Organised crime in Russia is out of control. Criminal "brigades" own everything of value and can "acquire" any commodity in any quantity if the price is right. Ferocious criminal gangs ship out nuclear warheads with the same aplomb that they plunder train-loads of stolen bank-notes. Fearless and ingenious they even ripped-off Russia's entire gold reserves.
Grigor is a street-wise Muscovite who sells his ass to anyone for twenty roubles. There are plenty of takers; many don't bother to pay. Aged a mere eight years, he roams the streets, railway stations and airport terminals of this once proud city, his small, angelic face smeared with grime and distorted by a cigarette jutting from his mouth. Suddenly the granite like exterior dissolves, his bottom lip trembles and tears track down his filthy cheeks. "I want to go home." But there is no home for Grigor to return to - his parents are lost to a world of vodka in a new land of mayhem, murder and mobsters.
He is one of hundreds, perhaps thousands, of discarded children that infest the railway stations, bus shelters and wastelands of Moscow seeking a "quick fix" to suppress their daily misery. Their only crime was to have been born at a time when a super-power tottered and then fell into the yawning chasm of poverty.
Russia is a fractured society where the underworld dominates with a Capone like ferocity. The state has evaporated in all but name. Corruption, always a feature of communist life, has blossomed out of control. The new Tsars of the nineties, dressed in sleek Armani suits and Gucci loafers are today immensely wealthy, bloated with arrogance and are utterly ruthless.
Within one year of Mikhael Gorbachev's ousting, over 2600 (some estimates put it as high as 5000) "crime clans" employing over 3 million criminals had miraculously appeared and spread like wild-fire throughout the former Soviet empire. Forty of them match or out-number in size the Sicilian and American Mafias'. Collectively they form the most powerful criminal grouping in the world.
This lead Boris Yeltsin to warn in 1993 that "Nearly two-thirds of Russia's commercial structure has ties to the growing criminal world." Such was their alarming growth that Interior Ministry officials warned that organised crime would control between 30-40% of the Gross National Product "In the next few years." This figure has probably been out-stripped already. How these syndicates came to the fore and achieved such concentrated power in so short a time remains mystifying.
Yet criminal gangs have been operating in the Soviet Union for decades. The "Organizatsiya" - the organisation - dates back to Bolshevik times where it concentrated on political assassination, armed robbery and other juicy gang-banging enterprises. Courted and used by Stalin for his own devious purposes the organisation was later outlawed and a great many of its members ended up in the abominable Gulags. But by then they had formed a hard backbone of professional criminals who became impervious to Stalin's cruel and whimsical treatment.
Known as "vorovskoy mir", the "world of thieves" they secretly spread throughout the whole of the Soviet state becoming a "corporation of underground establishments." In the same fashion as all other criminal organisations they were a secret society and developed strict laws that set them aside from society at large. Transgression of the "thieves' law" was meted out by a "court" and was always severe. Stealing from a fellow thief, turning state informer and a host of other offences were punished by execution. The worst transgression was serving in the State army and the offending culprit could expect to suffer a bloody and excruciating death.
The princes of the Russian thieves were the indomitable "vory v zakone" - "thieves-within-the-code" who presided over national meetings and developed tactics for each of their clans. Imprisoned by Stalin these elite criminals were as tough as they come. Not only did they mete out severe punishment to their underlings but would inflict the most exquisite pains on themselves. Masochistic in the extreme these acts were intended to demonstrate to their gaolers that nothing could subdue their iron wills.
One prisoner, Edward Kuznetov serving 15 years in prison, observed some of these harrowing and perverse rituals: "I have seen convicts sew up their lips or eyelids with thread and wire; sew rows of buttons to their bodies; nail their scrotum to the bed... cut open the skins of their arms or legs and peel it off as if it were a stocking..." He also witnessed cases in which they would "... cut lumps of flesh from their belly, roast them and eat them; or cut off their fingers or nose or ears or penis..."
