Combating core vapgs core imperative of the operation for security and cooperation in europe or the ofce. Corruption takes many forms, but the one that concerns us today is clep tokcracy or rule by heed. Nowhere is this idea of corruption as a system of government more fully realized than in the russian federation. Russia has been on a steady path to clep krotic authoritarianism ever since putin entered the seen 18 years ago. Since then, a new generation has entered adulthood, one that does not remember a russia before putin. As these young russian men and women enter the workforce, they confront institutions in both the public and private sectors that have been completely assimilated into putins clep toe crat tick architecture and are left with the choice to ielker be coopted into this corrupt system, or effected from it. While put continue is the central figure responsible for russians dispense into clep toe crattic rule, hes not the only one. A strong man of the kremlin is surround by a loyal group of kroonny whos aid and awet the president complicit in the robbery of the russian people and the sad state of russian democracy. Moreover, hes cronies enable the kremlin to export its brand of clep tackcracy into neighboring countries transforming corruption into a potent geo strategic weapon. Our briefing today will examine the dynamic of putins closest circle in order to establish who most strengthens and benefits from his rule. Additionally, briefers will analyze how these cronies advance putins goals and interests. We are grateful to have such distinguished panelists with us here today. I look forward to hearing your thoughts on this important issue. First where he have brian whit more who joins us all the way from prog. Brian is a Senior Analyst and also writes the power vertical blog. Prior to joining rfeo in 2007, he worked for eight years for the boston globe. First in the globes Moscow Bureau and later as a central and Eastern Europe correspondent based based in prag. Following brian we have i willya and and i understand your wife just had a baby, so thank you so very much for being with us here today rather than at home. You know, we understand what a sacrifice youre making to talk about this very important topic. Who joins us from the russian fed not the russian federation, the Free Russia Foundation where he is a Research Expert where he is an academy associate. In addition, he heads free speech llc which runs a project on the export of corrosive practices from post soviet states to the west. Well then here from dr. Sal vin who the hell sink i can commission knows very, very well who sat senior professor and a professor at georgetown university. Onders is a leading specialist on policy in russia, ukraine, and Eastern Europe and worked as an economic adviser to the president of ukraine from 1994 to nine mean it 97. Following him we have marrous lor rine help me out here. These lith wanian names, man. Okay, that. Who joins us from further away that prag. Is he a Senior Analyst for policy analysis and a former fellow at the hudson insurance stutd. A highly regard journalist, he is been reporting on russian and dams domestic Foreign Policy for over two decades. And finally we will hear from ambassador daniel frooed, distinguished fellow at the atlantic council. He is one of the foremost experts on russia government. His career with the Foreign Service has spanned over four decades and seven presidencies. Wow. Ending earlier this year when he retired from his post as a state Department Coordinator on sanctions policy. Very relevant for this discussion. We will conclude way q a session. Id like now to give the floor to our first panelist, brian whit more who will provide us with an overview. Brian, the floor is yours. There we go. Thats better. So i started again or can everybody hear me . I cant say how delight i did am this issue is getting attention. Weve been talking for the past few years about the information war, ive attended strat com dialogues and seminars and im enjoying all of them, but i think ive been harping on the issue that we need to broaden the aperture here a little bit, because information of information is just one of the things that the kremlin has weaponized. And, in my opinion, the most important thing to weaponize is corruption. Ill start by saying i think its a bit misleading to characterize Vladimir Putins rush russia as simply contract tocracy because this implies that the regimes primary aim is the enrichment of the elite. Corruption has been instrumental liesed at home and weaponized abroad. The domestic role of corruption is control, the elite to maintain its loyalty, members of the russian political elite effectively have the license to seek rents, to month ties their positions so long as they remain politically loyal and politically useful to the putin regime. Only those who prove disloyal or unuseful are ever prosecuted for corruption. When theres a Corruption Case in russia the first question i always ask myself is not what did ore she do what he or she is accused of doing what they did, because of course they did. Who did they cross political sfli what happened . Why are they on the outs politically. Thats always the first question to request squ when a Corruption Case bubbles up in this regime. Internationally corruption has been weaponized an used as a tool of state crafted. Kremlin seeks to capture elites and establish networks of influence abroad by ensnarg officials in corrupt deals. Im fot going to get into details because we want to keep it brief in the beginning reasoned we can go into broad details later. Moreover, the russian state has both clem clep toe crattic and ideological elements to it. This what i call the two russias. Sometimes clep toe crattic raurk and ideological russia do indeed work hand in glove. By id lom cal russia i mean project of Vladimir Putin to make russia great again, brick it back up off its knees and restore it to what it believes to be its rightful place as a world power. Sometimes corruption and ideology go hand in hand, but at other times the two russians are at tension with each oj and operate at cross purposes. Closely related, the weapon nyzation of corruption is the weaponzation of russian organized crime which is also used as a tool of state craft. But just as it is incorrect to classify russia as simply a clep tokcracy its also incorrect to classify more accurately as my friend and cloeg wrote in a recent report, russia is effectively a state way national liesed fafya. The russian securitier is vitses work closely with organized crime often facilitating their activities. As a result of the Security Services are able to establish a socalled churn net kaza or black account which has unprais traceable cash that can be used for all sorts of off the books operations and influence operations abroad. I can go into details a little bit more detail about this but ill keep my opening remarks brief. Organized crime groups are often pressed into service to perform tasks the kremlin wants to keep its fingerprints off, such as smuggling weapons into. Done boss, akas sas nating dissidents be in london and so on and so forth. Weaponized corruption and organized crime are part of a larger, nonsa net tick arsenal that Putins Kremlin is using to weaken western institutions. Other elements of this include finance, information, energy, cyber space, the port for extremist Political Parties and religion. If you want to think