Kleptocrats Without Borders: How Post-Soviet Ruling Elites Export Their Money and Power to the West

TIME: 13:00-14:00, 29th June 2017

VENUE: The Henry Jackson Society, 26th Floor, Millbank Tower, 21-24 Millbank, London, SW1P 4QP

SPEAKER: Ilya Zaslavskiy

Event Chair: Dr Andrew Foxall, Director of the Russia Studies Centre at The Henry Jackson Society

Dr Andrew Foxall

Good afternoon ladies and gentlemen and welcome to The Henry Jackson Society it has just gone 1 o’clock so we will start on time today. My name is Andrew Foxall and I oversee our work on Russia and the former Soviet Union. I am delighted that we have with us today Ilya Zaslavskiy a friend of a number of years now who is institutionally at least an academy associate at Chatham House and a Research Expert at the Free Russia Foundation. Previously Ilya was a Robert Bosch fellow at Chatham House and a visiting fellow at the Legatum institute. Professionally Ilya has a lot of experience working in Russia and the countries of the former Soviet Union most notably as an energy consultant he worked at the TKBP project for some time but that is not what he is speaking about today.

Instead what he will be speaking about is this notion increasingly popular and prominent over recent years of kleptocrats and kleptocracies and he will be trying to shed some light on the sorts of tactics and techniques that kleptocrats from the former Soviet states specifically Kazakhstan, Russia and the Ukraine, the sort of tactics and techniques that individuals from these countries use to export their money, wealth and power to the West. As I said I am delighted that Ilya is with us today and without any further ado, Ilya please.

Ilya Zaslavskiy

Thank you Andrew, it is a big honour to speak at The Henry Jackson Society I appreciate the opportunity and thanks for coming. It is a very topical issue now Russia seems to be on the agenda in Washington, in London and in Brussels. Our project has been conceived even before it was so high on the political agenda. The main idea today is to test some ideas. The project which we call under minders is supposed to come out in the next few months on two websites in Russian and in English but mostly oriented for social media. So the idea is to do around 100 profiles of different actors ranging from oligarchs to not necessarily wealthy people but those representatives or agents of kleptocratic regimes who actively undermine democracy in the West using resources, connection and power that they have derived from their home regimes, home countries.

What is unique about this project is that we don’t necessarily talk about corruption. Corruption is something which should be defined by law. That means we can call someone corrupt if either their home country or in the West court or police have come to conclusions that these individuals are corrupt. This is not applicable or relevant these days because the state legal systems have been captured, hijacked by kleptocrats themselves they now use laws to advance their corrupt activities. For example we have seen that in international communications say between Spanish prosecutions who tried to go for money laundering activity tried to go for Mafia bosses from Russia buying properties in Spain but then we saw the Russia state defending these gangsters, some high level officials trying to actually prevent investigations. So the idea of this project which is still under development is to talk about not only corruption but what we call corrosive practices, corrosion of democracy, undermining.

One of the purposes is to understand that not everything can be defined by law there are gaps in international and in Western legal systems just because the political environment has changed so much. Kleptocrats are now using such sophisticated methods and they use legal systems for when they are useful to them for their sinister purposes. There is even the term law, fair, state.

One of the objectives of this project is to introduce new terms to reflect this reality. Andrew mentioned kleptocrats. What we see is there are kleptocrats those who steal money from their home countries and who derive their power from stealing huge amounts of money and continuing the process of stealing. Then there are Western enablers those kleptocrats they help them in the West but then there is the missing link for us, the under minders. It is one of the possible terms it could be different names, one of the closest synergies to that would be oligarchs but we believe that this is a slightly misleading term from the 1990s which is no longer that relevant or applicable. Oligarchs really mean the power of a few wealthy individuals sort of partly independent and having their own political agenda it is debateable whether that was even true in the 1990s.

Now especially in Russia and other post-Soviet countries especially Petra states like Kazakhstan and Azerbaijan, oligarchs don’t really have power and there is not much distinction between public and private sector. Many of these wealthy individuals who are on Forbes list they derive their money from state contracts, tax breaks and different favours from the State. Private property can be taken away from them. So in fact our project argues that it is misleading to talk about not only corruption in post-soviet space but it is even misleading to talk about existence of market system, the existence of private property because kleptocratic regimes hijack the state, hijack law and they really define law to a really broad extent for their own advantage including in property rights.