All good things come to an end and it was no different for vorovsky mir, whose rigid disciplines began to crumble in the wake of World War II. By 1950 they had begun to court foreign crime syndicates, convening a European "congress" in the small city of Lvov. Leading Mafia's from Italy, Poland and elsewhere attended. At home in mother Russia the thieves began re-establishing links with the eminently corruptible communist functionaries. Over the course of the next four decades they were irrevocably bonded by a super-glue of self interest and greed.
Operating in quiet collaboration with the Sicilian and American Mafia's, the Japanese Yakuza, Chinese Triads, Turkish and Balkan crime syndicates, the Russian gangsters understood that the Soviet empire possessed massive natural wealth. Besides having the world's largest oil reserves, the Soviet republics have more timber than the Amazon as well as a vast reservoir of gold, gemstones and other mineral wealth.
In addition there was an immense stockpile of weapons waiting to be plundered and millions of acres of additional land that could be put to work for the already burgeoning narcotics industry. The problem for the crime Barons was how to tap into and exploit this vast array of riches. With that special Russian flair for Chess, a strategy developed that was so complex that it became practically invisible and was always two or three moves ahead of law enforcement. Ultimately it was to lead to the most spectacular criminal "coup" ever devised.
Commencing with a scam that would've made Ian Fleming's Goldfinger blanch in admiration, the Russian Mafia, along with outgoing Communist Party officials, "heisted" thousands of tonnes of gold bullion from Russia's reserves. Valued at $35 billion, Russia's gold reserves were estimated to be 100 million troy ounces - just under 3000 tonnes. Then in September 1991, a palpitating Grigory Yavlinski, the economic supremo, revealed to delegates at the Group-of-Seven industrial countries meeting in Bangkok, that a mere 240 tons were all that was left. Two months later, in November, even that had disappeared. "Not a gram of gold remains; the vaults are empty," said Victor Geraschenko, chief of Gosbank, the Russian Central Bank.
In one operation valued at $4 billion, over 300 tons were secretly shipped to Switzerland, some of it subsequently arriving in London. Unlike Britain, the Swiss authorities do not keep records of gold imports which makes it a favourite centre for disguising the point of origin - a very effective method of laundering suspicious transactions. The bullion, some sources now believe, was used as collateral in a secondary scam that set-out to vacuum-up all the available Rouble bank-notes in existence at the time and sell them at knock down prices to organised crime syndicates from around the world.
Still shrouded in fear and secrecy, 280 billion Roubles - valued at hundreds of billion of dollars at the official commercial rate of exchange - were being offered for sale by shady wheelers and dealers to leading figures in the world of organised crime. In one suspect transaction during January 1991, 140 billion Roubles were hawked by Russian middle-men, for an estimated $7.7 billion but was foiled by the KGB. Six months later; just a few weeks prior to the abortive coup that unseated Mikhail Gorbachev, a suspiciously similar transaction for 140 billion Roubles was struck and eventually netted $4.5 billion - demonstrating how quickly the currency had been devalued.
At about the same time another shadowy character was bidding for "100 billion clean, clear, good, legal, bundled, counted, verified, packed and stamped Russian Roubles" on offer from a questionable Liechtenstein based company. Purchased at a fraction of the true price, as low as 8 cents on the dollar, Colombian cartels, Mafia hoods and the planet's criminal fraternities were stampeding to snap up the banknote bargains. In part to launder their dirty narcotic revenue and also to reap a giant profit by repatriating the currency in exchange for bargain basement priced commodities, the Rouble proved to be the currency of choice during 1990 and 1991.
In another case, a massive TIR truck was driving the highways and byways of Italy, loaded to the ceiling with Russian banknotes looking for a hot home. Information on this scam was gathered by phone taps authorised by Italy's Antimafia Commission. Santo Pasquale Morabito, a notable Italian narcotics dealer single-handedly purchased 70 billion Roubles. Costing a paltry $4,6 billion, Morabito stumped up cash, anticipating a quick killing. His agent, a member of the Turkish Mafia attempted to sell them on but chose a Swiss undercover operator who brought the matter to the attention of Swiss authorities. Meanwhile, another TIR truck load of notes being transported across Europe under the protection of KGB guards was kept under surveillance by intelligence operatives. Cash was draining out of Moscow at such a phenomenal rate that it caused panic in the gold-capped spires of the Kremlin.
