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Legitimacy Crisis: scandals in the heart of the Cypriot Government

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By Rafaela Piyoti

Justice. By Paris Christophi.

 

A new round of UN-led negotiations on the Cyprus Problem is currently ongoing. Representatives from the UN have already held discussions with the leaders of both communities on the island, the Greek Cypriot and the Turkish Cypriot, as well as with the Prime Ministers of Greece and the United Kingdom. But, as the official government of the Republic of Cyprus (RoC) is taking part in the peace negotiations, its legitimacy on the island is at stake. This is the result of a series of scandals that have been revealed in the last six months, to which the government has failed to successfully respond.

The first scandal was revealed by Al Jazeera on the 12th of October 2020, wherein they uncovered that the Cypriot government was selling passports to foreigners who had been previously engaged in illegal activities. After this ‘Golden Passports’ scandal emerged, additional accusations were made against the President of the RoC regarding his approach to the Cyprus Problem. Finally, unprecedented police violence was used on the 13th of February 2021 at a protest against corruption and state authoritarianism. These scandals have challenged the current government and with the parliamentary elections taking place next month, a change might be coming. Al Jazeera’s investigation into the Cyprus Investment Programme revealed that a number of senior Cypriot officials, businessmen and lawyers were involved in discussions with convicted criminals regarding ways to acquire Cypriot passports illicitly. As part of the investigation Al Jazeera revealed a video recording and what they referred to as The Cyprus Papers, more than 1000 leaked documents related to the Cyprus Investment Programme. The controversy became known as the ‘Golden Passports’ scandal and it led to the resignation of Demetris Syllouris, the Cypriot parliament speaker, and Christakis Giovani, a Cypriot MP.

In addition, the President of the RoC, Nicos Anastasiadis, was also accused of profiting from the ‘Golden Passports’ with his law firm amongst those mentioned in Al Jazeera’s investigati. However, according to Anastasiadis, he is not currently involved in its operation, it is instead being run by his children. Anastasiadis is additionally alleged to have travelled to the Seychelles with the private jet of a Saudi Arabian prince who has since acquired a Cypriot passport. Andreas Paraschos, the Cypriot journalist who accused Anastasiadis of receiving economic benefits from the scheme was forced to resign from his job. His resignation has been criticised as a violation of freedom of expression, a basic human right for any democratic government. Furthermore, following the ‘Golden Passports’ scandal, the European Commission has opened formal legal action against the RoC to decide whether the Cyprus Investment Programme was lawful or not. According to the European Commission, ‘Golden Passports’ raise concerns over money laundering and corruption which are prohibited in EU member states.

Paraschos’ accusations about the RoC’s President, however, did not stop at the ‘Golden Passports’ scandal. He revealed that Anastasiadis was considering the possibility of a two-state solution to the Cyprus Problem in a conversation he held with Alexis Tsipras, the Greek Prime Minister at the time, in which Paraschos was present. In support of Paraschos’ claims, the Cypriot Archbishop made a public announcement claiming that in a private conversation he had with the President, Anastasiadis claimed that a two-state solution could be favourable for the Cypriot economy which could continue operating programs like the Cyprus Investment Programme. To make things even worse, in an interview with a Cypriot newspaper, the former UN special envoy for the Cyprus Problem, Espen Barth Eide, has also referred to Anastasiadis’ support for a two-state solution. The RoC’s President defended himself by arguing that Eide has always shown a preference to promote Turkish interests and that’s the reason he spreads such ’unfounded fiction’.

As for Paraschos’ and the Archbishop’s claims, Anastasiadis dismissed their claims as gossip and said that his words have been misinterpreted. Nevertheless, following recent developments on the peace negotiations, Anastasiadis sent a letter with his recommendations about the new peace talks to the UN – the letter has not been made public.

The lack of transparency and the refusal of Anastasiadis to state publicly his opinion on the Cyprus Problem has only further angered Cypriots. NGOs and independent journalists on the island describe the current government of the RoC as an authoritarian regime, rather than a democratic government, and they continue to call for Anastasiadis to resign.

To show their opposition to the government, NGOs and non-profit organisations joined forces, and organised a protest- attended by several hundred people, in Nicosia, the capital of Cyprus, against corruption and state authoritarianism. The covid-19 pandemic and the economic impact of the measures taken by the government to limit the spread of the virus were used as a trigger for the protest, but the more fundamental cause was the dissatisfaction of the people with the government, in light of recent scandals.

According to people who took part, the protest had a peaceful character but once the police got involved to break up the demonstration violence sparked. The police used a water cannon and teargas against the protestors which resulted in several people being injured. One woman was hit by the water cannon and underwent an emergency surgery to save her eyesight. A lawyer who took part in the protest argued this constituted an unprecedented use of police violence on the island. The official statement of the government was that the police were deployed to stop the demonstration as it was violating the rules in relation to Covid-19.

