Netanyahu may be weakened, but authoritarian threat isn’t, warns Russia expert

Netanyahu may be weakened, but authoritarian threat isn’t, warns Russia expert

Ilya Zaslavskiy, an expert on oligarchs, believes that corrupt money from Russia and other kleptocratic regimes bodes ill for Israeli democracy

Simona Weinglass is an investigative reporter at The Times of Israel.

Israeli protesters take part in a mass rally against Prime Minister Benjamin Netanyahu under the banner 'Stopping the Immunity Law — A Defensive Shield for Democracy,' in Tel Aviv on May 25, 2019. (Tomer Neuberg/Flash90)
Israeli protesters take part in a mass rally against Prime Minister Benjamin Netanyahu under the banner 'Stopping the Immunity Law — A Defensive Shield for Democracy,' in Tel Aviv on May 25, 2019. (Tomer Neuberg/Flash90)

In the early morning of September 18, several hours after polls had closed, Blue and White party head Benny Gantz took the stage at his campaign headquarters and thanked his supporters: “It’s still too early to determine the results of the election, but one thing is clear, more than one million people chose to say no to incitement and division, yes to unity, no to corruption, yes to clean hands, no to efforts to destroy Israel’s democracy.”

Over the next few days it emerged that Blue and White had won the largest number of Knesset seats of any party. Blue and White is a hodgepodge of center-right and center-left politicians who came together because they agreed on one thing: Prime Minister Benjamin Netanyahu was systematically undermining the rule of law, the Supreme Court, the police, the free press and other democratic institutions as well as inciting hatred against minorities, they claimed. They felt he must be unseated because, as several of Blue and White’s leaders put it, there was a real danger he would transform Israel into an authoritarian state like Turkey.

While the final results of the election depend on which faction is ultimately able to form a coalition in the coming weeks, the strong show of support for Blue and White suggests that this message resonated with many Israelis. They believe that the country may have, at least temporarily, bucked the worldwide trend of electing populist leaders who denigrate such institutions as the courts and law enforcement as agents of an unelected “deep state.”

Supporters of the Blue and White electoral alliance cheer at its campaign headquarters in Tel Aviv on September 17, 2019, as the first exit polls are announced on television. (GALI TIBBON / AFP)

Pro-democracy activist Orly Bar-Lev expressed such sentiments when she tweeted with relief on September 19, “At the last minute, we managed to divert the helm of the ship that was sailing into the iceberg.”

But Ilya Zaslavskiy, the Washington-based head of research at the Free Russia Foundation, an organization that advocates for a free and democratic Russia and opposes the country’s current regime, warns that the global trend of growing authoritarianism and retreating democracy may be harder to defeat than with a single politician.

He claims that populist leaders, like Donald Trump in the United States, Viktor Orban in Hungary or Recep Tayyip Erdogan in Turkey, are symptoms of a global problem, not the problem itself. If the deeper issue is not addressed, he cautions, one would-be authoritarian may merely be replaced by another.

The deeper problem, Zaslavskiy believes, is that since the end of the Cold War, kleptocratic regimes, most notably Russia, but also countries like Kazakhstan, Azerbaijan, China and Malaysia, have failed to democratize, and instead have exported their values, corrupt practices and countless billions of dollars of corrupt or criminally obtained money to the West. Over time, this process has had a corrosive effect on Western societies, contributing to inequality and undermining the rule of law and democracy. The only solution, Zaslavskiy believes, is for democratic countries to adopt a policy of containment vis-a-vis Russia and other kleptocratic regimes, the chief measure of which would involve stemming the cross-border flow of corrupt money.

Ilya Zaslavskiy. (Courtesy)

In Israel, for example, says Zaslavskiy, one can see the pervasive influence of Russian oligarchs, who invest in Israeli startups, establish charitable organizations, buy real estate, own prominent media outlets and most notably, form close business and personal ties with Israeli politicians and other elites. Not all, but some of these oligarchs, says Zaslavskiy, act as agents of the Russian regime, without necessarily disclosing this to the Israelis they come into contact with.

Zaslavskiy notes that one prominent oligarch, Petr Aven, initially rejected accusations that he worked on behalf the Kremlin, then later reportedly admitted it to the Office of the Special Counsel, as documented in the Mueller report.

In March 2017, Mikhail Fridman, Petr Aven and German Khan, the owners of Russia’s Alfa Bank, sued the opposition research firm Fusion GPS over claims in the famous “Steele dossier,” that the three were allegedly close to Putin and traded favors with him, describing any such insinuation as “defamatory.”

