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Corruption is gaining recognition among civil society and government decisionmakers alike as a central factor in many of the world’s worst problems. It is acknowledged as a cause not only of persistent poverty and underdevelopment but also, increasingly, of many of the security challenges undermining global stability. Yet the understanding of the way it functions lags behind this realization—as does, therefore, the likelihood of devising good remedies.

A prerequisite to building an effective anticorruption approach is an intimate—and unflinching—examination of the specifics of corrupt operations in the individual country of interest and its physical and electronic neighborhoods. The picture that emerges from such an analysis can help in tailoring effective anticorruption efforts, and should inform any interaction with such a country, to avoid reinforcing such networks and their practices. 

Key Themes 

• Corruption is not just the behavior of some venal officials in a particular agency; it often represents the operating system of sophisticated—and successful—networks.
• Examination of three dissimilar Eurasian countries—Azerbaijan, Kyrgyzstan, and Moldova—reveals some of the ways these networks may structure themselves.
• Distinctions between public and private sectors, licit and illicit actors hardly apply. Kleptocratic networks integrate across sectors, with some individuals playing multiple roles. The network leader may be outside government.
• Ruling kleptocratic networks harness levers of government power to the purpose of maximizing gains or ensuring discipline. Other elements of state function are disabled, meaning capacity deficits may be deliberate.
• These networks’ practices are facilitated by developed-country business registration service providers, or real estate agents that sell to suspect buyers. But Western enabling goes further. Military and development assistance, the character of diplomatic relations, even foreign direct investment can contribute to an incentive structure that rewards corruption.
• Investigative journalists and civil society organizations are well positioned to develop the information an analysis of such systems requires, but they may need help framing their efforts—which alone should not be expected to bring about change.
• A clear infographic presentation of the structure of such networks may be helpful in driving home these realities.

Some Framework Questions for a Structural Analysis of Kleptocratic Systems

• What elements of governmental function have been deliberately shaped or disabled to serve the enrichment objectives of the kleptocratic network?
• Are the networks vertically integrated; if so, how?
• What elements of the private, ostensibly nonprofit, or criminal sectors are integrated into these networks?
• What institutions or factors outside the country enable the networks’ activities?
• What revenue streams are captured and where and how is the money secured or spent?

Introduction

Recent events have made corruption and its consequences difficult to ignore. In the single year 2015, like an unremarked rerun of the Arab Spring, mass protests broke out in Brazil, Guatemala, Honduras, Iraq, Lebanon, Malaysia, Moldova, and South Africa, among other countries, ultimately toppling two chiefs of state and threatening others. And those were hardly the most virulent demonstrations of corruption’s destabilizing effects. Its role in the rise of the self-proclaimed Islamic State or of the gangs that terrorize Central American neighborhoods is increasingly clear. In the wake of the Unaoil and especially the Panama Papers revelations,¹ Western citizens are becoming increasingly sensitized to the severity and scope of the phenomenon as well, and have demanded accounts from their own political leaders.

In this context, anticorruption activists, both in afflicted countries and in the West, are reinforcing their campaigns. Policymakers are challenged to respond. The scramble to find approaches that work is on.

In the single year 2015, mass protests broke out in Brazil, Guatemala, Hunduras, Iraq, Lebanon, Malaysia, Moldova, and South Africa, toppling two chiefs of state.

In May 2016, British Prime Minister David Cameron convened a first-ever chief-of-state-level summit to gain some consensus and commitments on steps to facilitate the fight against corruption internationally. Civil society organizations and investigative journalists have doubled down on efforts to shatter secrecy protections shielding the identities of the real beneficiaries of shell companies and the assets they hold. The U.S. Congress is considering expanding to the rest of the world language the House approved in the wake of the 2014 Ukraine crisis authorizing the imposition of sanctions on officials “responsible for, or complicit in, or responsible for ordering . . . acts of significant corruption in the Russian Federation.” Among the corrupt practices the original bill enumerated were “the expropriation of private or public assets for personal gain, corruption related to government contracts or the extraction of natural resources, bribery, or the facilitation or transfer of the proceeds of corruption to foreign jurisdictions.”² That’s a fair list of the principal types of activities that make up corruption in this early twenty-first century.

