Russian Mafia Hurts Free Market

EKATERINBURG, Russia - Boris Yeltsin used to run this town. Now the mob does.

The new czar is a former soccer star named Konstantin Tsyganov. Police and fellow gangsters say Tsyganov's crime organization controls 60 percent of this rich industrial region, with branch operations in Moscow.

In or out of jail, Tsyganov is a man with clout. During a mob war last summer, his henchmen decided they needed more than machine guns to battle rivals from the ferocious Chechen mafia. So they hijacked a tank from a nearby military testing ground and parked it in the central square. The Chechens left town.

Tsyganov is something of a Russian Robin Hood. His thugs allegedly extract up to one-third of the profits from businesses struggling to establish themselves. Yet after he was arrested on extortion charges last spring, invalids, pensioners and the local soccer team wrote letters extolling his philanthropy, demanding his release and saying they could not survive without his largess.

Three-quarters of the residents believe their city is ruled not by the government but by the mafia, a 1993 survey showed.

And 56 percent believe the police are not fighting organized crime because they have been bought off.

Ekaterinburg is not unique. Organized crime and corruption have become so pervasive they are choking the development of a free-market system in Russia, according to a growing number of officials, business people and victims.

Some think the problem could threaten the Yeltsin government.

In his state-of-the-nation speech last month, Yeltsin promised a crackdown on crime, which has seemed to grow as fast as the private sector since the Soviet Union collapsed.

During the December parliamentary elections, Communists told voters the Yeltsin administration was more corrupt than the old Soviet system, and ultranationalist Vladimir Zhirinovsky promised to convene tribunals to shoot criminals on the spot. Reformers, who did not make crime a campaign issue, were trounced.

According to a report to the president by Pyotr Filippov, the longtime Yeltsin adviser who heads the presidential Analytical Center for Social and Economic Policy, all owners of cafes, restaurants and retail stores are paying protection money to mobsters, as are 70 to 80 percent of privatized businesses and commercial banks.

Organized-crime groups and their shady business partners are all known here by the umbrella term "mafia," though they are smaller and less organized than La Cosa Nostra or Latin American drug cartels.

Not all gangsters rely on physical force to collect payment. Some merely threaten to report their victims to tax inspectors. Nearly every business fudges its income to avoid taxes that can total 90 percent of its profit.

MOB INFORMERS

Attempts to crack down on organized crime have failed because law enforcement has been infiltrated with mob informers, Filippov said.

In some places, local officials seem to be cowed by gangsters, while elsewhere they collaborate.

If crime abounds in Russia, punishment is rare. Gangsters are far more likely to be slain by rivals than arrested. The conviction of a bribe-taking bureaucrat or a corrupt cop would be sensational news here, but such stories almost never appear.

Despite the torrent of allegations of corruption exchanged by Yeltsin supporters and their foes in the Supreme Soviet last summer, not a single high-ranking official has appeared in the dock.

"The prosecutor's office is an exclusively political tool," said Igor Baranovsky, a reporter for the Moscow News. "It will never work against the party in power."

Low-level officials do get nabbed, but these cases get little publicity. In 1993 the Interior Ministry logged about 13,000 crimes by government officials, ranging from abuse of power to forgery, theft and graft.

In Ekaterinburg, police concede that Tsyganov is a well-liked man. Supporters say it is because he gave fledgling entrepreneurs what their government has been unable to provide: protection against petty criminals and other extortionists, reliable debt collection, a well-connected "friend" to run interference with meddling bureaucrats and, sometimes, financing at much lower interest rates than banks offer.

SEEKS LEGITIMATE EMPIRE

Even if much of his capital was extorted from businesses or stolen from state enterprises, Tsyganov is trying to make his 30-odd companies into a legitimate business empire, they said.

Police paint a less flattering portrait of Tsyganov, who is being held in the nearby city of Perm because the local jail is not secure enough. Tsyganov's thugs once tried to batter a businessman into signing over half of his company, said Vyacheslav Latyshev, deputy head of the Ekaterinburg organized-crime department. When the man stoically refused, Tsyganov allegedly poked a knitting needle into his ear until he signed.

No Ekaterinburg officials have been charged with protecting Tsyganov. Russia has no financial-disclosure requirements for public servants, so it is impossible to investigate whether there are official ties to Tsyganov-owned firms.

Soviet officialdom has always been corrupt. But the current situation is worse because the state has relinquished economic control without dismantling state-run monopolies, safeguarding ownership rights or stripping bureaucrats of their near-absolute powers, analysts said.

Organized criminals, inside and outside the Soviet-era bureaucracy, have rushed in to fill the vacuum.