THE DEKLEPTOCRACY REPORT
APRIL 4, 2024
Welcome to The Dekleptocracy Report! The Dekleptocracy Project (TDP) is a 501(c)(3) based in Virginia. We’re on a mission to show how existing levers of accountability can protect democracy and prevent authoritarians, their networks, and enablers from exploiting or circumventing the US system. As always, please sign up and forward this newsletter.
BOTTOM LINE UP FRONT
Welcome to the seventh issue of our newsletter in 2024! We take an in-depth look at Global Magnitsky – US legislation copied in several other countries that specifically sanctions individuals and entities involved in corruption and human rights abuses. We suggest that this underused legislation – yet to be applied in the current war in Ukraine – provides the current US administration with an additional tool for naming and shaming both perpetrators of war crimes and their enablers. Combined with existing sanctions authorities targeting financial and commercial relationships, this can provide a more comprehensive approach that can be coordinated with allies with similar legislation.
In the Digest, we look at yet more stunning reporting by The Insider, this time about the potential role of an infamous Russian military intelligence espionage and sabotage unit in the use of sonic weapons against US personnel and their families around the world. We also dive into Armenia’s attempt to break out of Moscow’s embrace in the aftermath of Russian forces stepping aside to allow Azerbaijan to retake occupied land in Nagorno-Karabakh as well as move into internationally recognized Armenian territory amid credible claims of ethnic cleansing.
In Qui Custodiet, we look at insightful reporting on Russia’s “false transit” scheme that helps explain how the country continues to get crucial electronics and other components through, erm, voluntary members of its free trade bloc. We also examine the latest moves by the US Treasury to target cryptocurrency platforms coinciding with an important Wall Street Journal investigation of the use of tether by one of Russia’s largest arms companies to procure gear for the deadly Lancet drone. In Around the World, we see evidence of Russia’s transfer of large volumes of oil to North Korea in violation of UN sanctions as payment for millions of munitions supplied in recent months. Finally, we discuss why this week’s second round of the Slovak presidential elections could have an outsize impact on the region.
GLOBAL MAGNITSKY AS SANCTIONS POWER UP
According to the Atlantic Council’s Russia Sanctions Database, the G7 countries, Australia and Switzerland, have imposed financial sanctions on over 5,000 Russian entities, the vast majority of which have been since 2022. But, arguably, these sanctions are just the low-hanging fruit. Alexey Navalny’s Anti-Corruption Foundation maintains a list of nearly 8,000 “bribetakers and warmongers”. The Ukrainian government’s State Sanctions Registry lists over 18,000 individuals and organizations. While leading Ukraine’s other allies in identifying and sanctioning the war machine and its enablers, the US has so far chosen not to use Global Magnitsky — legislation empowering the executive branch to sanction individuals involved in human rights violations and corruption – in the current war. Yet this power has significant scope for amplifying the broader sanctions regime and the potential for driving multilateral action over Russia’s actions where the United Nations has singularly failed.
The Global Magnitsky Act originated from the Magnitsky Act, signed by President Barack Obama in 2012 that imposed sanctions on Russians implicated in the arrest and death of Sergei Magnitsky, an accountant who investigated a major tax fraud and died in a Moscow prison in 2009. Bill Browder, a not uncontroversial former investor in Russia, who had hired Magnitsky’s firm in Moscow, championed both acts in the US and internationally. Russia did not help its case when it reacted to the Magnitsky Act by banning US adoptions from its orphanages. Those sanctioned under this legislation were denied entry into the US, cut off from its banking system, and had any US-based assets frozen. While the original Magnitsky Act focused on Russia and a specific crime and set of perpetrators, Global Magnitsky, signed into law in 2016, empowers the executive branch to ban visas and impose sanctions globally on foreign persons anywhere in the world involved in human rights abuses or corruption.
President Donald Trump signed Executive Order 13818 in December 2017, which extended Global Magnitsky powers by targeting not only state-linked individuals but any foreign person committing severe human rights abuses or corruption. This Executive Order marked a shift from specific, activity-based penalties to broader, status-based sanctions, allowing for more robust action against international corruption and human rights violations. Before this, many human rights groups saw Global Magnitsky as too narrowly targeted. In addition, the updated Global Magnitsky also encourages other countries to adopt similar legislation, which Canada did in 2017, the EU and the UK did in 2020, followed by Australia in 2022. Other countries that have passed similar legislation include Estonia, Latvia, Lithuania, and Kosovo.
