Russia is preparing to “nationalize the elites” by forbidding bureaucrats (and their spouses and children) from owning property or bank accounts abroad.
(1) This need hardly be said at this point but this does demonstrate that Russia is not the “kleptocracy” it is frequently described as. Why would kleptocrats purposefully make life any harder for themselves?
(2) It is also unprecedentedly harsh and rigid. I know of no similarly harsh law in any other country, be it clean or corrupt.
(3) The law was pushed for in its current form by UR deputy Valery Trapeznikov, who used to be an industrial worker from the Urals. The same type of person whom democratic journalist Julia Ioffe calls sovoks, and the same organization that is called the “party of crooks and thieves” by Navalny and chums.
(4) There is some opposition to the law, but it does not come from the quarters a consumer of Western media might expect. By and large, they are liberals.
(5) President of Londongrad Prokhorov argues that this “automatically closes the gates to power for those, who have succeeded in life – young, entrepreneurial, independent people. For those, who have earned enough so as to not steal, who have reasons for going into politics other than to fatten their bank accounts.” Despite the obvious self-interest and poorly disguised class chauvinism this reeks of, there is some measure of truth to this.
(6) But voices like Prokhorov’s are in the minority. While a majority of Russians are fine with people holding foreign bank accounts, they’re not okay with bureaucrats doing the same. 66% support this law, while only 10% are again.
(7) One common but rather unconvincing argument is that it will have no effect anyway because bureaucrats would just re-register their houses to their parents’ or other relatives’ names; or transfer ownership to an anonymous account with an offshore firm; or use the law’s exceptions, e.g. undergoing (fictitious) medical treatment or education abroad. This is besides the point. Of course all this will happen to some extent, but the whole point is that it will make things much harder for them, and will tilt the incentives against owning property abroad. Gorbachev’s anti-alcohol campaign didn’t end Russia’s alcoholism problem either, but it did diminish it to a great enough extent to add 2 years in life expectancy in the space of a couple of years.
(8) Many of the critics say that it is also a substitute for a “real” war against a corruption, one of many. As I pointed out before, that is because liberals can never be truly appeased. They seem to think that corruption is a problem that can be solved at the drop of a hat should the thieving authorities really desire it, when in fact it is a product of deeply-seated and only barely corrigible institutional and even biopolitical factors.
(9) One truly problematic feature that the critics are correct about is that this law doesn’t distinguish between magnitudes. A $50,000 two bedroom apartment in a Bulgarian seaside town is honestly affordable even for a relatively middling Russian bureaucrat, so why should he be denied it? There is clearly a difference between that, and a multi-million dollar villa in the French Riviera.
(10) I also think a major and understated reason for this law’s appearance is security concerns now that the US may be enacting the Magnitsky Act and some of its close allies are considering similar sanctions. The broad texting of the law, encompassing anyone who the US decides to name as a “human rights abuser”, as well as its proposed extension to cover other countries like China, clearly indicate that it probably has little to do with human rights and a lot more to do with subversion; i.e., a Russian official, clean or otherwise, who happens to have a residence or bank account in the US, can be blackmailed into spying or influencing the country in certain ways by a threat to freeze or seize his US assets. So ironically, I guess this infringement on Russian sovereignty has actually – arguably – had a positive effect on it.
I guess “nationalizing” elites is one way to reduce the risks of hostile takeover bids on them.
Few days ago I watched CNN commentary on Syria. Russia and Russian (weapons) were mentioned at least as often as Syria and Syrian (army). It also came to my mind that in all recent shooters main villians are Russians with minor Latino component. Are States going to wage a war on Russia? In this case selling one’s foreign investments now would be a wise step.
