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The Panama Papers and Putin

Vladimir Putin's regime has increasingly subjected its opponents to systematic harassment and detention.
OPINION: The Panama Papers scandal, among other things, reinforces growing concerns about high-level fraud and corruption within President Vladimir Putin's government and raises troubling questions about Moscow's conflict with neighbouring Ukraine.
While Putin is not personally named in the massive leak of financial documents known as the Panama Papers, close associates of the Russian president nevertheless feature prominently in them.
The list of names identified by the Panama Papers includes Russian regional governors, members of the Russian parliament, Kremlin spokesperson Dmitry Peskov, and Putin's close friend and cellist, Sergey Roldugin.
While there is nothing inherently illegal in using offshore tax havens, it is estimated by the Tax Justice Network that $1.3 trillion of assets from Russia are currently sitting offshore at a time when many Russians are experiencing tremendous economic hardship.
These revelations follow a number of reports and books in recent years from whistleblowers, journalists, scholars, and foreign government agencies, which document a massive concentration of secret wealth and power by the Putin regime.
According to Karen Dawisha's book, Putin's Kleptocracy, Putin has established a regime in which the leader, his inner political circle and friendly oligarchs have hugely enriched themselves in a criminal and corrupt fashion. Politicians loyal to Putin have become wealthy and oligarchs close to Putin's cabal have become billionaires.
At the same time, the Putin regime has increasingly subjected its opponents to systematic harassment and detention, curbed unauthorised political demonstrations, and pursued an extensive crackdown on independent media organisations and journalists.
But Putin's kleptocratic rule is not just been a Russian problem. For many years, neighbouring Ukraine has played a key role in facilitating this system.
Given that the Russian economy is heavily reliant on oil and gas exports and about 50 per cent of these exports went until recently to the EU market via the Ukraine, the country holds enormous strategic significance for Russian oligarchs and their associates in Putin's political entourage.
In particular, there have been indications of co-operation between the Putin regime and Russian organised crime in the Ukraine with respect to the vitally important energy sector.
Apparently, some groups of Russian mafia have coordinated directly with state organisations in organising the supply of energy, especially natural gas, to Ukraine from Russia and central Asia.
But Ukraine's place in the triangle of crime, politics and business in Russia came under serious threat in 2013 when the then pro-Russian Ukrainian President Viktor Yanukovych agreed in principle to sign a trade association deal with the EU.The Putin regime felt it had no choice but to use all means at its disposal to protect its vital interests in the Ukraine.
It used economic pressure on the Ukraine to block the proposed trade association agreement with the EU, and when angry anti-government protests toppled the Yanukovych leadership in Kiev in February 2014, Moscow reacted with force.
After annexing Crimea in March 2014 and then actively supporting armed separatists in eastern Ukraine, Putin's Russia was targeted by several rounds of international sanctions from the US and EU. The Putin government retaliated with sanctions of its own against a number of Western countries, including Germany.
The conflict between Russia and the Ukraine over the last two years has generated the worst crisis in relations between Moscow and the West in the post-Cold War era.
Altogether, over 9,000 people have been killed and about 20,000 wounded since the conflict in eastern Ukraine began in April 2014.
And Russia has paid a huge economic price for backing the separatist rebels in the Ukraine. The value of the rouble has plummeted, inflation has spiraled, and Russia is facing economic recession and zero growth in 2016.
The Putin regime claims the US had engineered the Ukraine crisis in order to extend its global dominance through NATO enlargement.
But the problem for Putin and Western observers who share this view is that the major impetus for NATO enlargement in Eastern and Central Europe has come from the countries of the region – which have historical memories of Russian interference in their internal affairs - rather than Washington.
And membership of NATO was not on the agenda for the Ukraine when the crisis began.
So why did the Putin regime feel so threatened by the prospect of a trade association agreement between the Ukraine and the EU in 2013? After all, Russia itself was a major trade partner of the EU.
An examination of the terms of the agreement is instructive. Article 20 pledged to "prevent and combat money laundering", organized crime, and corruption in the Ukraine. To this end, the Ukraine and the EU agreed to implement this provision to international standards, including those already adopted by the EU.
From the standpoint of the Putin regime, Article 20 could undermine Russia's power base in the Ukraine by seeking to extend the rule of law and attacking networks of organised crime and corruption. Moreover, it was feared such a development would have political 'spillover' effects into Moscow and threaten the legitimacy of Putin's kleptocracy in which the favoured few massively enriched themselves at the expense of the majority of Russian citizens.
Thus, Putin's political concerns about the fall-out from the 2013 EU-Ukraine association agreement significantly contributed to Russia's subsequent intervention in the Ukraine.
It is ironic the scuppered EU-Ukraine association agreement was finally signed in June 2014, and that the agreement contains strengthened anti-money laundering and financial transparency regulations.
This agreement and now the Panama Papers open up new political pressures on Putin's kleptocracy. But it is clear that Putin has every intention of fighting hard to preserve his leadership system. This may ultimately be a losing battle, but in the meantime the largely Putin-controlled Russian parliament recently passed new secrecy laws that hamper international attempts at prosecuting cases of corruption that have links to Russia.
Putin will face his day of reckoning, but it will probably not come soon enough for the well-being of his country.

Robert G. Patman is Professor of International Relations at the University of Otago, New Zealand.