The Magnitsky Effect

Why Washington's imposition of sanctions against corrupt Bulgarians should be a cause not for panic but for political sobering

09:00 | 30 март 2023
Обновен: 15:09 | 30 март 2023
Снимка: Bloomberg L.P.
Снимка: Bloomberg L.P.


By Iskren Ivanov

The US State Department's imposition of Magnitsky Act sanctions is one of many possible actions the US government can take to gentlemanly remind its allies that being a friend of Washington is not just a political privilege. It is a responsibility that every US ally must take seriously and consistently if it is to maintain America's credibility.

Not that sanctions were not an expected scenario. They have been talked about for a long time at political and expert levels, so it was only a matter of time before we knew the next names on the Magnitsky list. Unlike the 'first wave,' these sanctions have more than symbolic significance. Their purpose was to show that Bulgaria needs serious reforms to continue on its path as a full member of the Euro-Atlantic family. In many respects, the reforms have failed for two reasons.

Bulgaira (un)reformed 

The first is due to the lack of political will, which citizens feel very acutely because of Bulgaria's crisis. After several unsuccessful parliamentary elections, the credibility of populist parties continues to grow, the Euro-Atlantic camp is deeply divided, and society is polarised to the degree that calls into question the protection of national interests.

The lack of political will also poses an increasingly clear danger: undermining the authority and credibility of EU institutions and the NATO collective security system. Some would call such a danger exaggerated, but experience shows that when there is no fight against corruption, misinformation, and ideological conformism in society, politicians pull the wool over the eyes of citizens by debating the benefits of Bulgaria's membership in the Alliance and the Community.

The second reason is the "two chairs" policy that Bulgarian politicians tried to follow in their relations with Russia after 2014. Some strange consensus has formed in Bulgaria over the presumption that the country could remain "in the symphony" with Moscow energetically and culturally, militarily, and strategically still be a loyal partner of the EU and NATO. The bad thing was that some European countries tacitly supported this configuration, as they remained heavily dependent on Russian energy supplies. Thus Bulgaria has become a "buffer zone" between the West and the East, a near abroad in which the pro-Russian and pro-Atlantic wings tacitly agreed on the country's policy. Outside these factions remained the populist actors, whose slogans were reduced to "down NATO," "EU - gender," or "war with Russia," and "death to Russophilism."

The US has been the only one to remain consistent and, since 2009, has discreetly reminded our politicians that if Bulgaria wants to move forward, it needs to take real action and not just limit itself to handshakes and loud declarations in support of the West. In doing so, America wanted to prove that the absorption of EU funds and NATO security consumerism should not be an end in themselves - even for the poorest country in the EU.

Things dramatically changed after Russia annexed Crimea and Donald Trump won the US elections. These events scared the political elite, as Bulgaria could no longer follow the two-chairs policy and had to think about two priorities - how to break with its decades-long dependence on Russia and how to balance the left-liberal wave that started to penetrate the country after Barack Obama's two terms in the White House and which - for several reasons - was not well received by Bulgarians. Bulgaria's strategy then changed in the direction of close alignment with the Trump administration. Indeed, in the first two years of his term, relations between Washington and Sofia reached an unprecedented level. The Americanisation of Bulgaria was taking place at lightning speed, and President Trump had become a political idol for many Bulgarians - curiously, his good-natured attitude towards Russia. After the political fiasco of the storming of the Capitol on January 6, 2021, things changed abruptly, and Trump's political ratings plummeted - despite the best efforts of his supporters to portray him as a martyr. Trump's loss in the White House election also became a loss for many Bulgarian politicians who had invested trust in him. That has put Bulgaria in a very difficult position, as in the Biden administration's image, it was seen as a country with a pro-Trump slant. And if the first wave of sanctions were a direct hint of the huge problems Bulgaria has with corruption, the second was aimed at forming a new, liberal, American-style political elite in Bulgaria.

Has the US interfered in Bulgaria's internal affairs?

