Crime and Corruption in Eurasia: A Threat to Democracy andInternational Security

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Crime and Corruption in Eurasia: A Threat to Democracy andInternational Security

March 17, 1995 23 min read Download Report
Patrick Fagan

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1025 March 17, 1995 CRIME AND CORRUPTION IN EURASIA A THREATTO DEMOCRACY AND INTERNATIONAL SECURITY INTRODUCTION A tidal wave of crime id corruption is sweeping Eurasia, threatening to bury the nascent and fragile democratic institutions in Russia and other countries in the region The gangland-style murder earlier this month of Vlad Listyev, director-designate of th e Russian TV Network, drew worldwide attention to the problem. Russia alone is under at tack from over 5,000 gangs, 3,000 hardened criminals, 300 mob bosses, and 150 illegal organizations with international connections. Approximately 40,000 Russian busines s and industrial enterprises are controlled by organized crime. Their combined output is higher than the gross national product of many members of the United Nations The Russian mufiyu (a generic term for all organized crime in the former Soviet Union) is e s timated to be worth $10 billion2 More Russians died of criminal violence in. 1993 than were killed during nine years of war in Afghanistan? In 1994 criminals look 118 people hostage in Moscow alone. The situation in other Newly Independent States (NIS) of the former Soviet Union is even worse, with criminal gangs even controllinghe value of some national currencies.

The future of Russia, Ukraine, and their neighbors in Eastern and Central Europe is at stake. Moreover, developments in Russia are crucial t o the post-Cold War international environment. Crime and corruption may well cause a hard-line backlash in Russia,bring 4 1 2 3 4 Ministerstvo vorov v zakone (Ministry of Thieves-in-Law Izvesriyu, July 20. 1994, p. 5.

Russian government sources. quoted in Intercon Daily Report on Russia, June 17,1994. p. 1.

Andrey Konstantinov, Kto takiye nayemnye killery, i kak oni voyuut protiv naroda (Who are Killers for Hire, and How dolley Fight the People Komsomolskaya Prav July 19, 1994, pp. 1-2.

According to Peter Grinenko, former head of the New York City Detective Bureaus Russian department, in an interview with Dmitry Radyshevsky, Moscow News, July 1-7.1994, p. 12. ing to power an ultranationalist demagogue like Vladimir Zhirinovsky or an impe rialist strongman like General Alexander Lebed Ordinary people who feel unsafe in the streets now mistakenly perceive democracy as the freedom to loot and murder.

President Boris Yeltsin is doing very little to curb the corruption that plagues his ad minis tration. The Russian media have accused Defense Minister Pave1 Grachev and First Deputy Defense Minster Matvei Burlakov of organizing the murder of a popular investi gative journalist, the late Dmitrii Kholodov of the daily Moskovskii Komsomolets. Kholo d o v published a-series of startling exposes of military corruption and was about to testify before a Duma committee when he was assassinated in October 1994.5 According to re ports in the Russian media, Central Bank officials in Moscow have been involved in fraud and forgery that have cost the Russian taxpayer over $350 million dollars; although charges were filed, no convictions have been made. Russia and its reforms are sinking into an abyss of contract killings arms smuggling, extortion, drug trafficking, money laundering, and bank fraud6 contract killers have murdered in Los Angeles, New York, and London. Former KGB specialists in assassination are available to the highest bidder.

Responding to this global threat will require coordinated action by the ent ire interna tional community An international campaign should be divided into three broad catego ries of activity Growing crime and corruption threaten not only Russia, but the entire world. Russian 1) COORDINATED ACTION BY RUSSIA, OTHER NIS COUNTRIES, AN D To turn the tide of crime and corruption in Eurasia, these countries should d Create entirely new criminal investigation agencies. Existing anti-crime EASTERN AND CENTRAL EUROPEAN STATES and corruption investigation agencies in Russia and other parts of t he former So viet Union are themselves corrupt and linked to organized crime. They must be replaced by new agencies with new and uncorrupted personnel d Arrest and prosecute suspected prominent criminals. Many very rich and well-known chals roam the stree t s freely. Citizens in Russia and elsewhere will trust their leaders only if it is clear that no one is immune from prosecution d Amend criminal codes to better define organized crime. Criminal codes are wholly inadequate to the task of combating organized crime. In particular, a conflict of interest doctrine must be incorporated into post-Soviet legal systems 5 Dmitrii Kholodov, I sluzhba tam pokazhetsia medom (And Your ServiceThere Will Look Like Honey Moskowskii Komsomofers, June 30. 1994, p 1. Kholodov was blown up by an exploding briefcase in what looked like a professional assassination. He reportedly was told by a source in the Russian military intelligence that the briefcase contained documents exposing corruption in the Russian military.