Don’t mention the war
Under the updated act, the Secretary of State files an annual report of the US administration’s implementation of Global Magnitsky. As of the end of 2023, the US had sanctioned 78 foreign persons that year and 650 individuals and entities since the passage of the 2017 executive order. The 2023 report covered three sanctioned individuals involved in the 2022 show trial of Vladimir Kara-Murza, a Russian historian and opposition leader, and Bulgarians involved in corrupt energy dealings with Russian companies. Other 2023 sanctions addressed human rights abuses and/or corruption in Paraguay, Guatemala, and Haiti.
Yet, neither the 2022 nor the 2023 reports mention the war in Ukraine. Notably, there is precedence for going after individual soldiers and police, including in Ukraine. In 2017, the US sanctioned Sergey Kisiuk, the riot police commander who ordered an attack on peaceful protestors in Kyiv’s Maidan Square in November 2013 during the Revolution of Dignity, killing more than 100 people. Other Global Magnitsky sanctions have been applied in recent years for those involved in war crimes in Uganda and Yemen, underlining the act’s potential for responding to claims of Russian abuses against civilians and prisoners of war.
Prominent NGOs, such as Human Rights First, have called for its use to prosecute “war criminals, human rights violators, and corrupt individuals” for offenses committed in Ukraine, like the Mariupol maternity hospital bombing (covered in the 20 Days in Mariupol documentary) and Russia’s widespread use of rape and other forms of sexual violence against both civilians and captured soldiers. The implied argument against the use of the act in dealing with Russian atrocities is that it would undermine its international scope by appearing to be a geopolitical tool rather than a universal concept.
An imperfect tool
Beyond its omission of the current war, the primary criticism of Global Magnitsky is that it aims to prevent human rights abuses and corruption worldwide but allegedly struggles to make a significant impact. According to this critique from supporters of the legislation, difficulties in enforcing sanctions and monitoring compliance undermined its effectiveness. The tactics used by those targeted for sanctions also often evade the intended restrictions, leading to the act’s limited deterrent effect. In fairness, other types of sanctions enforcement suffer from the same resource constraints.
A study by the International Lawyers Project on Global Magnitsky sanctions showed that only two-thirds of examined cases had some impact, mainly through travel bans and asset freezes. Their effectiveness significantly increased when governments and the private sector worked together to uncover the targeted individuals’ corporate networks, essential for enforcing asset freezes. However, one-third of the cases where the individuals involved did not rely on foreign travel or assets saw no significant effect beyond media scrutiny.
The lack of resources and sometimes competing policy priorities often worsened the situation. In September 2023, the House Select Committee on China criticized the Biden administration for a lack of action on Chinese slave labor practices in Xinjiang province, noting that only a handful of officials had been targeted under Global Magnitsky, while no actions had been undertaken under the far more specific Uyghur Human Rights Policy Act. The committee also asked why the Departments of the Treasury and Homeland Security had not designated more officials and companies profiting from exploitation in the province.
Yet this criticism also points to how Global Magnitsky can be part of a coordinated sanctions strategy rather than a scattershot approach if the administration can make each part of the sanctions regime play its role. The act’s primary advantage is its focus on human rights and corruption and the existence of parallel legislation among our major allies, including the EU and the UK, allowing a multilateral approach. A review of designations under the act since 2020 demonstrates that it has sought to avoid being a geopolitical instrument, as individuals from friendly countries – including Israel, Latvia, and Mexico – have appeared on the list, which has also been geographically broad, reaching Africa, Central Asia, and Latin America.
Ultimately, Global Magnitsky is a tool in the hands of the executive, giving the administration-wide scope to increase its application. It can be part of a broader sanctions strategy without undermining its integrity. In the case of the current war, Treasury sanctions can target the companies, politicians, and executives that make up Russia’s war economy. In the meantime, Global Magnitsky can pursue the chain of command and even lower-level membership of military units demonstrated to have committed atrocities, such as the Russian army’s 234th Paratrooper Regiment, documented to have killed hundreds of civilians in Bucha. Global Magnitsky’s most significant power could be holding individual perpetrators and their commanders personally to account by putting their names out in public and in every sanctions database used worldwide. Going further, applying Global Magnitsky to Russia’s enablers – including those in third countries who supply the Russian war machine with crucial components or services like shipping or facilitating crypto transactions – could send an even stronger message. If nothing else, these sanctions can create a form of lifetime infamy for otherwise anonymous perpetrators of some of this war’s worst atrocities.
Report links infamous Russian military intel unit to Havana Syndrome
This week, The Insider, in collaboration with 60 Minutes and Der Spiegel, published startling evidence suggesting that unexplained anonymous health incidents – dubbed “the Havana Syndrome”– may have their origin in the use of directed energy weapons by a notorious Russian military intelligence and sabotage unit, which is known by its designation 29155. The investigation found that known members of the unit – named in this and previous reporting – were present at the scene of suspected attacks on US government employees and their family members overseas. Beyond the culpability of Russia and its allies in attacks on American personnel, some of whom have suffered grave and lasting health consequences, the story again raises the question of how much the current and previous administrations may have known about this threat and when.
