Donald Trump and Vladimir Putin: The plutocratic evil twins claim to stand against the neoliberal economic order (they don't)

UPDATED: Threads connecting Trump to Russian business and crime go back decades, may be the big secret he's hiding

Published January 22, 2017 5:00PM (EST)

 (Reuters/Maxim Shipenkov/Christopher Aluka Berry/Photo montage by Salon)
(Reuters/Maxim Shipenkov/Christopher Aluka Berry/Photo montage by Salon)

This story has been updated to clarify facts in the case of Tevfik Arif, a business associate of Donald Trump who was investigated in Turkey for human trafficking charges. All those charges were dropped by the Turkish authorities and Arif has consistently maintained his innocence.

Ten days before Donald Trump’s inauguration, BuzzFeed published the unconfirmed "Trump dossier" reportedly compiled by former MI6 agent Christopher Steele, igniting a storm of controversy on many fronts. The media battled among themselves over BuzzFeed’s decision to publish; Trump attacked Rep. John Lewis, fueling a mass congressional boycott of his inauguration. As usual, the wider the controversies spread, the less likely it seemed that any of them would be resolved — which suited Trump just fine.

I doesn’t have to be that way. We don’t have to keep looking for a smoking gun, stumbling around blindly in a smoke-filled room. Just days after BuzzFeed’s publication, Washington Post columnist Anne Applebaum put it this way"Maybe we ought instead to abandon our obsession with 'secrets' and 'spies' and look at what is sitting in front of us."

But even more important than the specifics she cited — Trump’s reliance on Russian money, his ties to Russia through Paul Manafort, his repetition of Russian propaganda, his dogged fealty to Putin, etc. — was one source she linked to, a December story in the American Interest called “The Curious World of Donald Trump’s Private Russian Connections” by investigative economist and journalist Jim Henry.

Not only does Henry dig into the structure of Russian or Russia-related financial networks with which Trump has had connections — a broader perspective than the usual case-by-case approach — he also recounts how both Trump and Putin were in a sense created by Western neoliberal economics. Ultimately, Henry concludes that neither leader can be understood as an "uncaused cause":

They are not evil twins, exactly, but they are both byproducts of the same neoliberal policy scams that were peddled to Russia’s struggling new democracy.

Both leaders, in other words, are creatures of the very evil that Trump pretends to campaign against. They are not disruptions of the post-Cold War, ”End of History” status quo but rather its full flowering, initially ignited by the neoliberal “shock therapy” approach to privatizing the Soviet state economy.

Trump’s various unsavory Russia connections aren’t one-offs, Henry argues. He proceeds to document a much broader pattern, showing that “whatever the nature of President-elect Donald Trump’s relationship with President Putin, he has certainly managed to accumulate direct and indirect connections with a far-flung private Russian/FSU network of outright mobsters, oligarchs, fraudsters, and kleptocrats.”

“The network he speaks of is exactly the thing I had in mind when I wrote the Twin Insurgency’ piece,” author Nils Gilman told Salon. As I described here just before the election, that article argued that the "postmodern state" was "under siege from plutocrats and criminals who unknowingly compound each other’s insidiousness." The post-1970s erosion of the social modernist states, which sought “to legitimate themselves by serving the interests of middle classes whose size they sought to expand,” produced an ideological shift from egalitarianism to “maximizing individual opportunity."

The resulting retreat of the state left middle-class lives far more precarious, vulnerable to predatory plutocratic elites from above and criminal insurgencies from below. Trump had a foot in both camps, I argued — not an unheard-of situation, given that both forms of insurgency exploit the failure of the state.

“Putin himself is not a plutocratic insurgent," Gilman added, "but rather a plutocratic counterinsurgent. He crushed the first wave of [Russian] oligarchs and certainly aggrandizes the state.” But outside Russia, it’s a different story. Putin's international actions are about “opportunism, rather than principle," Gilman said. "It's not that he particularly wants to encourage plutocratic insurgency in adversary states [such as the U.S.] so much as that he will encourage whatever he thinks will be most effectively disruptive of adversary states.”

