HOW YOUR RETIREMENT SAVINGS MAY BE FUELING PUTIN’S WAR

The financial sectorsubsidizes authoritarianism

What if the money tucked away in your pension fund is helping fuel authoritarianism and Russia’s war against Ukraine? It could be invested in a private financial management company whose actions help Russia. Public pension funds often work with financial management companies to invest pension fund capital. Do you know what these funds are doing with your retirement? If you don’t, nobody does, because they are often private.

Take the reports of one such private management company, Elliott Management. This US hedge fund is reportedly considering investing in Russia’s last remaining gas pipeline route for selling Russian gas to Europe, TurkStream. TurkStream runs through to Bulgaria, keeps the lights on in Europe’s more authoritarian countries, funnels billions of dollars back to Moscow and an investment in it will expand Moscow’s capacity to sow corruption and undermine democracy.

We do not know who Elliott’s investors are, nor do we know their motives. And their motives do not matter. If reporting is accurate, Elliott Management’s potential investment would be in a strategic asset of one of the worst war criminals since WWII, at a time when Russia commits war crimes daily. This Bulgaria investment would hardly be the first time investors or businesses have abetted authoritarianism. It’s legal. And private financial management funds may do it with your pension savings

(source: the Kremlin).

There’s no easy fix

There’s no easy solution here, as simply “regulating Wall Street” won’t fix the problem. Whatever the solution, the US needs a system that enforces what should not need saying: companies that thrive on the rule of law should not enable those who seek to destroy democracy.

A corporate commitment to anti-corruption would be a good start. Another would be for politicians with authority over pension funds that invest capital with these private financial managers to tighten the reins on what these Wall Street funds do with their constituents’ retirement funds. And you can take action, too.

Without your action, transactions like this will continue and remain legal.

TurkStream and Russian gas

TurkStream, with a total annual capacity of 31.5 billion cubic meters (bcm), supplies gas to Turkey via one line and to several European countries—including Hungary, Slovakia, Serbia, Romania, Greece, Bosnia and Herzegovina, and North Macedonia—through its Bulgarian extension. Bulgartransgaz manages the Bulgarian extension of TurkStream. CEO and “Gazprom confident” Vladimir Malinov runs Bulgartransgaz.

According to reports, Elliott Management’s deal would involve refinancing TurkStream’s substantial debt to the Arkad Consortium, an engineering consortium with reported ties to Russian politicians. That would free up cash for the expansion of TurkStream.

That will help Russia grow the $10 billion annually it receives in oil and gas sales to Central and Eastern Europe.

(source: WikiMedia)

Russia remains integrated into our financial system

To be clear, there’s no indication of Elliott Management coordinating with Moscow. The Kremlin uses sophisticated Western financial players to mitigate US leverage, subsidize Russia’s war against Ukraine, circumvent the ramifications of sanctions, and amplify Russian foreign policy because the West allows it, and that appears to be the case here.

Instead of building TurkStream themselves, Moscow used the Arkad Consortium. Elliott Management’s possible investment would supplant Arkad and maintain Russian energy influence in Europe.

To help defend this last remaining piece of Russia’s strategic pipeline infrastructure, Russian interests could do worse than recruit one of the GOP’s most prominent donors with likely White House influence: Elliot’s founder, Paul Singer. Sanctions and US law are merely palliative measures and will not prevent incidents like this from occurring. Until politicians take decisive steps to extricate those countries from the West’s financial system that are undermining democracy, the West will have to rely on Wall Street hedge funds to defend democracy against authoritarianism.

But Bulgaria is an EU and NATO member…

On paper, Bulgaria appears to be a secure ally. Thanks to sanctions, the potential for chaos associated with TurkStream has remained limited. And thanks to sanctions, Russia’s pipeline politics are on the way out. Those pipeline politics led to a decade of war in Europe, ceaseless attacks on the rule of law and democracy and many murdered Ukrainians. But thanks to a Wall Street hedge fund, the last vestige of this poisonous geopolitical lever could be getting a lifeline.

The deal would also disrupt the European Commission's REPowerEU plan, which aims to phase out Russian energy imports by 2027. Moreover, Bulgartransgaz's Malinov is reportedly under investigation by the European Public Prosecutor's Office (EPPO). Malinov has publicly denied any wrongdoing, but the case has been marred by Malinov’s hospitalization just before his indictment and alleged threats against and a smear campaign targeting the European prosecutor. The alleged threats originated​​ from the Bulgarian oligarch Delyan Peevski, who is subject to a US Treasury designation under the Global Magnitsky Act..

The EU has a clear interest in this deal.

Americans have agency, too

The US government may no longer be Ukraine’s ally, but 46% of Americans want to support Ukraine more, and Americans have plenty of levers beyond urging Republicans to do the right thing.

• As governor of California, Gavin Newsom has authority over two of the most significant public pension funds in the world. We urge him to announce a review of all the investment activities of the funds in which California state-managed capital is invested. He could have an enormous impact on Wall Street’s behavior.

• Relatedly, because so much state-regulated capital originates from blue states, governors from these states collectively have enormous influence over Wall Street. For example, both California and Massachusetts alone and individually (!) have enough state-regulated capital to disrupt any ambitions of President Putin to reenter US financial markets. By leveraging their anti-corruption laws and constitutional authority to regulate commerce in their states, they can give Republicans a lesson in federalism while dictating access to Putin.

Wall Street financial managers, facing the choice of forgoing the ability to work with Russian interests in order to access blue-state capital pools, would not even stop to ponder the question. Blue states can enact these regulations and reviews, in most cases, without legislative action. The regulations have been in place for decades.

Trump and the GOP’s politicization of Ukraine have made support for it a Democratic Party plank. This means any Democratic governor, attorney general or secretary of state with ambitions for higher office or reelection can stand out by demonstrating decisive support for it. All it takes is one blue state to demonstrate leadership to erect a blue state bulwark to protect Ukraine. Wall Street hedge funds cannot exist as going concerns without investments from state pension and endowment funds.

• Lastly, contact your pension fund manager to determine where your funds are currently invested. By law, they have to tell you. If they balk, call your politicians and let them know.

Elliott Management’s potential investment would help fill Moscow’s coffers and reduce the amount of money Ukraine gains from gas transit rights. Instead of sitting back and complaining about the obvious fact that the GOP has become pro-Russian and that its major donors may sign up to become Russian pawns, blue state governments should begin exercising the tremendous leverage at their fingertips. We recognize the importance of this and have launched a program to help them organize to achieve just that. Join us.