Illicit Russian billions pose threat to EU democracy

There was nothing illegal about it, but both sides went to some lengths to conceal their activities.

The money came or was to come from Kremlin-linked banks, funds, and oligarchs instead of from the Russian state budget.

The €11 million was also funnelled via opaque structures in Cyprus to accounts controlled by party leader Marine Le Pen or by her father and former party leader Jean-Marie Le Pen.

Meanwhile, Germany's Bild newspaper has reported that Russia has funded the far-right AfD party in Germany ahead of elections in autumn.

AfD denied it, but Russia's modus operandi was so sneaky, Bild said, that the party might not have known it was being subsidised. It said, citing German intelligence sources, that Russia did it by selling gold to the AfD at below-market prices using middlemen.

Anton Shekhovtsov, a scholar of the subject at the Institute of Human Sciences in Austria, told EUobserver that Russia also had clandestine links to anti-EU parties on the far left, naming the Left Front in France, whose candidate Jean-Luc Melenchon is a frontrunner in the presidential election, and to Die Linke in Germany.

He said that if French or German journalists wanted to dig further "they should investigate the business activities of the party leadership and of people close to the leadership".

Russia has also cultivated more-or-less open ties with anti-EU parties further afield in Europe.

The list includes opaque "cooperation agreements" between the ruling United Russia party and the far-right FPOe in Austria, Jobbik in Hungary, Lega Nord in Italy, and, in what is still a work-in-progress, with Italy's Five Star Movement.

It also includes behind-closed-doors symposia that were organised by Kremlin-linked Russian oligarchs, such as Vladimir Yakunin and Konstantin Malofeev, and that brought together delegates from Germany's neo-Nazi NPD party, Bulgaria's far-right Ataka party, the far-left KKK party in Greece, and the pro-Kremlin Latvian Russian Union party.

But according to Shekhovtsov, the multi-million euro loans to the National Front appeared to be "an exception rather than a rule" and Russian financial or organisational support for anti-EU parties was not, in many cases, part of a Kremlin plot to sway upcoming elections.

"There is no coherent structure as such - there are various Russian actors who are trying to build ties with the European far-right, for instance. These ties are built on the basis of old networks", some of which go back to the early 1990s, he told EUobserver.

He said some European parties on the far-right or far-left were backing Russian leader Vladimir Putin for free because they "genuinely believe that Putin's Russia is guided by the same ideology they have".

He also said that funding for anti-EU parties was not good value for money because those parties remained independent, and because, the National Front aside, their "political power remains very limited".

He said parties such as the National Front and the AfD were primarily motivated by national issues instead of by foreign policy even if they did take the Kremlin's dime.

"There is no evidence that would suggest that the National Front is a Russian foreign agent," Shekhovtsov said.

"The AfD is independent from the Kremlin and would exist without Russia because it is a phenomenon that is rooted in German domestic politics", he added.

He said EU governments should instead be more wary of Russian efforts to buy the services of influential individuals in Europe.

"Russia would rather destroy the EU through corruption, implying collusion with establishment figures … than through the support of anti-EU forces", he said.

"Having access to the establishment is a more efficient way to exert influence on Russia-related politics", Shekhovtsov added.

No shortage of funds

Recent probes by the ICIJ, a club of investigative journalists in Washington, and by the OCCRP, a similar club in eastern Europe, have showed that there was no shortage of illicit Russian money in Europe that could be used to buy friends in high places.

Probes by US investigators and by Bill Browder, a British-American businessman who became a human rights activist, showed the same.

The ICIJ's "Panama Papers" investigation uncovered a money trail worth $2 billion (€1.9bn) of illicit funds linked to Russian leader Vladimir Putin that were funnelled using a law firm in Switzerland and a bank in Cyprus.

The OCCRP's "Laundromat" probe uncovered a trail worth $20 billion that went through almost every jurisdiction in the EU.

Sixty four million dollars of it ended up in the pockets of beneficiaries in Germany and $6 million in France.

A US probe into Germany's largest lender, Deutsche Bank, showed that it helped Russian clients to secretly move $10 billion out of the country.

Browder's investigation showed that the Kluyev Organised Crime Group in Russia, which had links to interior ministry officials and to the FSB intelligence service, used EU banks to launder $230 million of stolen money.

Thirty three million dollars of it ended up in France and $39 million in Germany.

Suspicion has swirled around certain German and Finnish MEPs in Brussels who appear to act in Russia's interests in a way that does not correspond to their parties' agendas.

It swirled around a prominent German MP in the ruling CDU party who later died in mysterious circumstances in 2014.

It also prompted a rare prosecution of Bela Kovacs, a Hungarian MP, who earned himself the nickname "KGBela" by reference to the KGB, the former name of Russia's FSB intelligence service.