All of which may help explain why Trump hasn’t done any major deals inside Russia, but has done a great deal of business with Russians in other countries. It may also help explain why and how Putin sees Trump as useful to him. 

“Both Putin and Trump are in some ways rightist backlashes against the twin insurgency," Gilman said. “I of course would have preferred to see a [leftist] solidaristic commitment to a high-functioning, inclusive, welfare-providing state,” but the left has had difficulty gaining and holding power. “Trump is less an outlier than simply a representative example of the sort of far-right candidates we see in Denmark, France, the Netherlands, Hungary, and so on: anti-trade and anti-immigration.” Of course, Trump's foreign-made product lines and foreign-born wife suggest that may be just another role the former reality TV star is playing.

The Neoliberal Origins of the Russian Threat 

One of the most important facts about contemporary Russia, Jim Henry writes, is "its emergence since the 1990s as a world-class kleptocracy, second only to China as a source of illicit capital and criminal loot, with more than $1.3 trillion of net offshore ‘flight wealth’ as of 2016.”

That in turn is just “a symptom of one of the most epic failures in modern political economy — one for which the West bears a great deal of responsibility…. the failure, in the wake of the Soviet Union’s collapse in the late 1980s, to ensure that Russia acquires the kind of strong, middle-class-centric economic and political base that is required for democratic capitalism, the rule of law, and stable, peaceful relationships with its neighbors.”

It’s hardly surprising that Western elites — enthralled at the time with Reaganism and Thatcherism — overlooked that tiny detail. As Gilman argued earlier, this was more than a question of neglect:

Instead, from 1992 to the Russian debt crisis of August 1998, the West in general — and the U.S. Treasury, USAID, the State Department, the IMF/World Bank, the EBRD, and many leading economists in particular — actively promoted and, indeed, helped to finance one of the most massive transfers of public wealth into private hands that the world has ever seen.

For example, Russia’s 1992 “voucher privatization” program permitted a tiny elite of former state-owned company managers and party apparatchiks to acquire control over a vast number of public enterprises, often with the help of outright mobsters. …

In 1994–96, under the infamous “loans-for-shares” program, Russia privatized 150 state-owned companies for just $12 billion, most of which was loaned to a handful of well-connected buyers by the state … initially just 25 or so budding oligarchs with the insider connections to buy these properties and the muscle to hold them. …

For the vast majority of ordinary Russian citizens, this extreme re-concentration of wealth coincided with nothing less than a full-scale 1930s-type depression, a “shock therapy”-induced rise in domestic price levels that wiped out the private savings of millions, rampant lawlessness, a public health crisis, and a sharp decline in life expectancy and birth rates.

This is the backstory of how today’s hyper-criminal and hyper-capitalist Russia was created — including another key western intervention: the army of American political consultants who helped get Boris Yeltsin get re-elected in 1996 over his Communist challenger, despite an abominable 8 percent approval rating at the beginning of that year.  This disastrous reshaping of Russia’s political economy was “not only condoned but partly designed and financed by senior Clinton Administration officials, neoliberal economists, and innumerable USAID, World Bank, and IMF officials.” Ironically, while Hillary Clinton took heat for a range of Clinton-era policies — NAFTA, “welfare reform,” mass incarceration — this policy was never debated or discussed, but may ultimately have sealed her fate. Now it threatens us all.

In addition to the oligarchs, the winners of the post-Soviet era included “needy borrowers like the Trump Organization, [for whom] the opportunity to feed on post-Soviet spoils was a godsend,” Henry notes, adding:

The nine-lived Trump, in particular, had just suffered a string of six successive bankruptcies. So the massive illicit outflows from Russia and oil-rich [former Soviet states] like Kazahkstan and Azerbaijan from the mid-1990s provided precisely the kind of undiscriminating investors that he needed. These outflows arrived at just the right time to fund several of Trump’s post-2000 high-risk real estate and casino ventures — most of which failed.

