[Congressional Record Volume 140, Number 84 (Tuesday, June 28, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: June 28, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
THE RUSSIAN MAFIA
The SPEAKER pro tempore. Under the Speaker's announced policy of
February 11, 1994 and June 10, 1994, the gentleman from California [Mr.
Royce] is recognized during morning business for 3 minutes.
Mr. ROYCE. Madam Speaker, I rise today to address an issue of
critical importance to our national security, to our foreign policy,
and indeed, to our domestic tranquility. That issue is the growing
threat of international organized crime, specifically, that emanating
from within the former Soviet Union.
In recent weeks, we have heard from a large number of administration
witnesses--the FBI Director, the CIA Director, and other experts on
this growing problem.
We have also heard from Russian parliamentarians who have seen
colleagues in Parliament, and other elected offices, gunned down by the
new Mafia. President Yeltsin himself has warned that, in his words,
``Russia has become a superpower of crime;'' and that the corruption in
ministries and law enforcement agencies ``is extraordinarily dangerous
for the nation.''
Our newspapers have focused on this issue, and so have our
constituents who have tried to do business there.
I believe it is important to take a few moments this morning to bring
some of the highlights to the attention of our colleagues who might
have missed some of these recent hearings. The statistics are awesome.
Director Woolsey testifying yesterday quoted the Russian Ministry of
Internal Affairs to the effect that a majority of Russia's 2,000 banks
are controlled by organized crime; he also stated that Russian criminal
gangs operate in 29 countries, including the United States; murders
have increased 47 percent in the past year, largely attributable to the
Russian Mafia; and, Yeltsin says that 60 percent of all Russian
companies are Mafia-infiltrated.
In Los Angeles alone, Russian organized crime has netted an estimated
$1 billion in health-benefits fraud cases. Similar stories emanate from
New York, and other large cities.
According to the International Security Subcommittee's report,
criminal groups in the former Soviet Union transferred $7 billion to
Germany in 1992 alone; this exceeds the total of all United States aid
to the region since 1990.
The main areas of threat are the illicit export of drugs and
weapons--both conventional and unconventional--the smuggling of nuclear
materials and technologies, and the support of international terrorism
and rogue regimes.
Linking all of these is the increasing Mafia control of the Russian
banking and financial transactions business. Put it all together and
you have an over arching threat of instability created by the
combination of these threats.
Internationally, alliances are developing, on a scale never seen
before, between drug syndicates, financial swindlers, commodities
thieves, arms dealers and shadowy political movements--all devoid of
ideological or national loyalties.
In a vicious circle that threatens to outstrip the abilities of our
police and intelligence agencies to monitor and counter, international
gangs contract to kidnap industrialists for ransom or to pilfer nuclear
weapons, to earn money for terrorist groups who in turn strive to
overthrow democratically elected governments, so that drug kingpins can
be sprung to freedom.
No longer scenarios from a Tom Clancy novel, these things are
happening around the world today.
These concerns are very real, the danger is very present. I would
urge this administration to redouble its efforts to identify and
isolate these criminal elements, and to assist the democrats within the
Russian Government in bringing these elements to justice.
As Director Woolsey implied, the model for comparative analysis of
this criminal aspect is the KGB and its sister organs in the old Soviet
Union. He noted yesterday that as we look now at some of these new
organizations, in and out of the State, we see the old familiar
elements.
My view is that rather than cutting back on the capacity of our
intelligence community to deal with this challenge, we should realize
its unique capacity and benefit from it.
We should also recognize that the complexity of the problem threatens
each of our crosscutting aims of democracy, nonproliferation, and
regional stability.
Democracy cannot prevail, markets cannot grow, and human and civil
rights cannot be upheld in the face of such overwhelming and corrupting
criminal activity.
Our aid should be conditioned on assurances from both Russia's
Government, and our own, that all is being done that can be done in
respect to monitoring and countering the growing threat of these crime
syndicates before they can choke off the infant democratic experiment
in the former Soviet Union. Many Russians are struggling against this
menace daily and deserve our support.
In closing I want to stress that this is not just about crime in
Russia, or marginal changes in our aid package--this is about
countering a real threat to the chances for a successful transition in
the former Soviet Union, and it is about stopping an international
crime wave before it crests on our own shores, and, before it goes
nuclear.
I would suggest that these thugs are of a different magnitude than
those in Haiti with whom the President and his administration seem so
obsessed, and I hope the President will find the wherewithal to deal
with them more effectively.
