The Kremlin's Influence

Two months ago, the Center for Strategic and International Studies (CSIS) released the results of a 16-month study it conducted with the Center for the Study of Democracy (CSD).  The study looked at five countries [Hungary, Bulgaria, Latvia, Slovakia, and Serbia] to determine the impact of Russian economic influence during 2004-14 and the possible correlation to the “general decline in governance standards.”    CSIS and CSD determined Russia “has cultivated an opaque network of patronage across the region that it uses to influence and direct decision-making.”  They describe an “unvirtuous circle” of Russian influence, a circuitous flow that begins with Russian penetration of either a country’s economy or political system, each feeding the other that results in what they call a “state capture.”  According to CSIS, the “end game” is to re-establish the bipolar world of the Cold War and weaken globalization.  In a bipolar world, the Russians feel they can wield influence like they could during the Cold War.  They want to influence events through manipulation of media, business, society and politics.  In so doing, they hope to weaken NATO and the European Union.  

According to CSIS/CSD, Western Europe and the United States thought their work was done in Central and Eastern Europe once several nations had become members of both NATO and the European Union.  They thought that since these countries are members of NATO and the EU, good governance would automatically follow.  Since 2004 interest and attention to good governance in these regions waned.  The 2008 Great Recession happened and shook democratic and economic institutions to their core.  And from what this report outlines, Europe as a whole was shaken to its very core and has yet to recover to the status quo ante.  A group of leaders from Central and Eastern Europe wrote and open letter to Barack Obama in 2009.  The letter told him the Russians were conducting economic warfare [both covert and overt].  The measures included energy blockades, media manipulation, bribery, and investments in European companies in order to get an economic foothold in the region.  The new administration did nothing to counter the Russian threat.  Russian economic activity [legal and illegal] has increased, democratic institutions have been diminished and some governments have openly embraced illiberalism [notably Hungary and Slovakia].  

CSIS/CSD calculated the Russian economic footprint by looking at five things; Russian corporate presence, direct investment, trade relations, and private ownership/investments.  CSIS/CSD determined that those countries with a Russian footprint of greater than 12 percent of GDP were susceptible to Russian economic influence and/or capture.  Those countries with less than 12 percent Russian presence were more susceptible to Russian political influence. The countries below the 12 percent economic threshold were Hungary and Slovakia.  They’re at greater risk of political influence, which is connected to Russia’s efforts to deepen or maintain their economic interests.  Russia’s economic footprint in Serbia is above 12 percent of GDP, but their political influence is more prominent.  Although Russia’s economic footprint in Latvia is also above 12 percent of GDP, Latvia has shown greater resistance to Russian political pressure.  The worst case is Bulgaria.  The Russians economic presence is over 22 percent of GDP and is ripe for Russian-influenced “state capture."  

Russia conceals its economic activity by using shell companies and offshore accounts.  And in using these mechanisms they are able to acquire interests in finance, media, transportation, construction, real estate and industry.  The region is heavily reliant on Russian oil and natural gas resources, so it is the energy sector through which the Russians exercises its greatest influence.  Since Russia controls the supply they can determine the prices other countries will pay for the privilege of staying warm in wintertime.  Because they are estimated to be reliant on Russia for 75 percent of their energy needs, they overpay between 10-30 percent than their Western European neighbors.  The Russians take their profits from the energy sector and reinvest them in other sectors of the economy.  This provides these companies with much-needed foreign direct investment, but it also tightens the Russian vice on the economy.  These other economic sectors contribute tax revenues to national budgets, so withholding of tax revenue is another coercive tool the Russians can use.  The Russians can tighten or loosen their economic vice in order to influence political decision making.  The Russians can also create and maintain a large network of patronage that rewards loyalty with increased financial compensation.  Russia has exported its “oligarchic capitalism” [or “autocratic kleptocracy” – pick your favorite metaphor].  Instead of exporting Communism like during the Soviet days, they’re exporting state-sponsored corruption.  