So great was the concern that Prime Minister Valentin Pavlov announced to a startled world that he had uncovered a "plot by Western banks to flood the country with roubles and topple President Gorbachev." Pavlov went on to claim that banks in Switzerland, Canada and Austria were involved but could not or would not name them, but added that this was a "financial war" and feared what would happen as the billions of banknotes were dumped back on the market over-night "creating hyperinflation, and destabilising the economy."
Adding that "Quite simply Mr. Gorbachev is getting in someone's way," he outlined a scenario in which the Soviet Union was threatened with a loss of economic independence in a kind of "annexation, quiet and bloodless." Largely derided in the west for his comments, the Kremlin none the less viewed the matter seriously enough to order the recall of all 50 and 100 Rouble notes in circulation. It is now known that reputable western banks were involved in this shady business. One "solid European bank" was discovered to have offered a well-heeled and cash rich American investor a block of one billion Roubles complete with "official letters guaranteeing their re-entry into the Soviet market."
At the time no one could understand why the world's leading gangsters were forming a disorderly queue to buy vast quantities of what was in effect little more than coloured paper - with hard cash. These were criminal entrepreneurs who possessed sharp business minds honed by decades of greed and power, and were not known for squandering their wealth. We now know that behind this ploy lay an even more audacious plan. The Soviet Union was to be asset-stripped.
And the assets were stripped. To the bone and back again. Gradually it became clear that the massive quantities of exported Roubles weren't just coloured paper. Almost worthless on the international market they were repatriated through some of the 260 Mafia controlled banks that sprung-up around the country. Having gone full cycle from export through to repatriation, the laundered Roubles, now viewed as inward "investment", were used to capitalise and finance the explosion of crooked Joint Venture companies that had mushroomed in the meantime. There followed a massive spending spree that continues to this day.
Russia has been recently described by Italy's Antimafia Commission as "a kind of strategic capital of organised crime from where all the major operations are launched." Wasting no time, the now Rouble-rich Mafia's set about plundering Russia's abundant natural treasures. Platinum, gemstones, oil, lumber, strategic raw materials; non-ferrous metals, - cobalt, copper, bronze, titanium even caterpillar tractors and other high value equipment; all went under the hidden hammer.
Transformed into a world of grab-it and prosper, Moscow began to wilt under the bizarre influx of plundering crime Barons and opportunists. One enterprising soul who now banks and has residence in Monte Carlo - reputedly itself a hot-spot for money-laundering and medallion wearing Mafiosi - was Artjom Tarasov. With entrepreneurial flair Tarasov acquired 4 million tons of crude oil at an equivalent price of $5.00 a ton. On-selling at $140 a ton the deal netted a cool half a billion dollars, less expenses, commissions, "kick-backs" and a healthy share-out to his swindler partner, the American Marc David Rich. Rich, the senior man of Marc Rich & Co., the giant commodities trading firm, is currently wanted by the FBI who have posted a $750,000.00 reward for his capture. Tarasov, meanwhile, became Russia's first multi-millionaire.
Immensely more profitable, however, is the illegal trafficking in narcotics and weapons and with prodigious profits derived from asset stripping and other scams, these two enterprises were set to undergo a meteoric rise. Russia has recently been estimated to have in excess of 2 million drug addicts, a figure that far outstrips the rest of Europe combined. Globally the narcotics industry is thought to generate in excess of $1000 billion annually.
Still the biggest dope peddlers around, the Colombians have cut an agreement with the Russian Mafias' to import cocaine for onward shipment to the rest of Europe - which despite the much vaunted "fortress" label is wide open to the East. Former Soviet colonies grow prodigious quantities of dope. Authorities estimate that between them the CIS states produce more hashhish than the rest of the world put together. Likewise, prolific quantities of opium poppies are grown and harvested under armed guard in Turkmenistan, Tajikistan, Kyrgyzstan, Uzbekistan and elsewhere, ultimately destined for world-wide distribution.