There was no official statement, however, on what the government’s exact orders were and why the police showed such force against the protestors, some of which were families with children. An independent investigation committee has been formed to look into the extreme police violence incident. The organisers of the protest argue that the police brutality is evidence of the oppression that endangers not only the legitimacy of the current government but it is also an attack on democratic values.

The main consequence of these scandals has been a severe damaging of people’s trust in the government of the RoC. Al Jazeera’s investigation uncovered its economic corruption, accusations made by Paraschos revealed President Anastasiadis support of a two-state solution, and unprecedented police brutality made apparent its increasingly desperate attempts to cling onto power. As such, the President of the RoC must either apologise and become more transparent towards the Cypriot citizens, or else resign from his position.

 

Rafaela is a part-time MA student in the Conflict Resolution in Divided Societies programme at King’s College London. She received her BA in War Studies and Philosophy. She is a Staff Writer for the Shield and writes for a Cypriot newspaper. Currently, she is a Research Analyst for London Politica. Her main academic interest is on the role of intelligence in policymaking. She also has a passion for Human Rights and has interned at the Cyprus Refugee Council. Rafaella enjoys traveling and learning about new cultures in her free time.

Financial institutions as enablers of global conflicts: the implications of the FinCEN leaks

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By Sandra Huang

Protesters in Kuala Lumpur, Malaysia calling for then Prime Minister’s resignation over 1MDB embezzlement scandal in August 2015

The fundamental role of the global financial system is often overlooked when it comes to the discussion of international conflict, where attention is primarily concentrated on the state actors involved. However, what is alarming is the actor that is beyond the state control. Given that the financial system is an essential instrument for conflict actors to access their resources and carry out their activities, global financial institutions play a critical role in blocking the flow of money and intervening such activities. Nonetheless, the fact that the financial system is globalised and run by the profit-seeking private sector has made an effective state control challenging and resulted in numerous scandals of its misuse across multiple jurisdictions by the ill-intentioned actors. Consequently, the potential of financial institutions to enable global conflict warrants further scrutiny.

As a standardised control measure, financial institutions in most countries are required by law to submit suspicious activity reports (SARs) to the authorities if a customer activity is suspected of being involved in financial crimes. In the US, SARs are filed to the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury dedicated to combating financial crimes. In 2019, news agencies and investigative journalists worldwide received over 2,000 leaked SARs submitted to the FinCEN between 2000 and 2017 as well as other government reports. Their investigations of the leaked files, publicised in September 2020 and known as the FinCEN leaks, attributed the suspicious financial activities to organised criminals, prominent officials, terrorists and sanctioned individuals who were linked to a number of high-profile security incidents over the last two decades.

Those ill-intentioned individuals exploited the complexity of the global financial system to launder their money so that the illegal aspects of their activities could go undetected. Although the leaked files only reflected pure suspicions of compliance officers in financial institutions, they nonetheless provided valuable trails of scandals in the past and underlined the inadequacy of control measures in curbing financial crime, which has led to a variety of security issues beyond the financial arena.

Among those security issues are socio-economic grievances and associated social unrest. They are usually triggered by the poor governance that failed to utilise public funding to provide better living conditions. For instance, the investigations into the FinCEN files revealed that the Venezuelan construction magnate, Alejandro Ceballos Jiménez, received over $146 million between 2013 and 2014 from government contracts to build public housing, while an excessive amount of the money was suspected of having been diverted to his family members through a money laundering scheme set up by Swiss lawyers. In 2015, an investigation into the housing project suggested that it was overcharged and that it was not properly furnished. The close relationship between the Ceballos family and the ruling elites has granted the family business numerous government contracts and sustained a luxurious lifestyle that can be witnessed through their high-end properties in the US; contrastingly, the ordinary Venezuelans are still suffering from the collapsed economy, poverty and insecurity. Notably, this is only a minor part of more than $4.8 billion involved in SARs related to Venezuela from 2009 to 2017, nearly 70% of which involved public money.

On the other side of the world, Malaysia was struck by large-scale protests between 2015 and 2016 over then-Prime Minister Najib Razak’s alleged embezzlement of billions of US dollars from an economic development fund, 1 Malaysia Development Berhad (1MDB). The scandal, which was brought to light in 2015 following a leak from a former Swiss banker, revealed a complex money laundering scheme, which spanned across multiple jurisdictions and involved Razak and his close associate Jho Low. While the trial over the case has been ongoing, the FinCEN files further revealed suspicious transactions involving over $2.5 billion between 2009 and 2016 linked to Jho Low and the 1MDB fund. Despite strong suspicions, those transactions were still carried out by multiple multinational banks throughout the whole period. Among the banks involved, Goldman Sachs was charged with the largest penalties of $5 billion by multiple jurisdictions for its role in facilitating and profiting from the money laundering scheme of the 1MDB fund. Troublingly, suspicions of corruption and money laundering revealed by the FinCEN leaks are not limited to these countries but are observed on a global scale, largely connected to powerful and well-connected individuals who pursue their self-interest at the expense of public good.

