The Threat of Russian 

Organized Crime

Issues in

International Crime

James O. Finckenauer and Yuri A.Voronin
U.S. Department of Justice

Office of Justice Programs

810 Seventh Street N.W.

Washington, DC 20531

John Ashcroft

Attorney General

Office of Justice Programs National Institute of Justice

World Wide Web Site World Wide Web Site 

http://www.ojp.usdoj.gov http://www.ojp.usdoj.gov/nij
The Threat of Russian

Organized Crime

James O. Finckenauer and Yuri A.Voronin

June 2001

NCJ 187085

Issues in International Crime
National Institute of Justice

The National Institute of Justice is a component of the Office of Justice Programs, which also

includes the Bureau of Justice Assistance, the Bureau of Justice Statistics, the Office of Juvenile

Justice and Delinquency Prevention, and the Office for Victims of Crime.

Portions of this report were prepared for the National Institute of Justice, U.S. Department of Justice,

under grant number 1999–IJ–CX–0014 to Yuri A. Voronin with funds transferred from the U.S.

Department of State. Points of view or opinions stated in this document are those of the authors and

do not necessarily represent the official position or policies of the U.S. Department of Justice.

James O. Finckenauer is director of the International Center of the National Institute of Justice, which

is the research arm of the U.S. Department of Justice. He is on leave from the Rutgers University School

of Criminal Justice, where he is a professor of criminal justice. Professor Finckenauer is the author or

coauthor of six books as well as numerous articles and reports. His latest books are Russian Mafia in

America (Northeastern University Press, 1998) and Scared Straight and the Panacea Phenomenon

Revisited (Waveland Press, 1999).

Yuri A. Voronin served as a visiting international fellow with the National Institute of Justice from

March 1, 1999, to March 1, 2000. At the time of his fellowship, he was both a full professor at the 

Urals State Law Academy and director of the Organized Crime Study Center at the Urals State 

Law Academy.
iii

CONTENTS

Introduction..........................................................................................................1

Historical, Political, and Economic Aspects......................................................3

Political and Economic Linkages ................................................................7

The Legal and Law Enforcement Context....................................................9

The Development of Organized Crime in the Urals ......................................10

Contemporary Issues Concerning Organized Crime in the Urals................16

The Future of Organized Crime in the Urals..................................................28

Notes ..................................................................................................................30
1

INTRODUCTION

A long smear of blood on the road marks the place where two masked men

shot dead one of Russia’s most prominent industrialists . . . outside his house

in the city of Yekaterinburg in the Ural Mountains. Oleg Belonenko, 51,

managing director of Uralmash, the largest industrial company in Russia,

had just got in this grey Volga car to go to work when two men in tracksuits opened fire with pistols, hitting him in the head and his driver in the

stomach. Both men died in hospital. Mr. Belonenko’s murder . . . once

again shows the power and ruthlessness of criminal gangs who control

large sections of Russia’s economy.1

n the decade since the collapse of the Soviet Union, the world has become the

target of a new global crime threat from criminal organizations and criminal

activities that have poured forth over the borders of Russia and other former

Soviet republics such as Ukraine. The nature and variety of the crimes being committed seems unlimited—drugs, arms trafficking, stolen automobiles, trafficking in

women and children, and money laundering are among the most prevalent. The

spillover is particularly troubling to Europe (and especially Eastern Europe) because

of its geographical proximity to Russia, and to Israel, because of its large numbers of

Russian immigrants. But no area of the world seems immune to this menace, especially not the United States. America is the land of opportunity for unloading criminal goods and laundering dirty money. For that reason—and because, unfortunately,

much of the examination of Russian organized crime (the so-called “Russian Mafia”)

to date has been rather hyperbolic and sketchy—we believe it is important to step

back and take an objective look at this growing phenomenon. Just what is this

Russian Mafia? What does it look like? Where does it come from? What does it do?

And how does it do it? We hope that through addressing these questions we 

can provide a context for assessing how much of a threat Russian crime might be 

to the United States—directly or indirectly—and how concerned we should be.

Let us begin by providing some context for our discussion. First, the reader should

know that defining organized crime is a matter of some dispute among scholars and

law enforcement specialists. That disagreement is heightened when the subject, as in

this case, becomes transnational organized crime. We will not, however, venture into

this controversy here. Instead, we will simply provide our own working definition of

organized crime:

I
2

Organized crime is crime committed by criminal organizations whose existence

has continuity over time and across crimes, and that use systematic violence and

corruption to facilitate their criminal activities. These criminal organizations have

varying capacities to inflict economic, physical, psychological, and societal harm.

The greater their capacity to harm, the greater the danger they pose to society. 

As in the United States, there is no universally accepted definition of organized

crime in Russia, in major part because Russian law (like U.S. law) provides no legal

definition of organized crime. Analysis of criminological sources, however, enables

one to identify some of its basic characteristics.2 These include organizational features that make Russian organized crime unique in the degree to which it is embedded in the post-Soviet political system. At the same time, however, it has certain

features in common with such other well-known varieties of organized crime as the

Italian Mafia. The latter has a complicated history that includes both cooperation

and conflict with the Italian state. Much more than was ever the case with the

Italian Mafia, however, Russian organized crime is uniquely a descendant of the

Soviet state. 

Russian organized crime has come to plague many areas of the globe since the

demise of the Soviet Union just more than a decade ago. The transnational character

of Russian organized crime, when coupled with its high degree of sophistication and

ruthlessness, has attracted the world’s attention and concern to what has become

known as a global Russian Mafia. Along with this concern, however, has come a fair

amount of misunderstanding and stereotyping with respect to Russian organized

crime. It is this combination that has stimulated our work on this report. 

We want to try to clear up some of the misunderstanding and misinformation and

also to try to ensure that where there is concern, it is well-founded. To do so, we

will trace some of the contextual features—historical, political and economic—of

Russian organized crime. We will look briefly at moves by the Russian government

since 1991 to cope with its crime problem. Then we will present a case study of

organized crime in the Urals region of Russia. It was there that the killings described

in our opening vignette occurred. As with any case study, our purpose in focusing

on the Urals is to capture and examine in microcosm what has otherwise been

explored mostly in macrocosm and purely descriptive forms. We will conclude with

a brief discussion of the real and potential impacts of Russian organized crime on

the United States.
3

HISTORICAL, POLITICAL, AND ECONOMIC

ASPECTS

Organized crime is a historical phenomenon that has existed for hundreds, and 

in some cases, for thousands of years in many different societies. But interestingly,

unlike common crime, true organized crime as we define it is not present everywhere. Certain characteristics seem to differentiate countries burdened by organized

crime from those that are not. Some of these characteristics appear simply to be

coexisting conditions, whereas others are facilitators, and yet still others could actually qualify as causes of organized crime. 