The narcotics flow through a sophisticated underground pipeline that runs through Bulgaria and Romania and other eastern European "portals" and onwards into the anxious hands of the Sicilian Mafia and Chinese Triads who refine and distribute the end product. Psychotropic drugs too, are a favourite item. These include amphetamines and the immensely powerful "Krokodil" estimated to be a thousand times more powerful than heroin.
Of far greater concern to western law enforcement and intelligence communities is the widespread trafficking of arms, including weapons of mass destruction. Plundered from former Soviet arsenals - often with the willing assistance of former KGB and senior military officers - almost any item is up for sale.
In one operation that took place in October 1992, police retrieved thousands of missiles, millions of rounds of ammunition, an armoured personnel carrier as well as a Mi-8 helicopter gunship. State industries, now run privately, have also been quick to tread the bonanza trail and sell the latest Soviet military equipment including Tanks - sold at $100,000 per ton weight - plus an assortment of rocket launchers and tactical missiles and fighter aircraft.
Far more worrying though, is the trade in nuclear weapons and material. A U.S. House of Representatives Republican Task Force reported at the end of 1992 that three tactical nuclear warheads had vanished. Priced at $14 million a throw, and with a range of sixty kilometres, warheads were being stolen to order from army installations in Irkutsk.
Master-minded by two former intelligence operatives - one ex KGB and the other ex GRU, the intelligence arm of the Soviet military - they were smuggled into Yugoslavia and then were trucked to Bulgaria, through Turkey and onwards, it is claimed, to clients in Iraq and Libya.
The same network filled an order for 32 kilo bars of plutonium that was ripped-off from Ukranian storage depots, but were seized by Italian police before reaching their destination, again in Iraq. Other seizures in Europe have included quantities of Plutonium-239, Strontium-90, Cesium-137 and highly enriched weapons grade uranium. Despite these police successes it is believed that large quantities of nuclear materials are reaching their ultimate destinations - those countries committed to making nuclear weapons.
Meanwhile the economic devastation of Russia continues unabated, a gruesome testimony of corruption and criminality that is largely ignored by an introspective and unmindful west. Growing numbers of despairing Muscovites die from hypothermia on the snow-swept streets where they have collapsed and huddled, foetal-like, following a mighty vodka binge. On average twenty or so real-life "stiffs" daily arrive at the morgue during the long winter months. Privatisation has bequeathed Russia 100,000 millionaires and an estimated 200,000 joint venture companies that are owned lock, stock and pork-barrel by various "entrepreneurs" - a word that nowadays has sinister overtones and is generally used as a code-word for "criminal."
Embracing a free market economy - something the west insisted upon if it were to grant foreign aid - has left Russia destitute. The old communist days, as harsh and unyielding as they were, at least provided a staple diet and free healthcare for the population. Despite being economically wrecked, Moscow, paradoxically, is now the most expensive business destination in Europe, overtaking Brussels and Paris in a one-stride gallop. Quick buck opportunities for the hard-nosed businessman have spiraled, even while the great majority of Russian citizens now look to a future of unyielding squalor.
And for Grigor and his friends each dawn is just another day of bitter hustling. Occasionally some solace is found in music. Gathered around a smoking fire to ward off the chill, a group of street kids pass a cigarette butt around and listen, as one of their number strums on a stolen guitar. It is one of those soulful Russian folk songs that speak of pain as a way of life. The words, sung by a sixteen year old veteran, yearn for a day when they can look forward to wearing a "nettle-coat" for comfort. The simplicity of the song brings out a rash of goose-bumps. Physical pain can be borne, even welcomed, but it is the emotional pain that cannot be endured in this new gangsters paradise.
And as the band plays on, an early Reagan administration National Security Decision Directive (NSDD) remains classified. It is simply entitled "Prolonged Economic Warfare against the USSR" As the economist, John Maynard Keynes, once shrewdly observed "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose."