MAFIA CAPITALISM IN MOSCOW

A dark blue BMW pulls up in front of the Hotel Moskva, a concrete monster from the Stalin era looming just behind the Kremlin. Three young men step out, mafiosi from Chechnya. They sport silk suits, wing-tip shoes, and mustaches. Their jackets bulge with gun holsters, which they accentuate by straightening their backs, letting their arms swing backwards. They are drunk and want to prove something to themselves. The Moskva is the right place for that because the Moskva is controlled by the Russian mafia.

The three swagger into the Spanish Bar, slump down at the table in the middle of the room, order beer and steaks. Silently they chew their meat, swig from their bottles, and scan the room with threatening looks. The business people from the banks and offices of central Moscow are trying hard to ignore the Chechens. There has been too much bad news about these Chechnyan mafiosi lately. In April Chechens had shot former wrestling champ Otari Kvantrishvili, a Georgian who had been the leader of one of the oldest Mafia groups in the country. In August they mowed down his successor, Amran Kvantrishvili, and his three bodyguards with a volley of bullets from AK-47s. They even used a rocket-propelled grenade to blast the director of a car factory out of his bullet-proof Mercedes.
The only one in the Spanish Bar who is not made afraid by the presence of the Chechens is Alexej. Alexej is never afraid. He used to be an elite soldier with the Red Army and it shows. Seven feet tall, short brown hair, bull neck, hands like dinner plates. Alexej was an interrogation specialist. At the front lines in Angola he could get anybody to talk. Now in Moscow he's a dollar millionaire. Just 30, he calls himself a banker and financial advisor. He is one of the best in Moscow because he was educated at the Army Institute for Foreign Languages, the talent pool for KGB and military intelligence. There he had been taught how to survive in the jungle, how to blow up a tank, how to attach the electric cables of a field telephone to the testicles of an obstinate informer. In the financial terrain of Moscow today, that's worth more than a Ph.D. from Harvard Business School.

Alexej glances over at the mafiosi and shakes his head. He doesn't like Chechens. "They kill people for fun," he says. Their whole mafia act disgusts him. The flashy clothes, the massive jewelry and showy cars. "They've seen too many American movies," he says contemptuously. "Do you know the world's fastest animal? A Chechen in his BMW." Then he laughs at his own joke, which is only funny if you're Russian and you don't like Chechens.
"The Chechens are crazy about BMWs," he tried to explain. "At home in the Caucasus mountains they drive them to the front." During the summer Russian TV carried footage of a silk-suited separatist leader Dzhokhar Dudayev proclaiming the independence of the tiny Caucasus province. His men were moving out against the troops loyal to Moscow in a convoy of tanks and luxury cars. The BMWs were manned by bodybuilders, sticking their Kalashnikovs through the sun-roofs. It took helicopter and rocket attacks by the Russian army, to undermine the Chechen's freewheeling image, which had been so carefully cultivated. Even under heavy fire they parade their arms in front of TV cameras.
Here in Moscow you can recognize Chechen-owned BMWs by their German and Austrian license plates. No policeman would dare to stop a Chechen just because he drives a stolen car. "They're all criminals," Alexej shakes his head. For him and most Russians the Chechens are entirely responsible for the demise of society and the rise of barbarism.

Alexej is extremely proud that he got rich without breaking the law. Which you can't give him too much credit for, since Russia has few laws. The criminal code is woefully insufficient; market regulation does not exist. After fighting capitalism for 70 years nobody was prepared for the dynamics of a free-market society. Now, postideological Russia has only two common denominators: the dollar and the law of the fist.

For the few who are able to navigate the jungle of Moscow capitalism, the former Soviet Union has become the promised land. The more insolent their approach to business the faster they get rich. Take the businessman who opened an investment fund called Eynabejan Bank early last summer. Backwards it reads Najebanye, Russian for "fuck you." Hundreds of investment banks had already gone bankrupt. The crash of the infamous MMM had made international headlines. And still the citizens of Moscow came to bring their savings to the Fuck You Bank.
After some weeks the company disappeared. The policemen who dispersed the crowd in front of their old office just shrugged their shoulders. The officers from the ministry of finance shrugged their shoulders as well and added the names of Fuck You Bank's boardmembers to a wanted list that already consisted of several thousand people.

