Ban the Word ‘Oligarch.’ The Manafort Judge Is Right.

(Bloomberg Opinion) -- During the trial of Paul Manafort, President Donald Trump's one-time campaign manager, Judge T.S. Ellis III told lawyers on both sides to avoid using the word “oligarch” to describe Russian and Ukrainian tycoons. The news and politics realms, too, should take heed of this astute instruction.

Ellis's explanation was that the word had taken on a “pejorative” meaning, and that its use by prosecutors would imply that Manafort “associated with despicable people and therefore he's despicable.” The judge added, “That's not the American way.”

The prosecution in the Manafort case appears to attach a particular importance to displaying Manafort's conspicuous wealth to the obviously less affluent jury. It's a tactic clearly targeting what communists would have termed “class consciousness,” the unarticulated anger at the sight of a $15,000 ostrich-skin jacket or huge house-renovation bills. The use of the O-word to describe any wealthy and politically connected post-Soviet individual would have complemented this prosecutorial thrust, something Ellis now has thwarted.

There are, however, other reasons for adopting Ellis's attitude. Nuance gets a bad rap these days, but the term “oligarch” as currently used gets in the way of a proper understanding of post-Soviet power dynamics — and thus of informed policy choices.

Ellis is not the first Western judge to be faced with the O-word. Justice Elizabeth Gloster of the Court of Appeal of England and Wales noted in a 2012 ruling against one rich Russian, Boris Berezovsky, and in favor of another rich Russian, Roman Abramovich, that calling such people “oligarchs” could be inaccurate, even though both were beneficiaries of Russia's wild transition to capitalism.

She noted: “There was some discussion between the historical experts as to whether the use of such term was appropriate, and what it conveyed, but that is not a matter which I need address.” Thus, Gloster satisfied her taste for precision and moved on, since the use of the term cast equal aspersions on both sides at the trial.

In Manafort's case, however, the O-word could potentially be applied to players in two widely divergent types of post-Soviet systems — the Ukrainian one and the the Russian one. The high-flying political consultant worked with representatives of both. He was a failed business partner of Russian billionaire Oleg Deripaska and, as former Ukrainian President Viktor Yanukovych's election guru, an indirect employee of the wealthy Ukrainians who stood behind the Yanukovych regime.

Yanukovych's Ukraine was a classic example of state capture by the beneficiaries of post-Soviet privatization. To protect their assets, these people invested in politics and media, and the Yanukovych regime took no important action without consulting with them. The system has been described as crony capitalism because the tycoons behind it received significant rents from the state, but that's an insufficient description. These wealthy men have also served as a kind of informal government, a variation of the Soviet Politburo, which some Russia experts have conceptualized as the representative organ of an oligarchy.

Researchers have noted that this type of oligarchy persisted in Ukraine after Yanukovych was deposed, under President Petro Poroshenko, who was a minor “oligarch” under Yanukovych.

The Russian system was a bit like the Ukrainian one under President Boris Yeltsin, though the influence of wealthy businessmen was, to a greater extent than in Ukraine, moderated by the power of the law-enforcement agencies and the entrenched bureaucracy. Under President Vladimir Putin, the difference increased as businessmen, including the president's cronies, were forced to subordinate their interests to those of the state.

The historian Edward Keenan wrote in his seminal work, “Muscovite Political Folkways”:

The Muscovite, and later Russian, systems tended to prefer oligarchic and collegial rule, to avoid the single leader, and to function best when the nominal autocrat was in fact politically weak. There were periods — they seem to be typically associated with rapid socioeconomic change and followed by political turbulence — when the monarch did "overpower" the essentially oligarchic system, but these seem to be exceptional.

It's a matter for expert debate whether today's Russia is going through such an exceptional period of dictatorship, rather than oligarchy. The prevailing side in that debate, ideally, would get to shape Western policy toward Russia. Today, however, Russia is treated both as a dictatorship ruled by Putin (he is assumed to be behind every Russian shenanigan, from hacking the Democratic National Committee to the actions of Russian mercenaries in Syria) and an oligarchy in which wealthy people take part in shaping policy.

The latter vision at least partially informs the U.S. sanctions policy against wealthy Russians. The 2017 Countering America's Adversaries Through Sanctions Act mentions “oligarchs” without defining the term, and it's not clear whether they are to be punished as Putin's agents or induced to rebel against him as important decision-makers. If sanctions are to change Putin's calculus, only the latter makes sense — but Putin's stubbornness in the face of the sanctions speaks in favor of the argument that his regime is an autocracy rather than an oligarchy.

It's also possible, however, that the Russian regime is still an oligarchy, but the wealthy businessmen and kleptocrats aren't the oligarchs in it. Enforcers, such as military and intelligence chiefs, are. There's been plenty of evidence in recent years that Putin has conferred with them on policy matters, not with his wealthy cronies. Dealing with Russia as a military- and intelligence-led oligarchy would require a different approach than economic sanctions, but no Western government appears to see things that way.

Manafort's history, too, illustrates the difference between the roles and attitudes of tycoons in Russia and Ukraine. Deripaska went after Manafort after their business relationship soured. He sued him and his partner Rick Gates, first in the Cayman Islands and Cyprus, then, earlier this year, in New York. Clearly, Deripaska expected a financial return from the partnership. The Ukrainian businessmen, who, according to the prosecution, paid him while he worked for the Yanukovych regime, never did anything of the kind, putting up the money without complaint or expectation of payback. It was a political investment to them.

The catch-all term “oligarch” distorts a complex reality, and Judge Ellis is right not to want it in his courtroom. It shouldn't pollute the broader discussion of post-Soviet governance, either.

To contact the editor responsible for this story: Jonathan Landman at jlandman4@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Leonid Bershidsky is a Bloomberg Opinion columnist covering European politics and business. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.