There’s a good chance this is one of the damaging things Trump is hiding in his tax returns: stark evidence of how completely his domestic financing evaporated in the 1990s and how dependent he became on foreign money, largely from unsavory, kleptocratic or otherwise criminal sources. As Henry acknowledges, “none of the activities and business connections related here necessarily involved criminal conduct,” but the public has a right to know about the specific allegations that have been made. Of course, what’s legal might still be politically toxic. What’s more, Henry argues that investigating people like Putin or Trump on a case-by-case basis often misses the bigger picture:

The global networks of influence and finance, licit and illicit, that exist among business people, investors, kleptocrats, organized criminals, and politicians, as well as the “enablers” — banks, accounting firms, law firms, and havens. Any particular component of these networks might easily disappear without making any difference. But the networks live on. It is these shadowy transnational networks that really deserve scrutiny.

The Bayrock Boys and Their Floods of Funds

Henry first examines the case of Bayrock Group LLC, “a spectacularly unsuccessful New York real estate development company” Trump was associated with, as the Financial Times detailed last August. “As of 2007, Bayrock and its partners reportedly had more than $2 billion of Trump-branded deals in the works. But most of these either never materialized or were miserable failures,” Henry explains.

Remarkably, as FT reports, Trump claimed under oath that “I don’t know who owns Bayrock,” even though he got 18 percent of the profits on its most prominent project, the 46-story Trump SoHo condo hotel in lower Manhattan, which he discussed on "The Apprentice" at one point, calling it “my latest development.” Finished in 2010, it “was foreclosed by creditors and resold in 2014 after more than $3 million of customer down payments had to be refunded.

The same fate befell Bayrock’s Trump International Hotel & Tower in Fort Lauderdale in 2012, “while at least three other Trump-branded properties in the United States, plus many other ‘project concepts’ that Bayrock had contemplated, from Istanbul and Kiev to Moscow and Warsaw, also never happened,” Henry reports.

Henry digs into details of two key Bayrock figures, former chair Tevfik Arif (aka Arifov), a Kazakh émigré, and senior executive Felix Sater, a Russian émigré, both by way of Brooklyn. Both have a variety of unsavory connections. Arif is linked closely to three Kazakh billionaire oligarchs known simply as “the Trio,” and at one point was investigated in Turkey on suspicion of “trafficking in Russian and Ukrainian escorts.” (All charges were dropped in that case, and Arif has maintained his innocence.)

Sater, a longtime Trump associate, has an extensive criminal career that includes stock racketeering, money laundering and gun-running. In a 2013 deposition Henry cites, Trump said, “I don’t see Felix as being a member of the Mafia,” but conceded he had no evidence.

The Icelandic Connection

A third focus of Henry’s attention is FL Group, an Icelandic private investment fund involved in Bayrock financing. As Henry explains, in the 1990s, Iceland's "tiny neoliberal political elite" had a brainstorm:

“Let’s privatize our state-owned banks, deregulate capital markets, and turn them loose on the world!” By the time all three of the resulting privatized banks, as well as FL Group [FLG], failed in 2008, the combined bank loan portfolio amounted to more than 12.5 times Iceland’s GDP — the highest country debt ratio in the entire world.

Along the way, Arif and Sater discovered FL Group as a veritable piggy bank, persuading it to invest $50 million in the Trump SoHo project and agreeing in principle to as much as another $2 billion in financing for other deals. That information comes from an outstanding lawsuit, which also charged that FLG and Bayrock agreed on a $100 million tax fraud scheme.  As Henry notes, “The Trump Organization has denied any involvement with FLG. However, as an equity partner in the Trump SoHo, with a significant 18 percent equity stake in this one deal alone, Donald Trump himself had to sign off on the Bayrock-FLG deal.

Was this criminal, or simply negligent? Take your pick.

FLG “had several owners/investors with deep Russian business connections, including several key investors in all three top Iceland banks,” Henry writes, and “had constructed an incredible maze of cross-shareholding, lending, and cross-derivatives relationships with all these major banks.” That made it almost impossible to regulate "control fraud," a term that describes insiders at financial institutions going on a self-serving binge, borrowing and lending to finance risky investments of all kinds.

There’s much more we don’t know about Iceland’s involvement with illegitimate Russian financing, Henry adds, ticking off a a list of unresolved issues. In short, Trump’s Bayrock partners alone were a veritable Trump University of international crime. Somehow, he claims to have been utterly oblivious.

