Commerce
Commerce
Opaque financial flows from authoritarian influencers undermine the rule of law and democratic governance in recipient countries.
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.
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
View All
Publication Date: November 13, 2023
High-Tech Chinese ‘Border Scanners’ Raise Transparency, Privacy Questions In Serbia
Authoritarian Country: China
Affected Region: Europe, Serbia
Author: Sonja Gocanin
China has donated border surveillance technology to Serbia under the stated goal of combatting smuggling and human trafficking across the Serbia-Bulgaria border. The donated technology, manufactured by CCP-backed Nuctech, may provide Beijing access to the personal data of EU citizens.
Publication Date: November 12, 2023
Russia’s Hand Seen in Moldovan Local Elections
Authoritarian Country: Russia
Affected Region: Europe, Moldova
Author: Marija Golubeva
Candidates from Moldova’s Chance party were banned from the November 2023 elections for accepting laundered Russian funds. Through strategic investments, Russia has employed regionalization and strategic ambiguity to sow distrust in Moldova’s central government and democratic institutions.
Source: New York Times
Publication Date: November 2, 2023
In a Worldwide War of Words, Russia, China and Iran Back Hamas
Authoritarian Country: China, Iran, Russia
Affected Region: Global
Author: Steven Lee Myers, Sheera Frenkel
Russia, China, and Iran have launched information campaigns to amplify messaging from Hamas’s online propaganda efforts. Outlets including Russia’s Sputnik India and RT en Español have echoed anti-western rhetoric and coopted anti-imperial messages to influence audiences across the Global South.
Source: Coda Story
Publication Date: October 25, 2023
Inside the Brain of a Kazakh Smart City
Authoritarian Country: China
Affected Region: Eurasia, Kazakhstan
Author: Bradley Jardine
A small village in Kazakhstan has deployed Chinese surveillance technology ahead of government plans to create smart cities nationwide. Analysts have raised concerns over China’s access to the private data of Kazakh citizens and collaboration with China to target protesters and minority groups.
Publication Date: October 24, 2023
Capitalizing on Crisis: Russia, China and Iran use X to Exploit Israel-Hamas Information Chaos
Authoritarian Country: China, Iran, Russia
Affected Region: Middle East and North Africa, Israel, North America, United States, Global
State-linked social media accounts from Iran, Russia, and China have used the Israel-Hamas conflict to spread disinformation and anti-Western rhetoric. This disinformation includes manipulated videos, false claims about US involvement in the conflict, and dangerous demonization of Israeli civilians.
Publication Date: October 22, 2023
Iran Joins Middle East Propaganda War on China’s TikTok
Authoritarian Country: China, Iran
Affected Region: Asia-Pacific, China
Author: Aadil Brar
Iranian narratives on the Israel-Hamas conflict have proliferated on the popular Chinese short-video app Douyin. Iran has spread pro-Hamas and antisemitic propaganda to 1 million followers on Douyin, which Chinese state media has reposted.
