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Corruption Is The New Communism

  • Brian Whitmore

Psst. Hey buddy. Wanna make a deal? (©Shutterstock)

Psst. Hey buddy. Wanna make a deal? (©Shutterstock)

Soviet tanks roll into Budapest and Prague.

Russian banks set up secretive offshore accounts and shady shell companies that stealthily buy influence and gobble up strategic assets across Europe.

Quislings in the East and fellow travelers in the West toe the Leninist line.

Business and industrial lobbies in both East and West parrot Putinist talking points.

A network of Communist parties and front groups advance Moscow's interests.

A web of opaque front corporations, murky energy deals, and complex money-laundering schemes ensnare foreign elites and form a ready-made Kremlin lobby.

Past, meet present.

In many ways, Russian corruption is the new Soviet Communism. The Kremlin's black cash is the new Red Menace.

In the East, an alliance of satellite states with Soviet-style socialist command economies and authoritarian political systems has been replaced with a loose grouping of kleptocracies with Russian-style crony-capitalist economies and dysfunctional governance.

And the Soviet Union's attempts to subvert the West with the power of an idea has given way to Vladimir Putin's Russia seeking to corrupt it with the lure of easy money.

The more things change, the more they stay the same.

"The Kremlin does not need to be the outright leader of a bloc of nations a la Warsaw Pact; instead, it can exacerbate existing divides, subvert international institutions and help create a world where its own form of corrupt authoritarianism flourishes," Peter Pomerantsev and Michael Weiss wrote in their widely circulated report, The Menace of Unreality: How the Kremlin Weaponizes Information, Culture, and Money.

Capturing Elites

The Soviet Union sought to spread Communism and establish a bloc of nations loyal to Moscow. Vladimir Putin's Russia seeks to spread its corrupt business model to establish a bloc of nations dependent upon the Kremlin.

The Soviet Union was primarily concerned with its immediate neighborhood, Eastern Europe, but also sought to spread its socialist model outward.

Putin's Russia is also concentrating on its immediate neighborhood, the ex-USSR, but has also set its sights on pushing kleptocracy farther afield.

It has used murky energy schemes with opaque ownership structures like RosUkrEnergo, EuralTransGas, and Moldovagaz as carrots to capture and control elites in former Soviet states like Ukraine, Belarus, and Moldova.

Farther West, the Kremlin has deployed shifty shell companies like Vemex, an energy trading company with a mindbogglingly opaque ownership structure ultimately leading to Gazprom, which has captured between 10-12 percent of the Czech energy market.

The Kremlin has indeed mastered the art of the corrupt deal to create patron-client relations well beyond Russia's borders.

"Gazprom, with the silent support of the Kremlin has set up 50 or so middleman companies, silently linked to Gazprom and scattered throughout Europe," the late energy analyst Roman Kupchinsky, former director of RFE/RL's Ukrainian Service, said in testimony before the U.S. Senate's Foreign Relations Committee in June 2008.

Kupchinsky cited the Vienna-based Centrex group, owned by a Cyprus-based Holding company and RN Privatstiftung in Austria, as well as the Gazprom Germania network.

Such fronts, he added, "do not add any value to the price of Russian gas being sold on European markets; yet they earn enormous sums of money which appears to simply vanish through shell companies in Cyprus and in Liechtenstein."

Kupchinsky also told the committee that "in Hungary, shady companies with suspected links to organized crime and to Gazprom seek to control large segments of the domestic gas distribution and power generation business."

'This Is The Story Of An Invasion'

There is also evidence that Putin has recruited some members of his old intelligence network in the East German Stasi to set up front companies throughout Europe.

A September 2007 investigative report by German journalist Hans-Martin Tillack uncovered how Gazprom Germania was "something of a club for former members of the East German security services."

"This is the story of an invasion. A massive campaign, planned well in advance. The General Staff is located far away in the east, in Moscow, the capital of Russia. The target area is Germany -- and the rest of Western Europe," Tillack wrote.

"But the story of this invasion is teeming with ex-Stasi officers and shady figures. It is a story of letterbox companies that do not even have a letterbox, of companies nestled within companies. The overriding impression? That they are concealing the flow of funds."

But it is an invasion in which many elites in the West are either willing -- or unwitting -- participants.

"Acquiescence to Russian corruption, with illicit funds regularly laundered throughout the West, works to the Kremlin’s advantage both domestically and internationally," Pomerantsev and Weiss wrote.

"If the premise of the neoliberal idea of globalization is that money is politically neutral, that interdependence will be an impulse towards rapprochement, and that international commerce sublimates violence into harmony, the Russian view remains at best mercantilist, with money and trade used as weapons and interdependence a mechanism for aggression."

Communism, despite its faults, attempted to appeal to universal human ideals and aspirations. But in practice, it cut against human nature.

Corruption appeals to the most universal and basest human instinct -- greed. And sadly, it is often in sync with human nature -- which makes the new Red Menace potentially more dangerous and insidious than the old one.

Corruption isn't just a matter of good governance anymore. It's now a national security issue and needs to be treated as such.

About This Blog

The Power Vertical
The Power Vertical

The Power Vertical is a blog written especially for Russia wonks and obsessive Kremlin watchers by Brian Whitmore. It offers Brian's personal take on emerging and developing trends in Russian politics, shining a spotlight on the high-stakes power struggles, machinations, and clashing interests that shape Kremlin policy today. Check out The Power Vertical Facebook page or


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