The imposition of the two waves of sanctions under the Magnitsky Act seems to have poured water into the populists' mill and, to a large extent, even helped them to increase voters' confidence in them. It is where we need to clarify why the idea that the US is interfering in the country's internal affairs through the Magnitsky sanctions is without any basis. We should not ignore the objective fact that the Magnitsky Act is not part of international law but was adopted by the US federal government in 2012 'in memory' of Sergei Magnitsky, a Russian lawyer who, after investigating several corruption cases in Russia, was detained by the Russian authorities and died in prison without the right to a defense. Initially, it was applied to individuals directly involved in the lawyer's death, but after 2015 the US government began to use it as a weapon against foreign individuals systematically involved in corruption. Those sanctioned lose the right to maintain business contacts with US firms, enter the US and invest in US companies. In this sense, Magnitsky sanctions are imposed at the State Department's initiative and on the US Government's behalf.

Why the Magnitsky Act does not violate Bulgarian sovereignty? 

The first reason lies in Washington's policy itself. According to the US National Security Strategy, the primary goal of US foreign policy is to protect US national security and the security of US allies. In this sense, Washington views corruption in Bulgaria not just as a threat to its ally but as a threat to its security. The system of alliances built by the United States since the end of World War II is based on mutual trust and commitment. In exchange for goods such as collective security, privileged status in investments, and the ability to develop joint projects, America's allies also have a responsibility to deter potential threats that could harm their relationship with the United States. In this sense, the lack of will to fight corruption is interpreted by Washington as a lack of effort on Bulgaria's part to be a potent ally within NATO. Moreover, an ally's lack of a will could become a contagious example, or at the very least, an opportunity for corrupt practices to spread to other allies and be used by third parties hostile to US interests. In short, being an American ally is a privilege and a responsibility.

These are the realities of working with Americans, unlike other political families, such as Eurasia, where Russia does not care who and how rules among its friends. The only condition is that the "chief" or "leader" be a good friend of Moscow. That explains why the West has been able to build a community based on principles such as the rule of law and a drive to build a powerful middle class that can raise the living standards of Western allies.

The second reason is that the scope of the Magnitsky sanctions is not universal: they are applied by the US against the individuals concerned but not against the country of which they are citizens. In this sense, sanctions against certain political figures do not amount to sanctions against the Bulgarian state. It is a gentleman's hint as to how and in what form the fight against corruption should continue. The more influential the individuals who fall under the sanctions - the greater the problem of corrupt practices in the country. However, the Magnitsky Act is not directed against Bulgaria but against the problems it faces.

That is precisely why the political elite in this country must find the will to reform, which would logically prevent more people from being placed on the sanctions list. Here it is worth stressing that the second wave of sanctions has hit the generally speaking 'conservative' camp in Bulgarian politics. Although different in profile, conservative political forces have become uncomfortable since the Democrats won the US elections, and therefore the real objective is to prepare the ground for a comprehensive reform not just in the judiciary but also in the political system. However, whether these reforms will be implemented depends not on the US but on Bulgaria. Therefore, the ball is once again in the hands of Bulgarian politicians.

The third and final reason concerns the whole concept of interference in the internal affairs of a country. Usually, when a Great Power interferes in the politics of smaller countries, it does so either directly, openly, or veiledly. It is a feature of Washington's foreign policy that the US acts openly only when it comes to countries that are not its allies within security formats, such as NATO. Otherwise, what comes out is that Washington would have to act against its interests, having already trusted a country by admitting it to the Alliance and sharing its military technology.

The history of the Cold War knows operations against communist governments in Central and Latin America, but to claim that the US services are working to change the political status quo at home is tantamount to a conspiracy theory. This type of message serves the populist camp, busily propagating the version that Bulgaria is an American colony. But in fact, the objective truth is very simple: the United States has no interest in interfering in the internal affairs of its allies because that would be to call into question the very Alliance it has created. The Magnitsky sanctions should be seen as an attempt by the US to contribute to the fight against corruption in Bulgaria. But at the same time, as a phenomenon that threatens and puts at risk US allies as a whole. After all, if an allied country is attacked tomorrow, then Bulgaria will also have to join in its defense as a NATO member state, right? In the same way, the Bulgarian government would react if tomorrow the country's security was in question and help was required from Western allies. Otherwise, Bulgaria is interfering in the internal affairs of the US only on the suspicion that there is a huge Trump lobby in the country.