So far this project is run by a group I would call activists, investigative journalists and from Russian speaking Diaspora living in Europe and in the US so far we have done around 25 profiles of different people by around 20 people some of them living in Britain but also in Germany and the Netherlands, France, many in Baltic States and some in the States in the US. We are also supported by the Free Russia Foundation which is a non-profit in Washington which became one of the best voices to bring critical views on Putin’s regime to the US to Europe and has been effective in giving alternative views.  The project is not exclusively with the Free Russia Foundation the hope is that it will be a platform for activists and investigative journalists to send in their own materials and their short articles about these issues, about specific profiles.

Last few words on methodology and the broad objectives of the project. So we actually believe that there is abundance of information about this corrosive practices and export of corrosive practices to the West. There are several factors which contribute to lack of interest and lack attention to this existing information. So one of them is a new term that I picked up recently, I have heard people say there is outrage fatigue which kleptopcracy. So there is so much information, there are so many reports and it is every day in the press and there are emails at least every week which just compile pages and pages of information and people are just tired no-one can comprehend it so that is one of the problems. Another problem is that very often that responsible and good information is mixed with speculations, heresy or some compremate both in the Russian speaking world and in the West. So people, even those who are interested in this information, they just get exhausted and they lose trust in the original source.

What we want to do is gather only responsible information with clear authors from good publications with clear references and give views not only from the critics of kleptocracy but also the counter statements from those who say they haven’t committed any crimes and so forth so to be objective in that way but also to look at four specific questions. So we are looking for people with particular backgrounds we believe most of these under minders are connected to three worlds to three specific backgrounds in post-Soviet space – communist party or communist youth, KGB or other security services or broader law enforcement mainly KGB and organised crime.

One of our thesis is in Soviet times these three worlds where actually quite separate and they had overlapping interests but they were quite antagonistic especially organised crime they had their own code of laws and that is why there is an expression thief in law, the higher bosses where called thief in law because they had their own criminal lawyers opposed to Soviet laws. It was considered to be a dishonour to cooperate with Soviet states at least for most criminals. KGB has its own long history of cooperating and contradicting with the communist party but the party felt that understanding the KGB got out of control and the party inaudible and made it inaudible so for them to carry out any assignations or purges they had to get to get a sanction from the party and they the KGB, at least big parts of KGB disliked that.

One of our contributors to the project made this great film called who’s Mr Putin it is available online with more than 3 million views both in Russian and in subtitles in English on radio Liberty’s site but also on other sites. She shows how these three worlds amalgamated got fused by Putin at least in St Petersburg when he was Deputy Mayor and how Putin used these three worlds in St Petersburg, KGB part and organised crime and how he monopolised and criminalised different economic activity in St Petersburg.  By the time he got to power in Moscow he had already sort of tested this method and he had groups of people who had tested this method in these 3 different worlds and benefitted a lot. So some of the first offshore accounts and money laundering took place in the early 1990s according to the book ‘Putin’s Kleptocracy’ and then we see that he replicated those methods throughout Russia in the 2000s in the last 17 years. Now I would say especially in the past 10 years he has been exporting those methods and practices to the West through different networks but also through individuals, under minders as we call them.

At the same time, this is the last thing I am going to say before Q+A this is why we think it is important to talk about corrosive, not necessarily corruption practices because although some of this activity is very centralised and coordinated and deliberate and thought-through, planned, some of it is not. Take for example Constantin inaudible… who is partly oligarch, partly religious sort of he runs this religious channel, he has been instrumental in using organised crime in Eastern Ukraine to do what they did in Eastern Ukraine but also I believe this uncovered plot to do inaudible… was pretty much planned and coordinated in Russia. So we have this kind of undermining activity.

There is also a lot of activity which is just done on cooperate level, individual level by wealthy people former oligarchs but also media people, diplomatic staff they just want their families, their mistresses, their children to be comfortable in the West, to be educated in the West, to settle in the West, to get property in the West. But then when necessary Russian state of Kazakhstan state or Azerbaijani state they usually have so much comprising material on these people or they have some kind of leverage on these people that they can activate them for their own purposes on an adhoc basis.

In this reality, in this mixed reality we believe that this phenomenon is so widespread and it has such a large scale, especially because it happens in the business sphere primarily it doesn’t get noticed. Because a lot of it isn’t an outright deliberate plan or outright corruption and a lot of it is actually technically legal but it is about bringing those post-Soviet practices and values to the West and actually actively imposing them and making them part of Western reality not the other way round not that these people get more educated and become more liberal in the West. They actually stay the same and they in a way, educate, pollute or undermine the West by buying lobbyists, media, by engaging in public relations, by giving the nation’s political parties and so forth. So far we have found about 30 different levels of how these under minders operate on a non-state level. So apart from state activity such as block voting in the UN or UNESCO or the Olympics there are non-state actors acting on a non-state level.

So recently, just to show examples there is Kazaki in Belgium, it started with some of the oligarch’s recently and wealthy people allegedly, there are debates about it, allegedly receiving citizenships and residencies for wrong reasons but now it is about a particular contract. There are areas of scandal in Malta about elections so it is not just about the US and Germany. It is about offshore accounts in Cyprus there are various stories going on there, it is about poor law enforcement in Monaco. So actually what I am trying to say is it is not only about the high level stories that we know about from the press, some of these stories don’t get covered enough but with these individual profiles we are looking to bring attention to these various problems through individuals.

Dr Andrew Foxall

Ok thank you Ilya it was most interesting and I thank you for your careful phrases and terminology given that you are speaking in London and we know how British law works on matters of liable. I am going to open up the floor to questions in just a moment, when you do ask a question I would ask you to identify yourself and if you represent a particular organisation or have a particular affiliation but before I do I am going to ask the first question myself if I may.

Actually I have two questions. One you mentioned this phrase that you had heard recently of outrage fatigue and that is something that I in dealing with media but also dealing with politicians and policy makers come up against on a reasonably regular basis. You speak about not only kleptocracy but you speak about events in Russia or Eastern Ukraine and recently the bar is quite high and the bar was almost set in the summer of 2014 with the destruction of MH17 being one example of that. So if yes people appreciate that Russia is still waging war in Ukraine but it hasn’t shot down another passenger jet, regrettably the bar is seemingly quite high. So my first question is how does this project attempt to break down that fatigue how can we as practitioners, as commentators, as academics and as analysts use the materials that you are producing?

My second question is, is in thinking about the profiles which you are creating and thinking about the tactics and techniques some of which you alluded to at the very end so legal advice, PR firms and so on and so forth are we not also talking about institutions as well as individuals so in creating the profiles are you also profiling institutions? I mean one can think of particular PR firms who have done work for the Kremlin over recent years some are based in London, some aren’t  so is it just individuals or is it institutions as well, perhaps you could speak about those?

Ilya Zaslavskiy

Dealing with outrage fatigue is tough. Many people and many experts have had enough of it and everyone is raising the problem but very few people have interest or have capacity to offer solutions but even if they offer solutions then there is no political will to act on it. So what we try to do to put forward as ideas, firstly we want to be very concise that is very important nowadays especially with tweeting mentality and short attention span of everyone. Some of the backgrounds of these people are just simply forgotten so in our view there is need to remind of some things in a very short way which should educate and open eyes especially when some of these people become topical for some reason in the press even at those times we found their backgrounds are not brought up properly. So there is some superficiality about these people that we want to counter.

Secondly one of the big value added from our projects is this continuous push to look at these 3 backgrounds, communist party, KGB and organised crime because this is what we believe defines kleptocracies very much now and this is what is forgotten. Essentially we are putting forward the idea of new containment, we need to contain those regimes in a new way which allows for interactions between students, for cultural exchange for legitimate migration, people to people communication, and essentially we want to educate western and Russian speaking societies to two facts. Firstly there is a link between corruption and corrosive practices in post-Soviet space with corruption and corrosive practices in the West and there is an ongoing price that the West is paying for ignoring that connection. Secondly that this containment is very urgent so essentially we are trying to say that if the West doesn’t pay some price today, some relatively moderate price today, the price for ignoring these connections and corrosive practices, tomorrow this price could be huge.

So I don’t like comparisons with the 1930s too much but on the level that appeasement in the 1930s then resulted in a huge price, if appeasement of dictatorships in the 1930s and there was some containment of those dictatorships I believe that the price in the 1940s could have been smaller. So on that level of comparison I think the same is applicable today.

