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The Russian 'Mafiya'

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POLITICS BY OTHER MEANS

Organized crime is the most explosive force to emerge from the wreckage of Soviet communism. The so-called Russian mafiya has undermined reform, spawned extraordinary levels of violence in major cities, and helped fuel a growing ultranationalist backlash. Although it is considerably less organized than its Western counterparts, and for that reason often misunderstood or underestimated in the West, Russia's crime syndicate constitutes a serious threat to post-Soviet democracy.

The "mafiya," Russian-style, is a hydra-headed phenomenon that feeds on the emerging market economy. Between 3,000 and 4,000 gangs operate in Russia, including several hundred whose activities span the territory of the Commonwealth of Independent States and cross the old Soviet borders into Central Europe and the West.

The definition of Russian organized crime is sometimes stretched for domestic political purposes. Police and politicians still fall into the Soviet habit of ascribing mafiya connections to anyone who possesses what seems an unreasonable amount of money. Total active gang membership in Russia is estimated at less than 100,000 people. Nevertheless, the hazy boundary between criminal and legal business activity has allowed mafiya groups to penetrate most areas of the Russian economy, giving them disproportionate influence.

According to the Russian Ministry of Internal Affairs (MVD), organized crime controlled as much as 40 percent of the turnover in goods and services by 1993. Few entrepreneurs can expect to remain in business for long without being asked to pay money or provide shares in their companies to gun-toting "protectors." In the absence of government regulation, criminal cartels have infiltrated banks, real estate markets, stock exchanges and even the rock music industry. Meanwhile, more traditional criminal pursuits have transformed the economy of regions like Central Asia, which is fast becoming the newest hub of the world narcotics trade. Most unsettling of all, perhaps, is the involvement of organized crime groups in the marketing of stolen Red Army weapons, which then turn up in the ethnic quarrels on Russia's southern borders.

What makes the Russian mafiya distinctively menacing is its connection to key sections of the government bureaucracy.1 No criminal enterprise of this complexity could have succeeded without the support and encouragement of officials at every level. According to government investigators, more than half the country's criminal groups in 1992 had ties to government. A number of cartels are fronts for the former Soviet elites, the "nomenklatura capitalists," who have shed their party cards en route to becoming wealthy monopoly financiers. Mounting evidence indicates that nomenklatura capitalists use organized crime groups as instruments in the fierce struggle over the spoils of the former Soviet Union: the industries, banks, defense facilities, ports and factories once exclusively controlled by the Communist Party.

In one notorious 1992 case, Chechen mobsters were intercepted in an attempt to swindle about $350 million from private banks in Moscow and other cities by using promissory notes, a form of interbank transfer inherited from the Soviet era. Four employees of the Russian State Bank were later accused of supplying the false promissory notes to the Chechens in return for a cut of the profits. Profit may not have been their only motive. The president of the country's largest commercial banking association believes the inspiration for the swindle came from senior Finance Ministry officials determined to undercut private commercial banking activity. Crime in the post-Soviet era, in other words, is often a continuation of politics by other means.

THE GREENING OF RED GANGS

To understand the Russian mafiya's role in the nation's political wars, a brief look back is useful. Russia's criminal underworld has an impressive history. Societies of smugglers, thieves and highwaymen existed on the margins of national life for centuries. In the late tsarist era, outlaw bands were glamorous symbols of struggle against landowners and the oppressive state. The traditional gang structure, fortified by a code of honor and rituals that discouraged outsiders, became a model for the early Bolshevik clandestine organizations.

The future founders of the Soviet state not only admired the gangs' antiestablishment ethos. They also secured employment for them in the revolution. Bandits were recruited for so-called expropriations, bank heists and kidnappings, carried out in order to raise funds. The young Josef Stalin counted gang leaders among his closest associates, eventually recruiting some of them into his secret police. After the establishment of Soviet power, members of the criminal underworld were used as enforcers and informers against political dissidents in the gulag prison system.

But the most profitable form of cooperation emerged in the 1960s with the rise of the black market. Soviet gangsters acted as unofficial middlemen in the "gray" and "black" economies, circulating privately produced goods or state materials with the tacit cooperation of factory managers and apparatchiks. At the same time, the archaic structure of the old Russian gang began to change. Large criminal organizations surfaced in many Russian cities, led by mob chieftains known as vory v zakonye (thieves in law), who ran the equivalent of territorial monopolies in trade. As traditional underworld proscriptions against involvement with authorities weakened, many mob leaders began to operate in tandem with government officials in their regions. By the close of the Soviet era, more than 600 vory populated the length and breadth of the Soviet Union.