Democratic erosion in both Hungary and Slovakia have come during a time of one-party rule [Direction-Social Democracy in Slovakia, Fidesz in Hungary].  Hungarian Prime Minister Orban and his party have revised the constitution five times since 2010, and they have passed laws that allows for more central control over the judiciary, media and the central bank.  The political left in Hungary collapsed during 2004-14 because of corruption [which became public], fiscal mismanagement, and the aforementioned 2008 Great Recession.  These events allowed Fidesz, a center-right party, to gain a stranglehold on the Hungarian parliament.  The far-right, ultranationalist Jobbik party is pro-Russian, anti-NATO and anti-Semitic and has become the second-largest party in the National Assembly.  In addition to his desire to hold onto power for power’s sake, Orban also uses Jobbik as a bogeyman to justify his embrace of an illiberal “sovereign democratic” model.  Orban is a big Euroskeptic and a big defender of national sovereignty from the bureaucrats in Brussels [Brexit, anyone?].  

In Slovakia, they too have seen a steady decline in judicial independence, free speech and other civil liberties.  There are high levels of corruption in government and in business.  As far as political leadership is concerned, Slovakia is a case of “old habits dying hard.”  Three-time Prime Minister Vladimir Mečiar ruled as an autocrat.  His successor Robert Fico, like Viktor Orban in Hungary, likes Vladimir Putin’s top-down “sovereign democratic” model.  Slovakia had made good progress on economic reforms under the leadership of Mikulas Dzurinda, but many in Slovakia didn’t enjoy the benefits resulting from the reforms.  Fico has begun to reverse the reforms of the Dzurinda era.  Fico has his own far-right, nationalist and conservative opposition in the form of the Slovak National Party [SNS], which is very pro-Russian.  Fico relies on the SNS [which CSIS/CSD believes receives funding from Russia] as a coalition partner to remain in power.  Slovakia’s political environment is unstable and fragmented, leaving it vulnerable to exploitation.  

Historically, Bulgaria has been close to Russia.  As a fellow Slavic, Orthodox nation it owes its independence from the Ottoman Empire to Russia.  During the Soviet era, Todor Zhivkov tried to make Bulgaria a republic of the Soviet Union.  As in other former Soviet client states, there is corruption in government and connections with organized crime.  Russia’s state-owned Gazprom is Bulgaria’s sole provider of natural gas.  Russia’s state-owned nuclear company Rosatom dominate Bulgaria’s nuclear sector.  Russian private oil company Lukiol controls Bulgaria’s only oil refinery and over 50 percent of the wholesale fuel market.  Russian foreign direct investments in finance. Telecommunications, media and real estate are growing. On top of the Russian grip on Bulgaria’s economy, the political environment is fractured.  Only the center-right Citizens for European Development of Russia [GERB] and its coalition partner Reformist Bloc are the only political parties that resist an overt relationship with Russia.  There are several parties that openly support Russian policies.  Prime Minister Boyko Borisov [GERB] was committed to integration with the rest of Europe, but had to walk a tightrope between pursuing that policy and alienating pro-Russian coalition partners and a large portion of the Bulgarian public.  I say “had” because Bulgaria elected a pro-Russian president last month, and Borisov resigned as a result.  

Serbia and Russia have been tight for centuries.  They’re both Slavic, Orthodox Christian, and share a linguistic heritage.  Russia has long supported pan-Slavism, with Russia assuming sponsorship and protectorship of their Slavic brethren.  Russia has sought to deepen its ties with Serbia even as it pursues EU membership.  As in the other companies, Russia has a firm grip on the energy sector.  Eight percent of Serbia’s natural gas comes from [wait for it…] Russia.  Russia’s Gazprom Neft owns a 51 percent stake in Serbia’s largest oil and gas company, Naftna Industrija Srbije.  Gazprom also owns a 12.7 percent stake in Serbia’s state-owned chemical company, HIP-Petrohemija.   Lukiol now owns Serbia’s largest gasoline distributor, Beopetrol.  The Russians are also investing in improvements to Serbia’s railway system.  Russia’s state-owned banks are acquiring large chunks of the Serbian financial sector.   

