As Kazakhstan's President Targets Nazarbaev's Wealth, The Biden Administration Faces A Dilemma

WASHINGTON — U.S. President Joe Biden struck a tough note against transna­tion­al cor­rup­tion dur­ing a high­ly pro­mot­ed vir­tu­al con­fer­ence he orga­nized in December for rep­re­sen­ta­tives of about 100 nations.

He called it “a crime that drains pub­lic resources and hol­lows out the abil­i­ty of gov­ern­ments to deliv­er for the peo­ple” and promised to work with part­ners around the world “to hold cor­rupt actors account­able,” includ­ing those that hide their mon­ey in the United States.

If Toqaev dumps a whole file of the [Nazarbaev] fam­i­ly’s hold­ings and deal­ings, does the U.S. gov­ern­ment move for­ward, know­ing that they are involv­ing them­selves in a domes­tic pow­er struggle?

 Analyst Alexander Cooley

Transnational cor­rup­tion was, his admin­is­tra­tion said, now a “core nation­al-secu­ri­ty inter­est” for the United States.

Just a month since that con­fer­ence end­ed, events 10,000 kilo­me­ters away in Kazakhstan may show the fine line the Biden admin­is­tra­tion will have to walk in try­ing to live up to its words.

A fuel price increase at the start of the year sparked a protest in a town in west­ern Kazakhstan that even­tu­al­ly mor­phed into a vio­lent pow­er strug­gle between President Qasym-Zhomart Toqaev and those close to his pre­de­ces­sor, Nursultan Nazarbaev.

After sev­er­al days of may­hem that left pos­si­bly dozens dead and at least 10,000 detained, Toqaev came out on top.

And on January 11, he sud­den­ly and unex­pect­ed­ly announced the state would end a con­tract with a waste and recy­cling com­pa­ny con­nect­ed to Nazarbaev’s youngest daugh­ter, Aliya, per­haps the first step in a cam­paign to claw back the world­wide for­tune of those clos­est to the for­mer president.

Their wealth includes assets in the United States and Europe that, com­bined, are worth at least $700 mil­lion.

Analysts say the U.S. admin­is­tra­tion faces a tough deci­sion if Toqaev takes up Biden on his promise to help hold for­eign cor­rupt actors accountable.

“If Toqaev dumps a whole file of the [Nazarbaev] fam­i­ly’s hold­ings and deal­ings, does the U.S. gov­ern­ment move for­ward, know­ing that they are involv­ing them­selves in a domes­tic pow­er strug­gle?” Alexander Cooley, the for­mer direc­tor of Columbia University’s Harriman Institute and an expert on Central Asia, told RFE/RL.

“It points to some of the strate­gic dif­fi­cul­ties, eth­i­cal dilem­mas, and trade-offs that have to be made when you ele­vate anti-cor­rup­tion to the high­est lev­els of nation­al secu­ri­ty and for­eign pol­i­cy,” said Cooley, who authored a book focus­ing on cor­rup­tion in Central Asia.

During his near­ly three-decade rule, Nazarbaev put the com­mand­ing heights of the Kazakh econ­o­my — oil, gas, met­als, and bank­ing, to name a few — in the hands of his fam­i­ly and friends.

They large­ly own them through off­shore com­pa­nies, many of which are reg­is­tered in the West. It is a struc­ture often used by klep­to­crats to pro­tect their ill-got­ten gains from seizure if and when they lose pow­er and influ­ence at home.

But the off­shore struc­tures — just like the phys­i­cal assets in the West — also open the door for Western law enforce­ment to get involved and start civ­il or crim­i­nal cases.

Historically, it has been tough for the West to pros­e­cute for­eign cor­rup­tion cas­es because a sus­pec­t’s home gov­ern­ment often has no inter­est in assist­ing law enforcement.

Cooley said that was on dis­play when the U.K.‘s National Crime Agency tried to seize three homes worth a com­bined $100 mil­lion that were linked to Nazarbaev’s daugh­ter, Darigha Nazarbaeva, and grand­son, Nurali Aliev, on the grounds that they could not explain the legit­i­mate source of their wealth.

Kazakhstan backed Nazarbaeva in the pro­ceed­ings, say­ing she was a cit­i­zen in good stand­ing and that her wealth was legit­i­mate, said Cooley.

Cooley said any fight to recov­er the off­shore assets belong­ing to Nazarbaev and his friends is going to be “extreme­ly messy and cost­ly” for Toqaev.

He point­ed as an exam­ple to the case of the state-owned Tajik Aluminum Company, bet­ter known as Talco, which sued its for­mer part­ner Azar Nazarov in 2005, alleg­ing he defraud­ed the com­pa­ny of more than $500 mil­lion. Talco was over­seen by Tajik President Emomali Rahmon.

When the case set­tled in 2008, it had become one of the most expen­sive in English legal his­to­ry, with lawyer fees exceed­ing $125 mil­lion. The case high­light­ed the exten­sive cor­rup­tion in the nation, fur­ther dam­ag­ing its already tar­nished invest­ment image.

Similarly, Privatbank, a Ukrainian-gov­ern­ment con­trolled bank, has been involved in an expen­sive and pro­tract­ed law­suit in at least four coun­tries against tycoon Ihor Kolomoyskiy, who is accused of defraud­ing the lender of hun­dreds of mil­lions of dol­lars. Kolomoyskiy denies the allegations.