Another security issue stems from terrorist financing, which refers to the way terrorist groups gain access to financial resources to support their operations. To combat terrorist financing, financial institutions are on the front line to detect and block the flow of money that fund terrorist activities. However, there is much to be improved in this area. Among the most notable examples revealed in the FinCEN leaks were transactions involving over $4 billion to and from Iraqi banks in SARs filed by Deutsche Bank’s US branches and Bank of America in 2014 and 2015. During this period, the extremist Islamic State (IS) group controlled a large swath of territories in Syria and Iraq and seized over 120 Iraqi banks. Although the SARs submitted did not clearly state the senders or recipients, which made direct attribution unfeasible, considering IS’s funding sources and financial activities, there is a high possibility that related transactions were made by the IS to channel its funds into the legitimate banking system in order to purchase weapons or receive funding from overseas charities. After all, SARs were filed by the banks with delays, by which point the transactions of suspected terrorist money had already been processed through the global financial system, representing a loophole in the global counter-terrorism efforts.

The FinCEN leaks also revealed other SARs involving large international banking institutions related to the financing of the sanctioned extremist groups Taliban and Al-Qaeda. This brings about another issue that is closely related to international security: sanctions evasion. Sanctions are a series of measures implemented by a country, a regional body, or an international body against targeted countries, groups or individuals for military, social or political reasons in a variety of forms, including financial restrictions, in order to effect changes to the sanctioned targets. On the first line of defence of the financial sanctions are financial institutions, whose compliance is key for a sanctions programme. Regrettably, several global banking institutions have undermined the US sanctions regime over time. For instance, in 2013, the Standard Chartered Bank (SCB) submitted the SARs against its Iranian clients following the whistleblowing of its former employees to the US authorities regarding its breaches of sanctions against Iran. The whistleblowing and the follow-up investigations by the authorities did not give the SCB penalties that were harsh enough to cut ties with Iran. Furthermore, in 2016, an Iranian-Turkish gold trader, Reza Zarrab, was arrested by the US authorities for carrying out transactions on behalf of sanctioned Iranian entities. The SCB only filed SARs against Zarrab and these entities months after the former’s arrest. Despite a number of penalties the bank received for its sanctions violations, the FinCEN files suggest that it had continued to report suspicions on Iran-related transactions until at least 2017, most of which were processed even though an SAR was filed.

Certainly, for financial institutions, gaining lucrative business deals that are likely to come from ill-intentioned actors and protecting the integrity of the financial system are two conflicting goals that are inherently difficult to maintain at the same time. By examining previous FinCEN files, it appears that the penalties imposed by the authorities have not had deterrent effects in the long term. Moreover, under the pressure of legal requirements, filing SARs has become more of a box-ticking exercise to ensure compliance, rather than a serious effort to combat money laundering, terrorist financing and other financial crimes. This is reflected in the FinCEN files where the leaked SARs were either submitted with severe delays, without sufficient information, or in a significant volume. This leads to an inefficient allocation of resources by the FinCEN as it may invest unproportionate amount of time in delving into irrelevant transactions and have limited capacity left to investigate into plausible money laundering cases, hampering its efforts to timely, effectively detect and suspend related illegitimate activities.

To respond to this challenge, the close cooperation between the public and private sector is essential to assist financial institutions in building effective compliance programmes that meet the needs of the authorities. The prevalence of transnational transaction activities also underlines the need for global coordinated efforts to curb financial crimes. These include standardised criteria in compliance requirements across different jurisdictions so that no gaps can potentially be exploited, and a mechanism to effectively share financial intelligence among different countries to facilitate cross-border investigations.

The leak of the FinCEN files has faced criticism because it disclosed confidential information and may impede the investigations by the authorities. Financial institutions may also be reluctant to trust the authorities and file SARs in the future. However, the insights revealed by investigative journalists – who have connected the dots of security events across the world – highlighted the scale of the problem and emphasized the pressing need to improve the current system in order to safeguard not only the integrity of the financial system, but also security at the global stage.

 

Sandra recently attained her MA with distinction in Intelligence and International Security at the Department of War Studies, King’s College London. Previously, she worked as a security consultant in a private company in Beijing and London, collecting and analysing open-source intelligence regarding travel security in Asia-Pacific, Europe and parts of Africa. Her research focuses on financial intelligence and its use to combat transnational corruption and the security implications of global financial crime. You can connect with her on LinkedIn. (Disclaimer: opinions expressed in the article are those of the author and do not represent any organisation.)

