[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.

                          ____________________