about the courses of putins conduct in this, why is this regime behaving this way, and you look at pute tint man, i like to look at putin as kind of a hybrid product. Hybrid is another one of the words over the past few years im going to put. Into a whole new context. Putins a hybrid man. Its very stereo typical to look at him as a project of the kgb. I think this is correct but its only part of the picture. If gene logically if he ask a project of the kgb, sos logically hes a project of the wild 90s, of the darwinian criminal world that existed in cities like st. Petersburg where he was deputy mayor, he played a integral role as a liaison between the citys authorities and organized crime groups in the 1990s and i think this is something very important to understand. In conclusion, ill say that one of my favorite talking points is the headline of a piece i passed to other panelists here, and that is that corruption is the new com mu niflt. Kremlins black cash is the new red menace, and it has to be looked at that way. Corruption is a tool of state craft, its something that spreading from moscow and its spread together tool of influence. And if you think about this, communism despite its faults and their alegion, did attempt to appeal to human ideals and aspirations although in practice it often worked against these ideals. Corruption on the other hand appeals to the most universal and basic human instinct out of greed, and sadly its often insink with human nature which makes the new red menace potentially more dangerous and insidious than the old one. Finally ill say corruption today is not just a matter of Good Governance anymore. Its not something we want to fight just because we want to be honest and good, although we do. Corruption is a National Security issue of the highest order and needs to be treated as such. Thank you. Well thank you very much, brian, for that fascinating overview as well as the source of elaborations on how the regime exactly is structured, that its not simply ruled by thieves, it has these ideological components to it. I read your article corruptions new com mu figs nix today an its an incredible piece. I think framing the issue be in those terms is precisely the way foreign pogsy needs to be approaching this topic the illya. Thank you, and thank you for coming. As brian correctly said, finally this topic is out in the open, everyone is discussing it and actually we quickly transferred from not discussion to a term which i recently herd, outrage fatigue with clep tokcracy. Everyone understands the problem but no one knows how to handel this unbelievable flow of information and what to do with it. Ive been studying this topic since at least 2011, bit of a junior expert with other people and senior experts from russia and europe warning about National Security expimplicati coming from west with post soviet space and even before aggression against ukraine happened, i predicted in 2013 that especially russian clep tokcracy are taking their practices anchor troupgs europe and the u. S. Over at least 25 corrupt corrupt or corecognition channels, manipulation of information, influencing discourse at think tanks and universities and so forth. In this briefing 2019 put forward a third warning and prediction. I think the west especially the u. S. As leader of democratic world has been so negligent and appeasing of corruption and subversion of Democratic Values under putin over the last 18 years that even on the best Case Scenario russian clep tokcracy will not be eradicated in the future. The best that we can hope right now from now on is to try to attempt to contain negative global to contain negative Global Impact of the radical kleptocracy coming. And try preserving its own Democratic Institutions. In a nutshell, this is no longer just about russia, but really about the u. S. And the west. In my Research Paper that is slated to come out at the Kleptocracy Initiative of the Hudson Institute in the next month, called we call it the values, and the influence in the west sort of the working title. I really want to emphasize the influence of nonstate actors or supposed nonstate actors coming from the post soviet space. The biggest difference with the soviet union is that not only there is this seeming sort of business interactions between supposedly private sector and in the west but the nature of transactions has changed considerably. And theres a little understanding in my view in the west, despite ample evidence that really from soviet times we now see the fusion of three different worlds and values coming from post soviet space in one elite. So in soviet times we used to have three different worlds, communist party, kgb and different Security Services and Law Enforcement and actual organized crime. They were actually quite antagonistic and quite conflicting with each other especially at some important points but now i would argue that those in russia and in kazakhstan and azerbaijan, they took the worst, but most practical values and Business Practices from each of the free world and amalgamated them into one comprehensive ideology and tactic and my friends with the kleptocracy and the investigative journalist, they have showing especially in st. Petersburg in the 1990s, putin came to power with a team which has been experienced and used network from all those three worlds. I think one of the important conclusions of that study and other studies that we do in Free Russia Foundation there are no systemic or any kind of liberals in russian government. Its a big myth which is still somehow spread in europe especially in countries that like finland or germany that still cooperate with russia on many business levels so people have been implicated in those years under putin. Even in st. Petersburg. Altogether with putin. I would argue i mean, recently i highly recommend the study that just came at londons rusi. And it raises this question that the russian cooperating is one of the most widespread operations especially big businesses in russia. Starting from the case of Corporate Trading this became a Common Future and the kremlin doesnt want to implement any measures to protect the businesses. Previously last year in the report for Free Russia Foundation in brussels called design, i also argue that the term oligarch is no longer meaningful really. In fact, it is commonly widespread but a huge and dangerous mistake to understand that some private businessman and market economy exists in russia but they dont. And Security Services and business in russia really means state favors, tax breaks, contracts from kremlin and these oligarchs are now cash handlers of cash flow allowed by putin. Also kremlin has special compromising material or other leverage over the lives. Even if the previously considered oligarchs they live in the west and they have the looks and lifestyle like western businessman they are putins handlers. Because their base is in russia really. But they want to spend money and sort of enjoy the best of two worlds. This brings me to my second major point and presentation. Kleptocracy in russia is no longer a residual on the u. S. I believe there are strong indicators that we are progressing through the time that the very existence of liberal western capitalism with accountability and Good Governance and jeopardy due to the kleptocratic in the russians. In fact, g7 itself could be, you know, not seen as that much about westen liberalism. I mean if you look at the