About instructions definitely, one of the tough topics that we want to cover is how these practices and values coming from post-Soviet space how they actually influence debates in the West and how they influence thinking and academic writing. A lot of corrosion comes from disinformation and propaganda and fake news, there are many terms for this and we want to look, we are preparing a report on how especially Russian money is influencing academic institutions, think tanks and research centres through specific grants, the nations, through some of the Oligarchs sitting on the boards of those think tanks receiving corporate and academic awards. I would call this area grey area but there is also what I would even call a light grey area where some of these debates, I mean many people I am talking about KGB methods in the west, active measures and control in terms of propaganda.

What we find both in the US and Europe is that there is a lot of debate which is on the verge of being misleading and being propaganda but could been seen as partially legitimate. For example on various levels there is a lot of let’s not have another cold war, let’s give up this cold war mentality we should cooperate with Russia, we should cooperate with other post-Soviet states and somehow those who propose containment or propose sanctions they are seen as guilty, as culprits who just want to break this long-term cooperation. Well in our profiles and short articles that we wish to publish we want to show that actually the cold war had many bad things about it both in the West and in Russia but overall it was a good thing. There was an aggressive power that wanted to dominate not only Eastern Europe but throughout the world and it had to be stopped somehow. In a way the West succeeded in doing it without too much blood so on that level, a very high level it was a good thing and no-one should be ashamed of it and no-one is comparing it to today. Some of the strategies from the Cold War are not bad themselves especially if applied to a legitimate concern.

Another popular, especially in the energy sector, so there is one other report I am presenting in London today on the Nordstrom 2 pipeline there is a lot of debate in Germany and surrounding countries that it is just about economic cooperation and this economic cooperation in the end could liberalise Russia and lead Russia to more democratic and wealthier position and make it friends with the West. In this light grey area we want to show that economic cooperation very often doesn’t lead to democracy actually quite the reverse, it actually leads to these kleptocratic states getting more money which they can put in either aggression like in Ukraine or they can pay more to their security services and the police, get surveillance equipment, hack other states elections and so forth. The wealth that these kleptocracies receive doesn’t serve good purposes for Europe or the US.

To talk about institutions we want to talk about the biggest cause, the big discourse themes that are now coming from these institutions and we want to challenge that discourse.

Dr Andrew Foxall

Ok, thank you so plenty of time now for questions and answers. We have got about half an hour I can see hands going up. Let’s start with Robert please.

Question 1

Robert Brinkley fellow at Chatham House and the Ukrainian Institute. Thank you very much Ilya I think the work you are doing is very valuable. We are here in London and this city has been one of the world’s major financial centres for hundreds of years but in the last 25 or so years it has gained a less good reputation as a major centre for the people you have been talking about the kleptocrats and under minders to launder their ill governed gains. The question that raises for me and perhaps your research can shed some light on it, do you think that the British authorities are failing to enforce the laws which we have or do you think there are gaps and more laws are needed?

Ilya Zaslavskiy

Thanks and it is a brilliant question, I think it’s both. What we know for a fact from different publications but also investigations from participants of this project is that law enforcement from some key Western companies and countries are sitting on piles of evidence about criminal activity coming especially from Russia. So we know for a fact that Spanish prosecution have been trying to prosecute some Russian gangsters for over a decade. In 2010 Spanish prosecutor gave information to FBI which FBI didn’t act on.

We know that when Adam Szubin one of the top officials from the US treasury under Obama he said we knew for years that Putin is corrupt and some of his inner circle are corrupt, well if they knew for years why is it only in the last 2 years that we get to know about it. So Wikileaks actually before it became a pro-Putin outlet some of the initial publications showed that and I am pretty sure that UK law enforcement has had a lot of information and evidence about Russian activity but for various political reasons the government didn’t act on it. We saw how slowly the Magnitsky law got adopted in the UK and how some of the specific investigations have been very slow, there has been a lot of criticism about that.

I mean it is a vicious circle when politicians don’t have political will to act on these things because there is not much demand from the public to act on it because it is conceded to be of secondary importance but also no-one wants to pay the price and be the first one to pay the price to stop some of this activity, to enforce laws more. So essentially if laws were properly enforced in Britain less Russian money would come into the city not so much money would come into real estate and obviously for some corporate interest in the UK it would be a loss. So that is one thing.