But corruption as it is currently manifested across much of the globe is not just a collection of practices indulged in by some—or even a large number of—officials. In a striking number of countries, corruption represents the adaptive behavior of sophisticated structures. These structures have deliberately bent or crippled key elements of state function in order to capture important revenue streams, ensure impunity for network members, and provide opportunities to secure and flaunt the gains—in a world in which the accumulation and display of wealth has increasingly become the chief marker of social value and success.

The networks that perpetrate such whole or partial state capture frequently coalesce around a kinship kernel. They cross international boundaries and vertical echelons, and weave together public-sector (and state-owned-enterprise) and ostensibly private-sector actors with outright criminals, sometimes including terrorists. But because the elaborate and purposeful nature of such structures has not drawn an equivalently sophisticated study by those who would address the problem, remedial efforts often fail to make much impact.

While a sanctions authorization, for example, and public listings of the beneficial owners of companies registered in all U.S. states would provide essential tools that could be applied to specific situations, on their own they don’t guarantee corrupt practices will be curbed. The question is how strategically and with what degree of concerted focus they are applied.

Burgeoning protests and civil society actions have often fizzled out short of achieving meaningful reform, either within existing frameworks or by attempting to build new ones. Such disappointments seem, so far, to mark the experiences in Guatemala, Lebanon, Moldova, and South Africa. Even in countries where more dramatic anticorruption uprisings have resulted in regime change, such as Egypt, Kyrgyzstan, Tunisia, and Ukraine, civil society has struggled to prevent an alternate network from simply stepping into the void left by the collapse of the old one, with little change in the underlying scheme.

While a sanctions authorization or public listings of the beneficial owners of companies would provide essential tools, on their own they don’t guarantee corrupt practices will be curbed.

The unconvincing record may be at least partially due to the lack of a systematic analysis, on the part of campaigners and their supporters abroad, of the complex, structured, and often transnational phenomena they seek to reform. Beleaguered civil society organizations may be scattering precious resources, rather than concentrating them against high-value system vulnerabilities. Or broad-based social movements may fail to predict and plan for likely system countermoves or reinforcement from abroad, with the result that they crumble in the face of determined or violent reactions. Or else reformers may not be equipped to capitalize on a brief window of opportunity with tailored institutional modifications that could shut down key functions of the kleptocratic system they oppose.

Outside efforts, meanwhile, such as international legal proceedings or individual sanctions, have to date been too piecemeal to fundamentally alter the incentive structure shaping kleptocratic officials’ decisions. Especially when the countervailing signals—sent by foreign direct investment in captured industry, for example, or generous military assistance to an offending regime, stature-enhancing state visits, or unfettered access for corrupt financial flows to banks and property markets—remain so powerful.

Improved analysis that could help guide more effective anticorruption initiatives must be highly specific to each situation under consideration. It must be informed by an intimate, on-the-ground understanding of the personnel and practices of the local kleptocratic networks and their international interlocutors, with attention to a calendar of internal and external events that might provide opportunities for—or thwart—initiatives.

To assist such analysis, a common framework of questions and a way of organizing the resulting information could help shape the inquiries and improve their legibility, and facilitate cross-country analysis, comparison, and action. Alongside examples from elsewhere, Azerbaijan, Kyrgyzstan, and Moldova model such a framework in the following pages, illustrating its key elements, typical country-specific divergences, and some knotty problems encountered during research, which would require further elaboration for a comprehensive examination of these or other countries.

