Ken Silverstein’s article in the current Harper’s, “Their Men in Washington” reminds us that the obstacles put in the path of influence peddlers representing corrupt and repressive regimes are impressive – on paper at least. On August 10, 2006, the White House released its “National Strategy to Internationalize Efforts Against Kleptocracy.” In doing so, the Bush Administration publicly embraced efforts to target corrupt foreign government officials as enemies of democracy and progress. The strategy committed the United States to take a number of approaches to counter corruption, including promises to:
Vigorously Prosecute Foreign Corruption Offenses and Seize Illicitly Acquired Assets. In its continuing efforts against bribery of foreign officials, the United States Government will expand its capacity to investigate and prosecute criminal violations associated with high-level foreign official corruption and related money laundering, as well as to seize the proceeds of such crimes.
Deny Physical Safe Haven. We will work closely with international partners to identify kleptocrats and those who corrupt them, and deny such persons entry and safe haven.
It follows, then, that the last thing the Bush Administration would do following such an announcement is invite a “kleptocratic foreign public official” to Washington for a White House visit. Right?
Well, maybe not.
And indeed, on September 29, 2006, President Bush hosted the President of Kazakhstan, Nursultan Nazarbayev, at the White House. How did the Kazakhs pull it off? We understand that the State Department firmly opposed the visit, as did staffers at the National Security Council. But our sources tell us that Kazakhstan turned to one of Washington’s most connected lobbying firms, Cassidy & Associates, to pave the way for this visit. And that made all the difference. Ken Silverstein’s piece makes clear what a powerhouse Cassidy & Associates is, and their ties to Kazakhstan could hardly come as a surprise.
Moreover, Nazarbayev has a closely guarded relationship with the power behind the throne in Washington: Vice President Dick Cheney. During the Clinton years, as Cheney was serving as CEO of Halliburton, a leading oil and gas industry service provider with an enormous position in Kazakhstan, Cheney also served Nazarbayev as a member of Kazakhstan’s Oil Advisory Board, and the two are said to have formed a lasting rapport. The relationship continued when Cheney came to the White House, and Nazarbayev sought Cheney’s advice and intervention in connection with a Justice Department corruption investigation, according to a New York Times report by Pulitzer Prize winning reporter Jeff Gerth. There has been lingering suspicion in Congress that Cheney intervened to slow down the Justice Department’s management of the Kazakh corruption investigation. In any event, following the Cheney-Nazarbayev contacts, the Justice Department’s actions slowed to a glacial pace.
Under Nursultan Nazarbayev, Kazakhstan has gone places. It has developed a robust economy which is in many respects the envy of the post-Soviet space. It was among the leaders in legal and economic reform. It’s not really possible to mention Nazarbayev along side a brutal Stalinist dictator like the late Turkmenbashi (Saparmurat Niyazov). He is, in a sense, far more salonfähig, as the Germans say, acceptable in polite society.
Still, Nazarbayev and members of his immediate family have accumulated some of the largest private fortunes in the world in recent years, on an official salary that is a pittance. In the late nineties, I examined a number of major Kazakhstani privatizations – including a study of the sale of Karaganda Metallurgical Works (Karmet) – working with a BBC documentary team. In each of these cases, I found that Kazakh interests emerged alongside foreign investors. Typically the Kazakhs obtained a 50% interest in the asset privatized, although they made no investment that could be documented to obtain this interest.
Just what were these Kazakh interests? In a large number of cases it was difficult to dig deep enough to know, but in some the names that surfaced were those of members of President Nazarbayev’s extended family.
Rumors persist that Nursultan Nazarbayev is one of the wealthiest men in the world. In any event, however, members of his immediate family have vast holdings in oil, gas, telecommunications, hospitality, construction materials, banking and finance. They are undisputably a key part of the new money that plays a dominating role in business in Kazakhstan.
Does that make Nazarbayev a kleptocrat? Certainly, some would say he’s the very model of the phenomenon targeted in the August 10 strategy. And the pendency of a Justice Department prosecution in which Nazarbayev figures prominently would seem to put him squarely within the strategy’s framework. Democratic Senators Carl Levin and Russ Feingold were quick to pick up on the dichotomy between presidential speech and presidential action, attacking Bush with statements read into the Congressional Record several days prior to the actual visit.
But President Bush had only words of praise for his Kazakh guest. He spoke glowingly of Nazarbayev’s commitment to democracy in Afghanistan. Curiously, Bush remained silent on the status of freedom in Kazakhstan itself. The truth is that Kazakhstan, for all its economic accomplishment, is anything but a burgeoning democracy. This past May, Nazarbayev secured passage of a bill allowing him to run for as many presidential terms as he likes. Yes, that was literally meant. The bill gave the right only to Nazarbayev. All other candidates only get two presidential terms at most. Nazarbayev’s intelligence service frequently finds cause to harass and intimidate the opposition. In recent elections, opposition parties have won one seat in Parliament. Western observers like the Organization for Security and Cooperation in Europe (OSCE) have accused Nazarbayev of rigging elections. Indeed, at a press conference I attended in Almaty, after an election in which opponents achieved roughly 20% of the vote, Nazarbayev stated: “Well, I suppose you could say we’ve made 20% progress towards democracy.” The room erupted into laughter. But for many Kazakhs it was no laughing matter.