Cooley said it may not make sense for Toqaev to fight such an uphill bat­tle. The pres­i­dent may instead decide to reach some sort of accom­mo­da­tion with the for­mer lead­er’s fam­i­ly, he said.

Western insti­tu­tions — includ­ing uni­ver­si­ties and think tanks — could become col­lat­er­al dam­age in such a fight if a dump of finan­cial doc­u­ments shows they accept­ed dona­tions indi­rect­ly from the Nazarbaev fam­i­ly or asso­ciates, he said. The Atlantic Council was crit­i­cized in an op-ed in 2013 for accept­ing mon­ey from Kazakhstan. The coun­try does not appear on its list of donors for 2020.

Civil Society Push

Even if Toqaev does­n’t seek to coop­er­ate with the United States, Kazakh civ­il soci­ety will con­tin­ue to push the admin­is­tra­tion to ful­fill its promise.

Members of the Coalition of Civil Society of Kazakhstan — an umbrel­la orga­ni­za­tion that unites var­i­ous activist groups and known local­ly as Dongelek Ystel (Round Table) — pressed for hard-hit­ting sanc­tions against Nazarbaev’s inner cir­cle, includ­ing fam­i­ly mem­bers, dur­ing a meet­ing at the State Department in December.

They came to the meet­ing armed with detailed dossiers on alleged cor­rup­tion by two dozen mem­bers of Nazarbaev’s circle.

The Dongelek Ystel mem­bers, includ­ing Akezhan Kazhegeldin, who served as Nazarbaev’s prime min­is­ter in the mid-1990s, were invit­ed to Washington to par­tic­i­pate in forums orga­nized by the U.S. Congress tied to Biden’s vir­tu­al con­fer­ence, known as the Summit for Democracy.

With the help of Human Rights First, a U.S. non­govern­men­tal orga­ni­za­tion, Dongelek Ystel last year filed appli­ca­tions with the State Department and Treasury Department request­ing that they sanc­tion six mem­bers of Nazarbaev’s cir­cle, includ­ing under the Global Magnitsky Act.

The Magnitsky Act autho­rizes the pres­i­dent to impose eco­nom­ic sanc­tions and deny entry into the United States to any for­eign per­son iden­ti­fied as engag­ing in human rights abuse or sig­nif­i­cant corruption.

Among the six are Timur Kulibaev, Nazarbaev’s son-in-law, and Kazakh met­als bil­lion­aire Aleksandr Mashkevich, a sus­pect in a long-run­ning bribery probe in Britain. Both have repeat­ed­ly denied any wrongdoing.

The activists say the United States should take action against the indi­vid­u­als because the alleged crimes were com­mit­ted using U.S. banks.

Brian O’Toole, a for­mer senior advis­er at the U.S. Treasury Department, told RFE/RL that law enforce­ment cas­es can take years and thus for­eign civ­il soci­ety groups tend to push for sanc­tions because they are “quick and cathartic.”

However, he said it may not be the best tool for the sit­u­a­tion. Sanctions are used to achieve for­eign pol­i­cy goals and not sim­ply to pun­ish individuals.

He said oth­er instru­ments, such as visa bans, may be more appropriate.

In 2021, the State Department pub­licly banned Kolomoyskiy from the United States for alleged cor­rup­tion but did not impose eco­nom­ic sanc­tions on him, a move that could have had sig­nif­i­cant reper­cus­sions for Ukraine’s econ­o­my due to his con­trol of key assets in the country.

Decades Of Corruption

Large-scale transna­tion­al cor­rup­tion under Nazarbaev has been known to the United States since the ear­ly 2000s.

The Justice Department in 2003 charged James Giffen, an American banker and con­sul­tant to the Kazakh gov­ern­ment, with fun­nel­ing tens of mil­lions of dol­lars in bribes to Nazarbaev and the head of the coun­try’s Oil Ministry in exchange for lucra­tive deals for Western oil companies.

Giffen was found guilty of only a mis­de­meanor tax vio­la­tion and a sin­gle bribery count and faced no more than six months in prison.

The United States has ramped up the use of sanc­tions to deter and pun­ish malign activ­i­ties, such as human rights abus­es and cor­rup­tion, com­mit­ted by for­eign gov­ern­ments and individuals.

Kazakhstan and its elite have been spared to date, despite their poor track record on both accounts.

Some ana­lysts have crit­i­cized the State Department’s reac­tion to the vio­lence against pro­test­ers in Kazakhstan as weak.

William Courtney, who served as the U.S. ambas­sador to Kazakhstan in the ear­ly 1990s, told RFE/RL that the West has been cau­tious to crit­i­cize Kazakhstan’s lead­er­ship over the years “because they have coop­er­at­ed in so many areas,” includ­ing non­pro­lif­er­a­tion and energy.

He said he expect­ed the United States to first see how things devel­op in Kazakhstan before con­tem­plat­ing any action against indi­vid­u­als. Like Cooley, he said impos­ing sanc­tions now for vio­lence or cor­rup­tion could be inter­pret­ed as the West try­ing to influ­ence the pow­er struggle.

O’Toole said Washington’s main pri­or­i­ty with respect to Kazakhstan over the next year is to make sure it sta­bi­lizes fol­low­ing the recent upheaval.

Original source of arti­cle: https: https://www.rferl.org/