These focus countries were deliberately selected to reflect different degrees of evident authoritarianism (therefore different implications for how civil society can even function to promote change) and different relationships with the European Union (EU) and other Western partners. The information provided here is derived from the practical experience of civil society groups on the ground (representatives of which met for a three-day workshop in September 2015 to launch this effort) together with more traditional research methods. A noticeable tightening of repression in Kyrgyzstan—including against some of the participants—made it the most difficult to depict in up-to-date detail. In any case, a definitive analysis would require more granular, on-the-ground research employing a variety of investigative techniques. These countries’ role here is largely illustrative.

A brief sketch of relevant recent history in each follows, to set the stage.

Historical Background

All of these countries were part of the former Soviet Union and still depend on Russia to some degree. But they diverge in their ethnic and cultural complexions, resource bases, and political processes. All of them can be described as kleptocracies, though network structures and practices differ in significant ways.

Azerbaijan

Since 1993, Azerbaijan, home to some 9.8 million people, has been ruled by one man and his son. Authorized opposition parties have obtained official results reaching no higher than single-digit percentages of the vote in presidential elections held every five years. In 2003, Ilham Aliyev succeeded his father, former KGB officer Heydar Aliyev, in such an election. This transition to a younger autocrat, like nearly contemporaneous ones in Morocco and Jordan (in 1999) and Syria (in 2000), was initially greeted with some optimism as to its potential for ushering in reform. As in the three Arab cases, however, such hopes have been disappointed in Azerbaijan. Ilham Aliyev has surprised many observers with his deftness and determination in consolidating power, including obtaining the passage of constitutional amendments in 2009 that abolished term limits, and with the severity of his recent crackdowns on civil society and the media—not to mention some erstwhile network members.

It was within the borders of today’s Azerbaijan that, sometime in the second millennium BCE, jets of fire spontaneously alight in the low-lying flats by the Caspian Sea contributed to the emergence of one of the world’s great religions. Zoroastrianism holds fire to be an emanation of God, linking it to truth and purity. But the ultimate destiny of this particular fire was to diverge sharply from the Zoroastrian ideal.

Those sacred fountains were produced by hydrocarbon reserves so significant that today’s Azerbaijan was also the site of some of the world’s first commercial oil wells and refineries, and was producing as much as half the world’s output at the end of the nineteenth century. Oil and gas are estimated to account for more than one-third of the country’s gross domestic product (GDP), and three-quarters of its government revenues.³

This combination of a repressive, authoritarian government and a volatile and unaccountable resource-based revenue stream has led to a structuring of Azerbaijani state institutions around systemic corruption—and compounds the difficulty of reform.

Plunging oil prices, however, have led to a sharp economic downturn, including a currency devaluation resulting in soaring prices for consumer goods. According to the government’s own figures, the country is in a recession, with GDP growth in the first quarter of 2016 estimated at -3.5 percent.⁴ This slump represents a drop from 5.8 percent growth reported by the World Bank in 2013, and a staggering 34.5 percent in 2006.⁵

The country’s geostrategic situation—as a potential alternative to Russia for energy supplies and a potential counterbalance to its neighbor Iran, with which it shares adherence to the Shia strand of Islam, but frosty relations—have perhaps influenced Western interlocutors to soften their assessment of its government to some degree. But the features of Azerbaijan’s political economy explored below are cause for concern.

In more than half a dozen cities in January 2016, despite the harsh political context, protesters poured into the streets, and riot police and soldiers broke up demonstrations.⁶ Rising prices for staple goods sparked the events, but marchers castigated the country’s tentacular, inescapable corruption, too. Meanwhile, Azerbaijan’s prisons contain several dozen political detainees, including purported supporters of radical Islamist movements, whose recruiters often gain traction with arguments against the corruption of secular regimes, as they have in a number of Central Asian countries, Afghanistan, Iraq, and Nigeria.⁷ The combustible combination of corruption, repression, and a sharp economic downturn has not yet sparked a conflagration in Azerbaijan, but the potential is there.