The general level of crime in a country is an apparent primary condition for organized crime. High-crime countries are more likely than low-crime countries to have

organized crime. This is because organized crime and common crime are influenced

by many of the same factors. Crime is related to the degree of urbanization and

industrialization and to social disorganization—factors that produce criminal opportunities and thus more crime. Organized crime is especially likely to be more prevalent in cities and countries with advanced levels of economic development, the

history of the Mafia in rural Sicily to the contrary notwithstanding. Economic development, industrialization, and urbanization both stimulate and facilitate demand for

goods and services. These include goods and services that are illegal (such as drugs),

regulated (such as cigarettes or guns), or simply in short supply. When there is a

plentiful supply of a legal, unregulated product, there is no incentive for organized

crime to become a supplier. When we have the opposite condition, however, then

we typically see organized crime rising to fulfill the unmet demand. This demand

may be for drugs, firearms, or sex workers, or it may be for a service such as protection or resolving disputes when there is no acceptable legal means of doing so.

The nature of the criminal opportunities available in a particular place also influences the presence of organized crime. The extent to which particular criminal

opportunities can best be exploited or, perhaps, can only be exploited by criminal

organizations also helps explain the presence or absence of organized crime. Some

crimes can be committed quite easily by criminals acting alone or in an unorganized

manner, but others cannot. The latter is especially true of crimes that are committed

across national borders.

With respect to organized crime, certain geographical or infrastructure characteristics, such as the presence of seaports, international airports, strategic border locations, rich natural resources, and so on, provide special criminal opportunities that
4

can best be exploited by criminals who are organized. More so than common crime,

organized crime is fed by the presence of ethnic minorities who furnish a ready

supply of both victims and the offenders to victimize them. Organized crime also

thrives in environments characterized by a relatively high tolerance of deviance and

a romanticization of crime figures, especially where government and law enforcement are weak or corrupt (the history of the Sicilian Mafia illustrates this). 

We are not suggesting that any of these factors are causes of organized crime but,

rather, that they create a favorable climate for its growth. The fundamental causes of

organized crime are actually quite simple—greed and demand. The greed for money

and power on the part of some is often (although not always) met by the demand of

others for goods and services that are illegal or unavailable. 

Russia is one of those unfortunate countries that has the receptive environment in

which organized crime thrives. Organized crime is deeply rooted in the 400-year

history of Russia’s peculiar administrative bureaucracy, but it was especially shaped

into its current form during the seven decades of Soviet hegemony that ended in

1991. This ancestry helps to explain the pervasiveness of organized crime in today’s

Russia and its close merger with the political system. Organized crime in Russia is

an institutionalized part of the political and economic environment. It cannot, therefore, be fully understood without first understanding its place in the context of the

Russian political and economic system.

Unlike Colombian, Italian, Mexican, or other well-known forms of organized crime,

Soviet organized crime was not primarily based on ethnic or family structures. To

help understand the difference, we can look to the history of organized crime in the

United States for a contrasting portrait. As a number of scholars have pointed out,3

organized crime provided a “crooked ladder of upward mobility” for some immigrants to the United States. Certain immigrants—sharing a common ethnicity, culture, and language, and, being on the bottom rung of the socioeconomic ladder,

either having legitimate opportunities for advancement closed to them or rejecting

the opportunities that were available—have turned to crime, and specifically organized crime, to get ahead. This crooked ladder for ethnic immigrants was not the

driving force behind organized crime in the U.S.S.R. Instead, the Soviet criminal

world—except in the Caucasus (e.g., Armenia, Chechnya, Georgia) and Central Asia

(e.g., Uzbekistan)—was built around a vertical dependency of individuals whose

coalescence into criminal groups was driven solely by their mutual participation in

criminal activities. The connection among these professional criminals, in other

words, was economic, rather than ethnic or familial.
5

Because organized crime is made up of criminals who conspire to carry out illegal

acts, a degree of trust is necessary among those criminals. Coconspirators must be

able to trust that their collaborators will not talk to the police or to anyone who

might talk to the police, and that they will not cheat them out of their money. A

shared ethnicity, with its common language, background, and culture, has historically been a foundation for trust among organized crime figures. 

Yet ethnicity did not play the significant role in Soviet organized crime that it

played in the United States. Instead, the Soviet prison system, in many ways, fulfilled functions that were satisfied by shared ethnicity in the United States. In the

Soviet Union, a professional criminal class developed in Soviet prisons during the

Stalinist period that began in 1924—the era of the gulag. These criminals adopted

behaviors, rules, values, and sanctions that bound them together in what was

called the thieves’ world, led by the elite “vory v zakone,” criminals who lived

according to the “thieves’ law.”4 This thieves’ world, and particularly the vory, created and maintained the bonds and climate of trust necessary for carrying out organized crime. 

Organized crime in the Soviet era consisted of illegal enterprises with both legal 

and black-market connections that were based on the misuse of state property and

funds. It is most important to recognize that the blurring of the distinction between

the licit and the illicit is also a trademark of post-Soviet organized crime that shows

its ancestry with the old Soviet state and its command-economy system. This, in

turn, has direct political implications. The historical symbiosis with the state makes

Russian organized crime virtually an inalienable part of the state. As this has continued into the present, some would say it has become an engine of the state that

works at all levels of the Russian government. 

Contemporary Russian organized crime grew out of the Soviet “nomenklatura”

system (the government’s organizational structure and high-level officials) in which

some individual “apparatchiks” (government bureaucrats) developed mutually

beneficial personal relationships with the thieves’ world. The top of the pyramid of

organized crime during the Soviet period was made up of the Communist Party and

state officials who abused their positions of power and authority. Economic activities

ranged across a spectrum of markets—white, gray, black, and criminal. These markets were roughly defined by whether the goods and services being provided were

legal, legal but regulated, or illegal, and by whether the system for providing them

was likewise legal, legal but regulated, or illegal. The criminals operated on the illegal end of this spectrum. Tribute gained from black markets and criminal activities
6

was passed up a three-tiered pyramid to the nomenklatura, and the nomenklatura

itself (some 1.5 million people) had a vast internal system of rewards and punishments. The giant state apparatus thus not only allowed criminal activity, but encouraged, facilitated, and protected it, because the apparatus itself benefited from crime.

These sorts of relationships provided the original nexus between organized crime

and the government. From these beginnings, organized crime in Russia evolved to

its present ambiguous position of being both in direct collaboration with the state

and, at the same time, in conflict with it. 

Specialists in Russian organized crime date the appearance of the first organized

criminal groups in the former Soviet Union to the end of the 1960s.5 It was then

that the three-tiered edifice known collectively as the Russian Mafia began to take

shape. As indicated, the top level of this structure was occupied by high-level

government and party bureaucrats. The second level consisted of underground or

shadow economy participants who exploited their jobs or connections with the

enterprises of the state-command economy for illicit gain. The shadow economy

produced goods and services “off the books,” that is, outside the state-mandated

production quotas, and the payment for these goods and services went into the

pockets of these occupants of the second tier. On the bottom level were the professional criminals who ran the various illegal activities such as drugs, gambling,

prostitution, extortion, and so on. 

Before the 1960s, the three levels of organized crime existed separately, and their

paths rarely crossed. This changed when the traditional criminal world began to

become intertwined with the economic or white-collar criminals of the shadow

economy and with the party bureaucracy. According to Stephen Handelman’s

account of the rise of the “comrade criminals” in Russia, “the black marketeers of

the 1960s and 1970s crossed the line dividing the underworld and the state. They

operated in easy and mutually profitable cooperation with Soviet bureaucrats.”6

This intertwining reflected the pervasive nature of corruption during the “period 

of stagnation” under Soviet leader Leonid Brezhnev (1964–82). Government and

party officials left no stones unturned in seeking opportunities to line their pockets.

One such opportunity was extorting money from the criminal world and the shadow economy in exchange for protecting their illegal operations. This complicated

chain of organized crime worked its way from the bottom to the top of Soviet society. It ultimately included state finances, industry, trade, and the system of public

services.7
7

During the presidency of Mikhail Gorbachev (1985–91), private enterprise, in the

form of cooperatives, was encouraged in the U.S.S.R. This was a dramatic shift from

what had been the prevailing Soviet socialist model of the economy, in which most

private enterprise was outlawed. Unfortunately, the people best positioned to take

advantage of this new opportunity were the criminals, the underground producers,

and the bureaucrats who collaborated with them. These collaborators knew how to

make money and had all the necessary connections to conduct business successfully,

and the new policy enabled them to start to operate more openly. Toward the end of

the Gorbachev period, when there were unmistakable signs that the Soviet Union

was about to implode, the insiders—high-level officials in the central and regional

headquarters of the Communist Party—began quietly to siphon off Party funds into

banks, trading companies, and export-import firms, to position themselves to take

advantage of what was expected to be a new economic era.8 This was a classic case

of trading political advantage for economic advantage. By the late 1980s, corruption

had reached such high levels that it was, for example, possible for any criminal to

bribe his way out of any lawbreaking problem. The result of this combination of the

“theft of the state” and the corruption was a massive increase in lawlessness and the

rise of a new type of organized crime that has since permeated nearly every level of

society in the former Soviet Union.

POLITICAL AND ECONOMIC LINKAGES

The privatization of state property that began in Russia in 1992—when public property began to be sold to private investors—both expanded and solidified the complex

relationship that had developed between the state and organized crime. Because of its

connections to officialdom and to the shadow economy, organized crime took part in

what has become the enormously lucrative scheme of privatization. As a result, the

assets controlled by organized crime give it enormous economic power, and hence

political power as well. These assets enable criminal organizations (in various guises)

to deal directly with the state—on behalf of their own economic interests—from a

position of parity. Organized crime has also attempted to assume certain governmental functions, such as dividing territories among competing economic actors and regulating business markets.9 It seeks to control business-market entry, to impose taxes

(protection fees), to set up tariffs, and—as is characteristic of organized crime in the

United States—to enforce all this through direct violence or other forms of coercion.

It is the latter activities that have laid the groundwork for direct conflict with the

state, because only the state can legitimately use violence. This series of developments is as much political and economic as it is criminological, and it is unlike

anything we have ever seen in the United States. 
8

Organized crime in Russia uses legal businesses as fronts for illegal activities and for

setting up illegal product lines.10 It creates “political clans” to exercise political

power and seeks to create and regulate markets to exercise economic power. The

following are some specific characteristics of Russian organized crime in the postSoviet era:

■ Russian criminals make extensive use of the state governmental apparatus to 

protect and promote their criminal activities. For example, most businesses in

Russia—legal, quasi-legal, and illegal—must operate with the protection of a

“krysha” (roof). The protection is often provided by police or security officials

employed outside their “official” capacities for this purpose. In other cases,

officials are “silent partners” in criminal enterprises that they, in turn, protect. 

■ The criminalization of the privatization process has resulted in the massive use 

of state funds and property for criminal gain. Valuable properties are purchased

through insider deals for much less than their true value and then resold for

lucrative profits.

■ Criminals have been able to directly influence the state’s domestic and foreign

policy to promote the interests of organized crime, either by attaining public

office themselves or by buying public officials.

Beyond these particular features, organized crime in Russia shares other characteristics that are common to some other forms of organized crime elsewhere in the

world:

■ Systematic use of violence, including both the threat and the use of force.

■ Hierarchical structure.

■ Limited or exclusive membership.

■ Specialization in types of crime and a division of labor.

■ Military-style discipline, with strict rules and regulations for the organization 

as a whole.

■ Possession of high-tech equipment, including military weapons.11

The flexibility and dynamism of the new organized crime give it a distinct advantage

in the competition for political and economic control with the rigidly bureaucratic

state institutions in Russia’s cities and regions. Through networks of financialindustrial groups or holding companies, central and regional organized crime
9

groups penetrate into each other’s territory, where they struggle for political and

economic spheres of influence. The expansion of organized crime in Moscow, for

example, has occurred through buying real estate, and through gaining controlling

shares of banks and other enterprises. These crime groups, in turn, are buying up

controlling shares in various regional banks and enterprises on a broader regional

level outside of Moscow.12

Russian organized crime operates successfully throughout the former Soviet Union,

engaging in such activities as money laundering, drug trafficking, and the illegal sale

of weapons. The bonds between the criminal organizations of Russia and those of

the other Newly Independent States (NIS) can be easily traced back to their old

Soviet nomenklatura connections. Many of the players are the same; only the name

of the game is different. The new game is widely known as “nomenklatura capitalism.”13 Unfortunately, this characterization does not capture the true criminal nature

of the post-Soviet economy. The combination of political and economic resources,

lack of accountability, and vast territorial presence facilitates the continued expansion of Russian organized crime and compels us to take its political and global

implications most seriously. 

THE LEGAL AND LAW ENFORCEMENT CONTEXT

Since 1991, Russian law and the criminal justice system have gone through significant changes. Among the changes relevant to organized crime are increased sanctions for crimes committed by groups (and especially for their leaders) and new

provisions on extortion.14 As with other legal changes, however, there has been a

continuing problem of weak law enforcement and an overall weakness of governmental authority. As a result, the law on the books is not the law in practice.

