Putin’s vicious assault on Ukraine has been a long time in coming. But it is not simply the case that the American and European establishment underestimated all along Putin’s grievances and his resolve to use brutal force, even egregiously violate international law, to assuage them.
All at once many among the cosmopolitan elites and the progressive neoliberal chattering class, who have tirelessly for decades reviled the military-industrial complex and condemned defense spending along with overseas intervetions by NATO and the United States, have now taken to social media with amazing chutzpah, sounding like self-righteous neocons while spouting the fulsome fiction that old-style conservatives are somehow collectively responsible for Putin’s villainy.
The good news is that the Ukrainians, like most Eastern European populations who suffered under Nazi and Soviet occupation for half a century, have rallied against the aggressor with a heroism and resolve not seen since Britain during the Blitz.
The question that no one is asking – yet – is why Putin was able to build up and finance his lethal war machine. While it is obvious that political shaming and sanctioning of Russia’s bad behavior over at least the last decade has been non-stop, Western leadership has routinely looked the other way and sometimes even winked at Putin’s talent for leveraging, manipulating, and strategically taking advantage of the global economic infrastructure to his advantage.
First, much of Russia’s military rise since the early 2000s can be explained by its pre-eminence as a petrostate. The fantasy of America’s progressive elites that they could “save the planet” by doing everything possible to curtail fossil fuels production in the larger scheme of things was well-intentioned, but as the old saying goes “the road to hell is paved with good intentions.”
It is already clear that the invasion of Ukraine is drastically changing thinking about energy policy in both Europe and America with a focus on energy independence over an accelerated push despite the economic disruptions toward renewable. As the Wall Street Journal pointed out prophetically last September, few Americans understood that accelerated green policy would create a dangerous national security crisis. It wrote: “the Biden Administration’s plan to curtail oil, gas and coal production by regulation would empower adversaries, especially Russia, Iran and China, which are the world’s three largest gas producers after the U.S”.
Second, and more important, are the intimate ties between the Kremlin and global organized crime, regularly ignored by policy experts. Russian-based organized crime (RBOC) has not only been critical in funneling tremendous wealth to Putin personally, his oligarch cronies, and his siloviki ,or military and intelligence cadres, but increasingly has become part of the security apparatus itself. As a study by the European Council on Foreign Relations underscores, “organised crime groups have…been used by the Kremlin as instruments of intelligence activity and political influence and are likely to become an even greater problem as Russian’s campaign to undermine Western unity and effectiveness continues.”
As far back as 2010 a research group from the World Bank estimated that “black money” or illicit cash from underground criminal transactions constituted almost 35 percent of world GDP.
The European Council for Foreign Relations cites “the tendency of Russian organised crime to operate within the legal economy and indeed, behind legitimate facades.” Thus the footprint of Russia’s criminalized security operations is most likely as large as, or even larger than, this figure. In addition, it bemoans the “continuing failure of Western countries to establish truly effective and cooperative institutions able to demonstrate the ultimate beneficiaries of corporate structures and to track money flows”.
The global institutional and political architecture since the end of the Cold War has been built around the neoliberal myth of international co-operation and general prosperity secured through free trade, democratic values, and the moral authority of its professional elites. The ideal of well-educated, culturally conscious, and socially responsible “global citizens” has served as an unofficial, quasi-religious credo for the post-Cold War neoliberal ruling classes.
But the reality below the surface has been far different. Economist Robert Neuwirth in his Stealth of Nations has carefully mapped the “informal economy”, or what he calls “System D”, of which the shadow economy is a significant portion, or at least overlaps with it. He considers it not an aberration but the trajectory of global capitalism as a whole. The advent and growing acceptance of crypto-currencies, often used for shady transactions, augments this trend.
Political scientist Louise Shelley has carefully traced the interconnection between corruption, organized crime, and terrorism as the phenomenon she describes as “dirty entanglements.” These entanglements, she writes, have become a standard feature of the globalized economy. The Kremlin siloviki with their generations of experience in managing and siphoning off funds from the planetary underworld in which the KGB long ago installed the sensors and black boxes for its highly effective intelligence sorties have slowly turned them into a covert network that can be easily deployed for more overt military purposes.
Catherine Belton in her best-selling book Putin’s People: How the KGB Took Back Russia and Then Took the West describes how the process has unfolded. “The system Putin’s men created was a hybrid KGB capitalism that sought to accumulate cash to buy off and corrupt officials in the West, whose politicians, complacent after the end of the Cold War, had long forgotten about the Soviet tactics of the not too distant past”. (53)
In fact, the whole economic “recovery” of Russia after the fall of the – and although Belton doesn’t say it herself perhaps a sizable segment of growth among the Western economies – has been due to laundered money and rigged financial asset schemes that have minimally benefitted ordinary Russians, but has concentrated excessive financial power in the persons and estates of its oligarchs as well as its security and military castes.
Furthermore, she suggests, that was the plan of old KGB masters with the downfall of the Soviet Union from the very beginning. They let the collapse happen because they realized that Soviet “socialism”, which has been established for ideological reasons right after the Bolshevik coup in 1917, was no longer viable.