De Toqueville reminded us that no time is as dangerous as the time of
regime transition. We must be sober and vigilant about the challenges
facing Russia, and the United States, during the transition;
indifference and indecision will only encourage the anti-democratic
forces at a time when they need our attention and support.
American University expert Louise Shelley has warned of a dim
alternative to democracy in Russia if we fail:
* * * the pervasiveness of organized crime may lead to an
alternative form of development--political clientism and
controlled markets. The control will come from the alliance
of former Communist Party officials with the emergent
organized crime groups . . . groups that currently enjoy the
preponderance of capital of the post-Soviet states.
Finally, I commend to my colleagues an excellent article on these
matters in the European edition of the Wall Street Journal entitled:
``Russia's Biggest Mafia is the KGB'' by Dr. Michael Waller, which is
attached to my statement, as follows:
Russia's Biggest ``Mafia'' Is the KGB
(By J. Michael Walles)
In partnership with the Russian government, the West is
launching another Great Crusade: A mutual flight against
organized crime. While stopping the spread of criminal
syndicates from the former Soviet Union into Western Europe,
Asia, and the Americas may well require cooperation with
Russian authorities, such cooperation is fraught with
dangers. Russia's organized criminals are not only rogue
elements battling the authorities. In many, many instances,
they are the authorities themselves.
The core of Russia's own battle against organized crime is
the Federal Counterintelligence Service, the re-named
internal security organs of the former KGB. Paradoxically,
ex-KGB operatives also happen to be at the core of Russia's
organized criminal underworld, with a grip on a great deal of
business activity.
This should not be surprising. Since the Soviet secret
police were founded in 1917 as the Cheka, they have acted as
agents of corruption for the country's nomenkiatra ruling
class. As the Bolsheviks consolidated power, the ``Chekists''
made house-to-house searches, stealing everything of value
and stockpiling it in warehouses where the items were
catalogued and ultimately distributed for use by the
nomenkiatra, or sold abroad for hard currency. They then set
up and operated big trading houses in the West.
In more recent years, the KGB procured contraband for the
ruling elites, laundered Communist Party funds through
investments in the West, smuggled narcotics from Central Asia
to Europe, trafficked in weapons large and small, rubbed out
opponents around the world, and engaged in bribery,
blackmail, and extortion at home and abroad. It had sole
authority to penetrate law enforcement and the armed
services, a power that could either end the careers of police
and military officers, or enhance them in exchange for
cooperation.
the ultimate mafia
The KGB had vast banks of information at its disposal:
files on millions of individuals, political and financial
data, a global information-gathering and analysis operation
staffed by some of the world's brightest minds, and a network
of enforcers to match. Backed by the Soviet superstate, with
branch offices in every town of the U.S.S.R. and nearly every
country in the world, the KGB was the ultimate mafia.
As the Soviet Union collapsed, that mafia unshackled itself
from the few civilian controls over it and began taking
advantage of the opportunities opened up by privatization and
the emergence of a market economy. It buttressed its
political independence with the unmatched power to move money
into and out of the country.
When Mikhail Gorbachev abolished the Communist Party's
monopoly of power, the KGB rushed in to fill the political
void as well. Prior to the 1991 elections for the Congresses
of People's Deputies in Russia and the other Soviet
republics, the KGB set up a special task force to organize
and manipulate the electoral processes. It held political
organization training courses for favored candidates, arming
them with privileged information about their constituencies'
problems, needs and desires. Admitted KGB officers, some
2,756 in all, ran in races for local, regional and federal
legislatures across the U.S.S.R.; 56% won in the first round,
according to a KGB internal newsletter.
The trends are similar in Russia's booming business
community. Radio Liberty's Victor Yasanna reports that during
perestroika, it was the KGB and the Komsomol that established
the first stock and commodities exchanges, ``private'' banks,
and trading houses through which the Soviets' strategic
stockpiles of minerals, metals, fuel and either wealths were
sold. The West would not allow the Soviets to damp these
reserves on the open market for fear of depressing world
prices, so the KGB took the alternative route of selling
through organized criminal channels to get the hard currency
Moscow desperately needed.
These networks were facilitated by the strategic placement
of support personnel abroad. KGB Chairman Vladimir
Kryuchkov's son, as station chief in Switzerland, was
implicated by a parliamentary commission in a scam to bank
fortunes in hard currency for the KGB and Communist Party
leaders and their families. The son of former Soviet Prime
Minister Valentin Pavlov, who worked in a Luxembourg bank,
was implicated in the same scandal. Even as the Russian
government went through the motions of tracking down such
monies, foreign intelligence chief Yevgenly Primakov blocked
the parliamentary investigations from looking further, and
the matter was forgotten.