Kyrgyzstan

Lacking significant natural resources, Kyrgyzstan (with a population of less than 6 million) has by default a more diversified economy than Azerbaijan. Agricultural production accounts for about one-quarter of GDP; mining, especially of gold, brings in some 10 percent, and almost all of the country’s electricity is locally generated hydropower.⁸ Were it not for earnings sent home by its citizens who have been forced to seek work in Russia, however, the country would probably be bankrupt. Remittances make up as much as 30 percent of the country’s approximately $7.4 billion GDP.⁹ And black-market commerce, including the international narcotics trade, is a vibrant economic activity. Even so, nearly one-third of the population lives in poverty, as defined by the World Bank in 2014.¹⁰

The only reasonably pluralistic country to emerge in Central Asia after the fall of the Soviet Union, Kyrgyzstan enjoys a comparatively positive reputation. Still, it was already taking an authoritarian turn by 2000. After what came to be known as the Tulip Revolution, which ousted the first post-Soviet leader in 2005, the country provided a taste of what was about to sweep the Arab world when protests at least partly fueled (as was the Tulip Revolution) by indignation at pervasive corruption toppled the government of then president Kurmanbek Bakiyev in 2010.

After widespread shock at the degree to which the previous administration of Askar Akayev had diverted large sectors of the economy to his own or his family’s benefit,¹¹ many in Kyrgyzstan were outraged that just five years later, Akayev’s successor—who had ridden to power on an anticorruption platform—was looking even worse.¹²

Bakiyev had appointed family members or close personal friends to key cabinet positions.¹³ The Central Agency on Development, Investment and Innovation, run by his son Maxim, served essentially as a money-laundering clearinghouse, passing revenues from the telecommunications sector, development assistance, contracts with the U.S. military, and other sources to shell companies and bank accounts in the West, especially the United States, the United Kingdom, and Austria. The Bakiyev network dominated the black market and the narcotics industry, and deliberately disabled the nation’s Drug Control Agency.¹⁴

In early April 2010, amid dismay at this betrayal of the Tulip Revolution’s principles—and sharply rising public utility prices—a day of protest called by opposition parties escalated into a nationwide movement. After clashes with the police, demonstrators stormed the White House, Kyrgyzstan’s presidential palace, and Bakiyev fled the country on April 15.

This revolution lurched out of control just two months later, when support for and opposition to the interim government fell out along ethnic lines in some southern towns, with rioting and widespread killings, largely, but not exclusively, of ethnic Uzbeks (who broadly favored the revolution and transition) by ethnic Kyrgyz. A struggle to consolidate control over the narcotics industry may also have played a part in motivating the violence.¹⁵ Tens of thousands of refugees fled across the Uzbekistan border.¹⁶

Amid this chaos, a revised constitution, enacted in June 2010, represented a new effort at establishing parliamentary democracy. But the ethnic rift dividing the country remains painful, and ethnic Uzbeks are still largely disenfranchised. A list-based voting system does not allow for personal connections between individual officeholders and any given constituency, thus preventing sanctions at the polls for officials not seen to be serving voters’ interests.

The consensus among civil society activists from Kyrgyzstan is that the new dispensation has done little to change prior corrupt practices, including electoral fraud, shakedowns for basic public services, and physical intimidation of regime critics, which seems to have increased in the first quarter of 2016.¹⁷ Transnational criminal organizations continue to prosper, trafficking drugs and other types of contraband across the country’s borders, and official anticorruption efforts are often criticized as window dressing or politically motivated. The structure of the dominant network is far looser than it is in Azerbaijan or Moldova, with subordinate officials, advisers and confidants, as well as local officials, capturing much of the gain.

Until 2014, Kyrgyzstan’s critical role as the host of Manas, one of the most important regional military bases servicing the war in Afghanistan, shaped its external relations, allowing successive leaders to play Russian and U.S. interests off against each other in a bidding war to gain control of the base.