In 1993 alo ne, 35 senior bankers and over 700 businessmen were murdered in Russia. 6 2 d Recruit and train a new judiciary. With weak courts and incompetent judges the legal systems of these countries cannot function d Upgrade the civil courts to handle private-sect o r disputes. Right now many private disagreements are settled at the point of a gun by the mafiyu d Upgrade security, inventory management, and accountability at nuclear production and storage facilities The decline of security at military and civil- ian-n u clear facilities poses a threat to the world. Rogue states such as Iran, Iraq North Korea, Libya and Syria as well as terrorist organizations and criminal syndicates, must not be allowed to purchase nuclear technology from these countries d Ease bureaucra t ic regulation of the economy. Bureaucrats who work to d Reduce the tax burden. High tax rates and corrupt internal revenue services are endemic in Central Europe and the Newly Independent States. Low taxes ap plied uniformly not only would increase the ta x base and bolster government revenues, but would reduce the rampant tax evasion that fuels crime and corrup tion gether with mobsters are the major source of corruption in the post-Soviet states 2) WESTERN COOPERATION WITH RUSSIAN, OTHER NIS, AND EASTERN A ND CENTRAL EUROPEAN GOVERNMENTS gree of cooperation with the West will be required to solve the problem. Thus, these countries should Since crime and corruption in the NIS are spilling over into other countries, some de d Share computerized databases on c r iminal activity. This would allow West ern law enforcement agencies to track, arrest, extradite, or prosecute Eurasian criminal figures and track Western criminal activities in the NIS d Identify trustworthy and reliable law enforcement personnel in the E a st Western law enforcement services need all the support they can get from local police establishments As they have done successfully in assisting Mafia prose cutions in Italy, Western police forces should make special efforts to cooperate Europe legal ex p ertise could be used to help Eastern and Central European and Eur asian countries draft laws and train legal personnel. with trusted law enforcement officials in the NIS and Eastern and Central d Gain Western help in writing comprehensive criminal codes. W estern d Create a witness relocation program. Protecting witnesses in organized crime trials is crucial to successful prosecution. Thus far no programs exist to protect witnesses from reprisals by criminals d Combat crime throughout Eastern and Central Eu r ope and Eurasia, and not just in Russia. For example, to stop the flow of drugs from and through 3 Central Asia, the U.S. Federal Bureau of Investigation and other police agen cies should become more active in Tashkent, Uzbekistan, and other Central Asian capitals d Expand the International Criminal Investigative Training Assistance Pro gram and other FBI-sponsored programs to al NIS countries. The U.S program to train police so far has been extended primarily to Russia. It should be expanded to all countr i es of the former Soviet Union and Centra! and East ern Europe 3) UNILATERAL ACTIONS BY THE UNITED STATES AND ITS WESTERN ALLIES There are atleast two actions which the U.S. and its allies can take on their own to curb crime and corruption in Eurasia d Tra c k and penetrate Russian and NIS criminal rings dealing in nuclear materials and narcotics. Intelligence gathering and covert action against crimi nals trafficking in these materials should be increased d Better monitor East-West financial transactions. Ma n y post-communist economies are suffering from capital flight, and a significant percentage of the money coming out of Russia represents the proceeds of such criminal activity as extortion and drug trafficking. To battle Russian and Eurasian crime success f ully, NIS deposits in Western banks should be screened and tracked more care fully THE GREAT CRIMINAL TAKEOVER Of great concern to the West, crime has become a major post-Soviet export. Illegal drugs, weapons, and nuclear materials are flowing from Russia to Western Europe, the U.S and Asia. Criminal organizations around the world can recruit former KGB officers with expertise in eavesdropping, assassinations, and paramilitary training. Shady busi nessmen from the East are buying up expensive real estate i n the prestigious Sixteenth ur rodissement in Paris, in Londons Kensington and Belgravia neighborhoods, and in California and Florida. They often produce briefcases full of cash-up to $3 million at a time-to buy property in the West.

Russian gangs are rule d by hardened criminals called vory v zukone (thieves-in-law who oversee a loosely knit federation of organized crime? The structure of the Russian majiyu is similar to that of American organized crime. A senior criminal normally over sees several fbrigad i ers who are in charge of soldiers. There is also an array of in formants, support personnel, and corrupt officials, in addition to a detachment of enforc ers to harass competitors or collect debts 7 Law in this case means a set of unwritten rules and regu l ations binding the criminals. Until the 1970s. these rules prohibited contact with or work for the regime. After the 1970s cooperation between the nomenklatura (party officials and the criminal underworld began to increase 4 Corrupt officials and criminal organizations are involved in a variety of black market activities that generate multi-million-dollar profits. The illegal export of such natural re sources as oil, ferrous and non-ferrous metals, timber, and diamonds is the most lucra tive, followed clos e ly by illegal drug production and distribution. The illicit sale of arms and nuclear materials and technologies represents the greatest threat to Russias neigh bors and to the West. Privatized property is bought up by foreign and domestic criminal organiz ations to launder and hide illegal profits grew by 50 percent from 1992 to 19

93. The Ministry believes that around 20,000 metric tons of metals, over l00,OOO metric tons of oil products, and more than 200,000 cubic yards of timber were smuggled abroad fro m Russia in 1993, with up to a trainload a day passing through Lithuania and into the port of Kaliningrad alone Russian officials will charge up to $80,000 to register a bank and up to 15 percent of the deals value to issue a license to export oil. Manage r s of govemment-owned indus trial enterprises often bill international customers only 10 percent of the price of exported commodities, with the difference between the contract price and the world market price deposited into their offshore bank accounts. Un t il early 1994, the Central Bank of Russia issued credits to commercial banks and state-owned enterprises at rates much lower than inflation. Banks and enterprises then loaned the money out at higher market rates. Cen tral Bank officials reportedly receive d 13 percent of the loan as bribes9 Soviet military officers allegedly sold off the militarys strategic supply of fuel to black marketeers in Western Europe from 1990 to 19

94. There were several million tons of oil in the strategic reserves, enough to fuel planned Russian occupation forces in West em Europe until the year 20

06. Russian generals used military aircraft to fly Volvos and other European cars home for sale. The top brass illegally traded in MIG fighters, ar mored vehicles, and stolen German c ars. They even illegally manufactured and sold syn thetic drugs using Russian military labs The Russian Interior Ministry-estimates that. smuggling of such natural resources as oil THE RUSSIAN CONNECTION TO INTERNATIONAL CRIME AND CORRUPTION The Russian m u fiyu landed in the United States in the 1970s. Since then it has become involved in gasoline tax and medical insurance fraud in New York and California. It has cooperated with the Sicilian mob in transporting heroin and with Colombian cartels in shipping c ocaine. One metric ton of cocaine was seized in St. Petersburgs Pulkovo air port en route to Antwerp in 1994 While not yet as powerful as the Colombians, the 8 Russias Smugglers Gain Strength, The Wall Street Journal, March 30. 1994. p. A12 9 Another scam involving Russian central bankers featured Chechen con men as well as corrupt Central Bank officials.

Using bribes and intimidation. they managed to defraud the Russian treasury of $350 million by issuing forged promissory notes. Personal interviews in Mo scow. 1993-1994 10 Kholodov, And Your ServiceThere Will Look Like Honey. op. cir 11 James Moody, criminal investigations bureau chief of the organized crime department of the FBI, in a presentation to the Russian-American Chamber of Commerce Annual Conven t ion Vail, Colorado, July 1994. said the Russians are more sophisticated, more global in their outlook. and better educated than any other criminal group in the United States 5 ChineseTriads, or La Cosa Nostra, the Russians are an up-and-coming force in th e in creasingly globalized world of crime. Russian mafiya operations in the U.S. are headed by Vyacheslav (Yaponchik) Ivankov, known as the father of Soviet extortion ill-gotten gains by investing in gambling, luxury car dealerships in European cities like Budapest, and banks, marinas, and resorts in the Caribbean Basin. They also work with topflight international attorneys in Frankfurt and Zurich to learn money-laundering tech niques.perfected by Colombian.drug.1ords and Sicilian mobsters. The main techniq ue is to move money electronically among dozens of companies so that eventually it finds its way into respectable investment portfolios in the West.

Russian and other Eurasian criminals also are becoming more involved in the intema tional drug trade. The o pium poppy and cannabis (marijuana and hashish) have grown naturally in Eurasia for millennia, from the Ukrainian steppes to the plateaus of Kyr gyzstan. With the collapse of strict police controls, drug cultivation in Eurasia has reached an all-time high . Three million acres of opium poppies are controlled by organ ized crime in Central Asia, primarily in Tajikistan, Uzbekistan, and Kyrgyzstan. There are no fuel and spare parts for the aircraft that once were used to police these areas. Be sides, in many i nstances the police are on the take from drug dealers, and the porous borders in Eurasia allow illegal drugs to pass from Central Asia into Western Europe drugs manufactured in Pakistan, Iran, and Afghanistan. Uzbek and Tajik tribes inhabit Afghanistan an d have close connections in Central Asian governments, and the Central Asians are plugged into the Moscow power structure. Azeris, Armenians, Russians, Geor gians, and Central AsianTurks play an important role manning the bridge between drug manufacturersi n Asia and markets in Western Europe.

Russia is also becoming a transit point for heroin coming from the Golden Triangle of the Far East (the Burma-Thailand-China border region The Russian mujiyu has estab lished a foothold in Hong Kong, Singapore, and Ban gkok, where it cooperates with the Chinese Triads. Moreover, Russian gangs in New York, working with the Mafias Gam bin0 family, are shipping heroin into the United States The Russian mufiyu is fast developing an international network. Mobsters launder th e ir Eastern and Central Europe, Russia, and Eurasia are becoming major transit points for THE ROOTS OF CRIME The problem of crime in Russia and the NIS has many roots. The criminal code of Rus sia and other former socialist states cannot deal with the free d om unleashed by the col lapse of communism. During Soviet times, such innocent practices as bu ing and selling for profit or dealing in securities or foreign currency were criminalized.Meanwhile such simple judicial tools as laws against a conspiracy to c o mmit crime were lacking. So viet law was ideological and arbitrary, allowing Communist Party apparatchiks to decide the legality of economic transactions 12 Beginning in the 1960s dozens of people in Russia were executed for simple hard currency exchange operations or for stealing socialist property. Hundreds were given 1

15 year GULAG terms for doing the same. At the same time, many murderers and other violent criminals received relatively short terns of four to seven years 6 Legally, there was no private property, so the legal system did not contain provisions for conflict of interest This legacy has been carried over into the new Russian Federa tion. Even today, there is no adequate definition of corruption in the Russian criminal code. Nor are there ad equate civil service ethics regulations. It is no wonder that Russia and other Newly Independent States have some of the most corrupt bureaucracies in the world. Their legal systems are completely incapable of preventing corruption.

Soviet-trained judges have a poor understanding of private property. They have not been trained in the WestemJegal practices of settling property and transactional disputes between private individuals. Before 1992, there was only one state-run arbitration system in the USSR. There were no forums for corporate dispute resolution. Since everything be longed to the state, nobody really cared whether contracts were honored. Parties to con flicts and their counsel had no personal or business interest in the out come of the pro ceedings.

This legal vacuum has been filled by a growing criminal class who are taking justice into their own hands. The inability of the civil courts to enforce justice has been a disas ter for the nascent business class in Russia and the NIS. Russians have privatized jus tice by reverting to hired hoodlums to collect debts. They also have employed mobsters to guard their businesses from other mobsters, and they pay protection money to gang sters to be left in peace 13 THE DANGERS OF CRIME AND CORRUPTION The explosion of crime and corruption in the NIS and some Eastern and Central Euro pean countries is a threat not only to the people who live in these countries, but to the en tire international community. It undehes the credibility of demo c racy and the market economy and even spreads the danger of nuclear terrorism. Specifically, crime and cor ruption x Undermine the legitimacy of democratic reforms. Nostalgia in Russia for the good old days of the Brezhnev era is growing. Threats to person a l security and property, growing prostitution and drug trafficking, and unchecked bureau cratic graft make the post-communist societies long for a strong hand. Commu nist and ultra-nationalist politicians and media utilize the criminal threat to boost sup port for their own causes.

Such demagoguery is best represented by neofascist Vladimir Zhirinovsky, who promised in his 1993 election campaign to stop crime in three months by arresting half a million people. He also called for public mass executions of te n thousand mob sters. At other times, however, Zhirinovsky has suggested a condominium with or ganized crime. He would make a deal in which gangsters would receive unofficial permission from the state to run drug trafficking and prostitution in exchange f o r leaving legitimate businesses alone. 14 13 Personal interviews in the Institute of State and Law, Moscow, July 1993. and with Dr. Nina Belyaeva of the Interlegal Foundation, November 1993 14 Recently assassinated criminal boss Otari Kvantrishvili even c r eated his own party, Russias Sportsmen. of sportsmen 7 x x Zhirinovskys simplistic formulas are a recipe for dictatorship. A dictator could use the rise in crime and corruption to crack down not only on criminals but on legiti mate businesses as well. The result would be the end of democracy and a free-market economy as a dictator renationalizes private property in the name of law, order, and economic equality Discredit free markets. Lacking a legal system capable of buttressing the mar ket economy, Russia and other NIS societies have lost hundreds of millions of dollars to .fraud. Legal authorities do not protect investors or consumers from thievery, extorlion, or fraud. For example in 1993 a company called Inde pendent Oil Concern stole millions of dollar s from investors and transferred the money abroad. The Russian prosecutors office did not even investigate the mat ter. Another example was the 1993-1994 MMM stock market disaster caused by Moscow entrepreneur Sergei Mavrodi and named for the initials of t h e part ners. This was a massively advertised pyramid scheme in which the value of the shares was driven sky-high by the influx of millions of new buyers. In the end the bubble burst and multi-billion-ruble losses ensued kets is tremendous. The crime and c o rruption of today are reviving prejudices left over from the days of Soviet communism, giving the old charge that business is dirty a new meaning. Widespread crime and corruption are deterring honest, indus trious people from joining the ranks of entrepre neurs and are fomenting a hostile po litical climate toward free-market reforms.

Weaken the rule of law. Democracy and free markets cannot survive without the rule of law. However, precious little has been achieved in establishing a firm legal basis for a civil society based on democratic principles. It takes the police two to seven hours to arrive if a foreigner is severely beaten and mugged. If the victim is Russian, they may not arrive at all. If a ruling is rendered by a judge the police often will not enforce it; there is no effective state-run or private en forcement service-with the exception of organized crime. Companies find little protection from the police, who sometimes are coconspirators with the mob. In 1994, dozens of senior police officers w e re fired for cooperating with the mafiyu, while others were killed by criminals for refusing to cooperate Impede Western investment Western businessmen increasingly are harassed by Russian mobsters. American managers in Moscow told the author that they ha v e received anonymous phone calls inquiring about their sales volume more than once a day. Such routine intelligence-gathering helps criminals to determine which foreign firms can be targeted for extortion. Americans, Germans, and Finns have been murdered, robbed, or severely beaten in Moscow, St. Peters burg, and other cities. To cope with the danger, foreign businesses must bear the The negative impact of all this criminal activity on the image of business and mar and Afghan war veterans. Such sports orga n izations provide security and collection services to private business. They also exert pressure on politicians. Ministry of Thieves-in-Law, op. cif 15 Yaroslav Shimov, Rossiyskogo grazhdanina obmanut legko. a nakzat obmanshchika trudno (le Russian Citizen is Easily Defrauded, But It Is Difficult to Punish a Crook Izvesfiyu, July 19, 1994, p. 1 8 steep costs of additional security for themselves, their families, and their prop erty. Faced with these costs, which can absorb as much as 30 percent of foreign p r ofits, many fums refuse to invest in Russia and the NIS tion of central controls since the collapse of the Soviet Union in 199 1 has led to the hair-raising possibility of unauthorized sales of nuclear components and ma teriel to terrorists and other crim i nals. By 1993, Germany had arrested over 100 people involved in smuggling-nuclear. components from the former Soviet Un ion. Ukraine, with its diverse nuclear establishment, was a major source of nu clear-related dual-use materials, including heavy water, zirconium, and hafnium from its Dneprodzerzhinsk production complex. These materials are all on the Nuclear Suppliers Group restricted list (the NSG is an international regime aimed at stopping the proliferation of dual-use nuclear weapon components).16 N u clear facilities also are located in such potentially unsafe and unstable areas as Tajikistan, Kyrgyzstan, Uzbekistan, and Kazakhstan. Tajikistan is in the midst of a civil war, while nuclear security in the other republics can be very lax. There are un g u arded nuclear components in research facilities such as Dneprodzerzhinsk in Ukraine and nuclear laboratories in Georgia and Armenia. Ex-Soviet nuclear scien tists are working on secret and illegal nuclear weapons programs in Algeria, North Korea, India Ch i na, Iraq, Iran, and Libya in violation of the Nuclear Non-Prolifera Radioactive components for nuclear weapons can be boughtin Russia and other parts of the NIS Since 1990 there has been clear evidence that uranium and pluto nium are being smuggled out of the former Soviet Union. Several smugglers died or became severely ill from mishandling the materials, which have been left in railway stations and airports in Lithuania, Austria, and Germany. Over 100 people have been arrested by German, Czech, and other Central European security services since 1991.

Russian KGB and military officers were supplying nuclear machinery and weapons systems, and Italian mafiosi were reselling them to Libyans. Transshipments of nu clear materials were made to Italy, Switzerland , Austria, and Sweden, but the direct route is even esier. Former PLO official Shaaban boasted in a May 1994 newspaper interview that he had purchased two neutron bombs, hiding one in a desert in South ern Jordan and another in Southern Lebanon. Shaaban d e clared that his people are go ing to attackTe1 Aviv and West Jerusalem with these weapons.19 This articular charge may sound implausible, but some take such scenarios seriously K Spread the dangers of nuclear proliferation and terrorism. The deteriora tio nTreaty 13 SO 16 William C. Potter. Nuclear Exports From the Former Soviet Union: Whats New, Whats True, Arms Control Today.

JanuaryFebruary 1993. p. 3 17 /bid pp. 6-10 18 Leonid Fituni, president of the Russian Academy of Science Center for Global and Str ategic Studies, Report to the Hanns Seidel Foundation, quoted in Claire Sterling. Thieves World (New York: Simon Schuster, 1994). p. 21 1 19 Valery Vyzhutovich, Brat PO sudbe, tovarishch PO oruzhyu (Brother by Fate, Comrade in Arms Izvesriya. May 25 1994, p. 5 20 Newt Gingrich, speech at the Nixon Center, Washington, D.C March 1.1995 9 STEPPING BACK FROM THE ABYSS Crime and corruption in Russia and other parts of Eastern Europe and Eurasia are a time bomb waiting to explode. They could cause a political ba cklash that brings the likes of Vladimir Zhirinovsky or 'the communists to power. To curb this increasing danger, ac tion must be taken on three levels 1) COORDINATED ACTIONS BY RUSSIA, OTHER NIS COUNTRIES, AND EASTERN AND CENTRAL EUROPEAN STATES.