The laws on corruption and organized crime remain only drafts as of this writing.15

Neither draft holds much promise of making substantive changes to the Russian

Criminal Code. The draft law on corruption follows a Presidential decree (by President

Yeltsin) in laying out a spectrum of responses to breaches of the rules. These responses range from disciplining guilty employees to firing them and banning them from

further employment in government to criminal prosecution (on the basis of charges

already provided for in the existing Criminal Code). The main thrust of the draft law

on corruption lies not in the response to instances of corruption that are exposed but

in measures designed to increase the detection of wrongdoing. The draft versions of

the law include the mandatory disclosure of the ownership of real estate, other property, and financial assets in large amounts, including the numbers of bank accounts.

Critics of the law condemn these disclosure rules as violations of privacy rights. 
10

The draft law on organized crime deals mainly with law enforcement and has been

strongly criticized for violating individual rights. Whether Russian legislators will

ultimately be satisfied with either of these drafts remains to be seen. In the meantime, inconsistencies between the 1996 Criminal Code and a heavily amended

criminal procedure code from the Soviet era have impeded the effective prosecution of crimes.

What do these legal developments mean for organized crime and for the efforts of

authorities to confront it? For one thing, the current gaps in the legal system have

facilitated illegal activities pursued by criminal organizations. In addition, inadequate law enforcement and a lack of public faith in the law and legal institutions

have encouraged illegal activity and its connections to corrupt officials. To combat

organized crime and corruption, or at least to appear to combat it, the Russian government has acted in ways that have actually worked against legal and judicial

reform, for example, carrying out dubious raids on media outlets that have been

critical of the government. Such raids have been a highly visible and controversial

tool of the Putin regime.

No serious effort has been made within the Russian government to define “organized crime” in legal terms as the broad and complex phenomenon that it is. The

Russian government has yet to formulate a coherent overall strategy for fighting

crime in general. It has also failed to address challenges presented to law enforcement efforts by organized crime in particular. Official corruption remains rampant.

There is no witness protection program. While the legal apparatus and law enforcement resources for fighting organized crime remain undeveloped and inadequate,

criminal organizations unfortunately flourish. Let us turn in the next section to a

specific case in point: the story of organized crime in the Russian Urals.

THE DEVELOPMENT OF ORGANIZED CRIME

IN THE URALS

Some 900 miles east of Moscow, in Russia’s Ural Mountains, lies the city of

Yekaterinburg. Known in Soviet days as Sverdlovsk, Yekaterinburg is the largest

industrial center in Russia, with a population of 1.5 million people. It has an extensive military-industrial complex, built to take advantage of the region’s mineral

wealth and its status as a transportation hub. The Ural Mountains mark the boundary that divides European and Asian Russia. This is an area known for its historical

significance, as well as its vast repository of rich natural resources. Former Russian

President Boris Yeltsin was born there and ruled for many years as the governor of
11

the Sverdlovsk region, which includes Yekaterinburg. It was also here that, in 1918,

the last Russian czar, Nicholas II, and his family were shot to death by the Bolsheviks

in the name of the Great October Socialist Revolution. 

Since the end of the Soviet Union in 1991, Yekaterinburg has been in the forefront

of those Russian cities and territories struggling to loosen Moscow’s grip on their

affairs. Regrettably, it has acquired another less laudatory distinction as well—that 

of being the “gangster capital of Russia.” Today, Yekaterinburg is one of Russia’s most

violent cities, with shootouts and contract killings reminiscent of gangland Chicago

in the 1920s. The Sverdlovsk region, for instance, experienced a 68 percent increase

in serious crimes from 1998 to 1999. How and why this explosion of crime, and in

particular organized crime, has occurred—and its global implications—are the subject of this case study.16

The history and nature of crime in the Urals is very much linked to the history of

industrial development in the former Soviet Union. It was in this region that major

industrial sites were built in the beginning of the U.S.S.R.’s economic boom of the

1930s. The early work force that manned this boom was made up not only of ordinary workers but also of large numbers of political prisoners and common criminals

who were confined in the prison camps—nerve endings in Stalin’s vast gulag—that

dotted the area. There are families in Yekaterinburg today in which almost all the

family members going back for three or four generations have been prisoners. Their

communities often treat residents who have never been imprisoned as outsiders

because they are not “normal.” As a result, crime in Yekaterinburg is family based

and intergenerational to an extent unprecedented in any other region of the country.

Generations of young persons, especially those without formal education, have been

practically limited to joining criminal organizations as their means of livelihood. Yet

even for others, working in state-run enterprises during the Soviet era was never

particularly attractive to the youth of the region. Crime and its practitioners, on the

other hand, were seen as less hypocritical, and in many ways more honest, than

working with corrupt bureaucrats and officials. On top of that, there was the additional (and universal) attraction of the romantic aura surrounding crime. 

By the late 1980s, two of the forerunners of today’s organized crime were actively

operating in the Urals region. The first we will call “white collar” criminals. Its practitioners were made up of a group of shadowy operatives known as “tsekhoviks,”

many of them clandestine millionaires, who had long been plundering state-owned

enterprises and property. Founders of an underground economy known as the shadow economy, they were more akin to businessmen (albeit shady businessmen) than
12

to professional crooks. As a consequence, they did not possess the traditions or

employ the methods of professional criminals, and in particular, they did not use

violence in their criminal pursuits. The criminal opportunities to be exploited

were so great that the tsekhoviks did not need to compete with one another but

simply focused their efforts on maximizing their gains from underground and

illegal production.

Cooperation between white-collar operatives in the shadow economy, those who

operated in the black market (dealing in goods that were either illegal or in short

supply), and ordinary criminals dates back to the 1960s, as we indicated earlier.

But it was in the 1980s, during the Brezhnev and immediate post-Brezhnev era

(Leonid Brezhnev was Soviet leader for nearly two decades), that this cooperation

flourished. For example, in the mid-1980s, the Uralmash criminal group (Uralmash,

located in Yekaterinburg, is Russia’s largest heavy mechanical engineering plant)

was active in the black market. At that time, the two brothers who were the leaders

of the Uralmash group supervised contraband operations that were based upon

receiving finished goods from the management of the Uralmash plant.17 In exchange,

the brothers financed lavish receptions for the factory managers. The latter was

especially welcome because Moscow had sharply reduced Uralmash’s budget and

the plant was facing serious financial difficulties.