Chavez Versus Maduro: Who Did It Worse?

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by Roisin Murray

29 May 2019

Hero vs. Scapegoat? (BBC)

For most of the late twentieth-century, Venezuela was considered the most stable democracy in Latin America, held up as an example for its volatile Latin American neighbours. Venezuela is renowned for being a country rich in natural assets. It is a major producer of oil, as well as a manufacturer of other goods such as gold, diamonds and natural gas. Yet, despite the abundance of its resources, a combination of chronic government mismanagement, corruption and a failed socialism project has meant that Venezuela is on the brink of implosion. The fate of Venezuela is key for the West as the Venezuelan crisis risks wreaking havoc with the international oil market, which would be particularly damaging to its main oil customer, the United States. Challenges to Nicholas Maduro’s legitimacy as President during the escalating political situation have begged the question: who is to blame for the collapse of Venezuela?

This question cannot be answered without considering Maduro’s predecessor, Hugo Chavez. Venezuela’s socialism was the brainchild of Chavez, but his death in 2013 meant he failed to experience the widespread poverty and mass emigration induced partially by his policies. In order to address the question of where culpability lies for the current crisis in Venezuela, this article will scrutinise Chavez and Maduro’s policies and their social impact on the Venezuelan people. This will help to contextualise the origins of the unrest in Venezuela and demonstrate to what extent the cause of the chaos can be attributed to Maduro’s policies, or inherited from his predecessor. Ultimately, this article will seek to demonstrate that Chavez orchestrated the disaster, while Maduro simply executed it.

Ideology

Venezuela’s foray into socialism can be traced to Hugo Chavez, an army officer who called for a ‘Bolivarian Revolution’ drawing on the legacy of Simon Bolivar, the leader of Venezuelan liberation. Chavez was elected president in 1998 after two unsuccessful government coups. He won the election on the platform of redistributing power to the people, a refreshing divergence from the corruption that had dominated the politics of the mainstream political parties for the preceding twenty-five years. In reality, however, Chavez’s presidency did not signify an end to corruption in Venezuela. Rather, he orchestrated a regime that was run according to patronage and nepotism. Furthermore, the ambiguity surrounding the government’s finances also contributed to Venezuela’s poor score on the Transparency International corruption perception index, which ranked the country 165th out of 180 countries in 2012. Nevertheless, the hallmark of Chavez’s rule was his ‘socialist’ agenda, which manifested itself in high government spending, redistribution of wealth and the nationalisation of Venezuelan industries. Chavez managed to win the trust of the working classes by injecting public money into social welfare programmes. One of the most notable merits of his government was the transformation of the ‘ranchos’ or shanty towns. However, as Webber highlights, his leftist, socialist ideology was not a permanent feature of his leadership. Rather, when Chavez entered office as ‘moderately reformist’, his socialist policies conversely began to develop in response to challenges from the right. And, even then, Chavez’s pseudo socialism remained built upon a market-focused approach to the predominantly private-sector economy.

Dissent intensifies as Maduro clings to power (Opensourceinvestigations.com)

Nicholas Maduro assumed power in 2013 following the death of Chavez, his former mentor. Previously a bus driver, he was quick to emphasise his humble origins, immediately establishing an affiliation with the working classes. Maduro appeared fully invested in Chavez’s socialist brainchild. He continued to rule Venezuela with greatly regulated price controls and a highly centralised, hands-on economy- all hallmarks of aspiring socialist regimes. He lacked the presence and charisma of Chavez, but secured legitimacy for his actions by constantly referring to Chavez’s memory and the longevity of his legacy. In this sense, Chavez’s shadow was never far from Maduro’s course of action. Unfortunately, Maduro’s tendency to follow the precedent set by Chavez was particularly replicated in his use of corrupt governance to rule. He centralised his power by establishing a more loyal Constitution Assembly under the rule of a new Constitution, thereby undercutting the opponent led legislature, the National Assembly. He further secured the allegiance of the military by offering it control over profitable businesses. For both Chavez and Maduro, corrupt practices seemed to be instrumental in propping up their regimes.

Economy

Chavez’s socialist dream was primarily financed by the surging price of oil, a material that Venezuela is fortuitously rich in and built its entire economic infrastructure around. Large investments in social programmes, facilitated by the country’s oil reserves, transformed the lives of poor Venezuelans and did much to bolster Chavez’s approval rating. However, the gains that Chavez made for the poor of Venezuela were negated by his eventual decimation of the Venezuelan economy under the auspices of implementing ‘socialism’. Government overspending caused rampant inflation, culminating in a recession in 2014 shortly after Chavez’s death. Furthermore, foreign investment stagnated under Chavez: revenue produced by foreign investment in 2004 amounted to $1.5 billion, in comparison to almost $5 billion in 1998. Culpability for the economic ills of Venezuela cannot be far removed from Chavez’s hands. As Corrales and Penfold point out, Chavez’s level of power over the economy was unparalleled, even in comparison to other leftist regimes of the era.