According to Belton, the KGB did not merely set about to keep their old agenda intact. Behind the curtains they substituted for the sputtering ideology of Marxist-Leninism and its state control of the “means of production” a postmodernist version of state capitalism. Its imperial ambitions remained the same. “For them,” she writes. “the end of the Communist empire did not mean an end to hostilities, but an opportunity to eventually continue them under new auspices.”
In casting blame on the Bolshevik founders of the Soviet state for the current “crisis” during his televised speech last week as a rationale for the invasion, while appealing to earlier Czarist myths of a unified, orthodox Christian-Russian imperium, Putin revealed the full scope of this new ideological machinery, which for Belton has been in the works for the last three decades.
Yet, as Belton makes clear, the implementation of this massive “covert operation” has only been possible because of the complicity of financial and intellectual elites in the West, or at least their willingness to benefit extensively from the corruption while keeping their heads in the sand about what might actually be going on. The point has been made forcefully by New York times columnist and celebrated economist Paul Krugman, who not too long ago was in close company with the same American counterparts to the Russian power hierarchies.
In his recent column entitled “Laundered Money Could Be Putin’s Achilles’ Heel” Krugman acknowledges how much of Russia’s ability to project itself internationally is dependent on the illicit cash, most of which is stashed and surreptitiously invested abroad, that the original KGB and present day siloviki stole and squirreled away to advance their secret vision of a powerful new “Third Rome”. Krugman concludes by stressing that black money is his “greatest vulnerability”, but warns how taking advantage of it “will require facing up to and overcoming the West’s own corruption”.
That task will not be easy. Both Republicans and Democrats have been ensnared – sometimes wittingly, sometimes unwittingly, sometimes half-wittingly – for a long time in the Kremlin’s Byzantine and plausibly deniable laundering and enrichment scams. In the last part of her book Belton documents how Russian mountebanks helped pull Donald Trump out of debt in the late 1980s and 1990s, and how this backdoor influence hustle set the staging for the later discredited charges by Democrats that the 45th President was a Russian agent.
But Belton does not touch at all on what is becoming obvious in retrospect – namely, that the nasty kerfuffle between Republicans and Democrats in the waning days of the Trump administration over Hunter Biden’s role on the board of directors of the shadowy offshore Ukrainian business entity Burisma Holdings LLC hides in many ways the key to decoding American elite collusion with the Russian global mobocracy.
Donald Trump was impeached because he tried to suborn current Ukrainian president Volodymyr Zelensky into releasing information on Hunter Biden’s embroilment with Burisma. But neither Hunter nor by implication his father were in any way innocent bystanders when it came to Burisma.
Burisma is a Cyprus-registered limited liability company involved in oil and natural gas production and is owned primarily by Ukrainian oligarch Mykola Zlochevsky, who was investigated by prosecutors starting in 2012 in both his home country and in Britain for fraud, bribery, tax evasion, and money laundering. Zlochevsky was never charged, and the inquiry by the UK’s Serious Fraud Office was suspended because of lack of co-operation from Ukrainian authorities.
Zlochevsky himself had been the minister of ecology and natural resources under Kremlin-supported Ukrainian President Viktor Yanukovych, who had been ousted in 2014 by the Euromaiden uprising, after which he fled to Russia. Russia regarded the overthrow of Yanukovych as the casus belli for seizing Crimea and provoking the secessionist movements in Eastern Ukraine.
The younger Biden, who had virtually no experience in the oil and gas industry, created a stir when he was named one of Burisma’s directors and received about $1 million in compensation while his father was US Vice President during the Obama administration. It was Trump’s suspicion that the deal had benefitted Joe Biden that led him later on to make his overture to Zelensky, which led to the impeachment attempt by Democrats in Congress.
The mainstream press consistently downplayed the strong implication that Hunter Biden had been a major player in fomenting “dirty entanglements” between black oligarch money, most likely of Russian provenance, and the political establishment at the time in Washington. But a report by the US Senate Committee on Homeland Security and Governmental Affairs disclosed that Hunter Biden and his business associate Devin Archer “formed significant and consistent financial relationships with the corrupt oligarch Mykola Zlochevsky during their time working for Burisma.“
It also found that “Rosemont Seneca Thornton, an investment firm co-founded by Hunter Biden, received $3.5 million in a wire transfer from Elena Baturina, who allegedly received illegal construction contracts from her husband, the former mayor of Moscow.” Finally, the Senate investigation unearthed a major link between the younger Biden and Kazakhstan, a close Russian ally, along with various “foreign nationals [who] have questionable backgrounds that have been identified as being consistent with a range of criminal activities, including but not limited to organized prostitution and/or human trafficking, money laundering, fraud, and embezzlement.”
Since the Russian invasion of Ukraine world leaders have rallied around the just cause of Ukraine and unflinchingly denounced Putin’s flagrant violation of international law and human decency, but a good portion of them not only reaped rewards from, but directly enabled, Putin’s state-sponsored organized crime syndicate that is now threatening the entire world. If certain populist factions foolishly admired Putin at one time for his middle-fingering of the transnational neoliberal order, they were at least right in recognizing that their supposed “betters” were all along the evil dictator’s silent paymasters.