For strategic reasons, even greater collaboration between tsekhoviks and “real” criminals began to occur in the late 1980s. One strategy was to find ways to invest and

launder illegally earned money. To do so, the underground moneymakers began to

reach certain arrangements with the leaders of criminal gangs in the region. Two

of the most influential tsekhoviks in the area—the father and son Tarlanov—became

more directly involved in crime through such arrangements. As a result, they became

kingpins not only in the shadow economy but also in the greater world of crime in

the Sverdlovsk region. These dual connections gave them brains and muscle and

facilitated their success in the nonferrous metals market, and in energy transport in

particular. The relationship of another tsekhovik—the economist Viktor Ternyak—

with leaders of the same Uralmash criminal group likewise led to the establishment

and prospering of a conglomerate of investment firms and companies. These include

the European-Asian Company, which had great success in the rare metals (e.g., silver) market.

Along with these developments, the vory v zakone began to expand their reach and

power in the Sverdlovsk region in the 1980s. Throughout the former Soviet Union,

the vory had long been regarded as the elite of the criminal world. They were hardcore professional criminals spawned by the gulag prison camps. To contrast them
13

with the white-collar shadow businessmen, these professional criminals became

known in criminal slang as the “blues,” a name that some believe derived from the

blue color of the tattoos that were associated with the vory v zakone. The vory were

adherents of the traditional criminal mores developed in the camps and followed a

strict thieves’ code.

In addition to their common criminal activities that included such staples as assault,

robbery, and theft, the blues began to organize and impose their criminal ideologies

(the traditions of the vory v zakone) on other criminals, including those who were

not prisoners or ex-prisoners. They began to build larger and more powerful criminal networks (loose collections of criminals and criminal groups organized around

certain leaders, criminal specialties or markets, and territories). These networks took

on the role of arbiters in the criminal community.18

Ultimately, conflict between the white-collar and blue branches of this evolving

underworld in Sverdlovsk was inevitable. The criminal orthodoxy of the blues was

unreceptive to the new thinking represented by the distinctively economic criminals. As active penetration of the legal economy by aspiring criminal entrepreneurs

began in earnest in the latter 1980s, the blues found themselves on the outside. The

white-collar entrepreneurs, who were made up of persons who had left the shadow

economy and in some cases gained respectable public images, began to employ

some of the methods of the criminal world, including the use of violence to eliminate competitors and business associates. Yet the vory, as well as some other criminal leaders who did not necessarily share their prison camp traditions and ideology,

remained a definite presence on the criminal scene. As the decade of the 1990s

began, this latter conglomeration constituted the core of a powerful, influential,

and extensive criminal network of blues in Yekaterinburg and throughout the

Sverdlovsk region.

The new Russian organized crime

The initial opposition between these two branches of crime changed in a major way in

the mid-1990s. This period was marked by the privatization of the state-command

economy and the breakdown of the rigid economic and political structures of the

old Soviet totalitarian regime. In addition, the loss of moral and legal underpinnings

that has sorely plagued post-Soviet Russia was a significant contextual factor in the

growth of crime. Strategic raw materials such as nonferrous and rare metals, jewels,

timber, and various products of the military-industrial complex flowed out in great

quantities from the Urals region to the West—most of it smuggled. This illegal

export fueled the growth of white-collar crime and, in turn, generated a wave of
14

general crime as well. The new criminal entrepreneurs who were fomenting and

exploiting this massive export soon became the targets of the blues’ interest. The latter, quite naturally, were not about to ignore the prosperity of their brethren in the

shadow economy and began putting direct pressure on them. To protect their businesses and themselves from violence, the new economic criminals were forced to

begin sharing their profits with the old criminal leaders of the blue branch.

The result of this forced marriage was a merging of general or more traditional

organized crime and the new forms of economic organized crime. New types of

criminal groups emerged and then joined into larger criminal networks. Organized

crime in the region acquired fresh features that continue to the present. Among

these new features is the fact that the leaders of different criminal groups started

splitting Yekaterinburg into large territorial sectors defined by spheres of influence.

By 1990–91, the Uralmash criminal group had become a network occupying the 

preeminent position in the shadowy world of business and crime in the Sverdlovsk

region. Their criminal activities were broad ranging, including everything from rackets

to trading in rare metals. Particularly lucrative was their export trade in nonferrous

metals and titanium. They continued to help the Uralmash industrial plant—which

suffered severely from the loss of the state-guaranteed market for its products—by

buying up its finished products for marketing. The diversified interests of the

Uralmash group included the local soccer team, restaurants, automobile dealerships,

hotels, and other commercial enterprises, including their own brokerage firm.

Today, the Uralmash criminal network personifies the new type of criminal organization that now dominates organized crime in Russia. They generally ignore the old

thieves’ code of the vory v zakone, but do employ strict discipline and subordination to their leadership. Instead of looking to the vory or other professional criminals

for their membership, they recruit former athletes and police officers. Not surprisingly, open warfare has broken out between the old and new forms of organized

crime, resulting in assassinations, kidnapings, torture, explosions, and street shootings in Yekaterinburg and other cities of the Urals. Similar violence has ensued from

competition over control of the various strategic commercial enterprises of the

Sverdlovsk region. The continuing crime war has resulted in the killings of many

leaders, as well as of mid-level and rank-and-file members. 

In addition to the original shadow-economy artists who were major participants in

the Uralmash criminal network, a group based in the central district of Yekaterinburg

emerged.19 Preferring to avoid clashes with law enforcement authorities that might
15

ensue from direct involvement in overt criminal activities, this central group has

pursued global investment projects, the export of strategic raw materials, and illicit

real-estate market operations, e.g., buying up real estate for money-laundering purposes. In addition, they control many commercial enterprises in the central districts

of Yekaterinburg, including insurance companies, casinos, fashionable restaurants,

and the street trade of the central marketplace. They control gambling through their

“Globus” business club.20 The central group is also associated with representatives of

legal businesses, is co-owner of the Urals commodity and raw materials exchange,

and contributes to a variety of charities. 

The Uralmash network, despite being portrayed in the media as a respectable financial and industrial group, dominates the criminal world of the Sverdlovsk region.

Among other activities, they settle disputes between subsidiary criminal groups. In

addition to ignoring the thieves’ code of the vory v zakone, they have even removed

old vory from leadership positions in the criminal community. Unlike Moscow-based

criminal organizations, Uralmash and, in particular, the central group, do not make

payments to the blues’ traditional central fund (the “obshchak”), a collection of

money that is used as a kind of welfare fund for vory and their associates who are

imprisoned, as well as for their families. The Uralmash network relies increasingly on

muscle and less upon arbitration for settling disputes. In this, they are more like criminal organizations and networks in St. Petersburg than like those in Moscow. As a

result, the thieves’ code and ideology has diminished in importance in Yekaterinburg

and St. Petersburg, where it has been pushed aside by young aggressive leaders who

are focused on laundering their illegal income by investing in legal businesses. 