Venezuela’s persistent over-reliance on oil, initiated by Chavez and inherited by Maduro, became a contentious issue when the oil boom imploded and prices plummeted around the time of Chavez’s death in 2013. Maduro’s solution to prop up the failing economy was to print more money, thus devaluing the Bolivarian currency further. The combination of these ineffective fiscal economic solutions, widespread corruption and gross mismanagement precipitated an economic and political collapse. Nevertheless, Maduro attempted to continue the socialist legacy that Chavez had begun, despite the economic circumstances rendering this course of action unfeasible. Maduro increased the national minimum wage on six separate occasions in 2018, but the positive effects of this move were negligible given the rate of hyperinflation. Maduro is a living proof that Chavez’s socialist experiment was completely unfeasible in the long-term, but stubborn persistence regardless signed Venezuela’s death warrant.

Social Impact

In the short-term, life for Venezuelans had been rejuvenated by Chavez’s measures. Between 2005 and 2014 unemployment rates and poverty rates fell by 50% and infant mortality plummeted. Workers were met with increased increments to the minimum wage, and literacy levels increased sharply. However, the improved lives of Venezuelans cannot be attributed solely to Chavez, and to do so risks overstating the impact of his policies at the expense of minimising the role of oil. As Canon argued, ‘the oil boom has without a doubt contributed an inordinate amount to the current upswing in growth and reduction in poverty.’ And even when society gave the impression of flourishing, this Chavez inspired ‘age of prosperity’ was built on shaky, unsustainable foundations. Chavez’s policies drummed up substantial national debt, and this ‘boom’ paved the way for the inevitable ‘bust’ when the oil prices crashed.

Venezuelan citizens queue for food as shortages worsen (Wall Street Journal)

Nobody has felt the effect of this escalating hyperinflation more than the citizens of Venezuela. Inflation levels have peaked at 1.7 million per cent, obliterating people’s life savings. Savings in bolivars equivalent to $10,000 at the beginning of 2018 only amounted to 59 cents by the end of the year. Widespread malnutrition has emerged due to basic food shortages, with Venezuelan citizens losing a median of twenty-four pounds in weight during 2017. Venezuela’s healthcare system also lies in tatters. Hospitals are lacking in vital supplies, and many HIV-positive and cancer patients are facing shortages of their medication. The growing dissatisfaction with Venezuelan life is reflected in the rate at which citizens are fleeing the country; 1.5 million people emigrated between 2014 and 2017. For those that remain in Venezuela dissent is not easy to express. Censorship of the media obscures the reality of the crisis and the Venezuelan police harshly subdue protesters with tear gas, and on occasion, bullets. Maduro’s recent measures have also resulted in the incarceration of protestors as political prisoners, causing an uproar from human rights groups.

Conclusion

Maduro is bearing the brunt of the criticism from the international community on the handling of the Venezuelan crisis- and rightly so. His economic ‘solutions’ to the recession have only worsened Venezuela’s economic position, he has rejected vital international aid and his authoritarian response to dissenting voices has demonstrated his unwillingness to be held accountable. But it would be injudicious to forget Chavez’s part in determining the crisis. The situation he created formed a set of unsustainable preconditions that Maduro was bound by when he inherited leadership of the country. His policies, that promised to uplift the lower classes, were inadvertently responsible for their being plunged into poverty years down the line. His irresponsible economic measures and unsustainable ideals set Venezuela on a course to crash and burn- but just not during his lifetime. Both Maduro and Chavez should be held equally accountable, whether they are here to face the charges or not.

Roisin Murray is currently working as a researcher at a private security consultancy. She holds an MA in International Relations from King’s College London. Her research interests include diplomacy, authoritarian regimes and counter-terrorism.

Bibliography

Canon, Barry. Hugo Chávez and the Bolivarian Revolution. Manchester: Manchester University Press, 2009.

Ellner, Steve and Miguel Tinker Salas. “The Venezuelan Exceptionalism Thesis: Separating Myth from Reality.” Latin American Perspectives 32, no.2 (2005): 5-19, https://www.jstor.org/stable/30040273.

Webber, Jeffery R. “Venezeula Under Chavez: The Prospects and Limitations of Twenty-First Century Socialism, 1999-2009.” Socialist Studies: the Journal of the Society for Socialist Studies 6, no.1 (2010): 11-44, http://dx.doi.org/10.18740/S47W2R.

