ORGANIZED CRIME IS BLEEDING RUSSIA DRY

From: ENN EMERGENCY SERVICES REPORT-EmergencyNet NEWS Service-Thursday, July 3, 1997 Vol. 1 - 184

ORGANIZED CRIME IS BLEEDING RUSSIA DRY
By Steve Macko, ERRI Crime Analyst

According to a recent study conducted in the United States, almost 50 percent of the Russian economy is controlled by organized crime and billions upon billions of dollars are leaving the country as a result. The study was issued by the World Bank and said: "In Russia, organized crime groups are dominating both legitimate and illegitimate economic sectors simultaneously."

The study was authored by Louise Shelley, who is a law professor at American University in Washington. The report also said that new criminal owners of businesses are not interested in making their companies work, but are draining the resources and transferring proceeds abroad, which exacerbates both flight of capital and non- payment of workers wages.

The report is based upon Shelley's forthcoming book that will be entitled: "Stealing the Russian State." The study said that Russian organized crime has seized control of more than 40 percent of the total Russian economy by taking advantage of the government's privatization program. Shelley said that the Russian mafia has an even larger stake in such economic sectors as consumer markets, real estate and banking.

The study said: "Russian organized crime groups secured a massive transfer of state property because the privatization occurred rapidly, on a huge scale, without legal safeguards and without transparency. These groups used force, if necessary, but relied mainly on their large financial assets and their close ties to the former Communist Party elite, the military and the banking sector."

In other words, because organized crime was already in operation before the collapse of the old Soviet Union, the mobsters, who already had large amounts of money at their disposal, were in the best position -- better than any legitimate businessman -- to take advantage of the situation when the government instituted the privatization program. Thus, a large percentage of businesses and real estate came under the control of organized crime figures. This was made possible because the government didn't think about who it was selling to and because organized crime already had corrupt government officials in its hip pocket.

Because organized crime has instituted an atmosphere of widespread corruption and bribe-taking among officials, it means that many legitimate businessmen must do the same thing in order to compete. A truly snowball effect that will eventually totally destroy the economy.

The Russian mafia is different in many other ways than other organized crime groups in the world. The Russian mob is truly destroying the Russian economy. Colombian drug traffickers will take their profits and will invest them back into Colombia. The Italian mafia also invests much of its profits domestically. But Russian organized crime groups prefer to deposit most of their proceeds abroad.

A conservative estimate says that since 1991, more than US$50 billion of capital has been taken out of the Russian economy by the mafia. A Russian Interior Ministry report said that the figure was probably at least US$150 billion.

Most organized crime groups in the world launder their proceeds in legitimate businesses. The World Bank study said: "Organized crime ... discourages foreign investment, deprives the country of its tax base, dominates the banking sector and financial markets and exacerbates the already widespread problem of corruption."

In other words, if you were an American business -- why would you want to invest in the Russian market and put up with all these problems, when there are plenty of other markets to get involved with that don't have the problems that Russia has? So, no new money is coming into Russia and the Russian mafia is sending huge amounts of money out of the country. This is not good.

Beyond popular belief, the streets of Moscow are still relatively safe from Western-style crimes such as mugging. However, gangland shootings and car-bombings of businessmen and bankers are relatively common. That's how the mobsters get rid of their competition.

It's going to be a big job for Boris Yeltsin and the Russian government to clean this up -- and every day and every year that goes by -- the Russian mob becomes more and more entrenched in the economy. Unless the Russian government finds some viable solution to this burgeoning organized crime problem, the future looks pretty bleak for the Russian people.

The ENN EMERGENCY SERVICES REPORT is a subscription publication of the EmergencyNet NEWS Service, which is a part of the Chicago-based Emergency Response and Research Institute. This publication specializes in Law Enforcement/Fire/EMS/Disaster and Medical Issues.

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