Violence reaches new levels

Conflict and violence have marked the competition among various criminal groups

and between the white collars and the blues, and this violence has been taken 

to new heights. In the fall of 1992, for example, the Uralmash criminal network,

which was by far the strongest in the region, created a special team to handle the

“physical elimination” of leaders of rival organized criminal groups. It recruited 

former special-forces training instructors and trainees from the military who were

expert in elimination methods.21

This action was met in kind by the central network, which created its own “hit”

team. Thus, two opposing assassination teams were formed within the same region

and sphere of criminal activity.22 This testifies to the extreme means to which the

new Russian organized crime will resort in settling disputes. It also says something

about the new sophistication in the use of violence. These were both highly 
16

professional operations that carried out assassination on order, with the protection

of corrupted officials.23

The blues strike back

One reaction to the struggle between Uralmash and the central group was a coming

together of the blues—the original criminal community including the vory v zakone.

This coming together served three purposes: maintaining the authority of the vory in

the prison system, strengthening the blues’ resistance to control of the new forms of

economic organized crime by the Uralmash and central groups, and adapting their

own criminal endeavors to the evolving market and political conditions. 

Leadership of the blues went to a group of vory who were regarded as smart enough

and tough enough to take up the challenge to the old guard.24 To meet this challenge successfully, they required the support of the underworld of blues elsewhere

in the country, continued strength in the prisons to feed the ranks with new recruits,

and connections with important officials. By the mid-1990s, previously isolated

groups of professional criminals had been merged into a greater criminal network 

in Yekaterinburg. The key figures in this network were all vory.

Critical to the survival of the vory v zakone and other blues in Yekaterinburg was

their ability to further their own economic interests, to invest the concentrated capital

they controlled that was otherwise just sitting in the obshchak, and, in general, to

increase their influence in the region. As witness to their success in accomplishing

these ends, the blues today control a number of areas of economic activity (e.g., gas

stations, some aspects of the oil business, timber, and nonferrous and precious metals). Despite their cooperative success, however, the battle over spheres of influence

has not ended. Since 1995, a number of the leaders have either died or been killed.

This random, personal-vendetta type of violence reflects a degree of instability in the

larger criminal community and is evidence that no one criminal organization has

been able to exert monopoly control over the various areas of criminal activity.

CONTEMPORARY ISSUES CONCERNING

ORGANIZED CRIME IN THE URALS

Statistical data on organized crime groups and their members in Russia are subject to

a number of reservations. These include questions about how the terms “organized

crime” and “organized crime group” are defined and the bases for counting membership in such groups. Nevertheless, such data provide a snapshot of the law enforcement perspective on the magnitude of the problem. According to the Organized
17

Crime Section of the Russian Ministry of Internal Affairs, 124 organized criminal

groups with 1,318 members operated in the Sverdlovsk region in 1998. By early

1999, the numbers had grown to 142 groups with 1,424 members. These numbers

are considerably larger than those of just 5 years before. It is further estimated that

362 commercial businesses are under the control of organized crime.

The Urals, and the Sverdlovsk region in particular, have been hit harder by organized crime than any other area of the country. Its industrial potential, rich natural

resources, and geographic location make for especially lucrative plundering. The

merging of traditional crime and the new economic crime, money laundering, and

the extensive use of firearms and explosives are especially characteristic of this

region. The redistribution of property from the state to private hands under Russia’s

privatization initiative has been controlled in Sverdlovsk by criminal networks, at

tremendous cost to the region’s economic development. Similarly, the attempt to

develop foreign markets for the region’s industrial products has attracted criminal

interests. As if matters were not bad enough, Moscow-based criminal organizations

and other outside groups are competing for control with the home grown criminal

networks. The methods used in this competition are the same as in the early 1990s:

corruption, blackmail, threats, and hired assassins. 

As the most criminal region of the country, the Urals has certain other distinctive

features. For example, it has become known as a “bespredel” (without rules) zone,

an area where the thieves’ code has no power. The vory v zakone have less influence in the Urals than in any other region of Russia. This means the local criminal

organizations, such as the Uralmash and central groups, do not bow to any nationwide criminal networks. At the same time, it means they do not gain the latter’s

support. This independence is contrary to the trend in other parts of the former

Soviet Union, where there has been a consolidation of the strength of the vory.

Independence results in greater conflict with criminal organizations from elsewhere

in Russia or the former Soviet Union, but at the same time, it brings relative stability

in the zones and spheres of influence among the Urals criminal groups themselves.

The latter does not mean, as indicated earlier, that there are not continuing efforts to

gain competitive advantage.

The underworld in Yekaterinburg is much better organized than it is in Moscow.

The enormous sums of money going into the hands of criminal leaders have facilitated their purchase of state-of-the-art weapons, the recruitment of new members,

and the bribery of officials, as well as the organization of detachments of trained

killers drawn from the special forces of the Russian army. Internal organization has

created sections devoted to counteracting the efforts of law enforcement, vertical
18

hierarchies of authority, and severe punishments for any who violate the rules.

Because there is general agreement on the division of the spheres of influence, 

disputes can usually be settled without violence.

The availability of alternatives for dispute resolution does not mean, by any stretch

of the imagination, that violence has disappeared. Physical elimination—assassination or killing—is still an important tool for doing business, but it is a tool that is

only used when other means are deemed inappropriate or have been exhausted.

This is unlike the situation in Moscow, for example, where physical elimination is

often the only means for resolving conflicts between criminal organizations.

The criminal leaders of Yekaterinburg and the Sverdlovsk region are well connected

with the city and regional governing authorities, and use their financial power both

for bribery and to influence the outcomes of elections. The same is true in the commercial and banking sectors. Bribery, threats, blackmail, and violence are used to

penetrate business management and assume control of commercial enterprises, or 

in some instances, to found their own enterprises with money from their criminal

activities. 

The three power centers of organized crime 

The three most powerful criminal networks in Yekaterinburg today continue to be

the Uralmash group, the central group, and the blues. The Uralmash group is the

most dangerous of the three. They are well-organized both vertically (having a hierarchical command structure) and horizontally (across various criminal enterprises),

with a clear delineation of functions. They are also especially well connected to the

political authorities and to law enforcement. They control a number of government

officials who use their positions on behalf of Uralmash. Their control of a law firm

in the city, for instance, enables them to exert their influence directly on the police

and the City Department of Internal Affairs. 

It is estimated that the Uralmash group controls some 140 commercial enterprises,

including a network of banking and lending institutions. They are heavily engaged

in exporting raw materials, rare and precious metals, weapons, medicines, and, from

time to time, radioactive materials. Their international connections extend to China,

Cyprus, Germany, Poland, and the United States, among other countries.

