Posted: March 27, 2013
By Markéta Hulpachová - Staff Writer | Comments (0) | Post comment
He was once the tattooed, tough-as-nails thief who earned his stars by ascending the hostile hierarchies of Soviet-era gulags. These days, you're more likely to see him sipping limited-edition Courvoisier in deluxe Mediterranean beach resorts, moving money on his cell phone from one tax haven to the next.
The new prototype of Russian gangster has traded in his monastic principles and leg-breaking ways for business savvy and may be eying the Czech Republic as a new launch pad for his international operations.
So says New York University professor Mark Galeotti, a former adviser to the British Foreign Office and a leading expert on organized crime. As old-school Soviet criminal structures become increasingly obsolete, Galeotti is mapping the rise of a Russia-tied organized crime culture in which financial power takes precedence over thuggishness.
"These are basically gangster businessmen. They don't care about codes; they don't want to wear elaborate tattoos or anything else that makes them identifiable as criminals," he says. "The criminal entrepreneur … wants to get invited to the ambassador's reception. He wants to travel freely so he can spend his money in London or on the beaches of St. Tropez."
Balancing profit and risk, the archetypal modern Russian gangster "probably has a whole portfolio of businesses," ranging from the "essentially legal" to factories that exploit illegal migrant labor, all the way to heroin trafficking.
"He doesn't care; it's all businesses," Galeotti says. "It just depends on what makes money."
This newfound pragmatism differentiates modern criminal entrepreneurs from their Soviet predecessors, the vory v zakone. Born in Stalinist labor camps, this formerly "dissident" organization - whose name literally means "thieves within the law" - adhered to a humble lifestyle and "thievery for the sake of thievery."
"They were the judges and arbiters of the criminal world. … They had a variety of codes of practice," Galeotti says. "You would never break a deal with another criminal, never cooperate with the authorities. … Money shouldn't mean much; actually, you should lead a really simple life."
Shedding the old codes of the vory has caused Russian mobsters to lose many of the signature characteristics that set them apart from other organized crime groups. Even the classification "Russian" or "Russian-speaking" fails to account for the complexities of criminal structures operating in the increasingly diverse former Soviet world. Galeotti mentions the so-called "mountaineers" from the countries of the South Caucasus or the predatory "not to be messed with" Chechens, who will hunt and kill their target even at the cost of their own destruction. Both are culturally distinct from ethnic Russian Slavs - who rarely get a mention by the Russian Interior Ministry - but all may be linked through intricate ecosystems that defy traditional police diagrams.
The distinguishing factor for all these groups is their links to Russia and the Russian banking system, which Galeotti says is "still thoroughly corrupted." Weak rule of law, institutionalized corruption and a law protecting Russian citizens from extradition are some of the factors that make the country a "phenomenal safe haven" for money-laundering and other criminal activities. By Galeotti's own rough estimates, dirty money makes up between 20 percent and 25 percent of Russian GDP.
With the Russian system as its backbone, the mafia is able to weave a tangled web of alliances best described as "loose networks of semi-autonomous individuals." In these muddy structures, it is often impossible to determine who works for whom.
In some ways, this problem of opaque definitions reaches all the way up to the Kremlin. President Vladimir Putin surrounds himself with deeply corrupt individuals, but does that make him a criminal, a criminal protector or merely a pragmatist?
"Probably for Putin, it's incredibly difficult to say," Galeotti says.
The ambiguous role of Putin, who has pledged to fight corruption as a way to stave off mounting political opposition, is currently prominent as the international community tackles the economic crisis in Cyprus, a tax haven built largely on the deposits made by well-heeled Russians. While not all of the Russian money in Cypriot banks comes from criminal activities (though Galeotti estimates some $20 billion of it probably does), the Russian government's reaction is telling of its overall stance on organized crime.
As Cyprus awaited a decision on a 10 billion euro European Union bailout deal and large investors stood to lose vast amounts of the wealth they deposited in the country's banks, suspicions grew in Russia that the EU deal purposely targeted Russian money.
Nevertheless, Putin agreed to contribute to the bailout effort and work within its structure. Meanwhile, Cyprus' largely Russian investors are already being courted by banks in other European localities like Switzerland and Andorra, The Financial Times reported.
This tepid stance toward a popular tax haven may indicate a political will to clean house in Russia.
"[Putin] is beginning to realize the extent to which corruption actually hits the state. … It's not that he has a problem with organized crime, but there are some good political reasons why he may try to move against it," Galeotti says. "There is a sense now [in the criminal world] that Russia isn't as safe now as it was thought."
However, if the co-opted criminal entities are familiarized with the new rules of the game, a crowd-pleasing cleanup may transpire relatively smoothly.
"Let's face it: Everyone Putin ever dealt with is dirty. But he's actually done a lot to clean up the system; so at least you know whom to bribe," Galeotti says.
The need to operate in a stabilized but systemically corrupt environment may be luring the Russia-linked criminal entrepreneur to "places that don't look like criminal havens" - places like the Czech Republic. According to Galeotti, the country has a unique mix of favorable factors: a stable political system, dependable banking, cultural links to Russia and a relatively high perceived level of corruption.
"There is something specific about the Czech Republic" as a strategic location in Central Europe, Galeotti says. Poland has its own organized crime scene. Slovakia lacks the infrastructure, and Hungary the economic and political stability. "The Czech Republic is small enough to be vulnerable but settled and established enough to be appealing."
Becoming a target of organized crime groups from the former Soviet Union is not a new experience for the Czech Republic. In past decades, local law enforcement had been relatively successful in fighting against Russia-linked mafias looking to take control of the local underground. But the criminal entrepreneur, whose business has recently been bolstered by drug routes shifting northward from Afghanistan, has something different to offer.
"Instead of trying to take over, now they're looking to team up with existing criminal entrepreneurs and offer deals, like heroin or cocaine," Galeotti says.
The experiences of local law enforcement appear to support this theory. The most recent declassified report of the police Organized Crime Unit (ÚOOZ) notes strong links to "large supranational criminal structures," with Russian-speaking entities playing the major role.
ÚOOZ also observes a transition from open violence to "more latent criminal activity" and an expansion of "strictly economically oriented criminal activity" that involves setting up puppet companies as well as infiltrating corporate and state entities.
"One of the most significant factors supporting the development of organized crime is corruption within the public administration," the report continues. "Highly placed civil servants do not only succumb to corrupt activity; surprisingly often, they themselves initiate it."
In such an environment, fighting against Russian organized crime's newfound financial power may seem a Sisyphean task. But as Galeotti points out, money is the criminal gangster's strength as well as weakness.
The new type of Russian gangster is smarter, more educated and more entrepreneurial. But while the hardened, old-school vor gangster was dangerous because of his recklessness, the new criminal businessman is "softer." Targeting his assets works, Galeotti says.
"What's the point of being a criminal if you're not going to have vast amounts of money to buy the huge tasteless chateau, the equally tasteless mistresses, the huge, gold-encrusted Bentley? All they have is what money buys them … respect, fear, guns. Take the money away, lock it down, and they suddenly become very alone."
Markéta Hulpachová can be reached at