The Myth of Strategic Corruption

There is no escaping the demand – in policy circles, at least – to view current times through a geopolitical lens. It is an inevitable consequence of the very visible fracturing of the world order. This is most keenly felt in the European Union (EU), where Ursula von der Leyen’s “geopolitical [European] Commission” has made the bloc’s ability to assert itself in global affairs the acid test of good policy. The hope is that this new lens will correct more parochial or naive visions of the world. Applied indiscriminately, however, such a view can distort policymakers’ understanding of challenges and the appropriate responses.

This I argue is the case with so-called strategic corruption, sometimes presented as a recent phenomenon that demands a distinctive policy response. In fact, this concept is neither new nor structurally different from more familiar forms of graft. The best defence against corruption is a thorough implementation of existing integrity policies in public- and private-sector institutions. The alternative is the securitisation of anti-corruption polices, which can lead to futile or actively harmful policy responses, such as those contained in the EU’s Defence of Democracy package.

Strategic Corruption and foreign interference

The idea of strategic or geostrategic corruption has gained currency among anti-corruption experts and foreign policy analysts to describe questionable interference by authoritarian or semi-authoritarian governments in the democracies around the world. A 2023 report for the European Parliament’s Socialists and Democrats (S&D) group, published in the wake of the Qatargate bribery scandal, distinguished between “classic” corruption scenarios and “geostrategic” corruption. In the former scenario, the private sector uses bribery and other methods to secure favours from public-sector officials, whereas in the latter scenario “states …opt for strategies to influence public policies outside the lawful process of diplomatic relations and agreements between States”.

This supposedly new scenario – as exemplified by the alleged meddling of Qatar and Morocco in EU decision-making processes – requires “a more precise diagnosis of the risks and an analysis of how to reinforce and develop additional prevention policies to those that already exist”. A recent analysis of the way that the EU leaves itself vulnerable to strategic corruption by China and Russia also focused on this new, illegitimate mode of conducting foreign policy, defined as a method of creating “relationships of financial dependence that distort the behaviour of public officials and advances the interests of hostile undemocratic regimes that want to do us harm”.

There is no denying that bribery and corruption are routinely used as part of the foreign policy tool kit of many states.  Over a decade ago, investigative journalists, national prosecutors, and others forensically documented the bribery of European politicians by entities linked to the Azerbaijani government in an attempt to burnish the international reputation of the regime of President Ilham Aliyev and silence criticism of human rights abuses.

More recently, there have been some spectacular allegations of bribery of US and EU politicians by North African and Middle Eastern states. New Jersey Senator Robert Menendez stands accused of using his position on the US Senate’s Foreign Relations Committee to help Egypt secure US military aid in exchange for hundreds of thousands of dollars in cheques, cash, and even gold bars, according to Department of Justice officials. The Qatargate scandal that erupted in Brussels in late 2022 revealed lurid allegations of Qatari and Moroccan officials attempting to influence European Parliament resolutions by using the services of former parliamentarians to bribe current ones.

Russia has in many ways pioneered this tactic in its near abroad and made liberal use of both illegal and legal forms of corruption to achieve political and economic objectives over the last two decades, particularly in relation to pipeline politics. The use of the so-called revolving-door phenomenon – attracting ex-politicians such as former German Chancellor Gerhard Schröder to serve as executives in Kremlin-affiliated private companies – was a clear strategy to gain approval for the Nord Stream 2 pipeline.

Less well known, but equally brazen, is the aborted South Stream pipeline, first agreed in 2007, which would have channelled Russian gas through Bulgaria, the Western Balkans, and Italy. The project got off to an inauspicious start with an attempt by Moscow to bribe a Bulgarian deputy energy minister, followed by plans to surreptitiously direct construction contracts to firms linked to high-profile politicians. Russia’s second-largest state-owned bank (a major investment partner in the project) recruited a former Bulgarian finance minister, his former deputy, and the minister’s brother in this period. The project was finally cancelled in 2014 after Russia’s annexation of Crimea.

A new kind of graft?

Does the threat and use of corruption by autocratic regimes hostile to the interests of democratic polities amount to a new scenario in international relations, as some observers maintain? This seems dubious. The use of graft to grease diplomatic wheels is as old as diplomacy itself. Corruption and bribery was part of the standard operating procedure of European imperial expansion from the 16th century onwards. As one historian has put it, the British in the Middle East and Asia operated on the principle that “everything and everyone had a price”. Officials back in Whitehall may have held their nose at such practices, but imperial interests demanded that local rulers must be “courted at no matter what cost – albeit through gritted teeth.” The use of state-owned or state-affiliated companies as vehicles for co-optation and bribery to achieve foreign policy objectives also has a rich pedigree in the history of imperial joint ventures, such as the Dutch East India Company, the British East India Company, and the Royal Africa Company.