Yet two years later, in April 2019, the US Department of Justice released its Mueller report, in which, Aven reportedly told the special counsel’s office that he does have a working relationship with Putin.

According to the Mueller report, “Aven told the Office that he is one of approximately 50 wealthy Russian businessmen who regularly meet with Putin in the Kremlin; these 50 men are often referred to as oligarchs. Aven told the Office that he met on a quarterly basis with Putin, including in the fourth quarter (Q4) of 2016, shortly after the US presidential election. Aven said that he took these meetings seriously and understood that any suggestions or critiques that Putin made during these meetings were implicit directives, and that there would be consequences for Aven if he did not follow through.”

Aven also reportedly described how he worked to set up a covert back channel between the Kremlin and the Trump administration.

Two months after the report’s release, in June of this year, Prime Minister Netanyahu presided over Aven’s Genesis Prize award ceremony and posed for a group photo with Aven, which was then posted to the Israel Foreign Ministry website.

From left to right: Ekaterina Kosina, Peter Aven, Jessica Kraft, Robert Kraft, Sara Netanyahu, Benjamin Netanyahu, Mikhaill Fridman, and Natan Sharansky on the red carpet at the Genesis Prize ceremony on June 20, 2019. (Haim Zach/GPO)

Aven isn’t the only oligarch with ties to the Russian regime and to Israeli politicians, notes Zaslavskiy.

Viktor Vekselberg, who was sanctioned by the US Treasury in April 2018, has had business ties to Blue and White leader Benny Gantz as well as to a company linked to Democratic Union member Ehud Barak.

Vekselberg was sanctioned by the United States for his connection to “malign activity” by the Russian government around the globe, “including continuing to occupy Crimea and instigate violence in eastern Ukraine, supplying the Assad regime with material and weaponry as they bomb their own civilians, attempting to subvert Western democracies, and malicious cyber activities.”

Vekselberg denies the allegations and has hired lawyers to try to overturn the sanctions.

Vekselberg was reportedly the main investor in Fifth Dimension, a now-defunct Israeli cyber-surveillance startup where Gantz was chairman of the board.

In this Jan. 26, 2017 file photo, Russian President Vladimir Putin, left, poses for a photo with Renova CEO businessman Viktor Vekselberg during an awards ceremony in Moscow’s Kremlin, Russia. (Alexei Druzhinin, Sputnik, Kremlin Pool Photo via AP, File)

Ehud Barak (who occupies the 10th spot on the Democratic Union slate) was appointed in 2014 to the board of CIFC Group,  which at the time was owned by the Columbus Nova investment fund, which has been hit hard by US sanctions due to a large investment by Vekselberg.

According to a recent article in the New York Times, Columbus Nova and its CEO Andrew Intrater “are American and not directly subject to the penalties, but his cousin and biggest investor is the oligarch Viktor Vekselberg, who was hit with sanctions in April last year.”

Moldovan-born Yisrael Beytenu party head Avigdor Liberman has his own ties to a number of prominent oligarchs. Until 2012, Liberman was under investigation over large sums of money that entered bank accounts belonging to his driver and daughter from a number of foreign businessmen with ties to Russia. The case was closed in 2012 by-then attorney general Yehuda Weinstein, without ever being heard in court. One of the businessmen, Michael Cherney, was photographed hobnobbing with Liberman on the night of September 17, as the election results came in.

Should the personal and business ties of so-called oligarchs with politicians concern Israelis? The Times of Israel discussed this question with Zaslavskiy.

The Times of Israel: There are many so-called oligarchs in Israel who are close to this or that politician. Is that a problem? After all, about 15 percent of Israel’s population is from the former Soviet Union, so business and personal ties between prominent individuals in Russia and Israel would seem only natural. Isn’t it reasonable to assume that oligarchs who cultivate ties with politicians are doing so in a private, as opposed to political, capacity?

Ilya Zaslavskiy: You have to look at this on a case by case basis. What sort of business deals are they doing and are the oligarchs promoting narratives that are useful to the Kremlin?

I recently wrote a report with Kateryna Smagliy called “The Kremlin’s Hybrid Analytica,” where we touch on some of the oligarchs who happen to be Jewish. These individuals promote Kremlin narratives like the role of Jewish veterans in the Second World War, while at the same time they exonerate the Soviet Union’s role in the Second World War. In some cases they try to present the Ukrainian leadership as Nazis or downplay Ukraine’s role and exaggerate the Soviet Union or Russia’s.

In Israel and in America these oligarchs promote the so-called St. George’s ribbon and veteran’s parades as well as advocate for the removal of US sanctions against Russia.

