Citizenship by Investment

Several guests I talked to had never heard of them. When the topic came up, it was almost in passing. Still, it lurked in the background. A representative from the Montenegrin government in one session described the new citizenship by investment (CBI) program they were planning:

It’s a way to attract people who have knowledge and experience to come and teach others, and to move the country forward. If executed and monitored properly, it’s a big opportunity for countries like Montenegro. . . . We don’t want to sell passports, we want to buy excellence.

I spoke with him and a few officials from other places who were looking to develop CBI programs. Georgia, Macedonia, and Moldova were all showing interest.

A civil servant from Armenia explained to me over coffee that his country, lacking oil or gas, was exploring ways to build a business environment that would attract foreign capital and saw citizenship by investment as a means to develop competitiveness. “We’re looking for a tool to place the country within the right networks,” he clarified. If inserting oneself in elite networks was the goal, the Global Citizen Forum was the place.

Just how common is citizenship by investment? More than one might expect. Over a dozen countries host operational programs. The Caribbean is home to five: Antigua, Dominica, Grenada, Saint Kitts, and Saint Lucia. In the Mediterranean, Malta sits alongside Cyprus, which froze its long-standing scheme in the autumn of 2020, and is accompanied by Egypt, Jordan, Montenegro, North Macedonia, and Turkey.

In Asia, Cambodia offers an option, and in the South Pacific, Vanuatu has a smorgasbord of channels in operation. Around them are countries that have laws on the books allowing investors to naturalize, but in much smaller numbers, if at all. These countries have yet to develop reliable, marketable programs. Including them in a maximalist definition yields at least twenty-two countries that in 2022 had a legal basis for naturalizing individuals who invest or donate a specified amount in the country.

Until recently, CBI schemes have been the preserve of small island countries with populations of less than one million. For such microstates, a sizable injection of foreign funds brought through citizenship by investment can have a considerable economic impact. However, the scene has recently begun to change as more substantial nations, like Russia and Egypt, enter the game.

With these newest programs still embryonic, it is difficult to judge their potential, but future growth appears to be moving away from tropical islands. As countries like Armenia, Croatia, Georgia, and Panama discuss options, citizenship by investment doesn’t seem to be going away anytime soon.

A Product in Demand

How big are the programs? On the face of it, they’re miniscule. Only around fifty thousand individuals naturalize though them each year — a negligible number in comparison to a global population of eight billion people. Yet the significance of the figure is much clearer when placed in context.

The population of likely consumers is relatively small. They’re largely members of the nouveaux riches from countries outside the Global North. Figures available from Malta, Antigua, Cyprus, Saint Lucia, and Dominica suggest that buyers come mainly from three regions: China and Southeast Asia, Russia and the post-Soviet countries, and the Middle East.

Some people from wealthy democracies may apply, including a growing number of US citizens. However, driving demand is a smaller population of wealthy people from countries with “bad” passports and authoritarian regimes. It’s the non-Western winners of globalization — those doing well on Branko Milanović’s famous elephant curve — who want it. For governments aiming high, these global elites are the target audience of citizenship for sale.

Yet not all countries have been equally successful in attracting investor citizens, despite the continuous growth of demand. In the early 2010s, investors went for Caribbean programs, which accounted for about 90 percent of naturalizations globally.

By the middle of the decade, however, they began turning to new offerings in the Pacific and Mediterranean, and since 2018 have sent Turkey to the top of the charts. It’s now the country of choice for most investor citizens and accounts for around half of all such naturalizations globally. Even at the height of the COVID-19 pandemic in 2020, Ankara was approving around a thousand applications per month.

Demand concentrates around a few places. Egypt, Samoa, North Macedonia, and Jordan may have programs, but so few investors select them that they hardly register on the wider scene. Though over twenty countries offer CBI options, only nine have approved significant numbers of investor citizens: Antigua, Cyprus, Dominica, Grenada, Malta, Saint Kitts, Saint Lucia, Turkey, and Vanuatu. They sit alongside the Comoros, which is excluded from the count of formal programs due to the uncertainties and legal questions around the channel.

Citizenship as Commodity

Citizenship is not only an unusual commodity — it is also unusual as a commodity, which presents distinct challenges when building a market around it. The first challenge comes from the role of the state, which is typically the great market-enabler.

States set the rules that structure markets and facilitate play within them. Their regulations may affect the type of producers in the market, the forms of competition among them, their possibilities of failure, as well as the kinds of goods available and how they are exchanged, whether legally or illegally. Though a state may provide the backing that sustains trust between market actors, it is itself never disinterested and may be persuaded by players to alter the rules in their favor.

States can also shield populaces from the worst effects of the market by compensating them when markets fail. Yet in the case of citizenship, the state is both the key market regulator and the sole producer of the good, for in the contemporary world, only states make citizens. If a government does not recognize a grant of citizenship as its own, the status is null and void.

Even Stefan Černetić, prince of Montenegro and Macedonia, had to face this reality. His high-society life, which included knighting Hollywood actress Pamela Anderson, came to an abrupt end when the police discovered that this Italian citizen, with a closet full of fake uniforms and royal robes, was merely posing as the head of state. He could not even turn to his claimed kingdom for help.

Stateless people, like the Rohingya of Myanmar or ethnic Russians of Latvia, know the dire consequences that can result when a government disavows them as outsiders. Even if they once had claims to belonging, their citizenship no longer counts if the state doesn’t stand behind it.