Moldova

Even smaller in terms of population than Kyrgyzstan, Moldova (with approximately 3.5 million people) has been convulsed by political upheaval and popular protests since May 2015, when the speaker of the parliament, Andrian Candu, leaked a central bank–commissioned report on suspicious money transfers from the country’s top three private banks.¹⁸ No less than $1 billion—or fully 12 percent of GDP—had been spirited offshore into accounts held by shell companies domiciled in places like Delaware in the United States, Scotland, and Belize, according to auditors from the Kroll investigations and risk management firm.

The country erupted. Marches and tent villages lining the stately downtown streets of the capital, Chișinău, have been a feature of everyday life ever since. In January 2016, protesters stormed the parliament after deputies broke months of deadlock to approve a new cabinet, which recycled a number of former top officials and included Pavel Filip as prime minister, a man many see as a proxy for the country’s most powerful oligarch, Vladimir Plahotniuc.

Squeezed between Ukraine and Romania on the EU’s eastern border, Moldova has long served as a corridor for contraband, notably women trafficked via the Balkans for sex in Europe, and a variety of foodstuffs and consumer goods.

According to civil society activists, government reforms enacted in 2010 as part of negotiations aimed at strengthening ties with the European Union and charting an eventual path toward accession reduced street-level extorted bribes, especially by the police, at least temporarily. Yet epic corruption has persisted in the judiciary and the Ministries of Finance and Education, among other agencies.¹⁹ And most agree that Moldova’s two dominant corruption networks were left largely undisturbed.

The tendency to view situations on Europe’s eastern marches in terms of an East-West geostrategic contest may obscure the importance of corruption as a driver of popular discontent.

Parliament Speaker Candu’s leaking of the Kroll report and the subsequent arrest of a former prime minister and head of one of those networks, Vladimir Filat, are seen by some not as harbingers of true reform, but rather as a kind of hostile takeover of Filat’s network by the now-dominant structure of Vladimir Plahotniuc. Candu is a well-known Plahotniuc confidant.²⁰

The cultural, or language-identity, rift that Moldova shares with Ukraine—between those who favor more integration with the West and speak Moldovan (a language close to Romanian) and the minority who identify more strongly with Russia—adds a separate element to this dynamic. It may prove distracting to some Westerners. Their tendency to view situations on Europe’s eastern marches in terms of an East-West geostrategic contest may obscure the importance of corruption as a driver of popular discontent, and lead to counterproductive policies.

The fact is that both of Moldova’s kleptocratic networks are nominally pro-EU. So some people’s Russian-leaning tendencies may reflect a simple desire for an alternative as much as a sense of cultural affiliation—let alone an active belief that Russia offers a markedly better governance model than the West. In the January 2016 protests opposing Filip’s selection as prime minister and demanding stepped-up anticorruption measures, civil society activists from across the identity divide joined forces.

While the International Monetary Fund, the World Bank, and even the EU have recently suspended foreign aid for varying periods, Romania and the United States, perhaps susceptible to the Plahotniuc network’s ostensibly pro-Western imaging, continue to play an enabling role. Financial assistance from both is rising, and senior State Department officials welcomed Plahotniuc in a stature-enhancing visit to Washington in May 2016. The situation in Moldova remains extremely fluid, with activists keeping up the pressure for systemic reforms. A restructuring of the state prosecutor’s office and mandate is under way, and in early March 2016, the constitutional court invalidated a 2000 law under which the president was chosen by the parliament rather than by a popular vote.

The Analytical Framework

Devising effective anticorruption approaches to countries like these requires digging beneath the narratives of their unique and divergent histories to find underlying structures. Tailored remedies require an understanding of the architecture of economic and political power, as well as the way each kleptocratic network has harnessed elements of state function to its own purposes and has exploited its circumstances and those willing to enable its activities, wittingly or not. To gain such an understanding, it is helpful to apply a common set of questions to each situation, and depict the results as clearly as possible.