countries like italy or et cetera. So we see that most developing countries seem to be learning whats kleptocratic government and Business Practices and capitalism based on the rule of law and proper separation of powers is no longer an ideal from societies where people have adapted to sophisticated and often seemingly comfortable and acceptable forms of state level corruption. So corruption is a new accepted norm. On many, many levels in societies both in the west and in post soviet space and elsewhere. So together with Free Russia Foundation and the group of 2,000 activists around the world, we are preparing a launch of a project which you mentioned in my introduction. And i think this is a new term that we believe is more relevant than oligarchs and other nonstate actors. It basically shows that we have a whole group of people and actors nonstate actors but connected with kleptocratic regimes who actively undermine the west and spending the profits in the west. I believe these individuals and corporations learned even more sophisticated financial disinformation and hightech methods to advance their own interests and there are multiple examples which i want to go to go into the session. What can we do and i have like one minute to discuss this. With this outrage fatigue. I think we need a new system of containment against russian and other post soviet kleptocracy that will create more up to date laws that deal with todays International Corruption and subversion, especially in regard to the Anonymous Companies in off shore jurisdictions. Something which kleptocracy is doing very well and the anticorruption groups are now discussing in washington especially. I also think we need to build Awareness Among western general public that will link that will create this understanding, acknowledgment in the minds of people about the link between transnational kleptocracy and the erosion of democracy in the west. So far, i have seen very few actual examples of that. So people in london now finally realize that they cant live in their own city, especially students, because of all the kleptocratics from around the world are raising real estate prices but need more examples like this. I will finish my presentation with warning that the price we pay today in the west to stop kleptocracy is considerable. And we have to understand that there will be a price. We need to especially in the business sector, we need to do containment. We need to really prevent some of the cash flows especially. But also many, many other Different Levels of subversion and corruption but this price is much smaller than the one that we are likely forced to pay tomorrow or the day after tomorrow. Well, thank you very much, ilya. I think your comment that oligarch is no longer meaningful is an extremely important point to hit home. Especially given that stephen kohl bert went to russia and thesele oligarchs, theyre cros of putin. Thats what they are. Its not like it was and to a point in ukraine where the oligarchs have a competitive political environment. Theyre not competing with each other, but working for putin. Id like to also back up your comments on the work of the kleptocracy and as you said, give a shout out to charles davidson. He was a panelist at a briefing we did last month, two months ago on asset recovery. And he talked about the Corruption Services industry. In the west. Where lawyers and bankers are ready and willing and advertise to take these funds and hide them in the west. So as far as you say, so negligent an appeasing, yes. Yes, very much so in the west. With that i hand it over to dr. Ozland. Thank you very much. On behalf of Helsinki Commission for this invitation and i believe that russias kleptocracy is an important topic. When i worked as economic adviser to the russian government in the early 90s my perception of corruption was like this. A pyramid, little at the top and then a lot at the bottom and then it changed like this. A lot of corruption at the top, little at the bottom. Russian administrated works much better than it used to, much smaller bribes but now it looks like this. It has become an atomic mushroom with all the corruption at the top. And i think that there have been two important things said here. Organized crime and oligarchy are over. They have been assumed by the state and in addition here to consider to a considerable extent they have been legalized. President putin is a lawyer and he thinks about legalizing many of the things that hes doing. Its more a matter of how the system functions than whether its legal or not. I have written several books about russias the soviet unions economic reforms. Right now, im at the final part of a new book with the working title russias crony capitalism. And the main idea is very much, putin has successfully integrated enrichment of the elite in his Economic System and i would say that i see russian Economic System today and power system as four different scircl. The first is state power and judicial power, no independent court in russia. Therefore, there are no Real Property rights. Property rights is something that you have abroad, not in russia. But since you have it abroad, how about getting it in russia because it stops your enrichment. The second part is the state corporations. Russias state sector, 12 years ago according to official russian statistics generated 35 of gdp. Today it is 70 of gdp. The big state companies are buying up the companies from the former oligarchs quickly at half the price. Because the oligarchs are not allowed, the former oligarchs are no longer allowed to sell to one another or to foreigners. They have to sell to putins Close Friends or to state companies and then that prices are at most half of what they should be. Therefore, we can see that the prices on the Russian Stock Exchange are extremely low. If you take the most outstanding state company, gas prom, it was worth at the peak on the london Stock Exchange 369 billion. Today, they have wasted 320 billion. Its down to 50 billion. And this is an extreme example but its not an an typical. And in the 2007, putin did something quite extraordinary. He transformed six big state companies with one from each of it to state corporations which are called nongovernmental organizations. So effectively privatized assets of more than 1 billion of value and then you wonder who controls these nongovernmental organizations . Well, of course its putin who controls it all. And the third circle that is the cronies, four of them have been sanctioned by the u. S. Government and this is the real putin circle. These are not kgb people. And they dont work in state companies. They are putins real friends. Whom the u. S. Government assumes also holds the part of putins wealth. Look, analyzing this, you wonder how do they make the money . Essentially two ways. Asset stripping mainly from gas prom. That is they buy assets for example, Financial Companies and Television Companies for gas prom cheaply and they get big state procurement orders at the massively inflated prices and theres no competition. Because putins friends, everyone knows what they should be given. Looking at the numbers i come to the assessment that 10 to 20 billion a year has been taken out by this group of essentially half a dozen people. Each year since 2006. If you add it up, were only 100 or 200 billion that has been taken out of this small group of people. Of course the consequence of this is theres not much revenue