Stealing vs. going to war. Why Russian corruption is not an obstacle to war but rather its cause

After the start of a full-scale invasion of Ukraine, there has been a shift in public perception of anti-corruption investigations. The notion that corruption undermines the Russian state and that a weaker Russia is preferable has gained significant traction. However, numerous studies indicate that corruption often gives rise to and sustains wars.

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• War fuels corruption

• Corruption breeds wars

• How effective are sanctions?

War fuels corruption

In 2021, Russia ranked 136th out of 180 countries in Transparency International's corruption perceptions index, placing it in the bottom quarter of the list. This section includes countries, such as Syria, Eritrea, Mali, and Afghanistan, which are embroiled in civil wars, uprisings, or armed conflicts with neighboring nations. Analysts' assessments reveal a direct correlation between corruption levels and what the Fund for Peace (which compiles state fragility rankings) terms “security pressures”: terrorist attacks, uprisings, rebellions, insurgencies, and coups. Most countries that share a similar perception of corruption with Russia rank very low in the state fragility index. This is primarily due to their inability to maintain order within their territories, as their armies and police forces are plagued by corruption and struggle to counter emerging threats.

2022 Corruption Perceptions Index

transparency.org

When a country becomes entangled in a corruption-related conflict, the deterioration of the military's effectiveness leads to its prolongation and, paradoxically, becomes advantageous for military officials. As noted by Philippe Le Billon, a researcher in the political economy of war at the University of British Columbia, war creates additional conditions that facilitate illicit enrichment. Defense contracts, payments to non-existent soldiers, looting authorized by military commanders, parallel imports, the emergence of black markets, and the impunity of ruling groups—all of these create an ideal environment for various corrupt schemes and abuses. War incentivizes elite groups that have gained the most benefits and influence to be interested in its endless continuation. They simply need to maintain the military's effectiveness at a minimum level that prevents defeat.

Military officials benefit from prolonging the conflict by maintaining the military's effectiveness at a minimum level

In this regard, Le Billon believes that corruption can also be used to end a conflict by making peace more advantageous for the parties involved. For example, in the 1990s in Mozambique, the nationalist rebel movement RENAMO was offered payments from a $10 million trust fund created by the international community for this purpose, permission to collect taxes from businesses in its control zones, and a promise to include its representatives in the government and parliament, which were previously controlled by the single-party communist regime of FRELIMO. It is presumed that the latter provided RENAMO members with a share in all illicit deals made in the country. Since neither RENAMO nor FRELIMO were able to achieve a decisive victory, they agreed to the proposed conditions, which ensured their peaceful coexistence for over twenty years. Although the country ended up with a highly corrupt two-party system of limited democracy, where FRELIMO always obtained a majority in parliament, RENAMO remained a legal opposition that received its dividends from corruption.

Corruption breeds wars

The military budget, due to the secrecy surrounding many of its components, becomes an attractive target for those who seek to embezzle state funds, even in peacetime. A group of researchers from the International Monetary Fund (IMF) analyzed the correlation between the Corruption Perceptions Index and military expenditures and concluded that a large military budget is associated with poor quality of governance. Vito Tanzi, former head of the IMF's Fiscal Affairs Department, believes that up to 15% of the funds allocated by states for arms purchases end up as bribes.

Up to 15% of funds allocated for arms purchases end up as bribes

Autocracies maintain their power primarily through violence and corruption. The increase in military budgets makes military officials interested in preserving the regime. At the same time, this increase in itself creates incentives for starting wars. On one hand, civilian authorities want to ensure that their investment in defense is not in vain, and on the other hand, the military, who increase their influence through military investments, want to test weapons, justify the monetary inflow, and demonstrate the need for further budget increases.

The majority of studies examining the connection between war and corruption primarily concentrate on internal conflicts and do not delve into conflicts involving neighboring countries. Nonetheless, valuable insights can be gleaned from research investigating how specific types of political regimes influence corruption and the inclination to participate in wars.

The Soviet Union was a party autocracy, a regime in which power was concentrated in the hands of the party bureaucracy. After the collapse of the USSR, Russia and Ukraine became transitional regimes, somewhere between democracy and autocracy. Ukraine, for the most part, underwent a process of democratization, while Russia, on the contrary, moved towards personalized autocracy, where power is concentrated in the hands of one individual.

Russia has been significantly affected by this transformation, primarily due to its heavy reliance on the “resource curse” and the rise in commodity prices in the early 2000s. Research indicates that a substantial share of natural resources in a country's revenue stream is likely to lead to the establishment of an authoritarian regime. In such countries, economic growth is independent of institutional development (such as property rights protection or separation of powers) and human capital. As a result, elites and citizens prefer to engage in rent-seeking behavior rather than productive activities that drive government revenue through tax payments. They manipulate economic legislation to their advantage in order to share in the oil rent. Resource extraction is heavily regulated by the state, leading to the concentration of power and the fusion of political influence with economic interests. Consequently, the authorities even hinder the development of non-resource-based industries, as they create entities independent of resource extraction and, therefore, capable of challenging the autocratic elite in competition.

Corruption becomes the primary means of resource distribution and purchasing loyalty from key elite groups and the population in such regimes. At the same time, coordinating opposition efforts becomes challenging as the authorities can simply buy off and co-opt emerging influential groups.

