Russia: Tensions and Corruption

After Ivankov was shot on July 28, Russia-watchers were interested in what the shooting signaled about the Russian underworld. One expert, Mark Galeotti, who has spent considerable time at the coal face, said that the shooting could be a sign of tensions between two groups of criminals in Russia– the “bandits” that get their hands dirty with drug dealing and prostitution, and the “authorities” that have in recent years gravitated towards white-collar crime like embezzlement and corruption. The “authorities”, feeling the pinch of the recession, now need to turn back to lower-class crimes to continue to make money. This irritates the “bandits”, who’ve already claimed that turf. Galeotti also wrote that if Ivankov had in fact been mediating between mafias at the time of his shooting, it shows that Russian gangsters aren’t living by their old rules anymore. Not good signs for anyone who hopes the country won’t see new rounds of mob turf wars.

Mobs are not the only thing Galeotti focuses on. More recently, Galeotti said that Moscow’s new police chief doesn’t have the money or the mandate to solve the city’s policing problems, which include corrupt officers aiding organized crime and other major headaches that one person won’t be able to cure.

In business news related to corruption, a British hedge fund posted a mini-documentary on YouTube that alleged that senior Russian police officers and judges conspired to steal $230 million from Russian taxpayers. Hermitage Capital Management claimed last year it had been the victim of a fraud that had begun when a top Interior Minister official raided its Moscow offices and stole documents and company seals to try to embezzle hundreds of millions of dollars from three of Hermitage’s subsidiaries. The subsidiaries were re-registered in the name of a convicted murderer in the provinces. Whoever was behind the fraud wasn’t able to get at investors’ money; they did, however, use the subsidiaries to embezzle the $230 million from the Russian treasury.

According to the video, the company has filed dozens of complaints that have been ignored by Russian institutions and President Dmitry Medvedev’s anti-corruption commission. The story was just not getting through, Hermitage owner William Browder told the Daily Telegraph:

“The Russian media is afraid to say anything too explicit about police corruption as they fear they will be arrested by the people they write about,” he said. “The beautiful thing about the internet is that you can break through that logjam of fear and, at the same time, explain a complex story.”

Hermitage has scuffled with Russian authorities for years. Since its owner William Browder – one of Russia’s largest foreign investors – arrived in Russia in 1996, the company became known for its forensic audits of Russian companies and for leaking those audits to the press. After Hermitage released a dossier detailing mismanagement and corruption at Gazprom, Browder’s visa was cancelled. He’s not been allowed back into Russia since 2005.

Since the video was posted last week, Russia put Browder on its Federal search list on charges of tax evasion, and asked Interpol to put Browder on its international list for the same charges.

But Browder, a US-born Brit, is a foreigner. Ikea, another company that’s tried to expose corruption in Russia, is also foreign. But Russian businessmen like to work the system because generally it’s to their advantage, writes NGO-nik Boris Kagarlitsky in the lefty newsletter Counterpunch.

The Russian businessmen and their liberal intellectuals adore complaining about the state and officials, and simultaneously about rackets, the mafia and corruption, dumping the responsibility for these phenomena on this same state. However, on a closer look, it is easy to understand that they have exactly the state they want. If you underpay taxes (which are rather low anyway), it is quite clear that the vacuum generated by the weakness of the government will be filled by corruption. You complain about bribes, but – using those bribes – you receive contracts and public funds. And all time you ask for new privileges, grants, help and indulgences. Certainly, business would prefer to not pay either taxes to the state treasury or bribes to racketeers and officials. But if you would choose between taxes and bribes, between the strong state and systematic corruption, most likely, your business without hesitation would choose the latter.

Bulgaria Unit Questions Levski FC Owner

Bulgaria’s new anti-organized crime directorate apparently questioned the owner of Levski Football Club last week, though no one official gave reason for the questioning.

The Sofia News Agency speculated that the police were interested in Todor Batkov over a scandal last month, in which Batkov was tricked into believing that a Russian team wanted to buy four of his star players. Batkov sent the players to Moscow. While they were gone, Levski lost to bitter rivals CSKA Sofia 0-2. Batkov later accused CSKA managers of coming up with the scheme. Prosecutors are reportedly investigating.

I don’t read Bulgarian, so I can’t say that I’ve kept up with every shred of news out of the directorate. But if questioning Batkov over a football scam is the best they can do, I’m going to give in to cynicism and say that all the new government’s talk about fighting organized crime has been mostly for the benefit of the European Union, which holds a fat purse full of infrastructure and farm money.

Glenny: ‘Vanishing powder keg’

Speaking of the European Union, writer and Balkans expert Misha Glenny – who has also put in considerable time at the coal-face – wrote last week that the region is becoming more stable:

Apart from a huge effort on the part of a new generation of politicians and civil servants inside the former Yugoslavia, this process has been driven by the remarkable influence the European Union can exert on neighbouring countries who resolve to apply for membership.

I like Misha Glenny’s books very much and I respect him, but I don’t agree that the carrot of EU membership is going to be enticing enough to keep the region out of the clutches of organized crime and corruption, never mind other ills like nationalism. Yes, it was great that Serbia arrested a suspect in last year’s assassination of a Croatian journalist. But that was hardly because of an EU directive. If it were, it’s doubtful there would have been an arrest in the case – the EU has been ordering Serbia to arrest war crimes suspect Ratko Mladic since at last early 2006, and that has not happened.

But never mind that. Think mostly of Bosnia and Kosovo. Kosovo was a heaving, muddy mass of impunity for even smallish crimes like DVD piracy when I left the region – and I wouldn’t imagine that much has improved now that both the EU and the UN are in charge there. In Bosnia, the EU has continually allowed Bosnia to move forward on the road to membership though Bosnia hasn’t met benchmarks. And narrow nationalism and self-interest have trumped EU directives every time, which is why there are leaders talking trash and gutting the state-wide court that was supposed to have taken on organized crime and corruption. Meanwhile, guys like this and this flourish in the country. Corruption is scaring off foreign investors. It’s not just my take on it. Here’s what journalist Nenad Pejic had to say about the EU in Bosnia:

Clearly, Brussels needs to devote much more energy to the problems of the Balkans and it needs to be prepared to bring sticks to the table as well as carrots. The EU already has the instruments it needs -- it has a legal framework for making decisions and a police/military force to implement them. But over the years, EU action in Bosnia has consistently been too little and too late.

Italy Minister: Progress in Mafia War

Italy’s interior minister dropped some impressive numbers from his war on mafias at a press conference last week: Since taking office in May of last year, Roberto Maroni said the government has seized €5.3 billion in assets, arrested an average of eight suspects per day and dissolved a dozen local councils allegedly infiltrated by organized crime.

Police, however, won’t be keeping the seized vehicles anymore. Police detectives with a branch of Italian state police will have to turn over the seized Ferraris, Lamborghinis and Porsches they’d been driving and go back to driving Fiats. Interior minister Maroni, who just last year allowed police to drive the seized vehicles, now decrees that keeping costs down means that police may drive only cars with smaller engines, rather than the luxury cars they have gotten used to since last year.