Communist authorities themselves, however, took second place to no one in criminal behavior. During the 1970s and 1980s, scandals such as the Cotton Affair, in which party bosses in Uzbekistan raked in huge profits by falsifying production reports, revealed a previously unsuspected talent for larceny beneath the puritanical exterior of the Soviet leadership. Russians first began to use the word "mafiya" in those decades to describe the vast networks of corruption lurking inside regional and central ministries.

Perestroika did little to break the power of these networks. In fact, it brought various criminal strands of Soviet life together. "Perestroika was the real beginning of organized crime in our country," said one senior MVD investigator, a comment others repeated dozens of times. The secret wealth accumulated by underground tycoons and party barons found a legitimate outlet when the government expanded the permissible area of private commerce. Black and gray money poured into the stock exchanges, joint ventures, cooperatives, banks and joint stock companies that were otherwise celebrated abroad as harbingers of economic reform. At the same time, party bodies (and the KGB) quietly siphoned funds to trading companies and export-import firms that were being positioned to take advantage of the widely anticipated new era of "market socialism." Russian entrepreneurs who tried to operate by the rules found it impossible to survive in the face of both official and criminal competition. By the late 1980s, according to Russian analysts, the majority of small cooperative businesses established during perestroika was either controlled by or heavily in debt to criminal elements.

The stage was thus set for the shifting alliances and violent struggles that have come to characterize modern Russian organized crime. Russian mobsters have been as unwilling as their political counterparts to abide by the rules of compromise and consensus required of large organizations. This diffusion of mafiya power across the country has had a devastating effect. Gangland murders, bomb explosions, kidnappings and gun battles have become part of daily life in dozens of Russian cities. This increased violence has been the most visible sign of underworld competition for a stake in the new economy, and of a criminal sophistication beyond anything seen before in Russia.

The Russian gang is arguably the only Soviet institution that benefited from the collapse of the U.S.S.R. Once the powerful party machine that administered the old empire fell apart, the 15 new nations that emerged represented easy pickings for criminals who perceived the entire Eurasian continent as their natural domain. For instance, the smuggling trade flourished as enormous quantities of copper, zinc and other strategic metals were shipped from central Russia in unmarked trucks or military aircraft to Baltic ports and then to Scandinavia or Western Europe. The smugglers took brilliant advantage of the Commonwealth clash of sovereignties: products stolen from a Russian factory were regarded as legal goods the moment they left Russia's borders. So much illicit metal from Russian defense factories passed through Estonia on its way overseas, an estimated half a million dollars' worth a day in 1992, that the tiny Baltic republic earned the distinction of being one of the world's largest exporters of finished metal without operating a single metal plant.

Smuggling profits have formed the foundation of postcommunist mafiya wealth and the basis for the working cooperation between criminals and the nomenklatura. By the time Commonwealth governments awoke to the dangers created by their porous borders, and hastily began signing (largely ineffective) customs treaties, the income from the illicit trade in Soviet resources was being plowed into real estate, privatization vouchers and financial institutions. It soon became difficult to separate the gangs from their government patrons.

Russian authorities readily acknowledge that the mixture of unbridled capitalism, organized crime and official chicanery has produced a crisis of governance. A frustrated Boris Yeltsin said last year that mob activity had "acquired such scale and character" that it threatened the future of the Russian state. He complained it was destroying the economy, destabilizing the political climate and undermining public morale. "Crime," he concluded, "has become problem number one for us." It was impressive rhetoric. But it sounded, unfortunately, like an admission of defeat.

CRIME AND PUNISHMENT

There has been much bluster in the Russian parliament about crime prevention but, since casting aside communist rule in 1991, Russia's new leaders have failed to adopt any significant measures to curb organized crime. What's more, the reformers' most substantial achievements, demolishing the last vestiges of the police state and lifting most restrictions on private ownership, have had the perverse effect of creating the perfect environment for mafiya growth.

