Kleptocracies amplify every conflict risk and are existential threats to civilization

Taken together, President Trump’s declaration that corruption and human rights abuse constitute a national emergency and the catalogue of threats identified in the NSS have recognized all of the topics discussed in this report (i.e., great power competitors, nuclear aspirants, terrorism, organized crime, state failure, genocide, and obstruction of peace and stability operations). The central lesson that should be derived is that kleptocratic regimes are not an added threat that is competing in a zero-sum manner for scarce national security resources; rather they are a cross-cutting national security threat that either causes or contributes decisively to the threat actors already identified by the Trump Administration. Our first order of business is to catalogue why kleptocratic regimes constitute a pervasive threat to national security. Our second purpose is to propose recommendations for neutralizing this threat by being smarter about how we deal with it. These arguments are summarized below.

Kleptocratic Regimes: A Pervasive Threat to National Security

● Russian/Chinese kleptocracy, a systemic threat, and the general systemic threats posed by kleptocratic regimes

One of the greatest threats to U.S. national security is the corrosive impact of kleptocracy on geopolitical order. Kleptocracy and financial secrecy have metastasized into an existential threat to our civilization. Vladimir Putin has “weaponized” use of corruption for geopolitical ends. The convergence of corrupt values and practices in the former Soviet Union, reformulated for the 21st century and exported to the West, now pose an encompassing threat. The economic power of kleptocrats like Putin is safeguarded in the West by our lack of transparency regarding the real owners of corporations which allows kleptocrats to launder their illicit revenue in shell companies. We must address these threats by enhancing transparency and closing off our financial system to those intent on damaging our country.

● Kleptocracy and the Link to Terrorism, Radicalization, Fragile States, and Political Instability

Inherent in the nature of kleptocracies is massive diversion of public funds for private gain. The consequences – inadequate resources for public services, de-legitimization of the regime, and repression of dissent – fuel radicalization, state fragility, and conflict. Extremist groups draw on public anger at the abuse of power. Prominent current examples include the Houthi rebels in Yemen, the Taliban in Afghanistan, the Islamic State in Iraq and Syria, and Boko Haram in Nigeria. The most salient cases where kleptocractic actors have posed a clear threat to U.S. counter-terrorism and stabilization efforts are Afghanistan and Iraq. Systemic and high-level corruption – within governments we supported and funded – funneled revenue out of the domestic economy, further impoverished the country, hollowed out security institutions, undermined the legitimacy of the state, and fueled recruitment by insurgent and terrorist groups. Kleptocracy also has economic effects that slow growth, thereby undercutting political stability. Corruption distorts markets by adding costs and creating inefficiencies, and it deters Foreign Direct Investment.

● The “Convergence” among terrorism, organized crime, corruption and illicit power structures

The convergence of terrorism, organized crime, corruption, and illicit power structures constitutes an alternative, parasitic, global political economy that represents an existential threat to societies based on the rule of law. Their effects have been exacerbated by the dramatic increase in the flow of goods and services, money, people, and data that have resulted from globalization. Terrorists and criminals take advantage of these same flow paths and are able to do so invisibly as their transactions are lost in the overwhelming volume of licit and illicit transactions. There is an increasing level of organizational collusion between international terrorist organizations, organized crime and networked insurgencies (e.g., Hezbollah and the Sinaloa cartel). This threat is compounded by the collusion of “mafia states” that utilize the traditional tools of statecraft, such as passports, airline and shipping registries, and diplomatic pouches, to provide free passage to engage in criminal activity.

● Criminalized Power Structures: Leading Spoilers of Peace and Stability Operations

Criminalized power structures, defined as regimes that obtain and maintain power through exploitation of illicit revenue, have been responsible for obstructing or thwarting peace processes in at least 70% of the internal conflicts in which the United Nations has intervened since 1990.7 When the U.S. has been involved--and this has included both peace and stability operations--the figure rises to 100% (i.e., Somalia, Haiti, Bosnia, Kosovo, Afghanistan, and Iraq). Both the U.S. and the international community chronically overlook this problem. In the ten case studies examined in Criminalized Power Structures: The Overlooked Enemies of Peace, almost five years elapsed before missions had the mandate and means to mount a strategy to confront their kleptocratic spoilers.8 Not only had the “golden hour” been squandered, the legitimacy of the mission had typically been severely compromised. This is perhaps the most likely explanatory factor for the 50% rate of return to conflict within five years after an international intervention, as claimed by Kofi Annan.9