left for the others so corruption in russia today if we call it like that, because really its quite legalized. They have the state procurement legally, its very concentrated. But what i will shock you with is the fourth circle. Ilya touched on that and thats the west. This would not happen in the way it does without the west. After this goes through cyprus, cyprus is only a channel. And then it goes normally to some caribbean island. British Virgin Islands is typical for this. Then it goes to two places. London and new york. Or the u. S. More broadly. It goes through Anonymous Companies, llcs, that are usually they can be in nevada, wyoming and south dakota. This should not happen. But it does. The other problem is that the money passes not through the bank system which is properly regulated but through law firms. Well renowned law firms which consider this to be a Attorney Client privilege. In this way the wall street journal had an article on the 26th of december last year where it says that at least 40 billion a year goes into this country in this fashion. These are the two things that i suggest that we should focus on stopping. There should be no Anonymous Companies whose beneficiary owners are not known and there should not be any illegal sorry, its legal, accepted transfers of the money through law firms that bypasses the bank systems. These are the two suggestions i have that the United States congress should really do something about. Thank you. Well, thank you very much for that comprehensive analysis, doctor. You have been such a wealth of knowledge for the commission for so long and thanks again for running us through the important thing. To reiterate your circles, one is state power, fsb. Two is state corporations. Three are the cronies and friends of putin and then four, is us. A lot to digest. Marius, the floor is yours. Thank you, paul. I would like to thank the organizers for hearing me here. And i would like to give a credit to other institutions first of all to Kleptocracy Initiative forward dimensions. I worked for them for a year and wrote a report for them on weaponizing the kleptocracy, how putin weaponizes the kleptocracy. I really believe these guys of the Kleptocracy Initiative, not to offend anyone else, but they are the best in terms of expertise and determination to recommendation. So the institution i would like to mention is the institution im affiliated with right now is Business Institute for policy analysis. They sponsored my me here and im sharing my expertise with you today. I really think that we in the region in the baltic region in the Eastern Europe we have something to share with you. Because almost everything you are experiencing here in the United States or in the western europe we have experienced already. I mean, everything, information war, kleptocracy, democratic influence. Economic influence. You name it. Everything we have experienced already. So i will try to speak today about this particular experience. And because i believe you will find some parallels with the processes in the west yourself. So first of all, i would like to say that i was asked to talk about the kleptocracy as a tool of Foreign Policy of a russian regime. I should say its not a tool of Foreign Policy. Its a weapon. We can its not only putin. Its not just about putin but about the system. But what putins regime weaponi weaponizes kleptocracy its not only about Foreign Policy. And the second thing is it was already mentioned were dealing with not i should not say not a normal state or even not a normal authoritarian state. We are dealing with mafia state. And that makes a difference. So theyre projecting all kind of influence which is not usual to normal state influence. And kleptocracy is one of them. So talking about our experience, ilya said that he started to be interested in the topic of kleptocracy in 2013. I should say i started to be interested and work on this in 2003. And it was because i dont know how many of you know, but we in lithuania we have the first president the first impeached president in europe in the whole history of europe. So it was 2003 when the scandal broke in lithuania about the president ial russian business and even criminals. That was a real eye opening for me myself. I had been working on russia since 1991, so its already 26 years. And it was really eye opening because we found that the influence can be projected by these these relations which at that time were considered just normal business. By the relations to the criminals because on the list of the people who were related to people around our president were people like shalikashvili who was on the u. S. List not on the sanctions list, but on the fbi list. So i started to work on that and later i look back to the history and i should say that this crony capitalism or kleptocracy in russia has started not it started not in the year 2000 when putin came to power, but it started at least in 1991 or i would say it started even earlier when the communist party and kgb made the plans to transfer money huge amounts of money that are different calculations but at least 50 billion were transferred to the west and 100 millions of dollars. So since that, theyre projecting the influence over the west using this money and using this influence and networks of influence. The other example i would like to give you is from our neighboring country, latvia. Now we have a coalition in latvia which is led by the party of the mayor of ben the name of the guy is lenberg. What is interesting about him, hes definitely not called or named the pro russian or russian agent, but what is interesting about him, he started his business in 1991 with the guy who was already mentioned. Why are they doing this . They tried to not just to achieve some Foreign Policy goals, but they tried to capture as it was said by brian the elites of the country. They tried to capture institutions and the ultimate goal is if its possible to capture the entire states. So first of all, they captured of course not only by having these relations with the lenberg but the other people they captured the port of ben sills and now looking back to the history, i can say that they projected the russian influence through several governments of latvia which were not called pro russian. The others the Prime Ministers of latvia, they have clear business relations with russia and always were well, at least semipro russian. But the thing is that when we dont we dont call mr. Lets say mr. Lenberg as a pro russian, we should remember that he was the guy who publicly called Russian Troops in europe as occupational ones. And the thing is that no one cares about that and no one looks into the history of his business. The same thing i should say about our well, even u. S. Attitude in 2003 because it was really the situation when we were talking in lithuania. We were talking about the russian influence over the lithuania and staunchest supporter of the impeached president at that time was the u. S. Ambassador williams. Every day or every second day he went publicly to defend our president saying that hes a normal guy, pro western. And its just about politics, not about the russian influence. And i put working on the Kleptocracy Initiative i put several documents at the kleptocracy archives on the issue. So you can find yourself. But to make it to the end, i should say that we should look at the issue having in mind the quotation of the famous spanish prosecutor