The recent “Kazakhgate” trial here in the U.S. demonstrates that the Justice Department believes there is a pervasive culture of corruption within Nazarbayev’s regime. The trial centers on James Giffen, an American businessman with ties to the Western oil companies, who stands accused of funneling millions of dollars in bribes to Kazakh officials. Giffen ran Mercator Corporation, a small New York merchant bank. Mercator’s business consisted of representing and advising the government of Kazakhstan in negotiating oil and natural gas concessions with Western energy companies. In the beginning of 1995, at the same time as Mercator won the Kazakhstan contract, Giffen was made a “Counselor to the President of Kazakhstan,” a title which gave him special privileges in dealing on behalf of the Kazakh government (he received a diplomatic passport) as well as foreign energy companies. The idea was that for each successful transaction completed, Kazakhstan would pay Mercator a certain fee. In fact, of course, this fee was paid by the energy company as a part of the deal it struck with the Kazakh government. This money went into escrow accounts at several Swiss banks.
According to the indictment, Giffen illegally diverted some of the escrow money into secret Swiss bank accounts; moreover, he used more than $78 million of these funds to make payments to high-ranking Kazakh officials, including former Prime Minister Nurlan Balgimbaev and President Nazarbayev. The Kazakh officials used the money to finance expensive purchases of luxury items like jewelry, a speedboat, snowmobiles, and even tuition for one of the officials’ daughters at a Swiss boarding school. If the reader doesn’t smell bribery somewhere in this, perhaps a quotation from the government’s 2004 indictment of Giffen will help:
One of Giffen’s purposes in making these unlawful payments was to obtain and retain business for himself and his company… Giffen’s scheme worked – the Republic of Kazakhstan showered business on Mercator, paying it more than $60 million between 1995 and 1999.
The Indictment alleges that in carrying out this scheme, Giffen committed many serious crimes: (1) he conspired to violate, and violated, the Foreign Corrupt Practices Act… (2) he conspired to, an participated in a scheme to, steal tens of millions of dollars from the Republic of Kazakhstan… (3) he conspired to, and participated in a scheme to, deprive the citizens of Kazakhstan of their intangible right to the honest services of their political leaders… and (4) he conspired to launder, and laundered, tens of millions of dollars to further the schemes described above, and to hide their proceeds.
Giffen’s trial is set to begin sometime in the fall, but may be delayed by legal wrangling. His lawyers are trying to employ a “public authority” defense, insisting that Giffen has some links to the CIA, and that the CIA somehow ordered or sponsored his dealings to strengthen U.S. relations with oil-rich Kazakhstan. It will be some time before Classified Information Procedures Act (CIPA) hearings and motions are resolved, but whether or not Giffen was acting on behalf of the U.S. government, the scandal still points to a failed U.S. policy in Central Asia.
Either “Giffen the CIA agent” was part of a White House effort to cozy up to an oil-rich nation’s kleptocratic leaders via highly illegal means, or “Giffen the ordinary, decent briber” stands to provide further evidence of what is received wisdom among those who study Central Asia – namely, that Nazarbayev heads a corrupt and undemocratic regime. No matter which version materializes at trial, the Bush Administration’s curious decision to host and entertain Nazarbayev shows that U.S. energy interests remain paramount. The U.S. interests in promoting democracy, justice and official accountability in Kazakhstan are clearly viewed as something for the backseat, if they made it aboard at all. Moreover, cynics will say that over the last five years there has been less of an effort to export American democratic values to Kazakhstan, and more of an effort to import Kazakhstani corrupt practices that undermine democracy to the United States. Nazarbayev and Dick Cheney, it would seem, see things perfectly eye to eye.
Some claim that while trying to cut backroom deals with corrupt foreign bureaucrats, the United States has lost ground to China and Russia in the “Great Game” of foreign relations in Central Asia. Others are dismissive of “Great Game” analogies and suggest that Central Asia’s geopolitical significance to the United States is waning, oil or no oil.
Either way, the Bush Administration has once again created its own rules, and immediately proceeded to ignore them. The “National Strategy to Internationalize Efforts Against Kleptocracy” was still warm from the press when President Nazarbayev stepped into the White House with a smile and a handshake. The case against Giffen, and therefore against Nazarbayev, and was already known among the press and officials in Washington. Some kleptocrats, it seems, are very welcome indeed.
Evan Magruder contributed to this piece.