Why Nobody Invests in Japan
Tokyo’s Failure to Welcome Foreign Capital Is Hobbling Its Economy
A congressional impeachment inquiry seeks to determine whether U.S. President Donald Trump extorted a foreign leader, withholding a coveted White House meeting and U.S. military aid in order to promulgate a Russian-inspired conspiracy theory and smear his chief opponent in the 2020 election. The United States’ gravest constitutional crisis since Watergate is not just about preserving the integrity of U.S. democratic institutions from the president’s abuse of power, however. It is an episode in a broader geopolitical struggle between the defenders of democracy and the forces of oligarchic authoritarianism, from Kyiv’s Maidan to Hong Kong’s Mong Kok. In this wider global conflict, Trump and his surrogates have consistently aligned themselves with the forces of oligarchic authoritarianism—in Russia, Turkey, Hungary, and other countries, too. Nowhere is this clearer than in Ukraine.
That Ukraine is at the heart of the U.S. impeachment inquiry is no coincidence. The country is ground zero for the struggle between democratic rule of law and authoritarian oligarchy. Halfway around the world from Washington’s halls of power, Ukraine sits along a civilizational and geopolitical fault line. To Ukraine’s west are the liberal democracies of Europe, governed by rule of law and democratic principles. To its east are Russia and its client states in Eurasia, almost all of which are corrupt oligarchies.
Competition between these two governance systems has twice erupted into violent conflict. Russia’s war against Georgia in 2008 and its invasion of Ukraine in 2014 were both efforts to protect the Kremlin’s sphere of oligarchic interests from democratic reformers who had come to power through revolutionary social movements. This same motivation underlies Russia’s covert war of influence in other parts of the world, from Moldova to Montenegro and from Syria to Venezuela. In this war on democratic movements and democratic principles, Russia’s biggest prize and chief adversary has always been the United States. Until now, however, Russia has always had to contend with bipartisan resolve to counter its efforts to subvert U.S. democratic institutions.
An extraordinary political event led Russian Spetsnaz forces and military intelligence (GRU) officers to stealthily take control of Ukraine’s Crimean Peninsula in March 2014. A month earlier, in February, Ukrainian citizens had risen up against President Viktor Yanukovych, a deeply reviled kleptocrat who had perpetrated such audacious acts of corruption—such as installing an ostrich zoo in his official residence—that not even his oligarch cronies could defend him any longer. The last straw came when Yanukovych’s security forces fired on and killed more than a hundred pro-democracy protesters on Kyiv’s Maidan Nezalezhnosti, or Independence Square, in mid-February 2014. With blood on his hands, Yanukovych fled Kyiv in the dead of night and landed in Russia several days later.
Yanukovych’s decision to flee Ukraine enraged Russian President Vladimir Putin, not because Putin had some special affection for Yanukovych—in fact, he looked down on him as a petty thug of limited intellect—but rather because Yanukovych’s abdication of power imperiled the oligarchic system of influence through which the Kremlin controlled Ukraine. In this tributary system, oligarchs were allowed to enrich themselves at public expense as long as they maintained fealty to the Kremlin. The Maidan revolution’s promise of democratic reforms and accountability threatened to wipe out this oligarchic system of patron-client ties and thus posed a real danger to Moscow’s influence in Ukraine.
Yanukovych’s abdication of power imperiled the oligarchic system of influence through which the Kremlin controlled Ukraine.
The “little green men” that Putin deployed to eastern Ukraine were part of a coordinated Russian military response to Ukraine’s democratic revolution. Deeper inside Ukraine, the same corrupt oligarchs and officials who had pilfered public resources under the Yanukovych regime manned a second, civilian front. The organization that united these corrupt interests was the pro-Russian political machine known as the Party of Regions, which the political scientist Taras Kuzio has aptly described as a party of “crony oligarchs.”
During his campaign for president in the spring of 2014, Petro Poroshenko vowed to honor the sacrifices of the “Heavenly Hundred” (as the Maidan martyrs were known) by bringing about the “deoligarchization” of Ukraine and taking on these entrenched interests. Poroshenko was himself an oligarch and a founding member of the Party of Regions, but the international community gave him the benefit of the doubt. The months of Poroshenko’s presidency ticked by, and the promised deoligarchization never took place. Indeed, almost no one from the previous regime was held accountable. Poroshenko’s handpicked prosecutor general, Viktor Shokin, not only failed to properly investigate high-profile cases of corruption but was personally implicated in a shakedown run by two subordinates who became known throughout Ukraine as the “diamond prosecutors,” because stashes of diamonds were found in their homes. Shakedowns by corrupt prosecutors had been routine under Yanukovych. Their recurrence under the Poroshenko administration worried many of Ukraine’s international supporters.