Another thing I think some of these corrosive practices and techniques that under minders are using they just haven’t been defined properly by laws and it is a new reality, there are some quantitate changes from Soviet times. The plan is to present this project in 3 countries this month so I presented this in Bulgaria a few days ago, here and one presentation is coming up in Germany, Berlin. So in Bulgaria I learned about another 2 new things that I have not heard about so they said that there is a business intelligence company in Bulgaria which is affiliated with some Russian companies there which doesn’t necessarily walk on Bulgarian issues but they walk on Central European countries and they involve some of the formal Bulgarian security officials and they do a good job for their clients but the suspicion is that this information is being fed back to Russia. So in a way it is intelligence gathering which existed in Soviet times but if this is true, Russia can do it under the pretence of private consultancy and private companies.

So how do you deal with these kinds of things, what laws can you apply? Obviously there is a need to do something about this, very new things use of anonymous companies, use of offshore accounts, use of existing business channels and business methods, very advanced, very complicated trading in the banking system as we saw with Deutsche bank. Some of these activities are perfectly legal right now so some of the investments that are coming into the West, there are no laws to properly… so due diligence and audit are lacking laws.

So there is a lot to be done but for that to happen I think two things are needed – political will but also awareness and acknowledgement in the media and among the public that there is a connection between Russian corruption and lower standards of democracy in the West. So right now I mean the only visible things that we have, I mean it feels like people only start to realise it became impossible to afford housing in London so that is a clear connection for many people now. A lot of it to do with Russian and other kleptocratic money.

Beyond that there are many, many more things to be acknowledged so this is just a start. I hope, it’s unfortunate but the hacking of the elections in the US but also hacking in Germany, they are now educating people and bringing these new levels of acknowledgement, which I hope then will result in new laws and new containment.

Dr Andrew Foxall

I have three questions at the moment but again keep thinking and gesture to me if you wish to raise one. The next question is Euan.

Question 2

Thank you very much, Euan Grant former law enforcement in the ex-Soviet union. Following on from Roberts’s question which I strongly agree with you and say there hasn’t been enough looking at possibly hitting people legitimately through the tax system, what do you think is the reason for the relatively little coverage in the press and the fact that people like Edward Lucas are voices somewhat crying in the wilderness. Is it purely fatigue or do you think there may be more sinister reasons that I think was hinted at in Andrews point about the PR companies.

I would very quickly say that regarding academia, for the last 4 years I have been invited to speak at a major academic conference and this year I haven’t been invited which may have something to do with my proposed topic was very much about Mr Putin down south in Spain. Thank you.

Ilya Zaslavskiy

I agree and appreciate your question. Obviously the problem is very complicated. On the one hand we have, it is not only about outrage fatigue it, on the one hand we have very effective and extremely sophisticated propaganda machine working for Russia which uses all sorts of vulnerabilities on free speech and also existing concerns and anxieties in Western societies. They put forward all sorts of conspiracy theories they use people who want to advance their careers for greed, they use far right and far left and they do it in a very entertaining an engaging way. I mean it works even on Western diplomats who have tens of years of experience of dealing with various regimes. If it can brainwash people like that on some issues then it is pretty amazing.

But on the other hand two major problems which I find on the Western side apart from lack of political will and lack of acknowledgement of the connection between corruption and lower standards of democracies. I think those are two major liable and self-censorship of media outlets but also academics, think tankers, researchers, these two issues are connected. There has been a lot of discussion in Washington, I am not sure what is happening here with BBC and other outlets but in Washington there has been finally discussion that BBG, the board of broadcasting governors that it has to be reformed that radio liberty and the voice of America and other institutions have to be reformed, that they should reflect the reality and also act on disinformation and there have been different bills and new budget proposals for that. It is actually happening slowly to my taste but at least something is happening.

I think all other Western countries should follow up and do something about it because in my personal interactions with various Western journalists I saw that this is a big issue for them as well. Self-censorship is not only about liable old fashioned inaudible operation it is a very interesting phenomenon which should be studied separately I think because it is a multi-layered problem where we have a short attention span of the audience, people are tired of politics, people want to move away from cable channels to entertainment to Netflix to whatever. At the same time we see that traditional media is dying and it has to go digital, it has to have firewalls, it can no longer afford proper investigators and country based journalists so they send some young people to Russia for 2 weeks to right quick articles. We have had discussions with various investigative journalists, one very good expert said it costs around $300,000 to properly train and educate a good investigative journalist. It is not a cheap thing, so who can afford that? Very few publications.