You can't really blame the officers for their indifference; just now they have other problems - the real estate business, for example. In Moscow alone 8000 people are missing because they mysteriously disappeared from houses and apartments which had become attractive commodities on Moscow's real estate market. There is even a special housing police task force which investigates businesses that use murder and extortion to clear properties of tenants. Every week a couple hundred Moscovites disappear from their homes.
Right now the only people making large profits are speculators in real estate and investment bonds, a unique phenomenon in the history of finance. Under ordinary conditions, large profits in investment and real estate signal an economic boom. But in Russia nothing is produced, nothing manufactured, and resources are peddled under the table by the mafia. Speculators convert their profits into dollars, which they deposit into West European bank accounts.

Only the mafia can thrive under Capitalism Russian-style. Previously, under Communism, they had been the only ones able to amass then-illegal hard currency. Their ruthless methods made them into a powerful, functioning structure which would survive independent of the party.
The ruling party realized this early on. Stalin hired known criminals for his secret police, and under Gorbachev the first corrupt bureaucrats made contacts with the underworld. Now these connections are so solidified that the structures of New Russian Society are very much modeled after the structures of the Bratvas, the mafia brotherhoods.
Nothing has changed much for Russia's working class. The individual still has no worth. But now instead of a two-class system comprised of proletarians and party members, Russian society encompasses a mafia hierarchy.

The lowest levels make up the runners and lackeys. They are the owners of Moscow's numerous new kiosks, selling fruit, chocolate, and vodka, charging exorbitant prices because they have to pay off racketeers. They are also the waiters in mafia restaurants, the small-time speculators and smugglers who depend on mafia connections.
The second class makes all the headlines. These are the Khuligany, the hooligans and hitmen who guarantee that money is paid on time, troublemakers disappear, and competitors are eliminated. They work not only for the mafia but also for the third class, the "bizzninzmen," most of whom have made arrangements with the Bratva for security and debt collection. For this they pay up to 30 per cent of their profits.
At the top of Russian society are the chiefs. Some of them are recruited from the old bureaucracy, others from the godfathers of mafia syndicates. They combine the power of old-time party connections, government access to resources, and the strength of mafia enforcement. Over 150 clans have carved up the country. In Moscow alone eight clans share control of the city.
Alexej is working with all three levels of the clan hierarchy. He has his lackeys, his Khuliganies, his chiefs. He is running 10 money-exchange kiosks and a restaurant, and this summer he has opened the Adelphi Bank with his friend Mischa, who used to be an interrogation specialist in Afghanistan.

The Adelphi offices are two blocks from Moscows prestigious shopping boulevard, Gorki Street. A thin man with hollow cheeks and tousled black hair opens the door: Andrej, the Eskimo from Siberia. During Communism he used to peddle illegal photos of naked women at the train station. Last year the mafia got him a job as office manager and delivery boy in one of Alexej's exchange places.
Alexej lets him do a little bit of his own business at the bank office. He gave him as desk in the hallway to the bathrooms. Andrej put a calculator on it and a UV lamp to detect fake money. That's Andrej's agency. He is selling shares for the MMM, even though that investment fund crashed twice already and the board members are still in jail. Only MMM boss Sergej Mawrodi got out on bail in October, after which he successfully campaigned to get himself elected into the Duma, the parliament, where as a delegate he now enjoys immunity.

From Andrej's desk you can watch how greed reigns Russia. An elderly woman in a quilted coat enters, looking around insecurely. "I would like to buy some shares," she says. Andrej arrogantly orders: "Wait outside." Alexej giggles. "That's an old trick of the bureaucrats. If the people are left waiting they think this is an especially important place." Minutes later the lady is led to the desk. Andrej seems bored as he shows her a graph of the shares' projected value. In two months the graph promises an increase from 10,000 to 130,000 rubles. How much for one share today? "Fourteen thousand," Andrej grumbles, about four dollars. The lady buys 100 shares. Andrej counts the paper shares onto the table. They are brightly colored notes the size of dollar bills, bearing a scrawled portrait of MMM boss Mawrodi.
Alexej is shaking his head. "This morning the papers listed one MMM share for 14,000. But at noon our inside man at the stock exchange told us they're only worth seven." he says.