Russian policymakers committed a fundamental mistake: they tried to develop a free market before constructing a civil society in which such a market could safely operate. As a result, businessmen, politicians and law enforcement agencies suffer at the mercy of the lingering ideological prejudices of Soviet jurisprudence. Many activities that are required for a market economy to function remain illegal or unprotected by legislation; other activities that are considered unlawful according to Western norms, such as organized crime, are not specifically prohibited.

Under the existing system, police may arrest a group of felons caught in a criminal act, but the lack of Western-style conspiracy laws means police cannot prosecute the mastermind if he or she stays off the scene. Under Soviet law, "racketeering" was considered a capitalist concept and therefore inapplicable to Soviet reality. On the other hand, making a profit, "speculation," a serious offense under the old Soviet criminal code, remains an ambiguous area for post-Soviet law enforcement. Provisions for settling disputes between private companies have yet to be clarified, and no guidelines yet exist for establishing contracts or declaring bankruptcy. Russia has no independent judiciary and no way of tackling more sophisticated varieties of white-collar crime. Current laws offer no means of impounding the records of fraudulent companies or checking the criminal provenance of bank accounts. Even if such provisions existed, their enforcement would be doubtful. Russian policemen are so poorly equipped that some pursue criminals by bus and taxi. In such an environment, it is no wonder that crime flourishes.

Several ambitious plans to increase spending on police and security forces and replace the old Soviet criminal code languished in the last parliament. The new Russian constitution, approved by a narrow margin last December, establishes some important principles for reforming the justice system, such as an independent judiciary and the right to private property and business. But it remains to be seen whether those principles and plans will be translated into law.

The greatest obstacle to a coherent anti-mafiya policy remains perceptual. Many Russian policymakers (and some foreigners) believe that corruption and crime are the price that must be paid for Russia's experiment with free enterprise. They argue that other nations (including post-1917 Russia) also experienced high crime rates during periods of acute social and economic change. Today's smuggling tycoons and shady entrepreneurs are often compared to the robber barons of nineteenth-century America. Perhaps, too, it is only reasonable for those whose notions of order were shaped by Soviet authoritarianism to wonder whether the cure might not be worse than the disease. But arguments for accommodating the mafiya break down at a critical point. It is one thing to tolerate the excesses of future Russian Carnegies, Vanderbilts and Morgans; it is quite another to grant them free grazing rights in the political system.

The Russian mafiya's connection with government, born of its symbiotic relationship with the former communist establishment, makes organized crime a dagger pointed at the heart of Russian democracy. The danger is especially apparent outside the urban centers of Moscow and St. Petersburg, where local crime lords and their government allies have filled the vacuum created by the departure of communist authority. These alliances are joined for political as well as economic reasons. As regional leaders seek more power over resources, they share a common interest with black-marketeers and underworld figures in resisting central control.

Organized crime has infected the central nervous system of Russian politics. Throughout 1993, successive corruption scandals paralyzed the Yeltsin government. No institution was left untainted: senior commanders of the Red Army were caught in smuggling rings; cabinet ministers and police officials were discovered working for shady commercial firms. In the most celebrated case, members of the ill-fated Supreme Soviet, led by then Vice President Aleksandr Rutskoi, forced several reform ministers out of office over charges of corruption. Government officials, in retaliation, released documents attempting to prove that Rutskoi and his political allies were guilty of money laundering and weapons smuggling.2

The burlesque of charge and countercharge politicized even the slender efforts the state was making to halt corruption and further reduced the government's credibility. Russians could easily remember how corruption cases during the Soviet era coincidentally affected only the losers in political battles. While Yeltsin himself was not linked to any scandals, the president plainly found it awkward to deal with evidence of wrongdoing among his political allies. Several of his top anticorruption investigators quit in disgust. As the euphoria of August 1991 faded, most people concluded that hardly anything had changed except the faces in power. "To tell you the truth," one prominent Moscow journalist admitted to me, "if someone staged a new coup tomorrow, I would not know what or whom to defend."

To suggest to an increasingly disillusioned populace that crime is an unfortunate but unavoidable by-product of political and economic transition is an insult. The rising cost of living might be politically acceptable to ordinary Russians who, as they are the first to inform foreigners, have endured tough times before. But when economic discontent is joined to anger over official corruption and criminal violence, it becomes a potent political force. The sight of the country's newly rich emerging from luxury restaurants and gambling casinos, of Western cars jamming the roadways, of gunmen strutting down the streets, intensifies the nationwide sense of betrayal and, more significantly, the loss of personal security.

