries through multiple mechanisms : 

  • State-sponsored loans that mimic traditional development assistance
  • Support for large-scale infrastructure projects that rope countries into long-term, lopsided economic relationships
  • Foreign direct investment by nominally private firms that are ultimately linked to an authoritarian state-backed entity
  • Restricted market access that induces foreign companies to tout authoritarian narratives and censor content deemed unfavorable

These efforts are not necessarily predicated on huge amounts of money but instead stem from strategically-focused agreements with well-connected elites in strategic sectors of open societies.

Corrosive capital hides amid layers of larger exchanges with authoritarian regimes, the majority of which may appear legitimate and can have a financial, political, or cultural character. As established democracies and their private sectors come to grips with the threat posed by strategic corruption, democracies with less developed institutional frameworks for preventing corruption and providing transparency are at an even greater risk. 

The Kremlin’s ability to wield state-owned and nominally private economic entities as political instruments, swiftly and without visible deliberation, has allowed it to achieve outsized global influence.

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Ruslan Stefanov and Martin Vladimirov

Deals in the Dark: Russian Corrosive Capital in Latin America

Democratic Responses

Civil society can help bolster the institutions and accountability mechanisms needed for a strong defense against authoritarian corrosive capital.

Norms and Standard Setting
  • Private sector firms should adopt business strategies that prevent authoritarian actors from inducing the revision of public statements, the sanctioning of employees, the alteration of maps, and the like.
  • Businesses should weigh the reputational risks associated with censoring content, especially when authoritarian demands conflict with the expectations of their consumers. 
Cross-Sector Collaboration
  • National security agencies, antitrust authorities, and financial market regulators should strengthen their capacity to investigate money-laundering activities in cooperation with civil society and whistleblowers. 
  • Civil society activists, think tank analysts, and investigative journalists can collaborate to follow financial flows and study negotiations, agreements, and transactions in local settings. 
Education and Awareness
  • Civil society-led efforts to expose domestic and foreign state-capture practices are an effective check on corrosive capital inflows linked to large-scale infrastructure projects or strategic mergers and acquisitions.

Commerce

The reporting and analysis catalogued in the Portal illustrates how authoritarian powers compromise the integrity of civic institutions in countries around the world through corrosive capital agreements and opaque investments.

Latest Resources

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Source: Australian Strategic Policy Institute

Publication Date: October 4, 2022

Suppressing the Truth and Spreading Lies: How the CCP is Influencing Solomon Islands’ Information Environment

Authoritarian Country: China

Affected Region: Asia-Pacific, Solomon Islands

Author: Blake Johnson et al.

View Resource: Suppressing the Truth and Spreading Lies: How the CCP is Influencing Solomon Islands’ Information Environment

Following the November 2021 Honiara riots and the March 2022 leaking of the China–Solomon Islands security agreement, the CCP used propaganda and disinformation to push false narratives in an effort to shape the Solomon Islands public’s perception of security issues and foreign partners.

Source: Center for European Policy Analysis

Publication Date: September 6, 2022

Chinese Influence in Bosnia and Herzegovina

Authoritarian Country: China

Affected Region: Europe, Bosnia and Herzegovina

Author: Tijana Cvjetićanin

View Resource: Chinese Influence in Bosnia and Herzegovina

The Chinese Communist Party strives to cultivate cultural, political, and academic ties in Bosnia and Herzegovina. These efforts are more pronounced in the Republika Srpska, where the authorities tend to adopt a pro-Russian and anti-Western foreign policy stance.

Source: Center for European Policy Analysis

Publication Date: September 1, 2022

Chinese Influence in Serbia

Authoritarian Country: China

Affected Region: Europe, Serbia

Author: Stefan Vladisavljev

View Resource: Chinese Influence in Serbia

Chinese influence in Serbia is spread through various means. The most conspicuous and successful tools have been economic cooperation between Serbia and China, activities of the Chinese embassy, bilateral visits, “mask and vaccine diplomacy,” and cooperation with Serbian media.

Source: Center for European Policy Analysis

Publication Date: August 30, 2022

Chinese Influence in Bulgaria

Authoritarian Country: China

Affected Region: Europe, Bulgaria

Author: Ruslan Stefanov

View Resource: Chinese Influence in Bulgaria

China’s objective is to build an influential pro-Beijing lobby and prevent Bulgaria from joining the group of China’s outspoken critics. In the absence of any substantial initiative as the 16/17+1 format peters out, old-style Chinese propaganda is unlikely to sway many Bulgarians.

Source: Center for European Policy Analysis

Publication Date: August 29, 2022

Chinese Influence in North Macedonia

Authoritarian Country: China

Affected Region: Europe, North Macedonia

Author: Ana Krstinovska

View Resource: Chinese Influence in North Macedonia

North Macedonia is a member of several international organizations, such as the United Nations, the World Trade Organization, and NATO, where the vote of each country counts. Thus, China seeks to ensure North Macedonia’s friendship, or at least neutrality, on resolutions tabled by Western governments.

Source: Foreign Policy Research Institute

Publication Date: August 28, 2022

Political Training Under the Belt and Road Initiative: A Look into the Chinese Communist Party’s First Party School in Africa

Authoritarian Country: China

Affected Region: Sub-Saharan Africa, South Africa, Tanzania, Zimbabwe, Angola, Namibia, Mozambique

Author: Raphael Chan

View Resource: Political Training Under the Belt and Road Initiative: A Look into the Chinese Communist Party’s First Party School in Africa

Through Tanzania’s Julius Nyerere Leadership School, the Chinese Communist Party (CCP) allows foreign political parties to learn from its experience in governance and development while cultivating foreign partnerships that will advance CCP foreign policy goals.

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