Two more elderly women enter the bank. Each spends about $500 dollars on shares. A young woman wants a copy of the graph. Andrej kicks her out. "We are a respectable business. If you don't trust us go somewhere else." From the other side of the hallway Alexej's friend Mischa waves with a grin. The inside man from the exchange just called with the afternoon rate - 3000 rubles.
When the last customers leave two hours later Alexej grabs Andrej by his shoulders. "May I introduce you to the man who just lost his last $100,000 dollars?" he bursts out laughing. The latest MMM rate was just phoned in: 1800 rubles, or about 60 cents. This was the third crash this year. Andrej tries to smile. When a man in a windbreaker enters Andrej sells him a stack of shares at the morning rate. "Nobody in Russia really knows how to deal with money," Alexej says. "How should they? They've never been to a real bank in their lives. Under Communism money didn't really exist."

Right at the beginning of the boom, when MMM shares went up 6600 per cent in four months, Alexej and Mischa invested. "We immediately lost $1000 dollars." Alexej thinks for a second. "A thousand? Or was it a hundred thousand?" He scratches his chin. "I think it was $100,000 dollars. No, no for sure."
For Alexej and Mischa their millions are just an abstraction. They don't really buy anything with it and they rarely have cash to spend. That's why Alexej still lives in a tiny two-room apartment in a project on Prospekt 60. His two million are somewhere in the dark channels of Moscow.

It's hard work to retrieve the money from those channels. The key word is "Rasborka": when the Mafia solves a problem their way. For example there is a Rasborka for defaulting debtors. The first visit is nothing bad: a little pushing and shoving, a couple of broken pieces of furniture. The second time around the debtors are taken to the Patvale, the torture chamber. In the case of Alexej's Bratva the Patvale is under their casino. There the Khuligany work on the debtor for three days. After that if the money doesn't come, there's only the refrigerator left.

Alexej hasn't done any business without the Bratva for quite some time now. The Bratva is his insurance that he gets back the money he invests. Today, for example, he has to ask them if they have connections in Nagorno-Karabach. A year ago Alexej lent $100,000 dollars to a trader who wanted to sell overpriced grains to the state in the Caucasus. With interest he now owes Alexej $300,000 dollars. He is late.
"How am I supposed to get the money back without the Bratva?" Alexej asks. "There's a war in Nagorno-Karabach. They don't have a government, and anyway the government would tax me out of my profits. The Bratva is cheaper and more effective."

Alexej's Bratva controls the area around a city square about five minutes from the Bolshoi Theater. Alexej parks his car in front of the casino, by the brand new four-wheel drives, the favorite cars of the Bratva. Two bodyguards in suits wave Alexej through the front portal. Inside a large room with dark paneling and thick carpeting, uniformed servants are preparing the blackjack and roulette tables for the night. The minimum bet will be a thousand dollars.
In the back room the Bratva are having lunch. They are beefy guys, mostly around thirty, wearing designer sweaters and gold jewelry. One of them gets up. He's small and heavy, with shoulder-length black hair and a mustache. He hugs Alexej and they walk to another corner to talk briefly. Alexej's debtor in Nagorno-Karabach is late? No problem, the man assures him. The Bratva has people there. Tomorrow they will talk to him.

Back at the Adelphi Bank Alexej is met by disarray and confusion. Sergej the collector, in a black leather coat, shouts into a telephone. Mischa pulls Alexej in his room. One of the debtors in Moscow says he won't pay. Even worse - Andrej the office manager has embezzled $100,000 dollars. Now he has disappeared. In both cases it's too late for talk. "Rasborka," Mischa suggests. Alexej shakes his head. "We can't bother the Bratva with such a bagatelle. And we'd better not tell anybody about Andrej. If word gets around that our own people rip us off, our reputation is gone."
The two walk to a cabinet. Mischa hands Sergej a .38 mm revolver and puts a Makarov pistol in his leather jacket. Alexej grabs a Tokarev semiautomatic and a stun gun. He pushes the button and sparks fly out of the top, making a buzzing noise. "After three seconds the body empties itself involuntarily," Alexej explains. "After 10 seconds irreparable paralysis sets in."

They take Mischa's Jeep. First they want to take care of the debtor, a stocky real estate dealer with a modest office on Volgograd Prospekt. Alexej, Mischa, and Sergej push their way around the secretary and into his office, and the real estate dealer looks very nervous. "We do not want to be disturbed," he whispers to his secretary and locks the door from the inside.
In a thin voice he tries to explain to Alexej and Mischa why he hasn't paid yet. The two listen, looking at him with grim faces. Suddenly Alexej screams at him: "You owe money, so pay up!" With one hand he slams his gun on the desk, with the other he sends a lamp crashing to the floor. The real estate dealer breaks into a sweat. "Let me make a phone call." He is shaking when he dials. He mumbles into the receiver. "I got it," he sighs. Five minutes later he presents $100,000 dollars cash. The first installment. "That's better," Alexej growls, shoveling the wads of bills into a plastic bag. "You have 'til next week to get the rest."