renda. I dont remember the exact quotation, but he said about the network of criminals working for the russian regime. He said, you know, when the russian state comes for one reason or the other to achieve something by the means of the state, they employ the criminals. So in the same manner, they employ kleptocracy to achieve some goals that the state cant achieve itselves. Thank you. Thank you, marius. Especially for that in depth look at the prospective at how far this all goes. I think that that is the most surprising thing, is starting in 1991 and now, in 2017, were finally taking an in depth look at it. So finally, we have ambassador daniel freed whos going to take about what the United States might be able to do about this. Thank you. My point of departure is to assume that the previous speakers are correct about the nature of russian kleptocracy and its weaponization at the hands of the putin regime. I make this assumption because i agree with it. But you i need not go over the ground that has been covered. What then do we do . First of all, as was the case during the cold war, nothing will work if we lose the political and dare i say ideological struggle. We need to have faith in our own democratic system in ourselves, in the free world. And when we do that we have a foundation from which to proceed. I say this because now that very foundation is also under attack, both from without, from the russians, but principally from within from people not necessarily at all connected with russia. So this is a different kind of a struggle. Its not my purpose to go into that but i want to mention it. Secondly, a u. S. Policy designed to push back against russian kleptocracy and corruption needs to be integrated in a complete russia policy. There is nothing incompatible between pushing back on russian aggression in various forms and seeking those areas of Common Ground where it may be possible. I wouldnt be too hopeful about the positive agenda. But you dont rule it out. A second point is that this is not as you pointed out this the americans may have discovered this recently, but this has been a problem well before we discovered this on the front pages of our newspapers. Europeans have been dealing with this for a long time and the Baltic States and poland, bulgaria have been dealing with it since 1991 essentially. So the answer should not be made in the u. S. , its got to be coordinated with europe in particular and within the g7. All right. That said, what are our options . First is exposure. We should not let the corruption take place in the shadows. In the darkness. And this is a job principally for nongovernmental organizations. For journalists, for the 21st century cadre of investigative journalists and that sort of means tech savvy younger people who are adept at exposing malign influence. Theyre all over in russia itself. We need to expose what the russians are doing. The better to anathema tycz it. Just as it was not popular to be associated with the soviet union as their agent or as their useful idiot, its should there should be a price to be paid for doing the kremlins work for it. Secondly, and this is more in the area of government, theres pressure. There are both sanctions and there are enforcement of financial regulations. Treasuries, the Financial Crimes Enforcement Network is not a sanctions organization, but it goes after financial crimes. Theyre very good. They need to be very their expertise and resources can be useful in exposing what the russians are doing. Secondly and i have this requires some discussion, but russian investment is often let us say strategic. They want to buy up key elements of a countrys infrastructure using cutouts, cypriot money, false fronts. In the United States theres a committee on Foreign Investment which screens it for National Security purposes, so called cfius. It works. It may be that European Countries should study that and learn from the example. I understand a boy did like that a body like that can be a hindrance and a bureaucracy to legitimate Foreign Investment. But when youre dealing with money that isnt what it claims to be, governments may want to provide themselves with protection. Now, sanctions. They have a place here. My last job in government was the state department sanctions coordinator. I dont want to overestimate or oversell the ability of sanctions to solve the problems. Still, it is a useful tool. The magnitsky act was not designed to go after corrupt officials. It was designed to go after major human rights abusers, but it turns out and we know from the panama papers, but we know the corruption that Sergei Magnitsky had uncovered, who was murdered, uncovered a lot more than we thought. You see when you pull on a russian thread you never know what comes out the other end. The magnitsky act bothers seems to bother the russians so much so that they want to talk with about adoptions with just about anybody. Adoptions being the euphemism for the deal it would take to roll back the magnitsky act because the russians imposed a ban on adoptions american adoptions of russian children as retaliation. So when you hear someone is talking adoptions with the russians, what it really means is theyre talking about getting rid of magnitsky. The magnitsky act was not designed to deal with this problem, but it stumbled into it. Because threads in russia tend to lead to one another. The global magnitsky act, senator cardins creation in a way does explicitly deal with corruption. It is a legislative vehicle now a law which allows for us to go after corrupt russian officials. My experience, it is hard to demonstrate this. But that means you go to work including with nongovernment sources of information, the army of investigative bloggers and tech savvy people i mentioned earlier. The ukrainian sanctions went after as zander said went after putins cronies by design. We were not intending to make things pleasant for the kremlin after it had invaded its one of its neighbors for the second time in ten years. The senate bill which passed 982 which is now being taken up on the house, the same bill on russia sanctions includes along its many provisions two sub provisions dealing with corruption. One on privatization, allowing the administration to go after individuals who unjustly benefit from privatization. Again, may be hard to demonstrate. But it is a useful vehicle. And more generally corruption. Similar to the global magnitsky ability. Sanctions are not going to solve the problem, but they are a useful tool. I mentioned the various threads that come together. All of the tools i mentioned are useful to the degree that we americans and the europeans and the g7 take seriously the challenge of an autocratic russia, which wants to export its corruption and seems to be aiming to make the world safe for russian autocracy. That is by weakening Democratic Institutions and weakening the idea of democracy and lest you think thats an original thought on my part its actually about a 200yearold russian policy from the time of nicholas i. No need to remind our lithuania about czarnik last who used his liberal army to crush them. The better to keep out the infectious ideas of the enlightenment. I do not believe that russia is doomed to live forever its worst history. I dont expect the notion of the civilizational divide. In russian history, russia does when it fails at external aggression turn to internal reform. And it has sometimes been successful. And