Rising crime rates have turned what was once an ordered, communal society into a land of fearful strangers. In a 1992 survey, three out of four Muscovites admitted they were afraid to walk the streets at night. And in 1993 another opinion poll found that 49 percent of Russians rated crime higher on their list of concerns than unemployment.3

The strong support for the neofascist Vladimir Zhirinovsky in the December 12, 1993, parliamentary elections owed at least as much to the backlash against crime as to economic populism. The continuing appeal of both ultranationalist patriots and neocommunists is largely based on their invective against "mafiya" (read Western) values. Zhirinovsky, like many opposition candidates, campaigned on a harsh law-and-order platform. In his last television appearance before the election, he advocated a return to Russian civil war-era decrees ordering the shooting of criminals on sight.

Draconian solutions to the law-and-order crisis are now part of mainstream political thinking and will probably dominate the agenda of the new State Duma. Having failed to develop a society guided by the rule of law, the first post-Soviet government is reverting to the habits of its predecessors. Retrograde attitudes emerged in the aftermath of Yeltsin's battle with parliament during the crisis of October 1993. Shortly after the assault on the Russian White House, the government imposed a curfew on Moscow and sent squads of soldiers and police to patrol the streets. Not surprisingly, crime rates plummeted. The incidental success of these temporary measures strengthened the advocates among police and politicians for a Soviet-style war on crime. Yeltsin ordered police to drive "unregistered aliens" out of the capital in an effort to cripple the powerful crime syndicates who move easily between Moscow and other cities across the Commonwealth. The measure was targeted primarily at gangsters from the Caucasus. Chechens and Azeris in particular are responsible for a large percentage of drug trafficking. But the blunderbuss approach resulted in the expulsion or beating of thousands of otherwise innocent traders. Such violence indicated growing racial intolerance among Russians as much as any serious determination to root out crime. And, as some observers noted dryly, most of the Russian crime lords welcomed the move as a way of eliminating their biggest competitors.

There are also signs that the government is preparing to take a harder line against entrepreneurs, conforming to right-wing prejudices that identify private business with crime. The Ministry of Internal Affairs dusted off a KGB tactic used in the last year of the Soviet era, the search of commercial enterprises and confiscation of property without a warrant, and proposed it as part of an anticrime package. Yeltsin rejected the proposal after it was leaked to newspapers. But it surprised no one that the idea received sympathetic attention from nomenklatura capitalists and the right wing.

A reversal or slowdown of reforms is the goal of the former Soviet establishment, which prefers a subsidized, corporate capitalism to the unlimited expansion of private property. It also happens to be the goal of the larger criminal syndicates, which are eager to transform their wealth into political influence. Gangsters ranked among the staunchest defenders of democracy during the August 1991 coup, partially because of their traditional antipathy toward communists. But several have since confided that they no longer support reforms because of the "disorder" in the Russian economy. "In this kind of environment, who can do any business?" said one gangster without a trace of irony.

During the December campaign, some opposition candidates in the regions were believed to have received campaign contributions from mafiya groups, and there are reliable reports that ultranationalist parties have used gangs to harass Caucasians and other ethnic minorities. Whether or not such reports can be believed, the maneuvering room of the Yeltsin government has already been narrowed.

GOOD COP, BAD COP

Westerners underestimate the extent to which organized crime and corruption have hampered Russian political and economic reforms. Early assumptions that the introduction of free enterprise would smooth the way for democracy failed to take into account the lingering power of the former Soviet establishment. Organized crime has reinforceed the old structures in their battle to retain control over key sectors of the economy and strengthened popular hostility toward the free-market democratic policies pursued by pro-Western reformers.

The West should to take Russian organized crime far more seriously than it has up until now. The current situation poses a double dilemma to policymakers in Western capitals. While internal Russian developments have moved once again to the top of the international agenda, the West has increasingly less influence over Russia's domestic affairs. Western advice and financial assistance, albeit limited, have been discredited by Russia's bruising encounter with the chaos of the marketplace. Nationalist and authoritarian remedies are now ascendant. But important areas of influence remain unexplored.