The reporting also suggests the first attacks were not in Havana in 2016 – hence the name given to the syndrome – but may have taken place in Frankfurt in 2014, coinciding with Russia’s “hybrid invasion” of Crimea and the Donbas that year. More than 100 identified cases exist, but government agencies dismissed the claims as “psychogenic” or somehow a form of mass hysteria. This detailed reporting, including intercepted documents, travel logs, and metadata, suggests that two consecutive administrations knew and were unwilling to call out and respond to the use of special acoustic weapons by an adversary. Indeed, the investigation of evidence the US government itself should have gathered previously appears to contradict a 2023 finding document by the Office of the Director of National Intelligence that the use of acoustic weapons was “very unlikely” to have caused the syndrome. Beyond the additional harm to the victims caused by the repeated dismissals of the validity of their claims, the totality of the reporting to date suggests that the US government, through oversight or deliberation, may have allowed Russia and its allies to get away with targeted physical assaults on the top echelon of the US’s diplomatic and intelligence specialists and their families. Taking a broader view, it again raises the issue of both parties overlooking meddling and even outright attacks on people and institutions to avoid provoking public confrontation.
Armenia tries to pull itself out of Russia’s orbit
A split is widening between Russia and Armenia as the latter’s government, led by Prime Minister Nikol Pashinyan, is trying to distance Yerevan and Moscow, its purported primary ally in the region over the past 30 years. Since the Soviet collapse and the first Nagorno-Karabakh war in the early 1990s, Armenia has depended on Russia for military and energy support. Armenia’s security arrangement with Moscow has long restricted its foreign policy options. However, events since 2018, dubbed Armenia’s ‘Velvet Revolution,’ which brought Pashinyan to power and led to an unprecedented degree of political openness, have also complicated the relationship. In 2023, it deteriorated rapidly as Moscow, despite having forces deployed in contested territory, failed to respond to Armenian pleas for assistance when Azerbaijan, backed by Turkey, swiftly reconquered areas of Nagorno-Karabakh despite a Russian peacekeeping presence, as well as 150 square kilometers of territory internationally recognized as part of Armenia. The fighting has been followed by what many international observers have called ethnic cleansing of Armenians from these territories, a war crime.
For many Armenians, this amounts to betrayal and forced them to search for other allies in a neighborhood with slim pickings. For Armenia to look for allies elsewhere entails vast risks for Armenia. Not least, Russia is home to a large diaspora population, and it is not hard to imagine Moscow punishing these ethnic Armenians if their titular homeland were to step too far out of line. Yet, in recent weeks, Pashinyan has taken unprecedented measures. Last month, he ordered air defense and radar systems from France, a NATO country, and then froze Armenia’s participation in Moscow’s security pact, the Collective Security Treaty Organization (CSTO). In March, he expelled Russian security forces from their station at Yerevan airport, which they have occupied for three decades. The Central Bank then blocked transactions made with the Russian Mir payment system, which was in line with US sanctions. Pashinyan made unprecedented diplomatic overtures about EU membership in a final affront to Moscow. Even a year ago, any of these steps would have been unthinkable. Today, they reflect that Armenia cannot rely on Russia as a security or economic partner. Moscow has blamed French meddling and accused Yerevan of “distorting history” in its assessment of events. For the US and its allies, this is an opportunity to stand up for Armenia’s right to sovereignty and a chance to show the wider region that there are viable alternatives to being a Russian vassal.
Russia uses “false transit” scheme to acquire Western gear
Even a cursory glance at European trade flows suggests that large volumes of exports to Russia flow through neighboring countries, including Belarus and Kazakhstan, since the imposition of widespread sanctions against Moscow after February 2022. Still, recent reporting by Buro Media, Verstka, and the Organized Crime and Corruption Reporting Project has provided crucial insight into how much of this diversion works. According to their investigation, companies make use of a scheme called “false transit,” made possible by the common membership of Russia and several of its neighbors in a (very much Moscow-led) free-trade block called the Eurasian Economic Union (EAEU). In one example, they describe how a Kazakh company ordered high-tech semiconductor production equipment from Europe and had them delivered to a temporary Belarusian storage facility. The Kazakh company then issued orders to the storage facility to change the destination of some shipments to Russia, avoiding even the need to re-route the goods through Central Asia. As all the players are in the same free trade zone, the move is legal, at least under local rules. The story highlights the role of these “alternate” institutions, such as the EAEU on the economic side and the Collective Security Treaty Organization (CSTO) on the military side, allowing Moscow to create its own trade and security environment on the ground. Providing some of Moscow’s captive allies, like Armenia (see above) or Kazakhstan, with the political and financial backing to push back on such schemes represents the best chance to close these loopholes.