Dear Anatoly,
Just a few points;
1. The new law is surely more reason to doubt the stories about the enormous wealth that Putin is supposed to have hoarded. Obviously he could be keeping all of his wealth in Russia but corrupt leaders who fear overthrow don’t generally do that. He could also hold his wealth through proxies but how in that case can he control the proxies? Besides the political risks for Putin of holding even a small amount of money or property abroad even through proxies are now surely enormous. I am not saying that this law is conclusively refutes the claims made about Putin but they do seem to me to make them even less likely.
2. The new law will make it very difficult for businessmen and oligarchs to involve themselves in Russian politics. I cannot imagine that the likes of Deripaska and Prokhorov do not have property abroad. We know that Abramovich and Lebedev do and it seems that Luzhkov or at any rate his wife also did. Obviously these characters can once again transfer their assets to family members or proxies but if they were to go into politics questions they surely do not want to answer would undoubtedly be asked of them and I suspect that most of them will feel that it is simply not worth the trouble. I suspect that this explains Prokhorov’s negative reaction to the new law.
3. At a political level the new law also cleverly counters the “thieves and crooks” label that was placed on United Russia last year. We now have an actual law that makes it illegal for people holding government or political office to hold property abroad. Yet we know that many liberal Russian politicians do. Navalny is a case in point. His leaked emails show that he owns an offshore company in Cyprus.
To my mind the major reason for liberal objection to the law (other than your absolutely correct comment about liberals being unappeasable) is 3. As I well remember from the 1980s the liberals are vociferous in complaining about corruption in others but as the 1990s showed they are more than happy to turn a blind eye to it when it is done by one of themselves. They oppose corruption in the abstract but are in practice (as their deification of Khodorkovsky shows) they are unhappy about anything done to fight it in practice.
Also, how did the Dark Lord of the Kremlin manage to steal a Super Bowl ring from the owner of the New England Patriots? Am I missing something? Wouldn’t Bob Kraft have complained if he didn’t give it back? I haven’t seen Putin sporting the bling on any of his extensively photographed outings.
Unsurprising that the liberals are opposed to the law. Many among their ranks and whom they support or who supported them were basically robber-barons whose entire modus operandi was basically pilfering the state and its citizens of their wealth and then sending that ill-gotten wealth abroad. If that becomes illegal then it basically robs many of them of the prospect of a repeat of the “wonderful” 1990s….
“I guess “nationalizing” elites is one way to reduce the risks of hostile takeover bids on them.”
Looks like they already got to one of them:
http://www.theglobeandmail.com/arts/music/russian-prime-minister-medvedev-calls-for-pussy-riot-release/article4539138/?cmpid=rss1
AK,
1/ Probably this law aims to prevent and control corruption and to eliminate bolt-holes for officials suspected of corrupt and criminal activity. Anyone ever seen or heard online rumours about how the Bush family has bought property in Paraguay to run to should Dubya be called to account for war crimes?
2/ Depending on how it’s been framed, the law might also seek to prevent bureaucrats from using overseas tax havens to stash funds that should be invested in Russian industry or declared as income for the purpose of taxation. Particularly if officials are presently parking money in overseas accounts in countries where the tax regime is very lax and they can declare nil or low incomes so they can qualify for rebates in those countries.
3/ A $50,000 2-bedroom apartment in a Bulgarian town on the Black Sea might not be much for a Russian bureaucrat but might it not be out of reach for most people in that town? Foreigners buying up property in overseas countries could drive up prices to levels that local people can’t afford and cause a great deal of resentment. As well, there are surely seaside towns in Russia that need money and if a middling official can afford an apartment in Bulgaria, s/he can afford the same in Russia itself. On the other hand, if the bureaucrat wishes to take the family to Bulgaria for a holiday and rents a place for the duration of the holiday, that should be allowed.
Is there a corresponding law that requires bureaucrats to declare all financial and property investments and interests to the Duma, and to divest themselves of any funds and property that could pose potential interest conflicts?
We in Croatia have USKOK and it is an anti corruption police.
It is only what functions in Croatia and the only organisation that is respected by the ordinary guy.
Russia needs something like it.