the period of russian history we think of as the most successful, the period that gave us world class literature and art and music and a rapidly developing economy and a and the beginning of a more modern Economic System. It came as a result of its the failure of its aggression. Failure in various wars, crimean war, russojapanese war. We are not trying to achieve a weakening of russia. We are trying to achieve a defeat of putinist russia, the better to have a better relationship with that better russia. Thats my view. Being a lithuania being a neighbor of russia may have a more jaundiced view of russian history, but remember the current era reminds me more than any other period of the early 1980s. When russia was hostile to the west everyone in europe was worried about the outbreak of war. And russians were beginning to whisper to americans in the soviet union. I was one of them. Things cannot go on like that. Reagan administrations approach to russia had two periods. Pressure before gorbachev and when the russians turned inward having failed to intimidate the west, reagan abandoned his more rigid cohort and reached out to gorbachev. And it may be that one of these years a russian attempted internal reform will in fact succeed. So rather than end on a note of toughness and hitting back with the russians i want to talk about at least the potential of a better future. That time will come, though its not today. Thank you very much, ambassador freed. You know, great talk. Let me add, you know, for the much deeper perspective going back to the 1980s but going back 200 years and also conversely for the shoutout to the role of young people in getting this done. Both tech savvy and politically engaged. That leads to my first question, well now answer the question and answer phase. And this one is for ilya. In march and june, major protests against corruption broke out led by leading to crackdowns and of imprisonments. Does this signify cracks in the kleptocracy or a particular in the pan . And what more can be done to provide assistance to those russians who want to see a democratic human rights respecting russia in the future . Its a good question that all russians ask themselves and are divided now as russians are divided this is the newest one. I would say its definitely a hopeful sign that this new generation of senior students from school and students from the universities really are fed up with no prospects in life and no social mobility and outright corruption they face and a huge brain drain and immigration out of russia as for the adoption to really succeed. The question is how sustained this progress can be and how much resistance this the young people can provide. Because one thing that is not realized in the west i think enough is that russia since soviet times has really traumatic experience of state repressions and stalinist repressions. Thats why in the report i call this the gulag values because gulag is really a system of prisons and oppression and russias defining the defining feature of political culture as well. Its nothing cowardly to say that people fear repression and there is a limit to how much people can withstand. Many of us in this room including myself had to leave russia because we faced unprecedented dangers to our lives so i would say the good way to support is firstly for the west, uphold its own values. But also to engage in what i would call fielded containment. So definitely keep people to people contacts and programs i myself in 1990s participated in the problem called freedom support act and sponsored by bradley in the u. S. Congress and i saw thousands of students from the post soviet coming here and learning and becoming long term advocates of democracy in their own countries. Even if they couldnt really enforce their views in political life. So its a long time game. I would say i agree with ambassador freed that one day this regime will collapse and its inevitable. But the question is how it may take a decade or 15 years or lifetime of this kleptocratics that are in power and it involves a multilayered approach. Thank you very much. Three comments about the protests. And the first is that hes focused on one theme and i think this is very wise, the top theme, corruption. Its not about what kind of reforms that should be done afterwards. I think this is very wise. This is what you do when you want a democratic breakthrough. The second is that learning from protesters in 2011 and 2012 they were very concentrated in moscow and did not excite the rest of russia. And now theyre trying to engage 300 different cities around russia, the whole country. As ilya said hes focused on the young. The third is quite interesting. Criticizing one person after the other, but not putin. He went after putin himself and we know what happened to him. Thank you. Thank you very much. Given that we are coming up to the time constraints here, lets have a whole half hour of audience questions. Ill refrain from asking a second question. Audience, please. Hands. Over there. We have a mike for you. [ indiscernible ]. Well, i dont know what it would look like in the putin administration. But in a russia reform package would have to involve getting rid of the kleptocracy, opening up the economy. The rule of law at home. And all supported by a better relationship with the west. The russian economic reformers such as they are make the case that it is precisely russias hostile relationship with the west and its the failure of the rule of law at home which keep the economy backward and dependent on export of raw materials. So you would have a series of liberalizing reforms at home and an anticorruption campaign. That is a little bit hard to imagine under the current leadership. Only because president putin has a bit of the king lear problem. You cant go into retirement after you have done the things you have done to stay king. But, you know, anders osilan knows the state of the economic reform thinking and can do a better job of answering sort of the content of what a reform package would look like. Doctor . I would say that first you need to get rid of the regime. You cant change anything with people who are all dependent on a corrupt system. You have to change the people, the leadership. Thats the only way. In order to do that, you need democratic elections. Early democratic elections of both president and the parliament and then lower down after that. The economic reform we know how to do. Thats not a big problem. Additional questions . Right there. Right next to you, katia. I want to call attention to the best and worst of russia. One has to stress the best of the 90th birthday, shes a long standing chairwoman of the Moscow Helsinki Group and usually reformed to as the doyenne of the russian and soviet movement before that. I wanted to ask a question to per perhaps to you about something a rumor i heard for many years which is that putin is probably the richest man in the world. For many years i heard that hes worth 70 billion. Now i heard an updated figure of 120 billion. You pointed out why people inside russia unfortunately dont seem to be able to afford literally and figuratively refer to that fact if its fact. But i wanted to get your reaction to that. Do you mind giving your name and organization. I know who you are. Well, the previous speaker didnt, so i didnt. That was my fault. I should have brought that. Im recently retired from the u. S. Commission on International Religious