The result is that the state is the only legitimate seller of citizenship. Even if bureaucratic hurdles extend the naturalization process, and even if chains of intermediaries connect the buyer and seller, the state must sign off on every citizenship transaction. As such, there can be no legal secondary market.

Sovereign Prerogatives

Because citizenship is a state monopoly, even its smallest incumbents — microstates of less than a million inhabitants, lacking the economic and military heft that we typically associate with statehood — can employ this tool to raise revenue. What matters is not size but sovereignty.

Effectively, the state wears two hats when it sells citizenship, serving as both the sole producer of the product and the ultimate market rule-maker. The double role has at times yielded ethically questionable but entirely legal cases of countries selling citizenship to the criminally suspect. Tadamasa Goto, a Japanese mafia boss who became Cambodian for a sizeable donation, is one example.

Still, when the state both structures the field of play and serves as an indispensable player in the game, it presents challenges to conventional assumptions about what is needed for a market to work: namely, that a separation of these roles mitigates conflicts of interest and stabilizes market transactions. The multiple-hat issue is not merely acute, it is unavoidable when states build a market around a sovereign prerogative.

In the case of sovereign debt, for example, the possibility of default without compensation remains a looming risk because sovereign immunity limits the available tools for enforcing payments or seizing assets. Governments can also influence macroeconomic indicators, making it difficult for creditors to verify their economic health. To protect against such threats and secure liquidity, intermediaries with separate reputational risks enter the transaction.

Citizenship has its own version of sovereign default: nonrecognition. When, for example, Grenada closed down its economic citizenship channel in 2001 following pressure from the United States, it dealt with its investor citizens by simply refusing to recognize them as such, effectively erasing their citizenship. Similar incidents occurred in the Pacific across the 1990s.

However, this strategy becomes more difficult once these channels are formalized into full-fledged CBI programs. When citizenship is granted through an extended bureaucratic procedure involving a division of labor and external oversight, such willful disregard is more readily challenged, and instead membership can be severed only through formal, legal denaturalization.

Deglobalization and Citizenship

Could deglobalization transform the CBI landscape? If anything, it is likely to push demand even higher as people look for ways to guarantee access and opportunity should countries delink or seal themselves off into regional blocks. As states turn inward, supply also may increase among countries struggling with the economic fallout.

Even if globalization presses on, a different outcome is unlikely. Citizenship by investment will continue to grow in a world of risk, uncertainty, and inequality — the hallmarks of the capitalist expansion that drives much of contemporary globalization. Demand for the programs will persist as long as countries continue to produce wealthy citizens looking to improve their mobility or opportunities, or for an insurance policy against their own government.

Supply is unlikely to falter as states with limited revenue sources turn to this source of easy money, particularly when other economic streams dry up. Increasingly, our world is one of mobility rather than migration, in which people move — or seek movement options — with greater flexibility and on a shorter time horizon than is captured by the heavy notions of immigration and settlement.

But this does not render citizenship obsolete. Instead, it becomes more powerful precisely because it is portable and still holds force even outside the granting state. A doctor who moves to a different country may lose her credentials, but the same does not hold for citizenship: you take it with you wherever you go.

For this reason, even in an age of mobility, citizenship still has fundamental importance, and its implications for global inequality are profound. Citizenship is about far more than a valued bond between sovereign and subject. It is the differences between citizenships that define their worth.

Rising Tides

The CBI market turns and capitalizes on this uneven terrain of interstate hierarchies, but their perniciousness is well beyond its control. Citizenship by investment is but a small part of a wider global economy of citizenship in which people and countries are valued — and evaluated — differently.

The most extreme case is perhaps tiny Nauru, which now earns half its revenue processing asylum seekers repelled by Australia. Within the global economy of citizenship, the rich — whether countries or individuals — do what they can, while the small look for alternatives.

Nation-states remain fundamental to capitalist-driven globalization. They delimit and preserve the opportunities that companies and individuals profit from, whether by exploiting cost differentials or trading on comparative advantages. More crucially, they furnish the legal backing and regulations that markets require to operate — and that facilitate the juridical jiggering which unfettered capitalism embraces.

Nation-states, however, do more than cordon off jurisdictions and labor cost differentials. They cordon off populations as well, divvying up nearly all of humanity among themselves and regulating movement between them.

A globalized world does not come with global citizenship. Instead, the status divides, affecting where we can go, how we are treated, and what rights we have not only at home but across the planet. For some, it supplies possibilities and privileges; for others, it brings down penalties and limits.

Whether we like it or not, we are stuck with the status as much as it is stuck to us. The world of golden passports reminds us just how foundational it is — and inescapable, too — even in a highly interconnected world. As long as countries anchor capitalism, citizenship will anchor global mobility.

Nauru is facing even greater challenges, for as sea levels rise, the country’s own existence hangs in the balance. As climate change presses on, it will be the poorer and more fragile island microstates that suffer the most, even if they have contributed least to a crisis that does not stop at state borders.

Would a subaquatic country still be able to sell citizenship? The question may seem ludicrous, but it pinpoints the challenges that microstates face, leaving the people there to hustle as best they can. The delicacy of their position today underscores the complexities of global inequality and the geopolitical maneuvering that defines our world.