Even if it can be conceded that geostrategic corruption is not a new phenomenon, perhaps it is a different kind of corruption? The most obvious difference with the classic scenario is that today, the bribes and other inducements are offered by states rather than private individuals or companies. In addition, the primary motivation is not private economic benefit – for example, individual enrichment or a bump in a share price – but to advance the strategic interests of the state or polity.

The clearest statement of this view is contained in a 2017 Transparency International paper. According to the paper, corruption in a foreign policy context can “enable elites in one country to hold whole political classes in other countries to ransom, exert illegitimate influence over another state, sow insecurity and instability, and undermine government institutions”. Most importantly, this kind of corruption does not aim at economic benefit; rather, “it often relies on a willingness to forgo economic gains in favour of influence [or] favourable political outcomes”.

An analysis of Russian energy giant Gazprom’s activities in Ukraine before the 2014 Maidan Revolution would seem to support this view. Substantial payments were funnelled to companies linked to political figures, and the price of gas fluctuated according to who was in power rather than market dictates. The economic benefit to the company was never clear; instead, the aim seemed to be to ensure Ukraine’s strategic dependence on Russian gas, which, in turn, Russia could use as a lever for its foreign policy interests. More generally, a 2011 assessment found that the total losses due to waste and corruption in Gazprom may have reached $40 billion, compared with $44.7 billion in profits.

Private sector influence strategies

Given the scale of such corruption and the flagrant disregard of these transactions for normal economic calculus, it may be tempting to think that there is indeed a difference in kind rather than degree between so-called strategic and classic corruption. But the differences are in fact rather superficial. Two features of strategic corruption are also present in private-sector graft.

Firstly, structural dependencies can also be observed in the phenomenon of regulatory capture, where regulated entities end up manipulating the state agencies that are supposed to control them. That manipulation can take many forms, from illegal to legal and all shades in between. Legal forms include engaging in excessive or undue lobbying, manipulating the informational environment, and using the revolving door to skew the judgement and career incentives of officials.

The global objective of all these forms of manipulation is to establish a strategic dependence of the regulator on the regulated. Heavily regulated sectors, such as pharmaceuticals and finance, are particularly prone to this kind of capture. For example, a 2018 study found that 11 out of 16 medical reviewers engaged by the US Food and Drug Administration (FDA) involved in approving products went on to work for the companies whose products they regulated. The FDA’s lax approach to the regulation of opioids in the early 2000s – an approach that the American Medical Association’s Journal of Ethics called “all the more troubling in light of the close relationship between the agency officials responsible for opioid oversight and opioid manufacturers” – is a good example of how such dependencies can “sow insecurity and instability and undermine government institutions”.

Secondly, the most corruption-prone sectors are often arms-length national champions that operate within explicit or implicit national foreign policy strategies, notably banking and finance, defence, and extractive industries. The foreign policy goals served are leverage over the international finance system, strategic dependence for national security, and access to critical raw materials, respectively. In some cases, companies involved in corruption scandals are former state-owned companies, such as Italian oil and gas behemoth Eni, or firms in which the state has a significant investment or shareholding, such as French aviation company Dassault, which was prosecuted for its role in a defence-procurement scandal in Belgium in the 1990s.

Indeed, much of the contemporary anti-bribery legislative framework – the US Foreign Corrupt Practices Act, the UK Bribery Act, and the Organisation for Economic Co-operation and Development’s Anti-Bribery Convention – was designed in response to the perceived impunity of defence companies such as the Lockheed Corporation and BAE Systems in their relations with foreign governments. The situation in which it was not only legal but also tax deductible for European companies to bribe foreign officials persisted until the mid-1990s. It is an open question how much of this activity was known or tolerated by government officials, but it is not inconceivable that the attitude was that foreign officials should be “courted at no matter what cost – albeit through gritted teeth”.

Strategic or state-sponsored corruption is therefore neither new nor significantly different from other forms of corruption that it requires a wholly new policy response. Both varieties converge in the way that they exploit vulnerabilities in government institutions and decision-making. Neither variety can succeed without individual lapses in integrity among the decision-makers it targets.

The case of US Senator Menendez is instructive in this regard. He and his wife, Nadine Menendez, who were partners in a series of corrupt schemes, are accused of accumulating a Mercedes-Benz, gold bars, and nearly $500,000 in cash in return for promises to use their positions not only to help the Egyptian military but also to intervene in the judicial case of a New Jersey businessman. The illicit gains of domestic and foreign corruption were co-mingled. Payments from Egyptian sources were routed through a front company and a fake consultancy set up by Nadine Menendez, a classic tactic to disguise the source and ultimate beneficiaries of corrupt funds.

The Qatargate allegations, shorn of the more lurid details and the sponsorship of Gulf and North African states, also bear many of the hallmarks of classic corrupt schemes, which typically use consultants, front companies, or intermediaries to make payments to decision-makers. In this case, it was the fake non-governmental organisation (NGO) Fight Impunity that operated as a foreign policy consultancy for a sovereign client. Unlike legitimate forms of consultancy, it allegedly used bribery to achieve outcomes for its client, leveraging the networks of a former member of the European Parliament (MEP) and exploiting the willingness of sitting MEPs to take payments for making statements and influencing votes.