It takes hard evidence and the resources to find it in order to name suspects, however.

When asked by EUobserver if he could give examples of Russian corruption operations in Europe, Shekhovtsov said: "I suspect that schemes such as the Laundromat are used for these operations", but he declined to name individual beneficiaries.

"This would be a very strong accusation, for which really strong evidence is needed", he said.

It also takes courage to name people.

Browder, who transformed his hedge fund in London into an investigative bureau to go after the people who embezzled the $230 million using his former holdings in Russia, has received death threats and relies on British state and private security protection to do his work.

Exposure of the scam led to a string of murders in Russia, including the death in prison of Browder's former lawyer, Sergei Magnitsky.

It also led to the suspicious death of a Russian whistleblower, Alexander Perepilichny, in the UK.

Browder agreed with Shekhovtsov's assessment of the corruption threat to European institutions.

"The more Western people that are feeding at the Russian trough, the more advocates they have to help them with their political objectives", he told EUobserver in a recent interview.

He also agreed with the assessment that buying individual friends was a more "efficient" tool than political party funding if you wanted to influence EU foreign policy.

Relatively cheap

If it takes €11 million or more to help the National Front in France to contest elections, it took just £75,000 (€89,000) to buy the services of a British former attorney general, Browder said.

Browder recently testified in a House of Lords enquiry in the UK that Andrey Pavlov, a Russian lawyer who is on a US sanctions list for his part in the Kluyev Organised Crime Group [KOCG] scam, hired several consultancy and law firms with links to the British establishment to lobby against EU sanctions on Russia.

One of those firms, Debevoise and Plimpton, which has offices in Paris and Moscow as well as London, employs Lord Goldsmith, who was the UK attorney general between 2001 and 2007.

Goldsmith personally signed a letter, seen by EUobserver, "to represent you [Pavlov] in connection with the proposal and any further efforts to make you the subject of targeted sanctions by the European Union" in return for a relatively modest fee.

"Lord Goldsmith sold his name for £75,000", Browder told this website.

He said he could not prove that Lord Goldsmith's fee was paid out of the KOCG's stolen money, but he added: "What we can say is that Pavlov was a beneficiary of the $230 million fraud and he paid for these expenses from his own resources".

Some experts have said there is lack of evidence to support Shekhovtsov and Browder's warning that Russia has far-reaching corruption operations in Europe.

Mark Galeotti, a British scholar of Russian affairs at the Institute of International Relations in Prague, told this website: "While some money used to influence elections comes through companies and oligarchs at Moscow's behest, this is not common and this is about supporting people whose views are useful, not bribing people".

He added that "the idea that there are many officials or parliamentarians in Europe who can be considered [Russian] 'agents' is … questionable".

Browder said one reason for the lack of evidence is that law enforcement agencies have been either too slow or too unwilling to find it.

He said Europol, the joint EU police agency in The Hague, had created a "Magnitsky taskforce" to help trace the stolen funds in Europe.

But he said the KOCG was able to move money from Russia to France via Moldova, Latvia, Lithuania, Estonia, and Luxembourg in a matter of days, while it took at least three months for EU states to agree on bilateral "mutual legal assistance requests [MLAs]" to go after it.

He said the MLAs moved even more slowly if "one country that's a link in the chain becomes uncooperative".

He named Austria and the UK as being among the worst foot-draggers.

He also named Cyprus, which was at the heart of the Panama Papers, Laundromat, and Magnitsky money trails, and whose banks, according to a leaked report by the German intelligence services, at one point held $26 billion of illicit Russian funds - a sum that is bigger than the country's GDP.

Cyprus is a leading opponent of EU sanctions on Russia and has helped Moscow to attack Browder's lawyers in Nicosia.

If its actions were linked to its Russian hoard, it would represent an example of state capture by Russian corruption on a scale that dwarfed the Lord Goldsmith case.

Furs and diamonds

The Laudromat investigation showed that a lot of the Russian funds were spent on real estate, private school fees, rock concerts, furs, and diamonds.

But Mikhail Khodorkovsky, a former Russian oligarch whose political movement, Open Russia, works with Russian expats in the EU to uncover Kremlin operations, said that could be a good thing.

Russia's invasion of Ukraine, its military build-up, and its aggressive propaganda have raised fears of a clash with Nato to levels last seen in the Cold War.

But Khodorkovsky said that if the Kremlin elite had a financial stake in peace in Europe it would make Putin think twice before going further.

"If people took money out of Russia for a good life, then it would be OK. It would make Russia poorer, but safer, because people who have something to lose don't shoot", he said.

"Unfortunately, the same money is now being taken out to influence European society", he said.

A German translation of this article may be found here.