Back at the bank Andrej opens the door. He puts on a grin and tries to talk himself out of trouble: "Was late, because...." Before he can finish his sentence Alexej slams him against the wall. He squishes Andrej's throat with his lower arm. Sergej pulls his gun and holds it to Andrej's temple. "You think you can fuck us over?" he yells. "You think we're stupid?" Andrej struggles for breath. Alexej shouts him down. "You know what's gonna happen, you loser?" Andrej turns pale. "I'm gonna give you one week to get the money back. And don't even think about disappearing. You know very well we gonna get you anyway!"
Andrej slinks out the door. Alexej shakes his head. "He's not gonna make it. He's a case for the refrigerator." He hesitates for a moment, as if he has surprised himself by the quick death sentence. "I find it very stupid," he says, slightly embarrassed. "The final Rasborka doesn't get you anywhere. The money will be gone for good. Only your honor is saved." He sighs. "But in Moscow you can't afford to lose your face." He looks sad all of a sudden. "I hope to get out of this business by next year."

That is unlikely. Very few bizznizmen manage to go completely legal. The mechanisms of the Mafia are embedded too deeply into society. According to Jurij, one of the clan chiefs behind Alexej's Bratva, the situation is quite clear: "We are the state," he smiles.
Jurij has been a member of the Bratvas since he was sent to the Gulags for trading foreign currency in the '70s. Now about 40, he is part of the leading cadre of one of Moscow's clans, in charge of the privatization of real estate. His subordinates employ a variety of techniques: threats, blackmail, murder. It is a little easier with senior citizens and alcoholics. Alcoholics are taken to an apartment in the suburbs, where a professional drinker will keep them drunk for about two weeks. By the time the vodka and the drinking buddy are gone and the victim's recovering from his hangover, the apartment has already been sold.
In the case of senior citizens the story is a bit more chilling. Jurij's people approach elderly apartment-dwellers and offer them a kind of life insurance. They promise to take care of them, cook food, nurse them if they're ill, with the single condition that the insurance-buyer leave them the rights to the apartment when they pass away. The elders sign up. The next day they are dead.

Jurij is waiting for a meeting at a Georgian restaurant five minutes from the Red Square. There's no sign from the street, just a bell. The owner, an elderly woman, opens the door herself. Inside a large room is lit only by candles, decorated with wall carpets and oil paintings. This restaurant is recognized as neutral ground by all the clans of Moscow, whose leaders meet here to discuss business. Early in the evening it is quiet here, save for a guitarist quietly singing Georgian folk songs.
Jurij has black, horn rimmed glasses, shoulder-length gray hair, and a full beard. He brought his friend Pjotr, a 30-year-old Red Army officer who trades arms. Jurij talks. Pjotr stares into his glass of beer.

"Everything you hear these days about the Russian Mafia in the media just scratches the surface," Jurij begins. "Those are the beginners who get in shootouts, who work in pitiful businesses like robbery, prostitution, or drugs. What is really going on happens clandestinely." Does he think that Russia has been divided among the clans for many years? "I don't believe that. I know it for a fact," he answers. "Nobody in this country has power. So the Mafia filled that void."
Right now Russia is becoming too small for the established clans, and they are seeking to expand into new territories. "Especially to Germany and Austria, but also to the U.S.," says Jurij. "Any place where Russians went in the past decades. There were a lot who didn't cut ties with their homeland. It would be stupid not to use these connections."

Isn't he afraid that the government will try to stop these developments? He shakes his head. "The government has been a crucial part of these developments. Sure, the president will issue one or the other law, there is even a special task force against organized crime. But that only works superficially. Only the clumsy get caught."

Jurij finishes his lamb chop and wipes his mouth thoughtfully. "The main structures remain untouched," he muses. "And the connections between Mafia and governments are already very settled, because for work to be profitable you are dependent on good government connections. The interesting thing is that it was always the government people who took the initiative to form the clans."
So if the clan structures are so settled and established, how much real power does Boris Yeltsin wield? Jurij smiles, thinks for a moment and answers: "I would put it this way - Boris Yeltsin is a representative of our country."

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