Dictatorship and corruption complement each other. A paper by Hanne Fjelde and Håvard Hegre from Uppsala University demonstrates that corruption helps authoritarian leaders consolidate power and makes such regimes more resilient. Another study by Fjelde shows that the presence of oil rents further stabilizes corrupt regimes. In contrast, corruption destabilizes democracies, prompting authorities to strive to eliminate it, as failure to do so risks triggering a situation of civil conflict that may lead to a transition to a different regime type. High levels of corruption keep transitional regimes in a state of transition, preventing them from becoming fully-fledged democracies or autocracies.

Among all types of authoritarian regimes, personalist autocracies (which include party dictatorships, military juntas, and monarchies) are the most unstable, corrupt, and prone to conflicts. Power in these regimes revolves around the autocrat rather than institutional structures, making corruption the primary tool of governance. However, institutions also serve to protect the ruler. When institutions fail and power is determined by force and money, opponents are tempted to seize power through force. In such cases, the dictator's task becomes maintaining a situation where no one in the country possesses more power and wealth than they do, preventing potential rivals from uniting. According to a study by political science professor Eric Uslaner from the University of Maryland, corruption particularly aids in this endeavor as it erodes trust among citizens towards their fellow countrymen, society as a whole, and the state, leading them to trust only a narrow circle of acquaintances.

Corruption undermines the trust of citizens in their fellow countrymen, society as a whole, and the state

Konstantin Sonin, a Russian economist formerly associated with the Russian Presidential Academy of National Economy and Public Administration (RANEPA) and the Higher School of Economics (HSE), and currently affiliated with the University of Chicago, suggests that the longer a dictator remains in power, the more frequently he has to resort to repression, and the higher the risk becomes that he will himself be subjected to repression after stepping down or being removed from power. According to Sonin, as a result, autocrats begin to prefer surrounding themselves with loyal individuals rather than competent ones, as the latter may pose a threat to their position. However, such a substitution leads to a deterioration in the quality of governance and an increasing number of increasingly dangerous mistakes, thereby destabilizing the regime. Sonin specifically considers Putin's invasion of Ukraine as his biggest mistake.

The classic study conducted by Barbara Geddes, Joseph Wright, and Erica Frantz on the change of authoritarian regimes confirms that concerns of autocrats are not unfounded. In 69% of cases, the downfall of a personalistic regime ended with the dictator being killed, exiled, or imprisoned. As noted by the authors, dictators who fear punishment after being removed from power are inclined to initiate wars to prevent such outcomes, even though defeat in a war increases the likelihood of their overthrow. Military actions can help divert citizens' attention from internal problems, introduce emergency measures that prohibit criticism, shift the blame for worsening living conditions onto the enemy, and send rivals to the frontlines.

In 69% of cases, the downfall of a personalist regime ended with the dictator being killed, exiled, or imprisoned

Most often, personalist autocracies engage in conflicts with democracies, while democracies and autocracies rarely fight against each other. Transitional regimes, due to their instability, have a higher probability of getting involved in conflicts compared to established democracies and autocracies. Although democracies themselves often initiate conflicts, so it cannot be said that democracy guarantees peace, personalist autocracies tend to be the initiators when paired with democracies. According to a team of researchers led by Bruce Bueno de Mesquita, who utilizes game theory for political forecasting, this is attributed to the lack of institutional constraints in autocracies and the concentration of power in the hands of a few. Dictators need to convince a smaller number of people of the necessity of starting a war. They distrust their advisors, and so, unlike democratic governments, they choose conflicts with less caution and are more likely to lose. However, autocracies are less concerned about public opinion within the country and are less sensitive to economic and human losses compared to democracies, which makes them willing to engage in wars for much longer periods.

Corruption indeed played a significant role in the Russian invasion of Ukraine. For many years, Vladimir Putin used corruption to consolidate power in his hands and dismantle institutions that could have prevented the war. Corruption pushed him to constantly increase the military budget to maintain the loyalty of the armed forces while creating an illusion of invincibility for the Russian army and fueling the desire to test it on the battlefield. It also provides incentives for the Russian elites to continue a senseless and clearly losing war, as it allows them to profit from government contracts and the administrative chaos generated by the war, while helping them maintain their grip on power.

How effective are sanctions?

To what extent can the greed of Russian elites be used to divide them and end the war? For many years, corrupt elites had been transferring a significant portion of their wealth to the West because they understand that their assets are not protected in Russia. Sanctions have deprived many of them of a substantial part of their accumulated wealth. However, most experts note that the restrictions have not yet had a significant impact since the conditions for their removal have not been specified.

Western officials imply that sanctions could be lifted if Russian troops were withdrawn from Ukraine, but this condition is not enshrined anywhere and is poorly targeted. The parts of the Russian elites that theoretically could influence the decision on troop withdrawal do not have significant assets abroad, while those heavily affected by sanctions do not have real political influence. However, they could do something to end the war in exchange for promises of security and asset return. Yet, the demand to end the war seems unattainable to them and only pushes them towards inaction.

Scientists David Cortright and George A. Lopez from the Joan B. Kroc Institute for International Peace Studies at the University of Notre Dame analyzed the effectiveness of all international sanctions imposed in the 1990s and concluded that the key conditions for their success were the commitment of imposing countries to adhere to the sanctions regime and the creation of positive incentives to exit sanctions. Clearly defined conditions for lifting sanctions on individuals, such as providing support to the Ukrainian army or the Russian anti-war movement, would create incentives for action among Russian elites. Moreover, involving oligarchs in anti-war activities would sever their ties with the Putin regime: the elite would become additionally interested in regime change and ending the war.

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