Latvia is the only one of the five countries studied that were an integral part of the Soviet Union during the Cold War period.  It is also the most successful at resisting Russian political pressure.  CSIS/CSD attributes this success to two factors.  Latvia has been most successful at deepening democratic institutions and reinforcing the rule of law.  They have the Corruption Prevention and Combating Bureau [KNAB], an independent investigative body that has not been shy about making cases for prosecution.  KNAB has also led efforts to advance legislation to make the finances of political parties more transparent to the public, reduce conflicts of interest, and improve disclosure standards regarding disclosure standards about politicians’ income and lobbying activities.  Latvia also has a strong and independent judiciary which ensures the prosecution of cases brought forward by KNAB.  KNAB could recommend all the prosecutions they like, but without a strong independent judiciary willing to follow through on their work, KNAB’s work would be meaningless.  Latvia’s population makeup is also a plus.  One would think the 300,000 ethnic Russians in Latvia would be a liability. Because Latvia was occupied by the Soviets for 50 years, they are acutely aware of Russia’s compatriot policy toward ethnic Russians in the “near abroad.”  Russian actions in Ukraine have made Latvians wary of Russian hybrid warfare tactics and their attempts to interfere in the lives of ethnic Russians in Latvia.  The Latvians take the lessons being taught in Ukraine very seriously.   

Recently the Atlantic Council published a paper titled The Kremlin’s Trojan Horses:  Russian Influence in France, Germany, and the United Kingdom.  This is their effort to show that Western Europe is not immune to Russian efforts at destabilization.  In this report, they name names of the latest crop of “useful idiots” who express support for Russian policies.  Russia aims its efforts at the same kind of far-right, ultra-nationalist political parties they support in Central and Eastern Europe.  Russia cannot exert the kind of economic pressure on Western Europe like they do farther east to attain their political objectives.  They have other tools in their tool kit:  disinformation campaigns, cyber warfare, and cultivating networks of like-minded political allies.  The Russians view Western European values – democracy, freedom of expression, and transparency – as an existential threat.  

Like CSIS/CSD, the Atlantic Council establishes the 2008 Great Recession as the starting point where Russia began to step up its influence in France, Germany, and the UK.  They have been building political alliances with ideologically friendly groups and individuals, mostly with anti-EU, far-right political parties and leaders.  But they have also been friendly with center-right/center-left, and leftist parties as well.  

In France, there are three pro-Russian groups in the political landscape: the far-right, the far-left, and the Republicans.  The far-right National Front [Front National, FN] has been broadening its appeal by getting rid of the more extreme elements of their party – the anti-Semites [including party founder Jean Le Pen], overt racism, Holocaust denial, and radical Catholicism.  Now they tend toward defense of French secularism against Islam, identifying migrants as Islamist and terrorist, Euroskepticism, protectionism, and pro-Russian.  Le Pen and Vladimir Putin have several things both support:  authoritarianism, anti-American dominance, defense of Christian values, against gay marriage, anti-EU.  Marine Le Pen’s party is the only one to overtly accept Russian financial support.  The far-left [the Communists and the Left Party] are less Euroskeptical than the National Front, supports extensive government intervention in society, support a strong central government, and are also pro-Russian.  The Republicans’ pro-Russian support comes from the party’s connections to French businesses that have operations in Russia, specifically in the defense industry, the space sector, the energy sector, and banking.   Some Republicans were openly supportive of Russia’s annexation of Crimea.  Former Prime Minister Francois Fillon is the Republican nominee for the French presidential election to be held in April 2017.  He is almost as supportive of Vladimir Putin as Marine Le Pen.  He has consistently backed Putin’s actions in Syria since 2012.  He is also against economic sanctions against Russia that have been in place since Russia’s annexation of Crimea.  Both Fillon and Le Pen are likely to face each other in the French presidential election.  Somewhere Vladimir Putin is smiling.  