freedom. Great. If all audience members could do that, that would be great. Dr. Ozman . The simple answer we dont know. I think in the order of 100 billion would be reasonable. As i suggested the putin group takes out 10 to 20 billion of russia each year. But what we know from sergei who was a minor partner in the scheme, he was involved in 32 off Shore Companies and he fled the country in 2011, afraid of losing his life. He what he said was that normally putin owns about onethird in each company. And that he really owns it directly. If you take 2 billion and give him onethird, something 1 that would make sense but we cant know. We have no idea how many Anonymous Companies there are in this country. In britain, Prime Minister David Cameron said a bit more than a year ago that there were 99,000 buildings in britain that were owned by Anonymous Companies. And these are normally buildings that cost several Million Dollars each. So this is a lot of money. What russ . To my mind its misleading to focus just on putin because we are usually doing this mistake in the west that its about putin. Its putins regime, about putins wealth, but i would say its much more about the system itself. And the system is based on kgb. Its still based on kgb. Its not just well, of course its the hybrid system. Its just kgb, and looking to the history even in years of 99 to early 99 to somebody already mentioned that when this well, symbiosis of kgb and mafia took place, i should say that looking even back to the history we should say that all of these chiefs in law were controlled by the kgb in the soviet times. So its really based on the kgb and kgb managed from the as i said, we should look at the year of 1991, 1990, what they did at that time and they managed to come back to power in just in ten years. So to even answering the previous question, the regime would need to do something with all the system. Not just putin or his cronies. Thank you. Additional questions . Right here. Katia will bring you the microphone. Oh, youll get it natasha. Hello. Im ellen, im an intern for senator gillibrand. My question is directed to dr. Ozland and mr. Whitmore. Can you discuss more about how kleptocracy specially with business ties can lead to the undermining of democracy. Start with brian here. Youll be up next. To give you an example. Back in 2010 i was researching an article i ultimately coauthored that was published in the new republic called the new surrender. It was looking at the russian influence in the czech repling. I came across a company, it was an Energy Trading company, with a mind bogglingly opaque Ownership Structure that ultimately led to gas prom. This company mx had bought up 10 to 20 of the czech Energy Departments and those with ties to its were supportive of the kremlin line. I broke this down because its pretty complicated. Vem exis owned by those companies in germany and austria and founded by the gas proms financing arm and according to the European Commission is owned by two Companies One registered in cyprus and the other controlled by gas proms german subsidiary. Are you confused . Good, thats the point. My late colleague, the former director of the Ukrainian Service testified before the Senate Foreign Relations Committee back in 2008 that this is one of the companies. Gas prom has set up 50 middleman companies or so in europe. Why is this undermining democracy to get to your question . Every one of these creates a network of influence that is undermining the rule of law in every one of these countries. I called my article about the Czech Republic the velvet surrender. Because you had developed a revolution which brought in democracy. And democracy was being undermined and surrendered by the presence of the Shell Companies and the networks of influence. They were creating that they created. I have noticed over time as these companies have proliferated other things have also proliferated. You have had many socalled alternative news sites pop up in Central Europe with similarly opaque Ownership Structures which not surprisingly have a very eurosceptic line. A very antiamerican line. A very pro kremlin line. I dont these i think these are things are not unrelated to each other. So when corruption undermines our most basic values and i want to riff off something that ilya said, its the g7 versus the g 13. An elegant way of saying that a theme i have been playing with recently. I mean, were not in the new cold war right now. Were in a system. But we do have two normative systems essentially facing off against each other. In the world. I like the way you put this, the g7 versus the g 13 because its a very elegant way to say it. One to the west is something that we hold near and dear but appear to be under assault right now. The rule of law, the accountability of government, the sanctity of contracts t subordination of power to the law and we have one based on the east, the things were talk about today. Cronyism, kleptocracy, the subordination of the law to power. Unlike in the cold war we dont have two hermetically sealed systems. These things are not separated by a fold or a gap or an iron curtain or a berlin wall. They are seeping into each other. Our values are lets face it, attractive. They do seep into the other side. The other side is forcing their values into our system to the extent we let them. Thats the operative phrase, the extent we let them. I hope that addresses your question. This is how i see corruption undermining Democratic Values right now. And why you see it as a National Security threat of first order. Thanks, brian. Let me continue with three examples. The most innocuous is the former chancellor of germany who is immediately after he left as chancellor of germany he became hired by gas prom to the gas pipeline. So hes legally paid big money and hes still an important person in german politics. This is all legal. Second example, when putin was Prime Minister in 2008 to 2012, he spent a large part of his time visiting various countries in all the balkans trying to promote soft stream. When i see him one on one without any aides with a political leader i immediately suspect that corruption is the real matter there. Of course i cant know that. And the third example is the crude case in the ukraine. Reuters published a wonderful article two years ago called the comrade criminal. And they described the comrade how he got a credit line from gas prom bank for 11 billion. F 11 billion and for this money he was allowed to buy gas cheaply in russia and sell it for billions of dollars of sheer profit in ukraine at the normal price and then he was the main or the cofinance the president in 2010, 2012. Ukrainian elections are very expensive. Almost like american elections. And of course he was elected. Essential this is a russian agent who is called gas traitor because he carries out operations to the benefit of moscow. I might mention that he was the financier of a monument here just beside the congress for 2 1 2 Million Dollars a couple of years ago. Thank you. Did you want to speak . If you follow any story on undermining democracy in europe or here in u. S. You will find some russian money behind that. So absolutely, because if you will take any support for antieuropean, you will find that its not states funded support. You will always find some russia bank or Something Like that behind that. Its not state funded. If you will look to lets say the fascist movements in moscow theyre doing that