What’s the difference between an Israeli politician having a connection to a wealthy American businessperson as opposed to a relationship with someone like Vekselberg? Aren’t the American businessman and the Russian businessman essentially doing the same thing?

The United States government, which is an ally of Israel, has said publicly that Vekselberg is part of Putin’s regime, that he’s corrupt and that his activities have undermined the United States. He was put under sanctions for essentially being an agent of Putin’s regime.

I’ll give you an analogy. Let’s say you have a drug dealer who is considered a drug dealer in several countries but hasn’t been put in prison. Some countries put him under sanctions and many Western states consider him a drug dealer.

And then let’s say he comes to Israel and invests in a pharmaceutical company. Shouldn’t the public be concerned?

Let’s say certain Russian oligarchs are investing in Israeli startups and cultivating Israeli politicians. Do you think their goal is political as opposed to commercial?

It can be both. Oligarchs can invest in Israel for both political and commercial reasons. Many people take these Russian oligarchs at face value as capitalists. But for many of them, an investment in an Israeli startup or other venture is a risk-free investment because they are backed by the Russian state. If they lose money in such a venture, they will get compensated at the expense of Russian taxpayers.

It’s like if the oligarch comes to a casino. And someone sponsors them to put chips on most of the numbers on the roulette wheel. Normally, a person would not be able to do that because they can’t afford it. But the Russian state tells you, go ahead and put a chip on 30 out of 36 numbers.

The chances are one of your bets will win and you will appear to be a commercial success. No one cares that you lost all your other bets and that your net profit is a net loss, actually.

Generally, oligarchs are not liberal capitalists. They come from a kleptocracy that is ready to support them. They derive their profit from being an operative for cash flows of the state. At the same time, they can have political goals and get rewarded by the Kremlin for achieving those.

So you’re saying when some oligarchs invest money it’s not really their own money? Part of it is state money?

Well, I believe many Russian oligarchs are frontmen or handlers of cash flows, because initially they got their money with the help of the Kremlin anyway. They are essentially operating within a system of “state capitalism,” where most of the profits are achieved not through competition, but through monopolies, through deals.

Many oligarchs are inept businessmen. They would not survive without support from the state and its deep pockets.

So they’re making easy money?

I’m not anti-capitalist. It’s a natural desire and it’s fine that someone wants to get rich. The whole question is do they want to do it legitimately and do they have something to offer? Because the way to get rich legitimately is to be innovative, to understand the market before everyone else, to be hardworking, to risk your own capital in a legitimate way.

But there’s a good chance you could fail and not get rich. Last year, the Times of Israel investigated a company called Psy-Group. One of their main clients was [the U.S.-sanctioned] Oleg Deripaska, according to a report in the New York Times. The company was involved in social media influence campaigns. And we saw a document where a young employee, a recent graduate of the Interdisciplinary Center in Herzliya, was earning over NIS 30,000 ($8,500) a month. The average salary in Israel is closer to NIS 10,000 a month. We wondered at the time why that company paid such high salaries.

Russia has very deep pockets at the expense of the Russian taxpayer.

You see that sort of thing in Israel. Someone comes out of an intelligence unit and they take a job or start a company that does surveillance or invades peoples’ privacy or deceives people over the internet — because that’s their skillset and they can make more money that way than in a more traditional job. And sometimes these ex-Israeli military operatives end up working for criminals or kleptocratic regimes.

I keep on giving this example to everyone. Michael Flynn was a high-level American general. He got out of the system. Where could he get money? In Cold War times he would have been afraid to work with Russians. He would have considered it to be treasonous.

US President Donald Trump’s former National Security Adviser Michael Flynn arrives for his sentencing at the US District Court in Washington, Tuesday, Dec. 18, 2018. (AP Photo/Manuel Balce Ceneta)

In our times it’s not considered treasonous. And guess how much money Russians paid him? Not much. About fifty thousand dollars. For that price you can get a high-level American general to attend a gala dinner in Russia and sit next to the president. It’s like El Dorado for Russia’s intelligence services. In Soviet times to even approach someone like Flynn would have been too hard, there would have been too many shields around him. Now you can easily hire such people with relatively inexpensive contracts that look generous to those targeted people.

And for the people who accept these contracts, it’s difficult to resist. People have cognitive dissonance, they make excuses. They say, “I’m just doing a small thing which would not necessarily undermine our state. Everyone does it. This is just a private sector job.”

It’s pretty amazing how often people can explain it to themselves. On some deeper level I’m sure these people are smart enough to understand that no one would pay such money for no reason.