Corrales, Javier and Michael Penfold. The Dragon in the Tropics: Hugo Chavez and the Political Economy of Revolution in Venezuela. Washington D.C.: Brookings Institution Press, 2011.

Gunson, Phil.”Chavez’s Venezuela.” Current History 105, no.688 (2006): 58-63, https://search.proquest.com/docview/200735447?rfr_id=info%3Axri%2Fsid%3Aprimo.

Saudi Arabia: The Wind of Change?

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By Roisin Murray

Bin Salman ushers in a new era for Saudi Arabia?

With a historical legacy as the foremost theocratic state in the Sunni Muslim sphere, political developments in Saudi Arabia that threaten to challenge its conservative, religious identity are significant.[1] The domestic situation of Saudi Arabia is a concern for many foreign governments; states worldwide are reliant on Saudi oil, and Saudi Arabia is vital to the security of the Gulf region.[2] The international community has focused its attention on Saudi Arabia, as Prince bin Salman continues to implement his modernisation agenda under the banner of ‘Vision 2030’. Bin Salman, who previously held the position of defence minister, is the son of King Salman and has been named the successor to the throne. The latest development in bin Salman’s reform agenda has seen him embark upon an anti-corruption crusade directed at upper-level elites, crystallising in the detention of 325 top officials in Ritz-Carlton hotel on corruption charges. Thus, this article will discuss the recent corruption crusade in light of the wider reformist drive. Essentially, it will analyse to what extent this crackdown on fraudulent practice in business is a logical expansion of bin Salman’s blueprint for modernisation, or rather a smokescreen to distract from the pervading, growing autocracy of the kingdom.

These reforms are part of bin Salman’s wider drive for modernisation of the Kingdom, enshrined in his ‘Vision 2030’ blueprint. Traditionally, Saudi Arabia’s hegemony has remained wholly uncontested. Its national identity has been built on its role as ultraconservative Kingdom, greatly influenced by Islamic clericalism and financed by a state -sponsored oil industry. Bin Salman’s push for modernisation and diversification of the Saudi economy comes at a critical time. The financial situation of the Kingdom is precarious, following a decline in oil prices and the rising expense associated with participation in the war in Yemen. Bin Salman aspires to transform the Kingdom into a more expansive economy, driven by private investment and renowned for its ingenuity. However, systemic corruption is an obstacle to bin Salman’s precious roadmap.

Bin Salman’s so-called anti-corruption purges saw approximately 325 figures from Saudi’s elite placed in detention for eighty days under corruption and embezzlement charges. The ensuing investigation saw finances audited and personal bank accounts frozen. Yet, as January came to a close, bin Salman released the majority of those who had been detained in the Ritz-Carlton hotel in Riyadh, as their accounts faced scrutiny from analysts. A reported $100 billion was recovered by the Saudi government, following the end of a three-month investigation into charges of corruption amongst high-ranking royal families and businessmen. Over three hundred of the detainees managed to secure their freedom following a financial settlement which included an exchange of commercial property, stocks and cash. A full breakdown has not been made public, raising concerns that state business continues to be conducted behind closed doors, with little regulation. Accusations that the crackdown was the result of a nefarious political agenda, seeking to target individuals who were critics of the Prince, are rife. The private nature of the negotiations exposes the hollowness of bin Salman’s reforms. Traditionally, Saudi decision-making has been notably opaque ‘in the form of decrees with a flavour of palace intrigue’.[3] The continuation of such policies when addressing the lack of transparency in business dealings is somewhat ironic. Furthermore, it also emphasises bin Salman’s failure to challenge the lack of accountability of the royal family.

Those advocating change in Saudi Arabia applaud bin Salman’s reforms, which seek to promote accountability for financial malpractice in business ventures. However, his plans for the nation do not come risk-free. There is the likelihood that such practices will hamper potential foreign investment, while investment at home potentially stalls. Bin Salman’s excessive centralisation of the government and the nonchalance with which he requisitions assets does not exactly endear domestic investors.

The crusade to eradicate the corruption plaguing the upper echelons of Saudi Arabia is only one element of bin Salman’s wider template for modernisation. Bin Salman has already announced his intention to lead the Kingdom back to moderate Islam and has sought to curb the excesses of the religious police force. But the reform which has garnered widespread international attention is the lifting of the notorious ban on female drivers, to be enacted in June. Female liberation in Saudi Arabia has been further compounded by women’s increased access to the public sphere, enshrined in new legislation which permits them to attend football games.