US maintains focus on sanctions targeting financial services
As we have written in multiple newsletters, the US administration’s Executive Order 14114, signed just before Christmas 2023, explicitly authorizing sanctions against foreign financial institutions (FFIs) for the conduct or facilitation of transactions for Russia’s military-industrial base, has had a rapid and outsized impact on the global banking industry. Crucially, this includes international oil sales. What’s been notable about the order is that the mere threat of sanctions has forced dozens of banks in key markets to limit their Russian exposure. Last week, the US Department of the Treasury followed up with 13 sanctions designations on financial organizations and two on individuals. The former included cryptocurrency exchanges that allegedly provided services to Russian entities that have facilitated sanctions evasion. Meanwhile, a Wall Street Journal investigation published this week points to the central role of crypto in facilitating sanctions evasion by some of Russia’s arms companies. The report describes how Kalashnikov Concern, one of Russia’s largest arms makers, has used tether to acquire crucial components for Zala Aero, one of Russia’s largest drone makers and the producer of the Lancet unmanned aerial vehicle, in which Kalashnikov is a significant shareholder. The article notes, “For Vladimir Putin’s war machine, [the cryptocurrency] tether has become indispensable.” To its credit, the US government, especially the Internal Revenue Service, leads the world in tracing supposedly anonymous crypto transactions on the blockchain for domestic and international law enforcement. However, the investigation and latest sanctions underline that while Executive Order 14114 has significantly deterred traditional financial institutions, going after many currency exchanges will require far greater direct efforts.
Investigation details deliveries of Russian oil to North Korea
Since late 2023, multiple news agencies and governments have reported on the delivery of massive quantities of North Korean munitions to the Russian military. Indeed, the quantities suggest that North Korean, as well as Iranian supplies, of artillery shells and missiles have given Russia a crucial battlefield advantage in recent months as US aid, in particular, has stalled. A recent investigation by the UK’s Royal United Services Institution (RUSI) and the Financial Times, based on analysis of satellite imagery, appears to have confirmed that North Korea is receiving ample supplies of Russian oil in exchange for transferring part of its massive munitions stockpile. The research has traced the movement of North Korean tankers in and out of Russian oil facilities in the country’s Far East. While the dealings are not a surprise, they do appear to violate United Nations-determined caps on deliveries to the Hermit Kingdom and throw the broader UN-overseen sanctions regime on the country into renewed doubt. Along these lines, Russia has moved to veto the extension of UN sanctions on North Korea unless they are significantly modified. Russia’s moves to deliver large quantities of oil underlines that the country has ignored UN obligations to which it is a signatory. The developments represent the latest weakening of the credibility of the UN, which has proven largely ineffectual in altering the course of the war in Ukraine, despite important work in documenting Russian war crimes.
Slovakia’s surprisingly important presidential election
As in most Central European countries, Slovakia’s president plays a circumscribed constitutional role and is second fiddle to the government. So, one could be forgiven for overlooking the surprisingly robust first-place finish in the first round of Slovakia’s presidential election in late March of Ivan Korčok, a liberal and internationalist former foreign minister. He and the second-place finisher, Parliamentary Speaker Peter Pellegrini, will head into a run-off on April 6. As observers noted, Korčok’s more than 5% margin provides some optimism for this week’s final round. The stakes are more significant than usual for Slovak politics. Investigative outlet Vsquare recently released an investigation of a 2020 episode when then-Prime Minister Pellegrini allegedly asked Hungary’s prime minister to secure an invitation to Moscow for a public visit to shore up his popularity among Eurosceptic and pro-Russian constituencies at home ahead of legislative elections. Beyond these worrying links, a win for Pellegrini in the runoff election would likely give the current government of Robert Fico a freer hand in its agenda to curtail judicial oversight. The outgoing president, Zuzana Čaputová, has used her constitutional powers to try and curb judicial reforms that observers see as a bid to remove oversight. To watch: Will Pellegrini be able to capture enough of the nearly 12% of the first-round votes garnered by pro-Russian figure Štefan Harabin, or will moderates, shocked by Fico government policies into large-scale street protests since the fall, be able to mobilize again for the second round? Either way, the result will do much to determine if Slovakia will go down Hungary’s path of more authoritarian and pro-Russian policies or keep on the trajectory that saw the country join NATO in 2002 and the Eurozone in 2009.