These co untries should d Create entirely new criminal investigation agencies. Current police agen cies in Russia and the NIS are extremely corrupt. Rather than rely on existing personnel who are trained but tainted, it may be wiser for the Russian police to recru i t and train new personnel?' The Interior Ministry and former KGB of fices are penetrakd by mob informants and constantly leak highly sensitive in formation to the mafiyu d Arrest and prosecute suspected prominent criminals. Despite well-docu mented allega t ions in the Russian media, no one of high rank has been prose cuted for corruption or involvement with the mob. While First Defense Minister Matvei Burlakov and Chairman of the Central Bank Victor Gerashchenko were removed from office in 1994 because of c h arges of comption, they were never put on trial. For the Russian people to believe their democratically elected gov emment, some public figures accused of crimes must be investigated and, if the evidence warrants, brought to trial d Amend the criminal cod e s to better define organized crime. The Duma and other legislative bodies in the NIS should introduce the doctrine of conflict of interest into administrative law and pass an ethics code that applies to all pub lic servants. The Prosecutor-General's offic e and regional prosecutors should be allowed to proceed against mob leaders, whose names as a rule are well known.

This can be done without violating constitutionally guaranteed individual rights?3 The current Russian criminal code is sufficient to prosecu te the "fat cats" if the police, the prosecutor's office, and the judiciary are adequately paid and protected d Recruit and train a new judiciary. Sovietera judges lack the training and le gal knowledge to protect property rights and to adjudicate dispute s between pri vate citizens. As a result, many of these disputes are resolved by criminal ele 21 Personal interviews with Edwin Meese; Peter Filippov, former head of theYeltsin Analytical Center; and Vladimir Rubanov, Deputy Secretary of the Russian Nation a l Security Council 22 A similar call came from famed writer Alexander Solzhenitsyn in a recent Duma speech. Radio Liberty-Radio Free Europe Broadcast Monitoring, October 28, 1994 23 "Organized Crime and the Prospect of National-SocialistsTaking Power in R u ssia Analytical Center of the Russian President Special Report, January 1994 10 ments. A new legal system that can protect the lives, liberties, and property of its citizens requires an entirely new generation of lawyers and judges trained in Western lega l norms and practices. Existing magistrates should be phased out from positions of power and confined to lesser positions, for example, registrars and judges in traffic courts?4 d Upgrade the civil courts to handle private sector disputes. Russians revert t o the majiyu to settle disputes and debts. The government has to demonstrate that the state court-system is aseffective as-and safer than-the mob enforc ers. One way to do this is to introduce a marshal system to enforce court orders and rulings. Such a s t ructure, fashioned after its US. counterpart, will be charged with collecting court awards, seizing assets, and enforcing asset forfei ture. This will work better than the cmnt system because it will put the judici ary, not the mob, in charge of civil dis p ute resolution d Upgrade security, inventory management, and accountability at nuclear production and storage facilities. Criminals attempting to purloin nuclear ma teriel should be identified and prosecuted. So far this has not been done, espe cially wit h officials in charge of security themselves involved in nuclear smug gling. Russia, Ukraine, and other states must cooperate more closely with West em governments to identify and apprehend criminals attempting to acquire nu clear weapons, technology, and p ersonnel, with particular attention paid to buy ers from rogue states such as Iran, Iraq, North Korea, Libya, and Syria d Ease bureaucratic regulation of the economy. Russian, Ukrainian, and other bureaucrats are among the richest men in post-communist so c ieties. They achieve wealth by illegally selling export licenses, business permits, and other goods and services. They thrive on the bureaucratic red tape and regulations that frustrate normal and legal economic activity. Easing bureaucratic regula tion o f the economy not only would help stimulate the economy, but would re duce black market and other illegal activities. The recent announcement by President Yeltsin that he will abolish state licenses for oil exports and cut his staff by one-third is a welco m e step in the right direction d Reduce the tax burden. Taxes in Russia and Ukraine are among the highest in the world. Because they are so high, they are routinely evaded. It is common for bureaucrats to grant tax relief to relatives, cronies, and busines s associates in return for bribes and other favors." Sometimes business owners hire organized criminals to intimidate tax collectors. Thus, the mafiyu ends up with money that should go into state coffers. Reducing tax rates and uniformly enforcing tax laws would alter the atmosphere in which organized criminals and corrupt tax collectors operate 24 Personal interviews with Nina Belyaeva, the Interlegal Foundation:Washington, D.C November 1993 25 Tina Rosenberg Meet the New Boss, Same as the Old Boss Harper' s , May 1993, pp. 47ff 11 2) WESTERN COOPERATION WITH RUSSIAN, OTHER NIS, AND EASTERN AND CENTRAL EUROPEAN GOVERNMENTS These countries should d Share computerized data on criminal activity. This will allow the West to identify and apprehend Eurasian crimina l s in a timely fashion. However, West ern countries should bear in mind that the Eastern European-especially the for mer Soviet-.police forces are not fully trustworthy. They have been penetrated by organized crime. Western countries must be careful not to compromise intel ligence sources by disclosing informant networks or sensitive data26 d Identify trustworthy and reliable law enforcement personnel in the East The FBIs experience in cooperating with the Italians shows that trustworthy partners can be fou n d even in police forces penetrated by organized crime. The situation in Russia and other former Soviet republics is no different. A special effort should be made to locate, encourage, and cooperate with trusted officers to build rmanent, long-lasting ties between Western and NIS law enforcement officials 95 d Gain Western help in writing criminal codes. Specifically, this means draft ing laws dealing with organized crime and corruption, ethics codes for civil service, and administrative law. Educational pr o grams should be designed to help these countries train judges and prosecutors to handle actual cases of organ ized crime d Create a witness relocation program. Such programs have proven a major tool in prosecuting mafiosi in both the U.S. and Italy. The R u ssians have been asking for assistance in this area. The U.S. could bring in Russian officials to study the system in America and dispatch American specialists to implement a similar program in Russia d Combat crime throughout Eastern and Central Europe a n d Eurasia, not just in Russia. Western bweaucracies often treat the entire former Soviet area as Moscow and its branch offices. However, intercepting drugs in Central Asia or illegal arms in the Caucasus requires direct cooperation with Uzbekis tan, Kyrgy zstan, Azerbaijan, Armenia, and Georgia 26 Russian-American Intelligence Agenda: Cooperation or Confrontation? A seminar at the Heritage Foundation, March 31. 19