As a result of this backsliding, the international community insisted that concrete benchmarks be met before assistance could be disbursed to Ukraine. The demands included Shokin’s removal, the thorough reform of the Office of the Prosecutor General, and the establishment of dedicated anticorruption institutions free of political influence. Under coordinated pressure from Ukraine’s major donors—the United States, the European Union, and the International Monetary Fund—Ukraine established independent, national bodies to prevent and root out corruption. It also empowered a special anticorruption prosecutor and set up dedicated anticorruption courts. Collectively, the reforms were potential game-changers. Precisely for this reason, they posed a direct threat to Ukraine’s corrupt oligarchs and the officials who enabled and profited from their corruption.
As pro-democracy reformers struggled to defend their country against Russian aggression and simultaneously worked to reform Ukraine’s oligarchic system of self-dealing, on the other side of the Atlantic, Donald Trump was mounting a highly unorthodox political campaign. In sharp contrast to other Republican primary candidates, Trump expressed a highly positive view of President Putin and repeatedly shrugged off concerns about the kleptocratic and authoritarian nature of Putin’s regime. Trump also jolted establishment Republicans just prior to the Republican National Convention in July 2016 by instructing surrogates to remove support for military aid to Ukraine from the official GOP platform.
In March 2016, Trump had made another unusual decision by hiring Paul Manafort as his campaign manager. Many establishment Republicans saw Manafort as having gone over to the “dark side” by working for corrupt authoritarians such as Yanukovych, Zaire’s Mobutu Sese Seko, and Philippine President Ferdinand Marcos. Though Trump had plenty of connections of his own to Russia, Manafort brought new links to the Kremlin that went through the Party of Regions political machine.
Many oligarchs may have seen a Trump victory in 2016 as a way to get U.S. law enforcement off their backs and potentially even return to power in Ukraine.
Manafort’s ties included oligarchs such as Oleg Deripaska, whom the Treasury Department later sanctioned for having “represented the Russian government in other countries”; Dmytro Firtash, whom Republican Senator Roger Wicker described as “a direct agent of the Kremlin”; Rinat Akhmetov, Ukraine’s wealthiest oligarch and a leading industrialist in the Donbas; and Serhiy Lyovochkin, another Donbas oligarch who had served as the head of Yanukovych’s Presidential Administration and later the leader of the rebranded Party of Regions, known as Opposition Bloc. These were not just casual acquaintances: Manafort reportedly owed Deripaska $10 million, had worked with Firtash on possibly redeveloping Manhattan’s Drake Hotel, and stayed in close touch with Akhmetov and Lyovochkin. Special Counsel Robert Mueller found, for example, that Manafort had tasked his business partner Konstantin Kilimnik—whom the FBI claimed had “ties to Russian intelligence”—with passing campaign polling data to both Akhmetov and Lyovochkin in 2016 for reasons that remain unexplained to this day.
In mid-August 2016, Manafort was suddenly forced to resign from the Trump campaign after it was revealed that he had received secret payments totaling $12.7 million from the Party of Regions. The ties between the Party of Regions network of oligarchs in Ukraine and the Trump campaign persisted, however, after Manafort’s departure. Many of these oligarchs may have seen a Trump victory in 2016 as a way to get U.S. law enforcement off their backs and potentially even return to power in Ukraine. Lyovochkin and his fellow Party of Regions comrade Serhiy Kivalov were spotted reveling at Mr. Trump’s inauguration. Their dreams of a comeback seemed within reach.
During Mueller’s investigation, the Trump administration struggled to fend off accusations of collusion with Russia, and Ukraine’s underworld of pro-Russian oligarchs and corrupt officials tried to discredit the investigation’s core premise: that Russia had intervened in the 2016 election to help Trump. Just a few weeks after celebrating Trump’s inauguration in Washington, Lyovochkin penned an op-ed in U.S. News & World Report titled “Ukraine Can Win in the Trump Age,” where he sounded an optimistic note about the Trump presidency and put forth a conspiracy theory that not Russians but rather Ukrainians had interfered in the 2016 election and had done so on behalf of former Secretary of State Hillary Clinton. This narrative, first articulated by Russia’s Ministry of Foreign Affairs, sought to flip on its head the detailed evidence of Russian interference to support the Trump campaign, holding instead that anti-Trump Ukrainians had worked behind the scenes to smear Manafort and thereby tilt the vote in Clinton’s favor.
In the months that followed, the pro-Kremlin network in Ukraine began plotting a disinformation campaign against one of the most forceful supporters of Ukraine’s sovereignty and an ardent champion of its fight against corruption and Russian aggression: former Vice President Joe Biden (for whom the author served as a foreign policy adviser in 2014–15). A former Ukrainian military prosecutor named Konstantin Kulyk compiled a dossier of false allegations against Biden, claiming that Biden had improperly advocated for the removal of Viktor Shokin as prosecutor general. In fact, Biden had done so as part of a coordinated U.S. policy that was aligned with that of the European Union and the International Monetary Fund.
Kulyk had interests of his own in the matter. He had come out of the notoriously corrupt Kharkiv Office for Combating Organized Crime, where cops and criminals were largely indistinguishable, and was appointed as a military prosecutor in part thanks to Viktor Shokin. In June 2016, Kulyk was indicted for illicit enrichment in what was then a major corruption scandal. He reportedly met with Trump lawyer Rudy Giuliani in Paris and plied him with disinformation to advance the conspiracy theory that Shokin had been improperly fired at Biden’s urging.
The pro-Kremlin network in Ukraine began plotting a disinformation campaign against one of the most forceful supporters of Ukraine’s sovereignty: former Vice President Joe Biden.
At around the same time, Giuliani formed a business relationship with Gennady Kernes, the mayor of Kharkiv. According to Mark Galeotti, an expert on Russian organized crime, Kernes had “recent gang ties” and was until 2014 a “stalwart” of the Yanukovych regime. Despite these dubious associations, Giuliani’s private company, Giuliani Security & Safety, signed a contract with the city of Kharkiv, and Giuliani even flew to Kharkiv on a private jet to consummate the deal with Kernes in 2017. A pro-Russian oligarch named Pavel Fuchs reportedly brokered that contract between Giuliani and Kernes. As a real estate developer in Russia, Fuchs had been engaged on the Trump Tower Moscow project prior to the 2016 election; in 2017, he hired Giuliani to work for the city of Kharkiv. In a subsequent interview, Fuchs asserted that he considered Giuliani to be a “lobbyist for Kharkiv.”
During his appearances on Fox News, Giuliani repeated almost verbatim the conspiracy-minded talking points of another former member of the Party of Regions and Kharkiv native, Andriy Derkach, illustrating the pathway by which pro-Russian disinformation traveled into the U.S. news media. Disgraced former Ukrainian Prime Minister Mykola Azarov, a former head of the Party of Regions who had fled to Russia together with Yanukovych, also weighed in to support the claims against Biden that Giuliani and Trump promoted.
But perhaps no Party of Regions figure has a bigger stake in Trump’s fortunes than Dmytro Firtash. According to a 2014 Reuters investigative report, Firtash’s multibillion-dollar fortune “was built on remarkable sweetheart deals brokered by associates of Russian leader Vladimir Putin.” In 2013, however, Firtash was indicted in the Northern District of Illinois on bribery charges. He is currently in Vienna awaiting extradition to the United States. As part of a last-ditch effort to avoid extradition, Firtash asked Shokin, the corrupt former prosecutor general, to file an affidavit claiming that Firtash, like Shokin, had been unfairly singled out by the Obama-Biden administration. Firtash retained the husband-and-wife legal team of Joseph diGenova and Victoria Toensing, who reportedly have ties to both Giuliani and Trump.
President Trump’s attempts to coerce Ukraine into furthering his domestic political agenda are inextricably linked to the revanche of pro-Russian forces inside Ukraine. Those forces seek to curry favor with Trump’s inner circle. The same machine-style tactics that the Party of Regions honed for close to two decades in Ukraine—enlisting corrupt prosecutors to press politically motivated charges, bribing officials, offering sweetheart deals to political allies—have surfaced repeatedly in this network’s outreach to Trump and his surrogates.
Energy Secretary Rick Perry, for example, recommended a donor to his 2010 gubernatorial campaign as an adviser to Ukrainian President Volodymyr Zelensky, and the person was rewarded with a lucrative Ukrainian oil and gas contract. Giuliani’s private security company signed major deals with the mayors of Kyiv and Kharkiv while Giuliani was engaged on Trump’s behalf. And of course Giuliani’s associates Igor Fruman and Lev Parnas tried to use their connections to the White House to secure sweetheart deals in Ukraine’s energy sector, all while working to spread falsehoods about Biden and the 2016 election.
The country that profits most from these corrupt ties is Russia, which has relied on the Party of Regions for decades as a lever of influence in Ukraine. In 2014, the Kremlin was caught by surprise when Ukrainians rose up against this oligarchic system. Putin has been fighting back ever since. Despite Putin’s war and the vast amounts of dark money Russia has spent to co-opt politicians, Ukraine has thus far resisted subversion. Tragically, the United States has proven more vulnerable.
The president’s abuse of office for personal, political ends has done enough damage to the democratic institutions and political culture of the United States. But by aligning himself with the forces of corrupt oligarchy—whose ultimate patron in Ukraine is the Kremlin—Trump has upended a bipartisan U.S. foreign policy tradition of support for democratic rule of law. The days when the United States stood for what was right and honorable—fighting corruption, supporting the rule of law, encouraging democratic movements—have come to an end. They do so just as millions of anticorruption demonstrators take to the streets of Moscow, Prague, Bratislava, Beirut, Tbilisi, Jakarta, and many other cities to protest oligarchic regimes that stifle their democratic aspirations. Restoring the integrity of U.S. democratic institutions will require not only cleaning our own house but redoubling our commitment to democracy in this larger global struggle.