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: Voice of America

Publication Date: March 6, 2023

South Africa’s ANC Received Big Donation from Russian Oligarch-Linked Firm

Authoritarian Country: Russia

Affected Region: Sub-Saharan Africa, South Africa

Author: Kate Bartlett

View Resource: South Africa’s ANC Received Big Donation from Russian Oligarch-Linked Firm

The African National Congress, South Africa’s ruling party, received a large donation from a mining company used by a Russian oligarch to evade sanctions. Critics say this gift is a bribe in exchange for the ANC’s support for the Kremlin’s invasion of Ukraine.

Source: The Guardian

Publication Date: February 12, 2023

Australia Foils Iran Surveillance Plot and Vows to Bring Foreign Interference ‘Into the Light’

Authoritarian Country: Iran

Affected Region: Asia-Pacific, Australia

Author: Daniel Hurst

View Resource: Australia Foils Iran Surveillance Plot and Vows to Bring Foreign Interference ‘Into the Light’

The Iranian government attempted to surveille dissidents and members of the diaspora living in Australia in order to threaten relatives or protesters back in Iran. Iran’s goal was to prevent criticism of the regime from Iranians living abroad.

Source: BBC

Publication Date: February 6, 2023

Disney Removes Simpsons ‘Forced Labour’ Episode in Hong Kong

Authoritarian Country: China

Affected Region: North America, United States

Author: Nicholas Yong

View Resource: Disney Removes Simpsons ‘Forced Labour’ Episode in Hong Kong

An episode of American TV show The Simpsons was blocked in Hong Kong because of references to the human rights violations and forced labor camps in Xinjiang. American companies have had a tendency to comply with Chinese government demands to retain access to the Chinese market.

Source: All Africa

Publication Date: February 1, 2023

Africa: Taking a Toll – Lessons from Nairobi’s Expressway

Authoritarian Country: China

Affected Region: Sub-Saharan Africa, Kenya

Author: Msingathi Sipuka

View Resource: Africa: Taking a Toll – Lessons from Nairobi’s Expressway

A new Chinese-built highway was billed as a benefit for citizens in Nairobi. However, an exploitative toll agreement benefitted the Chinese operators and made the expressway inaccessible for Kenyans.

Source: The Guardian

Publication Date: January 31, 2023

Saudi Arabia Tourism Body’s Sponsorship of 2023 Women’s World Cup Condemned by Human Rights Groups

Authoritarian Country: Saudi Arabia

Affected Region: Asia-Pacific, Australia, New Zealand

Author: Mostafa Rachwani

View Resource: Saudi Arabia Tourism Body’s Sponsorship of 2023 Women’s World Cup Condemned by Human Rights Groups

Saudi Arabia paid millions of dollars to become a sponsor of the 2023 FIFA Women’s World Cup in Australia and New Zealand. Organizations have called this a ploy to distract from Saudi women’s lack of political and economic rights in the kingdom, acting to whitewash their reputation on the world stage.

Source: Gulf International Forum

Publication Date: January 4, 2023

Saudi Investment in Africa Surges as Iran’s Influence Sputters

Authoritarian Country: Iran, Saudi Arabia, United Arab Emirates

Affected Region: Senegal, Mali, Sub-Saharan Africa, Nigeria, Kenya, South Africa, Sierra Leone, Djibouti, Central African Republic, Rwanda, Mozambique, Guinea, Benin, The Gambia

Author: Jonathan Fenton-Harvey

View Resource: Saudi Investment in Africa Surges as Iran’s Influence Sputters

In an effort to diversify its investments and counter Iran, Saudi Arabia developed new relationships across Africa. For the Saudis, Emiratis, and Iranians, African economies present an opportunity to develop political influence outside of the Middle East, while reaping Africa’s natural resources.

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