By Emily Holland and Hadas Aron
The 30-page indictment of Paul Manafort, President Trump’s former campaign manager, outlines the illicit schemes he used to launder the proceeds of his political consultancy firm. It outlines the financial tools he used to avoid taxes, and accuses Manafort of failing to register as foreign agent, despite making millions lobbying for a variety of foreign governments, including the now deposed pro-Russian former president of Ukraine, Viktor Yanukovych. While it is unclear how the revelations in the indictment will affect Special Council Robert Mueller’s larger investigation into Russian meddling in US politics, the Manafort scandal brings to light the type of high-level transnational corruption that is not only common, but rather the cost of doing business in most former communist countries of East Central Europe and beyond. Ultimately, the revelations raise questions about the penetration of transnational corruption into US politics, and on how well equipped American institutions are to curb it.
What differs however from the types of scandals common not only to Ukrainian politics but also Russian, Hungarian and beyond, is the fact that Manafort and Gates have been indicted, not because of volatile and retaliatory politics, but rather because of rule of law processes and institutions. How this case is handled will have very interesting implications for the question of what happens when this type of high-level transnational corruption reaches the West. Of course, US politics is not untouched by corruption—US campaign finance is in need of profound restructuring, and there is systemic corruption in government procurements—but the type of transnational corruption linking foreign governments to the highest level of US elected office is not business as usual in the US political system. While many in Trump’s base do not seem bothered by Russia’s meddling in our presidential elections, or by the implication that Manafort worked with Russian agents and oligarchs to help elect a pro-Moscow Ukrainian president, all Americans should be profoundly disturbed that this type of kleptocratic politics has reached Washington.
The Manafort indictment should be crucial reading for those seeking a better understanding of post-Soviet politics and their implications for global security, foreign policy, and now US domestic politics. The allegations detail in depth the various strategies and tools employed by powerful and wealthy individuals (oligarchs) to enrich themselves in terms of both money and power. The proliferation of new tools of financial globalization including shell companies, complex acquisitions, and off-shore tax havens have made it increasingly easy for wealthy and powerful individuals to profit off of the state and ignore sovereign borders. Moreover, these schemes highlight a disturbing consequence of this concentration of power: a lack of institutions and processes to regulate and oversee this type of behavior leads to profound political corruption that inhibits and stunts democracy.
Manafort’s involvement in Ukraine is a perfect example of the dangers of this type of behavior. Through byzantine dealings with a Ukrainian energy oligarch that had links to the Kremlin, Manafort helped secure a $10b loan from bankers connected to Putin to finance the presidential campaign of pro-Russian Viktor Yanukovych. Ukrainian politics, captured by oligarchs from almost the moment of independence, did not have the institutional strength to prevent this type of meddling. Moreover, while corruption scandals at the highest level are common in Ukrainian politics, impartial and apolitical arrests are uncommon. The fact that Manafort was indicted by an impartial special council highlights a fundamental difference between East and West: Western institutions are stronger and therefore may be better able to regulate transnational corruption.
Of course, the surprising election of Donald Trump and his disregard for inconvenient institutions raise concerns over whether the Trump era is bringing Eastern style power politics into the US mainstream. So far there are signs in both directions. Trump’s connections to people like Manafort along with the many unanswered questions in the Russia investigation are indeed troubling. There are legitimate concerns that any Trump infrastructure projects will be financed and procured á la Russe: enriching those close to the Trump regime on the taxpayer’s dime. On the other hand, recent investigations have shown that Trump’s presidency has complicated rather than facilitated business dealings for his son in law Jared Kushner. Certainly, Trump’s unwillingness to disaggregate his personal business dealings from his elected office as well as his reluctance to adhere to norms such as making public his tax returns shows at the very least a sympathy to the norms of the Eastern oligarchy.
While the indictment of Manafort is a sign that perhaps American oversight institutions are functioning, it is unlikely that Manafort would have been caught if he had not become entangled with Trump. This raises the question: how many more Manafort’s are out there, and are any of them dealing in American politics on behalf of foreign governments? Unfortunately, given the stake that Russia has in undermining American democracy, it is likely that Manafort is not unique. A close reading of the indictment shows a defiant and brazen attitude: it is clear that Manafort was not worried about covering his tracks. Perhaps because in comparison to the oligarchs he dealt with in the post-Soviet space, the FBI is relatively benign.
It is difficult to assess what the future holds for Manafort, and if his indictment is a signal that this type of high-level corruption is not tolerable in the American political sphere, the larger problem however, is that the deep endemic kleptocracy connected with a rise in right-wing populism is exceedingly difficult to contain. The case of contemporary Hungary shows the shocking speed with which democratic institutions can be dismantled in favor of rules that protect oligarchic interests. Ukraine offers a truly tragic tale of the dangers of endemic corruption that ultimately led to disintegration of the state itself. American institutions have a far longer liberal democratic tradition, but only time will tell if American institutions are strong enough to stand up to the powerful global force of transnational corruption.