The Poligarchs, Oligarchs, and Stooges of the Paradise Papers
By Masha Gessen, New Yorker, November 6, 2017
Nov 9, 2017 - 10:45:15 AM
More than three hundred and eighty journalists have been studying an untold number of pages contained in millions of leaked files now known as the Paradise Papers, which detail the offshore assets and tax-avoidance mechanisms of a number of large corporations and super-rich individuals. These journalists are now producing dozens of stories, charts, and graphs that, among other things, connect various Russian businessmen and politicians not only to one another but also to U.S. Commerce Secretary Wilbur Ross and American companies such as Facebook and Twitter. But, to understand fully what is being exposed, one must first understand what kind of state Vladimir Putin has created in Russia.
The Hungarian sociologist Bálint Magyar has a name for it: a mafia state. Magyar—who studied the Soviet Union as an academic in Communist Hungary, served in the Hungarian government, and returned to academia after the populist takeover of his country—argues that the mafia state is a new kind of regime, distinct from autocracies previously known to man. By Magyar’s definition, the mafia state is run by a clan—a political family—that consists of poligarchs, oligarchs, and stooges.
The topmost poligarch is the patriarch, the mafia boss. He has surrounded himself with what Magyar calls the patriarch’s “adopted political family”: people who have proven their loyalty, either by many years of close friendship and work or through the surrender of wealth and power. The patriarch is in charge of everything in the country; he distributes all goods and rights. “The reinterpreted nation signifies his ‘household,’ ” Magyar writes. “He does not appropriate, only disposes.” The word “poligarch” combines “political” and “oligarchy”; the poligarchs are first endowed with political power, which they use to procure material wealth.
Then there are the more familiar oligarchs. The word first came into wide use in and about Russia in the nineteen-nineties; back then, it referred to men who had built their fortunes on the ruins of the Soviet economy and then used their wealth to obtain political power. In Putin’s mafia state, however, they have surrendered their autonomy—and any political ambitions—in exchange for wealth. Or, rather, the wealth belongs to the patriarch, who magnanimously allows the oligarchs to keep some or all of it—or doesn’t. An oligarch may be directed to invest in losing ventures, such as a media outlet the Kremlin wants to be neutralized, or allowed to invest with profit. Oligarchs from the nineties who refused to recognize the changed arrangement under Putin were cast out of the political family, landing in exile or in jail.
Lastly, there are the stooges. The mafia state eliminates the distinction between political and economic power, but maintains the façade of separation; stooges are necessary to represent the poligarchs in the economic sphere and the oligarchs in the political sphere. Oligarchs sometimes employ economic stooges as well, writes Magyar, “when they do not wish to reveal the full gamut of their economic activities resulting from their political contacts.”
The Paradise Papers have uncovered some of the stooges and their connections to oligarchs. One example is Yuri Milner, a Wharton-educated Russian businessman who once worked for the oil tycoon Mikhail Khodorkovsky, an oligarch who rejected the mafia-state bargain and lost his fortune, spent ten years in prison, and now lives in exile. Milner started making money through Russian tech investments in the aughts, and by 2009 he was investing in American high-tech companies. He has since become a Silicon Valley fixture and a bit of a science-and-technology celebrity (he founded the Breakthrough Prizes, which offer the biggest cash payout of any science prize in the world). The Paradise Papers expose Milner as a stooge of Alisher Usmanov, an oligarch who has enjoyed most-favored status under Putin. Some of the money for Milner’s investments in Facebook came from Gazprom Investholding, which is the finance arm of the Russian state gas monopoly, Gazprom; at the time, Usmanov ran Gazprom Investholding.
Other stooges in the Paradise Papers include a Russian parliament member from the Communist Party; a university classmate of Putin’s; and the wife of a top cabinet member, among others. The connections to the top poligarch himself cannot be traced, but can be strongly inferred.
Once identified, the stooges may be considered for sanction lists. The United States and other countries have instituted targeted sanctions against Russian individuals who are believed to be connected either to political power or to crime—though this distinction, in a mafia state, is as fuzzy as the distinction between economic and political power. Personalized sanctions get a much stronger reaction from the Kremlin than do systemic sanctions, which are designed to have a stronger impact on the economy. Indeed, Putin seems to be downright obsessed with the so-called Magnitsky Acts—laws, now on the books in the United States and Canada, that punish Russian stooges who are believed to be connected to gross violations of human rights.
The Magnitsky Acts are the brainchild of William Browder, a former international investor in Russia, whose auditor, Sergei Magnitsky, was tortured to death in a Moscow jail. The Russian state has raged against Browder by maligning him on television and placing him repeatedly on the Interpol wanted list. The American Magnitsky law is so important to Russia that at least one ambitious lawyer brought the issue—famously—to Donald Trump, Jr., Jared Kushner, and the former Trump campaign manager Paul Manafort. Had the lawyer, Natalia Veselnitskaya, succeeded in brokering an end to the personalized sanctions, she would have had every chance of being adopted into the political family—which rests, after all, on the unchallenged power of the patriarch to both reward and discipline his poligarchs, oligarchs, and stooges.
Conventional wisdom holds that targeted sanctions work because they make oligarchs unhappy. Sanctions separate oligarchs from their assets and, sometimes, their children in the West. The oligarchs might react to these measures by revolting against Putin. But the mafia-state model would suggest that the sanctions work by threatening Putin’s power more directly: they take away what he has given. In a mafia state, the patriarch disposes, and no one should have the power to annul that transaction.
Source: Ocnus.net 2017