The distorting lens of strategic corruption

The full focus of policymakers’ attention should be on preventing these shared lapses in integrity standards that are the weak points in institutions. Doing so is a matter of honouring familiar anti-corruption nostrums. The basic formula is easy to state, if difficult to implement properly. The natural inclination toward integrity in public officials and politicians should be reinforced through clear standards, for example on how to deal with conflicts of interest, an exemplary tone from the top, regular advice and training, and support for a culture of openness and accountability. At the same time, the likelihood of detection and sanction should be increased through an effective transparency regime, strong accountability watchdogs, including journalists and civil society, and credible enforcement mechanisms.

Such a robust integrity framework is the best defence against the varieties of corruption surveyed above. For example, existing revolving-door regulations, if properly implemented and enforced, could deal with many state-sponsored co-optation strategies. One of the main problems with these regulations, at both the EU level and the national level, is that moves to private-sector companies are virtually never prohibited, no matter how great the risk of a conflict of interest. Instead, such moves usually come with difficult-to-monitor conditions, such as a prohibition on lobbying former colleagues for what is known as a cooling-off period. Often, such conditions are poorly publicised, easily circumvented, or ignored. Preventing moves by former politicians to foreign state-owned companies on conflict-of-interest grounds or properly enforcing cooling-off periods would close down one channel of undue foreign influence.

This is a laborious, unglamorous agenda that demands significant resources and political capital. There are costs to policymakers shifting their attention elsewhere. Unfortunately, this is precisely what is happening with a misguided focus on strategic corruption, which can distort the view of the appropriate policy response to integrity lapses.

The most harmful distortion is the securitisation of anti-corruption policies: efforts to reframe these policies as primarily a means of countering an external security threat and to refashion integrity tools, such as lobby registers, for this purpose. This can already be observed in the EU institutions’ response to the revelations surrounding the Qatargate scandal. The S&D group report, by branding what happened as a new scenario of geostrategic corruption, arguably exonerates the European Parliament from the failures to implement its own transparency and integrity rules by suggesting that these events could not have been anticipated.

The special committee established by the parliament to make recommendations following Qatargate made “reinforcing the security culture of the European Parliament” its priority. Among the committee’s proposals are the need for security screening of parliament personnel “for possible … non-European influence”. It takes little imagination to see how such a proposal might be abused by a parliament with a more xenophobic bent. Under the heading of “integrity of Parliament work”, a hotch-potch of external bogeymen is invoked, including RT (formerly Russia Today), and the Muslim Brotherhood, despite none of them having any relevance to the Qatargate scandal.

More worrying than a non-binding parliament report, such narratives are also evident in the European Commission’s Defence of Democracy package, published in December 2023. The flagship policy to counter foreign influence is a proposed directive that would attempt to make interest representation – lobbying – on behalf of foreign governments more transparent. Lobbying across all sectors can be associated with corruption risks and is one vector for regulatory capture, but this lop-sided approach sees risks only in the activities of lobbyists in the service of governments from outside the EU.

Worse, the proposal’s provisions would capture a large swath of legitimate civil society activity that is funded from outside the EU while failing to capture much of the illicit funding that is channelled through seemingly innocuous companies, as in the Menendez and South Stream scenarios. This risks stigmatising civil society organisations as the mouthpieces of foreign agents while doing nothing to reduce malign foreign influence operations, let alone preventing future corruption scandals.

Similar objections could be levelled at proposals to prevent politicians and officials from receiving funds from high-risk states or entities linked to such states. Even assuming the legal obstacles to such proposals can be overcome, they will at best be a distraction from robust implementation of existing rules that apply to officials regarding conflict-of-interest management, public asset declarations, and revolving-door regulation. At worst, these proposals will stigmatise or prohibit legitimate activity while doing nothing to prevent the flow of illicit funds through front companies and other vehicles favoured by organised crime and money launderers.

This is not to say that there are no ways of aligning foreign policy objectives with anti-corruption goals. The commission’s proposal to allow for targeted sanctions on individuals and networks outside the EU engaged in systemic corruption is a good example of how to increase the reach of existing anti-corruption instruments.

Avoiding bunker mentalities

The defence of democracy is not merely a slogan but one of the most important and urgent challenges that Europe faces today. A resolute defence needs to complete and strengthen basic integrity and anti-corruption frameworks that have been sorely tested by the ability of both autocratic governments and vested private interests to exploit their weaknesses. The growing securitisation of this agenda, as part of a narrative about how societies and institutions are under attack from foreign powers, will distort policymakers’ understanding of what needs to be done and lead to futile or counterproductive new policy initiatives. A bunker mentality is not conducive to the kind of open and accountable government that is the best bulwark against corruption.

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