The first area requires a conceptual change in economic aid policies and in strategies for developing the Russian market. Until recently, the West concentrated on helping Russia meet its international debt load while encouraging it to carry on with austerity policies. Since the December elections, opinion has shifted toward providing more overt support for social safety net programs as a way of easing economic discontent. But these policies still do not address the central problem: the legal vacuum at the heart of the Russian economy. Western advice and assistance in creating a commercial infrastructure, including a viable banking system and regulatory agencies, and in developing a legal framework for business activities would go far toward meeting the security concerns of Russian and foreign investors.

If the obstacles in the Russian marketplace hamper Russian entrepreneurs, they have a chilling effect on foreigners, for whom the nexus between organized crime and politics exacerbates the cultural barriers between the ex-socialist East and capitalist West. Bribery was always a hidden cost of doing business in the Soviet era. Today, the hapless foreign businessman can find himself the target of extortion demands or worse. And he finds little sympathy from already overworked police and courts.

International assistance in bringing Russia's justice and law enforcement system into the modern era is therefore crucial. This task involves more than familiarization courses in the principles of Western jurisprudence and police exchange programs. Russian police are deficient in just about every area, from police cars and computers to techniques of crime detection and prevention. Aid in reforming the hoary machinery of Soviet justice, with its bias toward prosecution and disregard for individual rights, would go a long way toward removing a principal factor behind the widespread Russian contempt for law.

The Western police establishment, for understandable reasons, has been gun-shy about working closely with its Russian counterpart. The recent decision by the FBI to open a liaison office in Moscow is a step forward, but several agents admit that widespread corruption inside Russian law enforcement has kept relations less than collegial. However, the West has more than an academic interest in forging a collaborative relationship with Russia's police agencies.

The old rhetoric of the "evil empire" has been replaced by fears of Russian mafiya penetration of Western economies. Those fears are well grounded. Russian gangs have been responsible for a wave of violent crime in Central Europe and Germany. The smuggling of Russian resources abroad has depressed world prices for commodities such as aluminum. Weapons-grade uranium and other by-products of the Soviet nuclear arsenal have turned up for sale in West European capitals.

Russia's criminal syndicates are also attracting unsavory partners in the West. Gang leaders from Moscow and the Baltics have held "summits" with members of the Italian mafia, and Russia's growing importance as a drug transit corridor has aroused interest from Colombian cartels. Post-Soviet gangsters have become active in the United States, as suggested by the growing number of murders, interceptions of smugglers and evidence of substantial capital transfers. The MVD estimates $25 billion was transferred from Commonwealth states to Western banks by organized crime structures in 1993. The sobering possibility that the former communist establishment, through its mob allies, could become a major investor in Western economies reinforces the need for closer attention to the West's own economic security.

Russia's internal conflicts have dampened the triumphant mood of the post-Cold War era. The turmoil of the past two years has shaken several assumptions made by the West after the fall of the Soviet Union: that the communist establishment has lost its grip on politics, that Russians would eagerly grasp democracy with both hands, and that capitalism would provide the engine of Russia's transformation. The uncertainty surrounding the third assumption is the most troubling. As Russians increasingly identify free-market democracy with organized crime and corruption, they will turn toward much less congenial forms of governing. Unchecked economic chaos and gang violence could well foster the rise of a hostile, authoritarian power on the Eurasian continent, instead of the prosperous partner the West requires for a stable 21st century world.

FOOTNOTES:

1 I have spelled "mafiya" using its Russian phonetic translation in order to distinguish it from its Western counterpart. All figures cited in this article, except where otherwise noted, come from the Russian Ministry of Internal Affairs. Since facts about organized crime are still largely unpublished, much of the material presented here is based on private interviews with leading police officials, politicians and gangsters themselves.

2 In February 1993, Russian Defense Minister Pavel Grachev announced that 46 generals and top officers were to be court-martialed on corruption charges and that an additional 3,000 officers were to be disciplined for "illegal business deals" ranging from smuggling weapons to black-market sales of military equipment. A few months later, Grachev himself was hit with corruption charges related to the acquisition of official cars from Germany.

3 In the first year after the fall of communism, the Russian public prosecutor reported 2.7 million crimes, an increase of 33 percent over 1991. The rates for murder, rape and aggravated assault continued to climb during the first six months of 1993, along with categories of crime that had been negligible during most of the Soviet era, such as drug trafficking, embezzlement and theft of government property.

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