every year, so it is financed by russian oligarks. If you will look at the support to, lets take United States to the movements in United States, you will find russian money and russian oligarks behind them. Its not a funny issue. I really encourage all you to look at the movement and russia supported them because i really remember when we in europe were looked at the issue of Russian Support to antieuropean partisan seven eight years ago and we laughed at that. Now we know that this movements and Russian Support manage to almost well get to the brink of ruining european union. That seems to be the theme. Ambassador freed . I agree that you will find russian money behind many of the antieuropean nationalist parties but let us say the frances is not antieuropean and nationalist because it receives russian money. It receives russian money because thats what it is already, which suggests that the way to solve this and to make our societys less vulnerable to that kind of interference is to work on the issues that brought the west to its current path where we are vulnerable to these arguments. Its not to take issue with the question of russian money, but the russians didnt cause our problem, theyre merely feeding on it and contributing to it. Thank you, ambassador, brian . If i may get the microphone to work. In terms of where all this money is coming from, i think there is one place we really need to be looking and this refers back to my comments about organized crime in my initial comments. I dont know how many people remember the case the estonion Law Enforcement that was kidnapped back in 2015 and taken across the border to russia. This is a very big case, very appalling. What was really, really telling about the case to me, however, was what he was investigating. I think this is crucial to understanding where this money is coming from. He was investigating a cigarette smuggling ring facilitated by the federal Security Service of the russian federation. At first glance this just looks like some rich guys getting rich off a smuggling ring. In my conversations with the estonion Law Enforcement officials, what it was was essentially creating a black account. Now if this is just one little cigarette smuggling ring, you multiply that across all of the operations going on that is facilitated by the Security Services, you get a lot of untraceable cash and you wonder where this money is going that is supporting xenia foe bick or supporting these alternative media sites and you begin to get a pretty good idea. This gives the kremlin a lot of money to play with no fingerprints on it. This is one of the places we need to be looking. Thanks, brian. Additional questions . Lets get right there. Hi. Im an intern for congressman. We were talking about how instrumental this whole system is the system of the kgb, obviously the cohort thats now in power went through the kgb went through assessment on the new guard because they were not kgb trained and is there any opportunity for us in the west to interact with these new emerging leaders . Im sorry whose the question for . Some of them are fsb trained, some of them not. But its not just about the individuals, its about the system. Kgb from the very beginning it was essentially we make a mistake when we judge about the kgb as about some Intelligence Organization we have in the west, from very beginning it was criminal organization not only because it controlled all the criminal world in the soviet union but because you had all kinds of relationships with organized crime groups in the west and everywhere and that was when i look at the nowadays situation, i really dont looking back into the kgb history, i dont see major differences and major new things. Only new things are some new tools like social media or Something Like that. Were talking, lets say, about fake news and we consider fake news a new phenomenon. Lets look back to the ideas of hiv was invented by cia or Nuclear Winter theory and many others many others, these are fake news which were invented decades ago and now theyre just doing the same thing using the new tools. Thats it. Dr. Ozland to make a short comment . Yeah. What is happening is that theres a nationalization of the new elite. You can see three groups, technokratz, kgb officers and nationalists. Putin has said very clearly, either you stay in russia and get a russia education or you go abroad and you stay there. Thank you. So lets try to do one or two more questions. Right back there. Im an intern with congressman hecks office. So mr. Whitmore earlier you mentioned dependence corruption of the ideological aspect. Could you and anyone else maybe expand on how those two aspects the ideological and corruption work in concert . Yes. I can. When i talk about the ideological i want to be clear im talking about putins project of making russia a great power again, making russia great again if you will and so in this sense theres good and bad corruption. If you have corruption thats operating abroad in creating networks of influence that you can then use to undermine Democratic Institutions in the west, be they in the near abroad or farther west, along this regard i would echo what was said earlier, everything were experiencing now they were experiencing before and we should really pay close attention to what russia does to its neighbors, because its often what theyre going to do to us later. The estonions were getting hack the before it was cool. But this is this is corruption that works hand in glove with the ideological aims of the regime. When i describe that complex Ownership Structure of this Company Called very maniex that is buying up Energy Assets in the Czech Republic, a lot of people are getting rich off of this and its also advancing the interests of the state. Where its not where its not where theyre working in competition with each other, where ideological russia and cleptocratic russia if you will are working across purposes, we began to see evidence of this about a year ago, when we began to see putin start to cul his inner circle. When we saw the former head of russian railways, once considered the most powerful man in russia loses job. When we saw the head of the narcotic service for which was nothing of the sort, we saw him lose his job. When we saw the former kremlin chief of staff lose his job, this i interpreted as putin trying to rein in some of the more clept toe crattic elements of his circle, bringing in younger people who will steal less and work harder if you will. I think this was an attempt by ideological russia to rein in clept tow crattic russia because rebuilding an emtire is very expensive. So its in this tension is something we all need to keep our eye on between these two russias that like i said sometimes are working hand in glove but sometimes are working across purposes. Well conclude the briefing. Thank you so much brian. Thank you so much to the full panel. Fascinating briefing and well see you all at the next one. [ applause ] house major whip Steve Scalise is now out of the hospital after being shot during a congressional baseball game practice last month. His doctors say he will now begin intensive inpatient rehabilitation and has made excellent progress in his recovery. Today at 2 00 p. M. Eastern, White House Deputy press secretary Sarah Huckabee sanders will have a press briefing. Live on camera beginning at 2 00 p. M. Eastern. Well have it for
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