The Russia Conundrum

The Magnitsky case provoked international outrage, prompting the US Congress to pass legislation targeting individuals directly or indirectly involved in his arrest and death. The Magnitsky Act, signed into law by President Barack Obama in December 2012, named a series of Russian officials who would henceforth be prohibited from entering the United States or using the US banking system. Canada, the United Kingdom and other European countries followed suit with their own sanctions.

In evidence to the US Senate Judiciary Committee in July 2017, Bill Browder testified that the Magnitsky Act restrictions were having an effect on those it targeted, including Putin himself. ‘President Putin is … the biggest oligarch in Russia and the richest man in the world,’ Browder said. ‘I estimate that he has accumulated $200 billion of ill-gotten gains from these types of operations over his 17 years in power. He keeps his money in the West and all of his money in the West is potentially exposed to asset freezes and confiscation. Therefore, he has a significant and very personal interest in finding a way to get rid of the Magnitsky sanctions.’

Inside Russia, the Magnitsky case changed little. The Kremlin’s failure to act against those responsible for Magnitsky’s death was a signal to foreign businesses that they would not be treated differently from domestic firms. Kowtowing to the authorities, paying kickbacks and bribes, would remain the cost of doing business there. Entrepreneurs have continued to be targeted and cases of reiderstvo

are now estimated to account for one in seven of all business takeovers, involving funds in the tens of billions of dollars.

The reiderstvo pandemic began almost as soon as Putin came to power in 2000, when the Siloviki were given free rein to carve up Russia’s strategic assets and share the proceeds between themselves. Their first targets were the industries that had been privatised in the previous decade, which they picked off one by one. As scions of the security forces, the Siloviki held sway over the key state institutions, including the tax authorities, law enforcement and judiciary, fashioning them into a biddable machine that they deployed to plunder their hapless victims.

Under Putin, reiderstvo itself became a business, with specialist companies offering professional analyses of potential targets, teams of bent lawyers ready to rubber stamp the theft and detachments of corrupt FSB operatives to carry out the physical seizure. The Moscow magazine Ogoniok

even produced a standard price list for the services on offer, ranging from $1,500 per day to tap a mobile phone to $20,000 for surveillance of the target enterprise, while suborning the police and Prosecutor’s Office costs between $30,000 and $60,000.

Because speed is of the essence, the raiders usually arrive in force, overwhelming the company’s security men and intimidating employees with threats of violence. The owners are either removed from the scene or bound and gagged and held in a storeroom. The police are then called, by which time the new ‘owner’ has his feet under the desk, armed with fraudulent company papers and forged share registers. If victims appeal to the courts, they invariably discover that the judge has been bribed by the raiders and consequently refuses to hear their case.

Just as in some third world countries, the law in Russia can be hired as a tool for profit. Judges can be bought; courts are not independent of the will of their political masters; the judiciary knows full well that its judgements must conform to the wishes of the Kremlin. Opposition activists, including Alexei Navalny, who have tried to pursue cases of official corruption through legal channels have been uniformly rebuffed. In the single instance when a court did agree to consider a lawsuit alleging financial impropriety by the president, the Kremlin moved swiftly to shut the procedure down. Judge Tatyana Leskina of the Saratov Court of Arbitration received a motion in April 2016 calling for Vladimir Putin to be tried as ‘an enemy of the state, due to his plunder of Russia and impoverishment of the Russian people’. When she imprudently agreed to hear the case, Leskina was fired from her position and her decision quashed on the grounds that the courts have no right to interfere with the activities of the president.