Meanwhile, Western businessmen who flocked to Russia
actively pursued current and former KGB officers as business
partners. The law at the time required all foreigners to have
a Russian joint partner. A 1992 report in the Russian
newspaper Gelos concluded that 89% of all joint ventures
involved KGB officers. They occupy top positions in nearly
100% of all state and semi-state enterprises, where a
deputy director's position traditionally has been reserved
for a ranking KGB officer.
For Western businessmen, employing or otherwise retaining
KGB men had distinct economic advantages. KGB officers and
veterans are a tightly knit fraternity with unmatched access
to inside information, personal contacts, and other
mechanisms to get things done, including paying off
bureaucrats and high-level officials. Few contracts in Russia
have any legal basis, and the smothering bureaucracy makes
special favors from the KGB a necessary component of
successful business ventures. Some Western businessmen even
justified their new partnerships by reasoning that helping
turn secret policemen and spies into entrepreneurs would
promote Russian reform.
These businessmen were wrong. Honest security officers
suffered professionally for bringing cases of high-level
corruption to President Yeltsin's attention. According to a
former KGB general, Mr. Yeltsin's internal security chief,
Viktor Ivanenko, ``tried to tell the truth about certain
colleagues to President Yeltsin, but he was ousted.''
President Yeltsin authorized a new status called ``active
reserve'' so that secret police and spies could go into
business while in government service with all due privileges.
No conflict of interest laws exist to stop massive organized
corruption from taking place legally. The distinction between
private enterprise, racketeering and the security services is
now officially erased.
The largest and most visible symptom of the Chekists' new
influence is the gigantic ``Most'' financial and construction
group. Most's business strategy has been to hire between 800
and 1,000 former KGB and interior ministry officials to serve
as analysts, deal-makers and enforcers, according to ex-KGB
officials interviewed in Moscow. The firm's analytical
department, which acts as the principal advisory body to CEO
Vladimir Gassinsky, is headed by former KGB First Deputy
Chairman Filipp Bobkov, once the right-hand man of KGB
Chairman Kryuckev and a vocal supporter of the August 1991
coup attempt. Mr. Bobkov's department includes 80 KGB
veterans, including former KGB Chairman Viktor Chebrikov, who
advocated sending democratic activists to psychiatric
hospitals; B.S. Shulatenko, who was in charge of the
political police in Ukraine; and former head of the KGB's
dissident-hunting unit for the entire Soviet Union, Gen.
Ivanov, whose first name is a subject of some mystery.
The Most conglomerate is widely reported to be attempting
to buy the loyalty of members of parliament who have opposed
the Chekists. The company is also creating a media empire to
influence public opinion, reaching out to young professionals
who strongly support Western-style reform. In partnership
with the Stolichny and National Credit banks, Most is a major
backer of a new daily newspaper, Segodnya, and the popular
Independent Television Network (NTV). Just a year old,
Segodnya has a daily circulation of 100,000, while NTV
reaches 40 million viewers. Both media cartels are
politically quite liberal, but not to the extent of
criticizing the activities of Most itself.
information highway robbery
A new threat to legitimate businesses in Russia and the
West is the Federal Agency by Government Communications and
Information, known by its Russian initials as Fapsi, which
comprises the high-tech units of the former KGB. Responsible
for most forms of electronic spying, Fapsi is on the verge of
taking control of Russia's telecommunications lines. A recent
decree by deputy counterintelligence director Andrei Bykov, a
26-year veteran of the KGB technical operations department,
placed all telephone switchboards and their electronic
equivalents at the disposal of the security services. The
decree ordered that each telecommunications transit point be
equipped with eavesdropping devices.
Traditional-style gangsters also have gained power in
Russia. Otari Kvantrishvill, a notorious Moscow mafioso who
was assassinated in April, had positioned himself so well
that, in the words of Moscow News, he ``could successfully
settle conflicts between Moscow officials, financiers, and
representatives of the underworld.''
According to the State Duena's committee on security, 80%
of all enterprises are engaged in corruption, and up to 50%
are controlled by organized crime syndicates. What has
emerged from Russia's great economic reform is a huge
parastaial system dominated by the former KGB, the
bureaucracy and nomenkiatra and organized crime. Before the
West commits to help Russia fight mafia activity with
tradecraft and intelligence, it must first find institutional
partners there that are clean.
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