Then we have I think another phenomenon where some of the famous journalists, so only famous journalists in big publications can afford to speak about issues wholeheartedly and critically without euphemisms and without mitigating and playing down the issue but then some of them then become inaudible and concentrate on the topics they want. Because of all these factors this self-censorship occurs. They only way to deal with it is just to create more demand amongst the public for better publications to stop the flood of opinions and hearsay and to have more investigative journalism which engaging, entertaining, short and right to the point.

Dr Andrew Foxall

I would just add on that as well there is a tendency as well to think or assume that critical reporting of Russia and the West there is no blow back from this but we know of course that there is. Various critical journalists, one thinks immediately of Luke Harding at the Guardian or David Satter being banned from Russia for their reporting and there is also blow back again for organisations, bases in Russia so I know having spoken to journalists based in the UK that for example let’s say the BBC or the Telegraph writes a story that is critical of Russia here, then their journalists and other people who work for their offices in Russia are, it is made known to them that the Kremlin is aware of what has been said here.

The next question is the gentleman, three rows away in the glasses.

Question 3

I commend what you are doing I think it is extremely worthwhile. My name is Rod White and I am not affiliated. What I am interested in is the criteria in which you select the top 100 because there must be many thousands and the difficulties of the investigators face is that they have to do a number of cross checks to make sure that they are assessing the right person. That is the first but the related part is effectively what you are doing through you work is you are establishing a case for prosecution by the relevant authorities and also to name and shame the people in the public arena, am I right in my assumptions?

Ilya Zaslavskiy

Just to follow, David Satter there have been articles in the French press and the UK press, David Satter wanted to talk about Putin at inaudible but then for some reason he couldn’t the event was cancelled so it is happening.

Thank you for the two questions about methodology and where we want them to lead in those cases. I mean the selection is pretty much based on the interests of activists themselves so there are about 20 people involved but we hope there will be more people involved. Some of them have been doing their own personal investigations of particular oligarchs in Europe, it is also based on the availability of information and for the first 100 we are taking some of the most visible and notorious characters but also some of the unconventional characters who might not spring to mind right away.

Some of them are well known like Alexi Miller or the inner circle of Putin which have been exposed quite a lot but some of them for example like Yousef inaudible his undermining activity has been somewhat different but also relatively influential. So he is essentially banned from the US, the US doesn’t say for which reasons but the press has speculated it is for his earlier connections in Russia. He tours around countries where he is allowed with propaganda from Putin, supporting Putin, he is one of the trusted representatives. He is peddling this very useful theme of 9th May and victory and so forth but he is singing Soviet songs and it is again one of those light grey areas which is debatable.

In fact actually this whole project wants to, we are not inaudible we give our opinions and comments on the existing evidence and information but we want to raise debates about the light grey area, in our view it is just not being discussed enough for various reasons – either because it is just light grey and it is not so sexy for the media and people to discuss but also because of self-censorship and because people are afraid to speak about it. So we are not going to speak only about oligarchs. One could say this selection is still a bit random – we encourage people to send in their own suggestions and so hopefully beyond that 100 there will be more. So the next 100 will hopefully be driven more by public feedback.

Secondly, we don’t necessarily want, well our primary objective is not to have any of these people brought to criminal cases in the West because a lot of activity which we have described is not criminal or corrupt as I said previously we just believe it is corrosive and it has been stated by some responsible sources that for various reasons it is undermining democracy. In a way it is an opinion exactly because there is lack of law about this because there is lack of awareness so we encourage people to come back and say that we are wrong for which reasons and to have a debate about it. We believe that the truth will come out of the debate, so for some of these characters we want to have a debate. So the idea is not to bring criminal cases but to have to debates, to introduce new terms and to shed light on this light grey area.

Dr Andrew Foxall

I have two questions the first is Martin then I will come to you.

Question 4

Martin inaudible.. Glasgow University. I am interested in due diligence and I wonder if you are paying much attention to the procedures of due diligence especially in America but also in Britain. If we had more time I could give an example of a very disillusioning attempt to improve the due diligence system in an institution in this country and it was a complete failure, up to now. Are you and are people in the room here well aware of the guidelines for due diligence which one might have thought would prevent a lot of the horrible decisions which have been taken some of which you have been alluding to?