Yet, beneath the surface of these progressive developments, Saudi Arabian despotism only continues to strengthen. A recent centralisation of the power structure has afforded bin Salman almost uncontested power, highlighted by the extensive responsibilities bestowed upon him; he now enjoys control of the Defence, Foreign, Finance and Petroleum ministries.[4] Recent restructuring of the governing body means that decision-making has become highly exclusive, a privilege reserved for the elite.[5] Bin Salman has carved a position from where he can pursue his hawkish foreign policy goals, exemplified by Saudi intervention Yemen.[6] Thus, bin Salman’s reforms can be seen in the context of a diversion technique to distract from the growing tyrannical and coercive nature of the Kingdom.

Bin Salman is not only the driving force behind ‘Vision 2030’ but is also the fresh new face of Saudi Arabia’s public relations. Symbolic visits to the NATO headquarters and the White House suggest approval for bin Salman in the Western world, which has largely, and conveniently, ignored bin Salman’s continued centralization of power.[7] Yet, Hammond contends that the tendency of the Western states to endorse Saudi Arabia’s ‘empty discourse of reform, with its essentially limited gains’ is influenced by an ulterior motive;[8] their concern for stability in the Kingdom, given that it provides essential services to governments in the West.[9]

Ultimately, bin Salman’s reformist agenda is a red herring, and merely a pretext for bin Salman to pave his way to a Saudi Arabian autocracy. The anti-corruption purges are evidence of bin Salman’s far-reaching influence and power, and the lack of transparency in the final negotiations have thus far been excused. While it is easy to welcome the progressive social developments, on deeper analysis they seem tainted by a nefarious agenda; these ‘reforms’ are simply symbolic concessions to placate the international community and divert attention from bin Salman’s escalating power drive. The wind of change is blowing, but it is not strong enough to dislodge the authoritarianism of the Saudi royal family.

 

 

Roisin Murray is currently undertaking an MA in International Relations at King’s College London. She holds an undergraduate history degree from University College Dublin. Her research interests include diplomacy, counter-terrorism and insurgency, particularly in the context of the Middle East.

Notes

[1] Joseph Nevo, “Religion and National Identity in Saudi Arabia,” Middle Eastern Studies 34, no.3 (1998): 35,https://www.tandfonline.com/doi/pdf/10.1080/00263209808701231?needAccess=true&instName=King%27s+College+London-

[2] Tim Niblock, Saudi Arabia: Power, Legitimacy and Survival (Abingdon: Routledge, 2006): 1.

[3] Hamid Hussain, “Royal Rumble: Dynamics of Saudi Royal Family,” Defense Journal 21, no.1 (August 2017): 50.

[4] Umer Karim, “The Evolution of Saudi Foreign Policy and the Role of Decision-making Processes and Actors,” The International Spectator 52, no.2 (2017): 77, https://www.tandfonline.com/doi/pdf/10.1080/03932729.2017.1308643?needAccess=true&instName=King%27s+College+London

[5] Karim, “The Evolution of Saudi Foreign Policy’, 82.

[6] Karim, “The Evolution of Saudi Foreign Policy’, 82.

[7] Karim, “The Evolution of Saudi Foreign Policy’, 76.

[8] Andrew Hammond, The Islamic Utopia: The Illusion of Reform in Saudi Arabia (London: Pluto Press, 2012): 231.

[9]Hammond, The Islamic Utopia, 231.

Image Source:

http://www.arabianbusiness.com/politics-economics/386638-saudi-arabia-releases-two-princes-after-corruption-probe

Bigliography

Hammond, Andrew. The Islamic Utopia: The Illusion of Reform in Saudi Arabia. London: Pluto Press, 2012.

Hussain, Hamid. “Royal Rumble: Dynamics of Saudi Royal Family.” Defense Journal 21, no.1 (August 2017): 50-56, https://search.proquest.com/openview/783c8d01468270b5a07a0f4fb0fafc92/1?pq-origsite=gscholar&cbl=616545

Karim, Umer. “The Evolution of Saudi Foreign Policy and the Role of Decision-making Processes and Actors.” The International Spectator 52, no.2 (2017): 71-88. https://www.tandfonline.com/doi/pdf/10.1080/03932729.2017.1308643?needAccess=true&instName=King%27s+College+London

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Will there be a coup in Venezuela?

by

By Will Bisset

President Nicolás Maduro and Vladimir Padrino López, current Minister of Defence. (Credit: Carlos Garcia Rawlins, Reuters)

 

It has come as a surprise to many that Venezuela’s military, with its history of attempted coups d’etat, has sat idly by while its country descends into chaos.

Ostensibly, all the ingredients for the perfect coup are there: unprecedented shortages of basic goods such as food and medicine coupled with disastrous economic performance led to violent street protests over the summer, in which over 100 protestors were killed. The suffering population, 80% of whom have lost weight due to the ‘Maduro diet’, has been left further incensed by the growing waist-lines and wallets of the President and his cronies. All of this has contributed to the regime haemorrhaging legitimacy both domestically and internationally. If we consider that coups occur when a government faces a legitimacy crisis, it begs the question, why have the armed forces not stepped in for Latin America’s latest golpe del estado?