When you look at all these stories with Cambridge Analytica, with ex-intelligence people who work for oligarchs and autocrats, with public relations people and lawyers who work for them, they all have explanations why it’s okay for them to do this. And in a way I almost understand them because we are living in a more and more kleptocratic world. Even in the West things that used to be unacceptable are being normalized.

This is a very congenial environment for Russian intelligence services, because now they can spend much less money and in broad daylight do the same things that were so difficult to do in Soviet times.

Let’s say that Kremlin-linked Russian oligarchs are trying to cultivate Israeli politicians. It doesn’t necessarily mean they’re successful at it, but let’s say that’s their intention. Why would they befriend politicians on both the left and right, politicians with corruption suspicions against them and politicians who supposedly oppose corruption? What might the rationale behind that be?

You have to look at Russia’s strategy everywhere else. As I have mentioned, Russia has endless pockets at the expense of Russian taxpayers. They put bets on all the numbers on the roulette wheel and see which one wins.

It might sound illogical to place these bets on completely different political parties, parties on the right and left, parties that are pro-corruption and against corruption. But there is total logic to it, because Russia is ideologically fluid. When necessary they can appear liberal and when necessary they can appear traditionalist, just to gain influence.

The point is not to gain leverage necessarily. It’s a gradual, long-term strategy. The point is to gain access. Once you cultivate one person you can get introduced to other people. You can also use someone’s good reputation to launder your own reputation.

All of that is even before the main goal which is to try to cultivate them politically, to get them to make political concessions to Russia.

But even if you don’t extract anything illegal or hardcore from these politicians, they are less likely to act aggressively against you if something happens. Even if you don’t get any outright benefits, you may get some self-censorship and self-restraint from them.

They will think to themselves. “Oh my God. I have been partners and I have met with these people. They are dodgy. Aמd now if I start acting against them, they might expose this. Maybe I should just shut up and let someone else deal with this.”

But there is no one else because everyone else has been co-opted.

What kinds of things, for example, would Russia want from Israeli politicians?

I don’t think Russia wants to pursue any specific domestic policies within Israel. They don’t give a flying kite, as they say, about whether your ultra-Orthodox Jews go to the army or not.

They are concerned with how Israel’s foreign policy can be bent and twisted toward Russian regional interests and Russian global interests.

So for instance, can they neutralize Israel’s reaction to some of the things Russia is doing in Syria? Can they push Israel away from the United States on some of these issues?

Can they make Israel at least neutral in terms of sanctions against Russia. All reasonable states have joined forces against Russia. And the goal would be to split Israel away from that group.

For instance, it was an amazing achievement for Russia that Israel abstained from the vote on Crimea at the United Nations level.

Other goals would be to make Israel silent on the situation in Ukraine, to get Israel and Israeli politicians to legitimize Putin on the global scene, to meet with him, to praise him for his support of Jewish communities, to support his parades for veterans and to legitimize him in many, many other ways, for instance through Jewish organizations and big public events.

In 2017 Knesset members for Yisrael Beytenu introduced and got a law passed commemorating May 9 as a national holiday, as the day the allies won victory over the Nazis. You’ve said that celebrating May 9 as opposed to May 8 is part of a Kremlin narrative?

That’s an amazing achievement for Russia. The rest of the world celebrates the fall of the Nazis on May 8. Celebrating it on May 9 is essentially Stalinist propaganda. Stalin wanted to call the war the great patriotic war to exaggerate the Soviet role in the war and to exclude the Molotov-Ribbentrop pact and the Communists’ collaboration with Nazis until 1941.

Avigdor Liberman, right, and Russian Defense Minister Sergey Shoigu shaking hands with veterans at the IDF’s Kirya headquarters in Tel Aviv on October 16, 2017. (Ariel Hermoni/Defense Ministry)

And it is used today to exaggerate Russian losses and Russia’s contribution to the war as well as to to argue that the West still wants to attack Russia and that there are still many Nazi forces around the world, especially in Ukraine.

Why should Israelis object to their leaders being influenced by Russia?

Because increasing Russian influence in Israeli politics will lead to the corruption and co-optation of leading political figures. You will have more and more fraudulent business activity on your soil. Wherever Russian oligarchs come they always bring their business practices.

You will have higher real estate prices in the city centers. There will be less social mobility and competition in all walks of life.

You will see more Russian control of your Interior Ministry and police force, as has happened in several European countries. The rule of law will be undermined.

Israel’s rule of law appears to have been undermined already.

Trust me it can be undermined much, much further.