And this is where the main problem lies - in Bulgaria, we can hardly realize how seriously America takes corrupt practices at the highest level. That does not mean that Americans and Europeans do not suffer from the disease of corruption. But it does mean that mechanisms are triggered when the rules are broken. These are either lacking in Bulgaria or are not put into action at all.

Should Bulgaria rely on the US to fight corruption?

US support for the fight against corruption can be a benchmark, a starting point for tackling this challenge, but Bulgaria should not rely entirely on someone to lead it by the hand. That would already interfere with the country's internal affairs, and the US knows it. If we look at the diplomatic relations between America and Bulgaria, we will note that corruption has always been a problem in the statements of American diplomats in our country since the fall of socialism. Recently, another important element has been added to this rhetoric - that Bulgaria itself must fight corruption like the other post-socialist republics. Without such efforts, the country may find itself in the same group as countries like Hungary, which were among the most Euro-Atlantic NATO allies only decades ago, and now their policies point in a radically opposite direction.

What steps should future governments take to tackle corruption so Bulgaria can position itself clearly on the geopolitical map?

The first and main priority remains membership in the Eurozone. The main reason for this development is that adopting the single European currency will hand serious supervisory mechanisms to the European Central Bank, which automatically means a sharp decline in corrupt practices. However, it is important to mention the implications for how the euro will be introduced in Bulgaria.

The main problem is that the country has deteriorating economic indicators, and the gap between nominal and real wages continues to grow in both the private and public sectors. That is why the European approach is the winning approach for introducing the single European currency, which could happen after building robust compensatory mechanisms to ensure that key sectors such as health, education, and social security remain a priority for the state, as is the case in Europe.

On the other hand, freedom of private initiative will be guaranteed, businesses will be motivated, and the market will avoid excessive regulations that could harm free competition. This approach may take a little longer, in perspective even postponing the adoption of the euro by a year or two, but it will help Bulgaria to integrate more smoothly into the European economy.

The other approach would be faster but also more shocking. That involves identifying a sector to bear the burden of the changeover, with funds being redirected from it to offset a potential shock effect. In this scenario, joining the Eurozone would happen very quickly, possibly as early as 2024, but could lead to temporary economic instability. If policymakers bet on this approach, they must act quickly to prevent a price bubble or an increase in the scissors between real and nominal wages.

Secondly, judicial reform is needed in Bulgaria, and this is visible. One of the main ones, however, is that corruption affects not only the living standards of Bulgarians but also the quality of democracy. People are losing confidence in democratic institutions because a dangerous precedent is being set - democracy functions at the level of the state and institutions but not at the level of the judiciary. The fact is that the judiciary is separate from the other two, but it is democracy that guarantees its independence. Therefore, if it is not independent, there is no way that the quality of democracy can improve.

That is precisely why the US has no intention of interfering in the country's internal affairs and building a new judicial system. It must be done through reform initiated by politicians and, of course, by citizens. If the will for such reform is lacking, Bulgaria has reached the limits of its democratic development and is positioning itself as a Balkan, post-socialist democracy that will not evolve into anything more. However, the implementation of judicial reform cannot be carried out only with protest actions and constant public demonstrations in support of liberal democracy but with real steps that cannot be taken under a caretaker government.

Finally, the country's accession to the Schengen area must be the long-term goal, which will be the greatest proof that the fight against corruption is effective. Long-term because the outlook for Bulgaria's Schengen membership is unfavorable, given that the Austrian veto is still in place. Although this veto has purely political consequences, the Magnitsky sanctions prove that it is not unjustified. And corruption at Bulgaria's borders is a problem as old as Bulgaria itself. Entry into Schengen cannot be achieved simply by building a fence, given that there are systemic problems in customs control, which, as we have seen, even take victims on the Bulgarian side.

In summary, the imposition of Magnitsky sanctions should be an occasion not for panic but for political sobering. The political elite must understand that the consensus on the two-chairs policy has already been exhausted, and Bulgaria cannot return to it due to objective geopolitical circumstances.

Now that populism is on the rise again, and sentiment against the country's geopolitical orientation is the victim of much debate, a divided society and politicians need to unite to prevent more people from getting on the sanctions list.