Ilya Zaslavskiy

Due diligence and audit are one of the primary things apart from actual financial controls which need to be changed in the West if it really wants to keep up its high levels of governance, democracy and accountability because these are being undermined. Definitely these profiles will show failures of due diligence or lack of due diligence in corporate, in the educational sphere, in media. Some of it is due to incapacity or lack of desire to use Russian speaking sources so a lot of due diligence that happens in this country, especially in the corporate sphere, those who carry out due diligence they just look at criminal records of these people in the West. They only look at completed cases in Russia, Kazakhstan, Azerbaijan and they don’t look at Russian sources that much and they are very superficial in a way.

The reason why it is superficial is mainly because it is not required by regulators. So the starting point is for the government to demand more. Secondly it is down to, I would argue, falling levels of ethical standards especially in the educational sphere, in media and it is a much more complicated problem which the government cannot resolve on its own and will never do I think. I think this will only change after public awareness and acknowledgement of the problems unfortunately this acknowledgement only happens after some scandals or the war in Ukraine or the downing of the aeroplane and hacking of elections.

Due diligence is one of the main ways to contain the incoming influence from post-Soviet space so it should become one of the primary topics of discussion for this problem.

Dr Andrew Foxall

Thank you and our final question.

Question 5

Since you mentioned it is not just Russia it is a political Soviet base, talking about Ukraine for a minute, over the last year or so they introduced quite a few measures in the government of Ukraine of fighting corruption. Things like E declarations that a lot of government officials have to file putting forward their incomes and assets etc. and it is public information, special anti-corruption  bureau etc. Question – do you think and you obviously know more about it than I do, do you think this is for real and a real breadth of fresh air which will hopefully lead to something or is this half-hearted efforts casually window dressing just to satisfy them so they can get the next law?

Ilya Zaslavskiy

Well as far as I know Ukraine and studied the Ukraine energy sector, that’s my angle on Ukraine. I mean there are conflicting forces in Ukraine and I would say there is actual pluralism now in Ukraine compared to other post-Soviet space. The reason I use the expression post-Soviet space so much is we strongly believe that these connections between the communist party, KGB and organised crime they really run outside of Russia into post-Soviet space and all the way into Eastern Europe. It is not only our opinion, FBI has designated many groups they call them Eurasian criminal groups or brotherhood, they don’t involve only Russia. We see constantly how Russia uses gangsters and ex-KGB and ex-communists in all post-Soviet space for their own purposes and they have probably different leverages on those people.

To return to the Ukraine I really don’t know the outcome I don’t want to do forecasts like that because the country is still on the brink deciding its future, there are conflicting forces. Obviously many oligarchs remained in power or continued to exert lots of influence. How I see there is a very active civil society after Maidan around 50,000 activists and there is real media freedom in Ukraine, I mean definitely compared to other post-Soviet spaces but there are a lot of channels to shed criticism on the government for its slow steps. But overall obviously there are many vested interests in the government true they only do stuff when they are forced to by their own civil society, fair enough, and there have been good articles about it in Western press on how they had to change the prosecution, how they had to introduce new anti-corruption bills it was all done under huge, huge pressure the initiative wasn’t with the government as far as I can read.

What will it lead to? I don’t know what it will lead to I know that it is not only the Ukraine who has a lot at stake in the future of Ukraine. If the Ukraine fails then it is a huge failure for the European Union, it is a huge failure for Russian opposition, it is a huge failure for the US so one thing which I will say there will need to be more pressure, much, much more pressure on the Ukrainian government and there should be much more support to civil society in Ukraine.

So far the measures have been half-hearted there are still too many stake operations, have bankrupt and still too many people sitting on cash flows from those and they still continue to be generators of corruption. So apart from e-declarations they should actually start dealing with bigger economic assets and they should allow, one of the way I think they should encourage small and medium sized businesses much more and move away from the structure where big financial groups dominate the scene.

Dr Andrew Foxall

Ok thank you Ilya, I think you have done an admiral job in trying to keep your answers reasonably short but concise and comprehensive but most importantly to time as best as you could. It just falls to me to say thank you again Ilya for what was a very interesting talk, I certainly speak for myself and I hope I speak for most of us in this room when I say we look forward to the project finally being published and hopefully you will achieve some of the objectives you laid out for us today so please join me in thanking Ilya for his time.


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