You might see the introduction of one-party or one-branch rule, with the executive controlling the other branches of government. You might see extremist policies inside the country, so that in the long-term Israel could turn into a theocratic, authoritarian state that tramples on liberal values and democratic institutions.

You might see the harassment and tarnishing of the reputation of people who try to stop these trends. Essentially you might see the deterioration of separation of powers, of governance, of your judicial system. And then eventually Israel could be engaged in many more conflicts because that’s what allows an authoritarian state to justify its lack of democracy.

Israeli citizens should know that the Kremlin under Putin has a consistent track record of creating frozen and not-so-frozen conflicts because this is where the Russian regime operates like a fish in the water. It’s a fish that likes muddy water.

Russia has been shown to prolong and even instigate conflicts in places like Transnistria, Nagorno-Karabakh, in Georgia, Ukraine and all three Baltic states. It continues to support a kleptocratic regime in Venezuela. Russian actions in Syria are a continuation of that policy. The idea is to create havoc in a region that is important to Western allies and get benefits from that.

I think it’s interesting that you connect criminal activity and kleptocracy with rising authoritarianism. You’re saying there is an economic component to this trend?

It’s not easy to trace the connection, but there are some instances where it can be shown visibly, like real estate. In many Western capitals it’s now affordable only to people who make outrageous sums of money.

There is a global trend where kleptocrats invest in luxury real estate as a financial instrument, as a way to launder money and as a safe haven. It’s not so easy for them to open bank accounts anymore.

When the price of luxury real estate goes up, all other real estate goes up, because of the crowding-out effect. When you have gentrification and the building of more and more luxury apartments in the city center, then there are fewer regular apartments and their prices rise as well.

And then there’s social mobility. How many decent jobs can you get and what sort of decent things can you do even if you have a good education? The number of choices is narrowing for ordinary people. It’s partly because of these trends and partly because the service industry for wealth defense is expanding at the expense of ordinary jobs.

What you’re describing sounds very familiar to people who live or work in  Tel Aviv. Apartment prices are sky-high. Many residents do seem to be employed in what you call the “wealth defense” industry: lawyers, accountants, real estate agents. There is a preponderance of high-tech workers as well but what often doesn’t get discussed is that some percentage, it’s not clear how high, of the high-tech industry is fraudulent. It’s essentially theft and money laundering with a high-tech veneer. The Times of Israel has written many articles about this. And the problem is there’s no law enforcement. Israeli law enforcement does not crack down on the fraud, which itself may be a sign of corruption. This allows the criminality to expand. It’s hard to know how prevalent the phenomenon is but I can imagine that if large numbers of people are involved in unchecked fraudulent activity it might contribute to the rise in real estate prices.

We have to ask ourselves why is this allowed to happen. Because there are fraudsters and people who want to get quickly rich as far back as we can trace the human race.

One reason is because since the end of the Cold War the idea that any business is good business has become more and more normalized in the West.

The second reason is because Eurasian kleptocrats have learned how to exploit the Western financial system and the whole Western “wealth defense” system. They can hire all these ex-intelligence people, public relations people and lawyers and do their dodgy business in broad daylight with defense and shielding from these people.

My analogy is that Western business practices and democracy are like a clean lake next to a swamp. In Cold War times the lake and swamp were separated by a barrier. But the floodgates have now been opened.

People thought the clean lake would take over the swamp. But that’s not what happened. The natural process is for the swamp to take over the clean lake.

How do you stop that process?

You stop it by once again shielding the clean parts of the water from dirty ones, by creating filters, by removing weeds, by not dumping more waste into the water.

I advocate a new containment strategy for the West against Eurasian kleptocracies. Russia is the most aggressive and brazen player, but there are others. It’s basically almost the whole former Soviet space but also places like China, Malaysia, African states, Venezuela. These countries are exporting their corrosive practices to the West.

Because a lot of this kleptocratic money enters the West through anonymous offshore companies, the single most important thing the West can do is not allow accounts with anonymous beneficial owners.

The whole offshore system should be reviewed. Why was it installed in the first place? Has it been serving its initial aims and goals? What sort of things is it serving now? How can we make financial transactions more transparent and accountable?

So you’re saying the single most important thing Western democracies can do to check the rise of authoritarianism is stop dirty money flows?

Yes. By this point we have many indications about the malign influence of these kleptocrats. We’ve seen election meddling, annexation of parts of the Ukraine. It’s the first time that a major European power just shattered the security system that existed for half a century since the Second World War.

As an analyst I only have so many ways to say that the West is on a trajectory that will continue and more and more catastrophes will happen. How many more do you need to start dealing with this and to create bold containment? Because containment is still a peaceful and defensive policy.

read more: