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: Jamestown Foundation

Publication Date: August 18, 2023

Geopolitical Surprise In The Caucasus: Georgia Declares A Strategic Partnership With China

Authoritarian Country: China

Affected Region: Eurasia, Georgia

Author: Beka Chedia

View Resource: Geopolitical Surprise In The Caucasus: Georgia Declares A Strategic Partnership With China

Georgia has forged a strategic partnership with China after years of closeness with Western partners. China’s increasing influence in Georgia, particularly through investment in key strategic infrastructure, threatens Georgian democracy and the potential for rapprochement with NATO.

Source: The Guardian

Publication Date: August 11, 2023

‘It’s Not a Fad’: the Truth Behind Saudi Arabia’s Dizzying Investment in Sport

Authoritarian Country: Saudi Arabia

Affected Region: North America, United States, Europe, United Kingdom, Global

Author: Paul MacInnes

View Resource: ‘It’s Not a Fad’: the Truth Behind Saudi Arabia’s Dizzying Investment in Sport

Saudi Arabia is investing heavily in sports to bolster the country’s international image while advancing domestic development goals. Activists and experts warn that the Saudi government is “sportswashing” to distract from recent human rights abuses.

Source: Centro Latinoamericano de Investigación Periodística

Publication Date: August 6, 2023

Rosatom, Russia’s Nuclear Agency, and its Information Strategy to Win Bids in Latin America

Authoritarian Country: Russia

Affected Region: Latin America and the Caribbean, Bolivia, Nicaragua

Author: Pablo Medina et. al.

View Resource: Rosatom, Russia’s Nuclear Agency, and its Information Strategy to Win Bids in Latin America

As Russia’s nuclear agency, Rosatom, ramped up investment in Latin America, leaders signed agreements to strengthen their “digital communications strategies” and Russia-positive content has begun to appear in local media. Rosatom’s consultants have also intervened to sway local election results.

Source: New York Times

Publication Date: August 4, 2023

How a U.S. Tech Mogul Used Nonprofits to Sow Chinese Propaganda

Authoritarian Country: China

Affected Region: United Kingdom, Latin America and the Caribbean, Brazil, South Africa, Zambia, Ghana, Sub-Saharan Africa, North America, United States, Europe

Author: Mara Hvistendahl et. al.

View Resource: How a U.S. Tech Mogul Used Nonprofits to Sow Chinese Propaganda

An American donor with ties to Chinese state media has funneled money through nonprofit organizations to ultimately promote Chinese talking points within leftist activist groups, think tanks and media outlets worldwide.

Source: Euractiv

Publication Date: June 19, 2023

Almost 400 Websites Spread Russian Propaganda in Bulgaria

Authoritarian Country: Russia

Affected Region: Europe, Bulgaria

Author: Krassen Nikolov

View Resource: Almost 400 Websites Spread Russian Propaganda in Bulgaria

Bulgaria has seen a rapid growth in Russian propaganda over the past year, spreading disinformation and fake news through a network of growing mushroom sites, or websites created by malicious actors to project disinformation.

Source: Reuters

Publication Date: May 30, 2023

The Meat Magnate Who Pushed Putin’s Agenda in Germany

Authoritarian Country: Russia

Affected Region: Europe, Germany

Author: Tassilo Hummel, Polina Nikolskaya, Mari Saito, Maria Tsvetkova, Anton Zverev

View Resource: The Meat Magnate Who Pushed Putin’s Agenda in Germany

Ties between a German national soccer team and Russia’s state-owned gas company contributed to a blossoming relationship between the two countries. Foreign investment across Russian and German enterprises facilitated the spread of Russian influence and improved public opinion about Russia in Germany.

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