The “central” criminal group has lost much of its leadership in recent years through

arrest or assassination. At the same time, some new criminal alliances have been

formed with veterans of the Soviet Union’s disastrous military adventure in
19

Afghanistan. The latter are disgruntled soldiers who returned home from that lost

war with few prospects, but trained and hardened by their experience in using

weapons and in killing. They have been willing and able recruits for many criminal

organizations across Russia. 

The efforts of new figures to fill the central group’s leadership vacuum have resulted

in internal conflict and in increased potential for internecine violence and warfare.

The group continues, however, to keep the focus of its criminal activity upon certain

economic targets (e.g., international trading in nonferrous metals and other strategic

resources, insurance, guaranteeing interbank loans, and the stock market). Whitecollar crimes and corruption remain their stock-in-trade. The central group is still

well connected, both politically and with the new industrial and economic enterprises that dominate the region. 

Although not as economically powerful and influential as its rivals, the blues’ criminal network is the most numerous. This union of professional criminals continues

the tradition of the obshchak—the monetary or welfare fund for prisoners and

their families. Their financial base comes from payments by criminals and criminal

groups into the obshchak—as a sort of “mob tax”—and from the extortion of money

from businesses and commercial establishments. The blues have maintained regular

contact with vory v zakone across Russia—in Moscow, Perm, Chelyabinsk, and

Krasnodar. Sources report that six vory are active in the Sverdlovsk region today,

with dominance being exerted by several former prison leaders from the Caucasus

region. Relations among these leaders, however, remain ambiguous and complicated. 

In Nizhni Tagil, another large industrial center in Sverdlovsk, the blues are the dominant criminal organization. There they are divided into brigades by geographical

territory and criminal activity. They are well armed and well connected with criminal organizations in Central Asia, the Transcaucasus, and Turkey.

In sum, the criminal network known as the blues continues to have an influential

presence in this region, but less so than in some other areas of the former Soviet

Union. In keeping with the traditions of the vory v zakone, they render support to

criminals who are imprisoned. They are independent in their criminal activity, but

maintain “business relations” with criminal groups in Moscow, St. Petersburg, and

certain cities in Siberia. They cultivate their immunity from law enforcement by

maintaining corrupt relations with the police. They have not, however, penetrated

the region’s large industrial enterprises, as the Uralmash and central networks have. 
20

Together, these three powerful criminal networks embrace the larger cities of the

Sverdlovsk region like an octopus. In addition to controlling such traditional activities

as rackets, prostitution, gambling, drugs, and arms trafficking, they have heavily infiltrated numerous business and commercial enterprises, and they are involved in both

legal and illegal businesses abroad. To protect and facilitate all this activity, these criminal networks actively support political candidates and programs that are viewed to be

working in their best interests. In some cases, they have formed their own political

movements and parties. (See “Summary of the Criminal Activities of the Three Major

Criminal Organizations in the Urals” on the next page.) 

Organized crime in the economy

As the old Soviet state-command economy slowly evolves on its tortuous road to a

“free market” system, organized crime has been quick to take advantage of this evolution. Throughout Russia, criminal organizations have moved into key industries,

into the nascent money and banking sectors, and into the still-emerging stock market. Nowhere is this more apparent than in the Sverdlovsk region of the Urals.

Through various forms of financial and securities fraud, illegal exports (including

the export of capital), and other, more directly strong-arm tactics, the criminal networks of the Urals have effectively driven out, frightened off, or taken control of

legitimate businesses and businessmen in the Sverdlovsk region. As a consequence,

they now control, for example, the Lobvinsky Hydrolysis Plant—a highly profitable

business that produces a variety of wood-based liquid products such as wood alcohol, but that is also used for the illegal but highly lucrative production of vodka.

Likewise, the mob-controlled Kirovograd Copper Smelter had 777 kg of gold stolen

by its management. Similar control is exercised over the Malyshev Mining Company

that deals in precious stones, and over the Aluminum Production Plant. 

The magnitude of this type of criminal activity in the region’s economy is revealed in

part by the increases in the number of “economic crimes committed by organized

criminal groups” that have been investigated by law enforcement authorities. There

were 203 such cases in 1996 and 480 in 1997; there were 284 in the first half of

1998 alone. The latter cases accounted for some 58 million rubles ($2 million) in

lost sales and stolen raw materials and money.

One of the prominent characteristics of this economic organized crime is the amount

of violence associated with it. Killings of businessmen, assaults, and other violent acts

are so common that retaining some kind of security is a must for the survival of any

business. According to investigative and trial data, nearly all the killings for hire in

the region are connected to organized crime. A case in point is in the fuel and energy
21

Summary of the Criminal Activities of the Three Major Criminal

Organizations in the Urals

THE URALMASH CRIMINAL COMMUNITY

Occupies the preeminent position in the shadowy world of business and crime in the

Sverdlovsk region. Typical activities include:

• Rackets, kidnapings, and assassinations.

• Corruption.

• Illegal export trade in nonferrous metals and titanium.

• Running the local soccer team, restaurants, automobile dealerships, hotels, and other

commercial enterprises, including its own brokerage firm.

• Money laundering.

• Contributing to a charity.

• Settling disputes between subsidiary criminal groups.

THE CENTRAL CRIMINAL GROUP

A group based in the central district of Yekaterinburg. It pursues:

• Global investment projects.

• The export of strategic raw materials.

• Illicit real-estate market operations.

• Commercial enterprises, including insurance companies, casinos, fashionable 

restaurants, and the street trade of the central marketplace.

• Corruption.

• Money laundering.

• Extortion and gambling.

In addition, it is co-owner of the Urals commodity and raw materials exchange and 

contributes to a wide variety of charities.

THE BLUES CRIMINAL COMMUNITY

Includes the vory v zakone. This coming together served three purposes:

• Maintaining the authority of the vory in the prison system.

• Strengthening the blues’ resistance to control of the new forms of economic 

organized crime by the Uralmash and central groups.

• Adapting their own criminal endeavors.

The blues today control:

• A number of areas of economic activity (e.g., gas stations, some aspects of the oil

business, timber, and nonferrous and precious metals).

• Corruption, blackmail, and hired assassins.

• Extortion.

• Drug and arms trafficking.
22

sector, where a number of small entrepreneurs have lost money and been forced to

turn to such energy monopolists as Sverdlovenrego and Uraltransgazprom to bail

them out. When these debts are not repaid, both creditors and debtors turn to mobsters—the former to enforce debt collection, and the latter to receive protection from

their creditors. In a period of a week and a half in March and April 1998, three men

in the oil business were shot in different cities in the Sverdlovsk region.

