Immobilization of the oligarchs in Moldova, Georgia and Ukraine: mission (im)possible? Op-Ed

Op-Ed
	The assimilation or nationalization of the "Magntisky Act" can be turned into a political (pre-)condition in return for financial support granted to the countries where the US and EU support democratic reforms…
Dionis Cenuşa

Some conditions arose to establish new Western instruments of immobilization of the oligarchs and other severe offenders of the rule of law in the world. This could also help to heal the governance in Eastern Europe.

The US lawmakers have begun to build new measures to combat kleptocracy in Russia and the rest of the world, called CROOK (CSCE, January 2020), which can complement "Magnitsky's Act", adopted by the US in 2012 and extended to countries other than Russia (State Department, December 2017). On the other side of the Atlantic, policymakers in the European Union (EU), leading the new European Commission, have agreed to set up a sanctioning mechanism, similar to the American one, in 2020 (EuroActiv, December 10, 2019). Therefore, and despite the animosities in other fields, the transatlantic partners value the rule of law similarly. However, the sanctioning of global kleptocracy earned the title of an objective of the national security by the US, while the EU sees it as a fulfilment of its mission of human rights promoter.

By the time the EU will own its human rights sanctioning mechanism, Moldova, Georgia and Ukraine could have jointly conceptualized a "Magnitsky Act" for the DCFTA region. At present, this objective is unachievable. The Ukrainian presidency selectively looks at the local oligarchy and is discredited by the traffic of influence, attributed to various exponents of the White House administration. Moldova and Georgia are also irrelevant. The first gravitates around the Russian oligarchic circles, and the second one is experiencing an oligarchic system that uses authoritarian tactics to discourage common manifestations.

The "Magnitsky Act" and other sanctions in action

In the Eastern Partnership region, the first individual sanctions imposed by the US and EU were against the exponents of the autocratic regime led by Alexandr Lukashenko in Belarus. After the fall of the Ukraine’s oligarchic regime in 2014 and Russia's political-military interferences in Ukrainian domestic affairs in Crimea and the Donbas region, the US (4 decisions - 219 persons, 463 entities) and the European (177 persons, 44 entities) sanctions targeted ex-Ukrainian officials, exponents of paramilitary separatist movements and the decision-makers from Vladimir Putin's entourage. Some individual European sanctions imposed on former Ukrainian President Viktor Yanukovych are however partially annulled through the European justice (112.ua, September 2019).

At the same time, the transposition of the "Magnitsky Act" included people not only from Russia, but also from the current and past governing circles from other CIS countries, but also the EU. In December 2017, in the list of individual sanctions were included (Treasury.gov, December 2017): Gulnara Karimova, daughter of former Uzbek President Islam Karimov and Artem Chayka, son of former Russian Attorney General and brother of Igor Chayka, who has (in-)direct business deals with the family of the Moldovan President Igor Dodon in Russia (BalkanInsight, July 2019) and Moldova (ZDG, December 2019). During the period 2017-2019, the blacklist was supplemented with controversial persons from the EU states, as well as from candidate countries for EU accession (See Table below).

Widening the eligibility criteria for the more frequent activation of the "Magnitsky Act" and coupling it with US-type CROOK initiatives, along with their replication of such toolboxes within the EU, would significantly hamper the oligarchs' interest in capturing or corrupting political power in such countries like Moldova, Georgia or Ukraine. As a result, the oligarchs in the region fall under the constraints to correct their conduct and enter into legality, while at the same time giving up practices that degrade public property and abrupt human rights.

Moldova - only Plahotniuc?

The visa ban against the fugitive oligarch Vladimir Plahotniuc (US State Department, January 2020), introduced by the US in early 2020, is a necessary reaction to the actions of the critical exponent of the oligarchic regime, which abused the democratic institutions in Moldova, especially in 2015 -2019 (IPN, May 2017). According to the journalistic investigations, Plahotniuc owns of a category of advanced visas (E-2), offered in exchange for significant investments, hastily requested, after the 2019 parliamentary elections (Anticoruptie.md, January 2020). Then the governing coalition between the ACUM bloc and the Socialists took root, and Plahotniuc decided to self-annihilate the oligarchic regime (3DCFTAs, June 2019), to avoid individual sanctions.

However, the physical immobilization of the oligarch, through partial individual sanctions of the USA, is insufficient. The blocking of the real estate and financial assets, held at least on the US territory, should take place for the acts of corruption (contribution to the "theft of the billion"), under the provisions of the "Magnitsky Act". Another logical and imperative step would be to extend the sanctions at least to Ilan Shor, who due to the dual citizenship, has fled to Israel to escape de justice.