The depressing answer is that they are making too much money. Maduro, incompetent in so many ways, has launched a stunningly effective ‘coup proofing’ strategy. Lacking both the military pedigree and popular legitimacy of Chavez, it has been especially important to curry favour with the armed forces. Since coming to power, Maduro has identified them as a possible threat and extended patronage to buy their loyalty. Recently, this has come via access to profitable business opportunities and sanctioning involvement in illicit economies.

Business opportunities to buy loyalty

In July 2016 he handed power over food production and distribution, as well as jurisdiction of the ports, to the military. This gives soldiers a lucrative source of extra income, as well as ensuring their families are well fed. There is an unprecedented shortage of food in the country, and providing soldiers with a reliable source of food for their families should not be underestimated as a mechanism to buy loyalty.

Due to mis-management under Chavez, Venezuela imports almost all its food. During the importation and transportation processes, the armed forces are able to extract bribes. A recent Associated Press investigation quoted retired General Cliver Alcala explaining that the military was doing all that was necessary to ensure they got their ‘cut’ from such a profitable business. One South American businessman claims to have paid $8 million in bribes to those working for Food Minister General Rodolfo Marco Torres. Fortunately, for importers, the government overpays for food contracts, enabling them to pay officials these bribes. This particular businessman had a $52 million contract for yellow corn, charging more than double the market rate, with a profit of over $20 million. In this way the regime is using state resources to create this gravy train. Money that should be spent on public services is diverted instead for the armed forces’ profit. This removes any incentive to remove Maduro from power.

Further profits are generated selling food in military-run black markets. For example, Jose Campos, a grocer, has resorted to an illegal market to buy pallets of corn flour, priced at 100 times the government rate. This shows how members of the armed forces, of all ranks, directly profit from Maduro’s decision to allow them to control food distribution.

The figure appointed in September 2016 to ensure transparency and limit this endemic corruption in the military was General Carlos Osorio. Whilst Food Minister, he provided contracts to two shell companies with no history of importing food. The companies paid over $5.5 million into a Swiss account registered to Osorio’s two brothers-in-law. His appointment clearly indicates the regime’s complete disregard for fighting this corruption in food importation and distribution. In this way, Maduro is allowing corruption in exchange for political loyalty.

Sanctioned illegality in exchange for loyalty

General Alcala summarised the value of the food business: “Lately, food is a better business than drugs.”

Fortunately for the Venezuelan military, they do not have to make the difficult choice between the two. The mysterious ‘Cartel de los Soles’ or ‘Cartel of the Suns’ consists of numerous cells, permeating all ranks and branches of the Venezuelan armed forces. The name is a reference to the sun insignia worn on the uniforms of Venezuelan generals. Moreover, in September 2017, the Cartel de los Soles was publically accused of drug trafficking by the vice-president of Colombia. The United States has brought formal drug charges against numerous high-ranking members of the armed forces. In August 2016, US prosecutors unsealed a federal indictment against Nestor Reverol, the former head of the country’s anti-narcotics agency. Reverol was accused of ‘using his position of power [at the National Anti-Drug Organization] to enable drug trafficking organizations, all the while hindering law enforcement’s efforts to thwart them.’ In further stunning irony, he was promoted to Interior Minister the next day. This blatant protection and support is particularly instructive, in that Reverol is head of the National Guard. Which, less than 12 months later, was carrying out a brutal crackdown on protests against Maduro.

To be clear, the militarisation of the Venezuelan cocaine trade was not the brainchild of Maduro, and has likely been a gradual process over the last decade. However, it is evident why no senior military figures have been punished by the regime. Access to the drug trade is immensely profitable and enough to buy loyalty from generals that would otherwise be a threat to Maduro. The implication of Reverol’s promotion is clear: criminal activity is sanctioned by the state in exchange for political loyalty. Occasional arrests of low ranking soldiers are pure theatre; no important figures are ever threatened.

Conclusion

Maduro has constructed a situation in which it would be irrational for the armed forces to launch a coup. He has sanctioned kleptocratic conduct, endemic corruption, and illegality to cling on to power— and it has worked. As for the military, they are content to enrich themselves at the expense of the starving population by any means necessary. For as long as the President can extend benefits to the armed forces, there will be no coup d’état.

 

Will is a postgraduate student reading International Peace and Security at King’s. He has a degree in History and Politics from Newcastle University and is working as a political consultant. He has a broad interest in international security issues, with a specific interest in trans-national organised crime. You can follow him on @Bil93Bis

 

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