The German Social Democratic Party [SPD] has a long history of rapprochement with Russia, dating back Willy Brandt’s Ostpolitik from the 1960s.  Their “change through rapprochement” is their core policy.  The Social Democrats believe a “cooperative and integrative Russia policy” would lead to a peaceful and democratic Russia.   This policy blew up the SPD’s faces when Putin annexed Crimea and stirred up trouble in the Donbas region of Ukraine.  The older generation of Social Democrats [Gerhard Schröder, Helmut Schmidt] argued for compromise with Russia, but today’s generation of Social Democrats [especially current SPD-Chair and Vice Chancellor Sigmar Gabriel] favor a more pro-Russia policy that is 180 degrees from current German and EU policy.  According to the Atlantic Council, Gabriel offered to ensure approval of the Nord Stream 2 gas pipeline project that would circumvent EU regulations and weaken the sanctions against Russia.  Nord Stream 2 would double Russian gas flows to Germany and maybe allow Russia to cut off gas supplies to Ukraine.  Foreign Minister Walter Steinmeier supports a gradual lifting of sanctions on Russia.  Gerhard Schröder continues to advise the SPD on Russia while he acts as chairman of the board for Nord Stream AG, the consortium for building Nord Stream 2 that is also 51 percent owned by Gazprom.  Conflict of interest, anyone?  

In addition to the Social Democrats, two opposition parties - Alternative für Deutschland (AfD) and Die Linke – also develop contacts with Russia.  Die Linke’s deputy parliamentary leader Wolfgang Gehrcke says the US played the crucial role in Ukraine’s conflict with Russia [like Putin had nothing to do with it].  Alexander Gauland [head of Alternative für Deutschland (AfD) in parliament] wants a regular exchange with Russian officials and improved relations.  AfD also wants an end to Russian sanctions. PEDIGA, the anti-Islam movement in Germany, think of Russia as an alternative to the US and EU bureaucrats in Brussels.   

The United Kingdom has their share of Useful Idiots.  Nigel Farage [UKIP], belongs to the “most openly pro-Russian party in the UK.”  He’s been very supportive of Russian policy in both Ukraine and Syria.  UKIP’s money man, Arron Banks, wants to launch a “more professional party” than UKIP, one which has an anti-EU, nationalist agenda.  Brexit was not Russia’s doing, but the Russians are happy that the EU has been somewhat weakened.  Labour leader Jeremy Corbyn is a hard-core leftist of the Tony Benn school, as is Seumas Milne.  The Russians like Labour.  Upon Corbyn’s election as Labour leader, the Russian Ambassador to the UK said he had a “democratic mandate” for “opposition to military interventions of the West, support for the UK’s nuclear disarmament, conviction that NATO has outstayed its raison d’etre with the end of the Cold War, just to name a few.”  Corbyn campaign against Brexit, but reluctantly.  But Corbyn is very unpopular through Britain.  He owes his position to those who are paid-up members of the party, not the Parliamentary party.  Most of the party’s MP and their voters aren’t interested in Corbyn’s pro-Russian stance.  The Atlantic Council opines that UKIP, rather than Labour, is more of a pro-Russian threat to the UK.  They posit that UKIP, or the post-Brexit party envisioned by Arron Banks, would attract disaffected Tories or Labourites.  The ruling Conservative party is not squeaky-clean with regards to Russia, but their influence is described by the Atlantic Council as “superficial.”  Robert Halfon, a Tory backbencher from Essex, is linked to Ukrainian oligarch Dimitri Firtash, who is a middleman for Gazprom.  John Whittingdale, Tory MP from Maldon, also has links to Firtash. 

Roll Call of Useful Idiots

France

Marine Le Pen [National Front]

Francois Fillon [former Prime Minister, Republican]

Nicolas Sarkozy [former French president, Republican]

Jean-Pierre Chevènement [Socialist]

Louis Aliot [National Front]

Pascal Terrasse [Socialist]

Germany

Gerhard Schröder [former German chancellor, Social Democrats (SPD)]

Frank-Walter Steinmeier [German Foreign Minister (SPD)]

Sigmar Gabriel [German Vice Chancellor (SPD)]

Alexander Gauland [head of Alternative für Deutschland (AfD)]

Lutz Bachmann [PEGIDA]

Wolfgang Gehrcke [Die Linke]

Markus Frohnmeier [AfD]

United Kingdom

Nigel Farage [UKIP]

Arron Banks [UKIP financier]

Jeremy Corbyn [Labour]

Seumas Milne [Labour]

Nick Griffin [BNP]

George Galloway [Grassroots Out, former Labor MP]

Robert Halfon [Conservative MP]