An injunction against a Swiss lawyer, accused of bribing Azerbaijani top leaders and arrested in South Korea under the U.S. Foreign Corrupt Practices Act, creates a conundrum for U.S. policy makers: how Washington should deal with friendly foreign leaders who are demonstrably corrupt.
U.S. policy towards Turkey, Pakistan, Indonesia, and Peru, to mention just a few countries, faced corruption on the highest level, and remained always subject to American national interests. In those countries, Prime Ministers Tansu Ciller and Benazir Bhutto, and Presidents Suharto and Alberto Fujimori, were mired in corruption scandals which ultimately cost them power.
American businesses often complained that State Department's permissive attitude towards corruption on the one hand, and Justice's aggressive persecution of U.S. executives under the Foreign Corrupt Practices Act cost them business. Until recently most European countries had no criminal liability for bribing foreign officials, while many were allowed to write off foreign bribes as legitimate business expenses.
The answer to the conundrum is different in the short term and in the long term.
In the case of Azerbaijan, U.S. foreign policy practitioners are focusing on the short term. The realpolitik approach wins. They put a priority on U.S. interests: geopolitical, security and economic.
In the case of Azerbaijan, it is continuity of power, prevention of Russian and Iranian meddling, construction of the Baku-Ceyhan pipeline, and stability for American and international energy investors.
Azerbaijan spent years and millions of dollars in lobbying to cultivate relationships to achieve such an outcome.
At the same time, U.S. leaders and the World Bank and the International Monetary Fund policy makers are aware of the long-term interest of fostering reforms, the rule of law, and transparency in governance and economic management.
The United States has declared these priorities in Azerbaijan not just because many Americans believe in these principles, not out of goodness of its heart, but because, if implemented, such an approach will make Azerbaijan more prosperous, more attractive to foreign investors, and therefore, more stable.
These short-term and long-term interests clash.
A New York grand jury indicted a Swiss lawyer Hans Bodmer, who allegedly paid millions of dollars to unnamed Azeri officials. He delivered suitcases full of cash by executive jets which flew to Baku and provided expensive gifts.
The purpose of the alleged bribes was to steer privatization of the Azeri national oil company SOCAR into the hands of a foreign investor group, Minaret, led by a Czech businessman Viktor Kozheny, and by a company called Oily Rock. Investment funds, such as Omega Advisors and prominent U.S. politicians, such as the former Senate Majority Leader George Mitchell, were also involved.
So far, Washington seems not to be impressed with the news. Zeyno Baran, Director of International Security and Energy Programs at the Nixon Center and a Caucasus expert, says that "The United States knows that Azeri officials are corrupt. Aliev the elder and the younger were not named in the indictment", she says, so why go after them? "The United States is not going to change its position towards Azerbaijan," Baran says.
David Rivkin, a former White House and Department of Justice official in the Reagan and the first Bush administration, is a partner at the law firm of Baker & Hostetler. He often provides opinions on international legal issues, and is a well-respected commentator on international law.
Rivkin believes that the U.S. Foreign Corrupt Practices Act does not cover foreign recipients of bribes. Thus, while the U.S. Department of Justice may be right in prosecuting U.S. company executives who gave bribes, the United States does not have a basis in the law to indict the Alievs and issue an international warrant for their arrest. In fact, they enjoy sovereign immunity as head of state and acting head of state, respectively.
Moreover, says Rivkin, from a practical point of view, the United States should not go after the Alievs because of U.S. interests in that country. "As they cannot be prosecuted, they should not be named. That's why we have a category of "unindicted co-conspirators..." Still, Rivkin believes, "the United States should promote structural reform, and democratization and prosecute violators who pay bribes," while doing business with foreign leaders, he advises.
The Bush Administration, however, has already taken the first step in what can be called "Nazarbaization" of U.S.-Azerbaijani relations. "Nazarbaization" means that the United States will continue doing business with a leader who is demonstrably involved in corruption, but the relationship will never be as close as with a leader who is democratically elected and "clean".
The lawyer close to the grand jury investigation says that President Bush and Vice President Cheney have not met with Ilham Aliev during his visit to Washington in August, as they knew about the forthcoming indictment in New York.
American officials say that allegations, let alone noisy prosecution of corruption, may annoy foreign leaders and turn them against the United States. In case of Azerbaijan, it may push Baku to pursue a closer relationship with Moscow.
Russia has no objection to corruption among the former Soviet leaders, as the April 2003 natural gas "deal of the century" with the Turkmen dictator self-named Turkmenbashi (head of all Turkmen), demonstrates.
Moreover, the Kremlin is a master of navigating through corrupt capitals of its former empire, as it operates through the kompromat (compromising materials) files even more than through power projection.
The Kremlin thrives on manipulating corrupt leaders to such a degree, that a senior adviser to the Putin Administration recently floated a trial balloon in Washington, that Moscow use this expertise as a "subcontractor" in dealings with the future Iraqi government (which Moscow expects to be corrupt).
Many questions remain unanswered in the aftermath of this indictment.
Why prosecutors were allowed to get away with the indictment at all? Can the Foreign Corrupt Practices Act apply to foreigners? Are the Departments of Justice and State, handling this case, are on the same page?
Would Washington, in the end, prefer to deal with the Alievs in Baku who are weakened by the corruption scandal -- just as Ukrainian president Leonid Kuchma and Kazakhstan president Nursultan Nazarbaev may be easier to handle, with all the kompromat floating around?
Finally, no one is expecting the Azeri opposition to blame Russia or Europe for supporting corrupt leaders. As the Azeri presidential election campaign has already demonstrated, it is the United States that is held to a higher standard. The Azeri opposition accuses the United States of "warmly embracing" the Aliev administration despite the signs that the presidential elections will be tainted.
Thus, bribery scandals make the existing U.S. conundrum worse: Choosing between transparency and good governance, and Realpolitik, is more difficult than ever.
Ariel Cohen, Ph.D., is Research Fellow at the Heritage Foundation. His expertise includes energy security.
2014: The Year in Music [PHOTOS]