Any such depiction will, of course, represent a compromise: between clarity and detail, multidimensional realities and two-dimensional representations, well-founded suspicions and hard proof. The infographics that follow may seem to imply separation between the sectors of what are in fact deeply interpenetrated networks. Some compromises had to be made in the interests of a visual clarity that might, in its own right, spark realizations. Educated guesses will sometimes have to stand in for firm pronouncements about what are constantly shifting but remarkably resilient structures. Nevertheless, the following provides a basic, if inevitably incomplete, entry point.

If corruption is seen as the deliberate practice of one or more networks of interrelated individuals that are at least somewhat organized, then the network structures and modes of operation should be ascertained and depicted in as much detail as possible, through answers to the questions below. Comparative examples that illustrate some of the distinct forms such structures can take are drawn from Azerbaijan, Kyrgyzstan, and Moldova, along with several other countries.

Does a single network dominate?

For Azerbaijan, for example, given regime continuity reaching back to before the collapse of the Soviet Union, the answer seems to be yes. Still, some separation does exist between the networks controlled by the families of Aliyev and of his wife, Mehriban Pashayeva Aliyeva.²¹ President Aliyev must manage the competition. Some people point to the dismissal of the then minister of state security in October 2015, as well as Minister of Emergency Situations Kamaladdin Heydarov’s sale of several hotels, as evidence that Aliyev is actively disciplining the network. The incidents may also suggest that fissures are deepening.

In figure 1 below, the blue circle representing government elements of the network is labeled with the names of both of the leading families, to reflect the divided authority.

To Western eyes, Moldova presents an entirely different picture. It is by far the most democratic of the three countries examined here. Indeed, as of 2014, Moldova has been bound to the European Union by an association agreement, similar to those negotiated with neighboring Georgia and Ukraine. Civil society activists have taken over neighborhoods in the capital without serious fallout.

And yet, Moldova’s kleptocratic network appears to be almost as unitary as Azerbaijan’s. According to local and international experts, the separation that once existed between Vladimir Plahotniuc’s larger and more powerful group and the smaller one structured around former prime minister Vladimir Filat has largely collapsed over the past year.

Unlike the situation in most other highly corrupt countries, however, Moldova’s network is not dominated by a chief of state. Plahotniuc holds no government office, but from outside official institutions has managed to stack government structures with either his cronies or individuals too weak to threaten his operations. Perhaps reacting to—but reinforcing—this aberrant reality, international interlocutors sometimes seem to treat him as a stand-in for the government.²²

Figure 1 illustrates this Moldovan peculiarity by displaying the network leader’s name not in the blue government circle, but in the green circle, which represents private-sector network elements.

How dependent is the network’s functioning on the person of the chief of state? Or instead, is there a significant cadre of network members who could re-combine and retain their grip on the economy and key aspects of political function if the network is decapitated?

This is a question that should preoccupy local civil society actors who are demanding reform as well as their international supporters, especially if they have met with so much recalcitrance for so long that they are driven to demand dramatic remedies, such as high-level resignations or legal proceedings against senior network members. The identities, contexts, and inclinations of likely successors to the current ruling networks merit exploration in as much detail as possible.

For, as recent events in Egypt, Kyrgyzstan, Tunisia, and Ukraine demonstrate, even networks that seem clearly to be dominated by a single individual display a remarkable ability to rebound after he and his family members are removed from dominance—or the country. The mechanisms by which that resilience is achieved should be carefully examined.²³

In the case of Moldova, the identity of the chief of state is nearly irrelevant to the network’s functioning. President Nicolae Timofti has complained of Plahotniuc’s bald interference in political affairs.²⁴ Moldova’s degree of formal democracy may not, therefore, be as important a factor shaping its real political economy as Westerners may think.

The constitution of Kyrgyzstan—perhaps the most loosely structured of the three systems—permits presidents to serve only a single six-year term. A significant transition is therefore expected after the 2017 presidential elections. In the lead-up, repeated episodes of harassment reported by civil society