Putin emerges as a winner in the Panama Papers scandal

Putin emerges as a winner in the Panama Papers scandal
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Despite economic turmoil and challenged political credibility of Russia on the world stage, the Panama Papers revelations of corruption will not pose a  significant threat to the stability of Putin’s regime but will worsen Russia-US relations and the country’s image in the West.

Last Sunday, the world found itself in a sequel to Stieg Larsson’s Millennium series. An anonymously leaked set of 11.5 million confidential documents reached the hands of 400 journalists from 77 countries who, after a year of investigation, discovered in-depth information about over 200,000 offshore companies listed by the Panamanian law firm Mossack Fonseca, including the identities of shareholders and directors of the companies.

The leak revealed how world leaders and government officials, from over a dozen countries including Russia, launder money through elaborate schemes, and hide it in offshore accounts.

While Vladimir Putin himself is not named in the Papers, his close associates, including the Kremlin spokesperson, Dmitry Peskov, and his wife, as well as the president’s closest friend, the cellist Sergei Roldugin, are mentioned in the Panama files. The documents provide evidence of a $2 billion trail that weaves through a Russian bank and Roldugin’s financial operations with Panama-based shell companies to the Russian president.

No public reaction in Russia

The revelations of the Panama Papers did not produce shock in Russia as it did in the West. In countries governed by the rule of law, the Panama papers led to police raids, and investigations for evidence of corruption. These have so far culminated in the resignation of Iceland Prime Minister Sigmundur Davíð Gunnlaugsson and in UK David Cameron admitting, under public pressure, that he had a stake in his father’s offshore fund.

Yet all was quiet on the Russian front. In the immediate aftermath of ‘Panamagate’, no protests took place in Russia. Putin’s approval ratings remain high and there are no calls for his impeachment.

Nothing new on Putin

The information contained in the Panama Papers is not the most significant allegation of high rank corruption of the Putin government. A few months before the Panama Papers scandal, opposition and anti-corruption blogger Aleksei Navalnyi posted allegations of wrongdoing by the former president of Russian Railways, Vladimir Yakunin, and the family of Yuri Chaika, Russia’s prosecutor general who opened corruption cases against Putin’s enemies.

A plot against Russia

The fact that corruption by government officials is not news helps explain the lack of protest in Russia over the Papers. Skewed media coverage of the scandal on Russian TV and in the press is another contributing factor.

A week before the leak, the Kremlin announced that it was waiting for a large-scale information attack on the Russian president and his inner circle. After the Panama Papers were published, Peskov stated that the investigation is a plot against Russia, primarily motivated by Putinophobia and aimed at diverting attention from Russian’s successful military campaign in Syria where Russia played a pivotal role in the liberation of Palmyra. The Kremlin was thus “disappointed” in the findings of “lying” journalists who worked on the Papers.

The Russian state-controlled TV stations, newspapers and online publications did not mention the scandal until after the official statement by Peskov was made. Some outlets mentioned allegations against the Ukrainian president Petro Poroshenko but not those against Putin’s associates.

A few of the independent liberal media outlets did cover the scandal at length. Opposition newspaper Novaya Gazeta, worked on the Panama Papers project along with international journalists for a year. However, the newspaper’s message is marginalized and does not reach the majority of the Russian population. It is unable to offset the dominant line of thinking that the revelations were orchestrated by Washington.

Putin’s “post-modern dictatorship” will not be shaken

Contrary to other countries, in Russia the Panama Papers revelations will not lead to political reforms or to better monitoring of offshore operations. The Papers will also not open up honest investigation of tax evasion. Rather, the accusations will likely lead to a further crackdown on independent media outlets and opposition groups: Novaia Gazeta will be punished. The Russian parliament deputy has already promised to sue the newspaper for libel against Putin. The newspaper will most likely be also accused of tax evasion. The authors who worked on the project will likely face persecution.

Despite Putin’s seemingly cool stance and his denial of being implicated in the scandal, he is nervous, and more so about the domestic security situation and the potential danger of public unrest as a response to the faltering economy, alienation from the West and the new corruption allegations.

Several recent developments serve as an indicator of this anxiety.  A few days after the publication of the Panama Papers, Putin announced the creation of a National Guard headed by his former bodyguard, Victor Zolotov. The Guard will answer to the Ministry of Internal Affairs and will fight domestic terrorism and crime and protect public safety.

Putin also addressed journalists with a plea to not foment a revolution in Russia. His message is clear: he will resort to radical measures to prevent public unrest in Russia.

How were cases of Russian corruption dealt with in the past?

In 2008, President Putin personally addressed claims that he was the richest man in Europe, saying: “It’s simply rubbish. They just picked all of it out of someone’s nose and smeared it across their little papers.”  Putin and his circle have always denied such allegations and are going to continue to deny it.

There have always been severe repercussions for those exposing the doings of public officials.  Western journalists have been expelled:  Bill Browder had to leave Russia in 2005 after he exposed the corrupt oligarchs who were robbing the companies in which he was investing. His lawyer, Sergei Magnitsky, was beaten and died in jail.

Further damage to Russia-US relations

It has not been a secret for Russia specialists that Putin has been at the forefront of the former KGB apparatus’ attempt to regain power after the collapse of the Soviet Union.

The Russian government is right to note that the Panama Papers presents very little new information on Putin; money laundering practices by people close to Putin can be tracked back to the late 1980s. That is when the leaders of the former KGB began transferring money into offshore accounts.

Similarly, the allegations that Putin is corrupt are not new. In 2007, a secret CIA report put Putin’s wealth at around $40 bn. For over 10 years, there have been allegations that Putin has a vast personal fortune, claimed to be in the $20-100 billion range.

There is a growing sentiment in Western academia and policy circles that the last three decades of Russian history should be framed as those of resurgent authoritarianism based on corruption rather than failed democratization. The Panama papers will strengthen this belief.

So much so that it leads to tempting conspiracy theories that would rival those of Putin himself. While Putin dismissed the papers as an American conspiracy against Russia, one of the most reputable American experts on Russia, Clifford Gaddy, who spent years studying Russia’s “virtual economy” reciprocated by inviting Russia experts to investigate the possibility that it was Russians themselves who leaked the Panama Papers in order to blackmail the West and coerce it into taking Russia seriously.

Categories: Economics, Europe

About Author

Marina Peunova

Marina Peunova is an analyst with expertise in Europe and Russia. She has written extensively on Russian foreign policy, Islam in Russia, the rise of the Russian and European Far Right, as well as global migration. Marina holds a master’s degree in International History and Politics from the University of Geneva’s Graduate Institute of International Studies and a bachelor’s degree in History from Georgetown University.