The nationalization of the "Magnitsky Act" and its transposition into the national normative framework appeared in public in 2018 (IPN, December 2018), but it got lost in the negotiations of the ACUM-PSRM coalition formation. The mentioning of the “Magnitsky Act” was missing from the PSRM-ACUM agreements, the initial one from June (the first PSRM-ACUM coalition agreement) and next one from September 2019 respectively (the second ACUM-PSRM coalition agreement). This political dynamic has led to a significant deviation from the electoral promises made by ACUM bloc (the ACUM’s Electoral Program, February 2019). In January 2020, a few months after the dismissing of the government of Maia Sandu (NEE, November 2019) and ACUM's exclusion from the government, the Platform DA returned to the topic of adoption of the "Magnitsky Law" (January 2020).

Thus, almost two years have elapsed since the Liberal Democratic Party proposed such a bill (in July 2018), while being in the parliamentary opposition (IPN, December 2018). An explanation of the failure of the ACUM bloc to enforce the "Magnitsky law" is the geopolitical compromise with the PSRM. There was a general intention, assumed in full by the components of the coalition, regarding the reestablishment of relations with the East and the West to maintain the political and economic stability of the country (IPN, September 2019).

The next, though distant, chance to adopt the "Magnitsky law" is achievable after, and if, the pro-EU opposition can remove the Socialists from power. The forthcoming presidential elections of 2020 are a first "window of opportunity".

The intangible oligarchs from Georgia and Ukraine

Compared to Vladimir Plahotniuc, the oligarch Bidzina Ivanishvili brought Georgia to the threshold of a "state capture". The political opposition feels threatened by selective justice (Civil.ge, March 2019), and administrative detentions and disproportionate fines (300-750 EUR), against the protests of June 2019, violate fundamental rights (Transparency.ge, January 2019). Serious concerns about democratic setbacks, with adverse effects on US investments, are addressed by the US, on a bipartisan line, to the ruling "Georgian Dream", controlled by Ivanishvili (Civil.ge, January 2020). The EU has so far come with careful remarks on the electoral and justice reforms (EEAS, December 2019). In no way, the EU does want to confront the oligarchic factor that deforms good governance in Georgia, signalling that it prioritizes fragile stability and security.

Ukraine is another example of a partial compromise with the oligarchic factor. Although the activity of ex-president Petr Poroshenko is part of meticulous investigation in more than 10 dossiers (UNIAN, July 2019), the Ukrainian state allows the position of the oligarch Igor Kolomoisky to strengthen. The latter intimidates state institutions (National Bank) and is pressurizing the state to restore his ownership rights over "Privatbank", after systemic siphoning out money accounting for $ 5.5 million (OCCRP, January 2018). Volodymyr Zelensky's administration is poised to make concessions to Kolomoisky that seem to be crucial for future relations with the IMF (Ukrinform, September 2019). The decision of the court in London in October 2019 rejected the request to release the assets frozen in 2017 and belonging to Kolomoisky (EuroActiv, October 2019). This precedent can cast a negative light on the Ukrainian courts, if they attempt to favour the demands of the Ukrainian oligarch (Antac, December 2019).

The Ukrainian case, and even more so the Georgian one, denotes a vast potential for applying the "Magnitsky Act" by the US and later one by the EU (with its mechanism). Opposition and civil society in these countries can popularize this idea, including as an objective for modernizing national legislation to immunize the countries against the kleptocratic influences from the region (Russia, Azerbaijan, Turkey or even the EU countries - Hungary, etc.).

Instead of conclusions...

The extra-territorial interventions operated by the West target individuals and entities that resort to acts of corruption, degrading to the rule of law and the human rights situation for large social groups. For states with precarious institutions and democracy, Western measures are helpful, although partially. Or, because of the late character, sanctions fail to play a genuinely demotivating role for the emerging "offenders".

Indeed, the protection of Western democratic values, through the introduction of individual sanctions, has the potential to create constraints against rulers with authoritarian traits or oligarchic connections in the countries associated with the EU. The assimilation or nationalization of the "Magntisky Act" can turn into political (pre-)conditions for granting financial support to the countries where the US and EU support democratic reforms.

The sanctions used by the US and (eventually) the EU in the Eastern Partnership region require flexibility and/or sharpening to effectively isolate and annihilate local oligarchic influences from Moldova, Georgia and Ukraine. The focus should be on the preventive nature of the sanctions. In conclusion, the punishment of the oligarchic forces that infiltrate the state institutions and produce “captured states” is necessary regardless of whether the Russian factor is involved or not.

IPN publishes in the Op-Ed rubric opinion pieces submitted by authors not affiliated with our editorial board. The opinions expressed in these articles do not necessarily coincide with the opinions of our editorial board.