94. At this seminar, Kenneth De Graffenreid. David Major, and J. Michael Waller all warned aga inst excessive cooperation with the ex-USSR services. 27 Moody presentation to the Russian-American Chamber of Commerce, July 1994, op. cit 12 3) UNILATERAL ACTIONS TAKEN BY THE UNITED STATES AND ITS WESTERN ALLIES The U.S. and its Western allies should a 4 Track and penetrate Russian and NIS criminals dealing in nuclear materi als and narcotics. The illicit spread of these materials and substances is by far the largest security threat posed by the crime wave in Russia and the NIS. To cope with it, the West needs first-class intelligence. This may come from human sources T) or from sophisticated electronic surveillance (ELINT).

While mobsters today outgun and outspend many Eurasian police forces, they lack the high-tech intelligence-gathering capabilities of Western governments a4 Better monitor East-West financial transactions. Eastern Europe, Russia and other states in the region have turned into a giant money-laundering ma chine. This multi-billiondollar infusion of "dirty" funds both destabilizes and cri m inalizes the Western financial system. The U.S. should force Western banks to evaluate sources of money from the East and to report suspicious financial ac tivities to law enforcement authorities CONCLUSION The wave of crime and corruption engulfing Russi a , the NIS, and parts of Eastern and Central Europe presents a threat not only to the peoples living in these countries, but to the entire world. Organized crime discredits the market system and undermines demo cratic institutions. It also raises the prosp ects that terrorist groups might gain access to nu clear materials or technologies. Thus, organized crime in these regions threatens intema tional security and stability.

The Central European and Eurasian governments must drastically reorganize their le ga l and law enforcement systems. They must apply economic policies that foster the free market, not mufyu development. The West should cooperate with Central European and Eurasian law enforcement authorities as much as possible. And in the vital areas of nu clear, chemical, and biological non-proliferation and drug interdiction, the West should act resolutely and, if necessary, unilaterally.

Ariel Cohen, Ph.D Salvatori Fellow in Russian and Eurasian Studies 13


Patrick Fagan