The Patterns Repeat

A fourth case concerns another Trump associate, Russian-Canadian billionaire Alex Shnaider, As Henry describes, Shnaider “co-financed the seventy-story Trump Tower and Hotel, Canada’s tallest building,” opened in Toronto in 2012, which went bust this past November “like so many of Trump’s other Russia/FSU-financed projects.”

Shnaider, in turn, owed some of his success to his former father-in-law, Boris J. Birshtein, "a close business associate of Sergei Mikhaylov, the reputed head of Solntsevskaya Bratva, the Russian mob’s largest branch, and the world’s highest-grossing organized crime group as of 2014, according to Fortune." It’s a small world, after all. Donald Trump can’t turn around without bumping into someone close to an international crime figure and striking a real estate deal with him.

Number five on Henry’s list is “The Case of Paul Manafort’s Ukrainian Oligarchs,” which remind us that this association alone should have torpedoed Trump’s chances from the beginning. Read in the context of the other cases here, it fits into a larger pattern. 

Finally, there’s what Henry calls “The Case of 'Well-Connected' Russia/FSU Mobsters” who just happen to call Trump Tower home. As he explains, unlike most New York luxury buildings, the tower has no prying coop board and its residents have included "tax-dodgers, bribers, arms dealers, convicted cocaine traffickers, and corrupt former FIFA officials."

I’ll highlight just one example: David Bogatin, considered a key figure in Semion Mogilevich’s Russian organized crime family, has “a long string of convictions for big-ticket Mogilevich-type offenses like financial fraud and tax dodging,” Henry explains. Allegedly, Bogatin once owned five separate condos in Trump Tower -- that Donald Trump had personally sold to him.

So what does Henry conclude from all this? Here’s how he puts it:

First, the President-elect really is very “well-connected,” with an extensive network of unsavory global underground connections that may well be unprecedented in White House history. In choosing his associates, evidently Donald Trump only pays cursory attention to questions of background, character, and integrity.

Second, Donald Trump has also literally spent decades cultivating senior relationships of all kinds with Russia and the FSU. …

Third, even beyond questions of illegality, the public clearly has a right to know much more than it already does about the nature of such global connections. …

Finally, the long-run consequence of careless interventions in other countries is that they often come back to haunt us. In Russia’s case, it just has.

Of course the U.S. has intervened overseas hundreds of times, but three particular cases of “blowback” have radically reshaped our word: First, overthrowing the elected government of Mohammed Mossadegh in Iran in 1953 eventually led to the Iranian Revolution in 1979. Second, our decision to “give the Soviets their own Vietnam” in Afghanistan in 1979, which eventually led 9/11.  Third is the 1990s neoliberal intervention in Russia.

Terrible as the consequences of the first two have been, the third may prove far more destructive in the end, in part because both of America's political parties — for all that divides them — are still dominated by neoliberal true believers. Questioning that faith is still widely considered heretical, despite all the suffering it has brought.

That suffering is a big reason why we’re seeing a right-wing figure like Trump emerge, Gilman argues. Never before have so many Americans "voted for a candidate who expressed fundamental pessimism about the prospects for the country, the sense that America is getting a raw deal from the rest of the world," he said. "That sort of feeling is common in other countries, for good reason, but it is unprecedented in the United States, also for good reason. It is the essential psychological soil out of which radical rightism grows."

Being clear about where the Putin-Trump alliance came from may not directly help us fight the threat posed by Trump’s presidency. But it surely should inform our strategic thinking. Trump and Putin are only symptoms of a larger problem. We need to restore the lost sense of possibility of what a “high functioning, inclusive" state can do to shape a better world for all. To do that, we will need to fight back on every front against the dangerous twin insurgency of plutocrats and criminals these dubious leaders represent.


By Paul Rosenberg

Paul Rosenberg is a California-based writer/activist, senior editor for Random Lengths News, and a columnist for Al Jazeera English. Follow him on Twitter at @PaulHRosenberg.

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Capitalism Donald Trump Neoliberalism Russia Russian Hack Trump Dossier Vladimir Putin