When otherwise legitimate businesses turn to organized crime to enforce debt collection, one often unexpected drawback is that they suffer from having “gotten into

bed with the devil.” Businessmen commonly employ for debt collection criminal

groups that operate under the guise of security firms and are legally registered as

such. The court system for arbitrating financial disputes is so inefficient and outmoded that procedures can last for months or even years. Thus it is easier, more

efficient, and most important, faster, for businesses to turn to security firms controlled by organized crime than to rely upon the courts. In this way, Russian

organized crime has taken on certain governmental functions, much as the 

Mafia did in Sicily. 

Criminal organizations forcibly expand their partnerships with businesses that may

have initially invited them in, to use them for money laundering. This money laundering is often carried out through directing or controlling the foreign economic

activities of commercial enterprises. The criminal organizations use licenses, contracts, and overseas sales agreements to maintain accounts in foreign banks and thus

evade taxation. It should be pointed out that high rates of taxation and tax evasion

and blackmail, threats, violence, and corruption involving tax inspectors and the tax

police are commonplace throughout Russia.

Western businessmen who control the global markets in jewels and precious metals have aided Russian organized crime in their ruthless exploitation of the riches

of the Urals. In the oil and gas sector, crime groups have “gained considerable

clout . . . by supplying short-term business loans to oil companies and providing

access to corrupted government officials who can lobby for favorable legislation,

or influence business deals.”25 Their mutually beneficial commerce has facilitated

large-scale international fraud and has enabled Urals-based criminal groups to

gain footholds in Hungary, Belgium, the Netherlands, Cyprus, and the United

Arab Emirates. 

Not surprisingly, one of the major activities of economic organized crime in the

Urals is legalizing incomes and profits that are earned criminally, (i.e., money laundering). This is done through a variety of mechanisms: buying foreign currency,
23

shipping money abroad to offshore tax havens, creating fictitious companies, buying shares of privatized enterprises, purchasing real estate, and creating charitable

foundations. Transnational operations—those that cross national borders—require

avoiding or corrupting customs controls. This extra step becomes unnecessary

when the laundering is done through investment in the local and regional economies.

The latter has the added advantage of facilitating control of some of the most profitable business enterprises in the region. Instead of a simple currency exchange,

lucrative growth investments can be made. 

Among the important factors that have permitted or encouraged the infiltration of

organized crime into the Urals economy are gaps and deficiencies in the law, which 

is still a mix of old (Soviet) and new provisions, and the lack of effective cooperation

among the various law enforcement and regulatory bodies charged with policing the

economy. Some of these bodies are newly created and have unclear missions, and

almost all such bodies are badly underfunded. In addition, international cooperation

is also very hit or miss. Some of the offshore tax havens, for example, refuse to cooperate at all with Russian law enforcement. The relatively facile manner in which

Russian organized crime groups have taken advantage of technological advances for

criminal purposes, versus the relatively slow and inadequate response of law enforcement to this exploitation, suggests that the criminals are going to stay ahead of law

enforcement for at least the foreseeable future.

Organized crime and corruption: Infiltration of the 

legal and political systems

Experts such as Yakov Glinsky, Senior Researcher at the Institute of Sociology of the

Russian Academy of Sciences in St. Petersburg, estimate that between 30 and 60

percent of the income of Russian organized crime is spent on bribery and various

forms of political lobbying. To uphold and protect their interests with governmental agencies in both the executive and legislative branches, criminal groups carry

out this lobbying in the form of receptions, dinners, trips, and outright cash for

reelection. We assume that roughly the same proportionate use of illegal largesse 

is practiced by the criminal organizations in the Urals. Corruption is a necessary

practice for the continued activities of any organized criminal group. What is

unique in this situation is the degree to which criminal groups have infiltrated the

political process. The Uralmash and central groups in particular have succeeded in

electing political candidates favorably disposed towards them, in opposing other

candidates, and even in electing their own members to office. This trend towards

merging individual political parties and movements with criminal organizations 

is driven both by the desire of organized crime to influence the political and 
24

economic processes and by the needs of these political entities for financial support in amounts that only organized crime can supply.

Investigations and court cases in the Urals region have revealed that corruption, official abuses of power, and representation of the interests of criminal organizations are

systemic. These abuses are not idiosyncratic to particular persons who happen to be

in power at a particular time; they are endemic to the system of power. They are

present at all levels of government, but especially at the regional level. Those agencies responsible for regulating foreign economic matters and for licensing are most

vulnerable to corruption. 

Because of the latent nature of this corruption, it is difficult to estimate its magnitude or to say much about trends. In 1997, the Sverdlovsk Regional Internal Affairs

Department investigated 308 crimes involving corruption. Through the first 6

months of 1998, this number had increased to 199. The main targets for bribes

were the police, customs officials, and tax inspectors. For example, the regional

prosecutor investigated the case of the director of police in Kamensk-Uralsk, who

was regularly receiving payoffs from the head of a criminal organization. In return

for his money, the police director covered up or expunged crimes committed by 

the members of that organization and alerted them to possible investigations. This

scenario has been repeated in many police jurisdictions. 

The merging of economic organized crime and corruption has had a number of

deleterious effects: a warped redistribution of property and capital, a merging of the

top leadership of the three most powerful criminal organizations in the region with

governmental authorities, and the resultant formation of a powerful criminal lobby

that influences important economic and political decisions. 

The institutions of government have lost the confidence of the people of the Urals,

just as they have lost the confidence of people in the rest of the country. Unfulfilled

expectations of what “democracy” would bring, failed reforms, high unemployment,

unpaid wages, and the loss of social benefits have all contributed to this loss of confidence and to a growing cynicism. The vacuum of power and government service

has been filled in many areas by criminal organizations that have moved to take on

some of these governmental functions, providing funds for the repair of schools 

and hospitals, sponsoring sports events and activities, and setting up charities. As a

result, they gain the support and assistance of the people in neutralizing the efforts

of law enforcement. 
25

In the Urals industrial center of Nizhni Tagil, the former soccer player “Konstantin”

exemplifies this trend. Law enforcement authorities estimate that his criminal organization controls about 60 percent of the criminal market in the area and that it has

affiliates in Moscow as well. Despite this, Konstantin is regarded in the Yekaterinburg

area as a “Russian Robin Hood.” It is not hard to see why. In the overcrowded detention facility in Yekaterinburg, where two remands had died because of the intolerable conditions, Konstantin’s criminal group responded by delivering lifesaving

medicines, supplies, and foodstuffs. It is estimated that the organization takes about

30 percent of the income of local businesses in extortion payments, but in return

provides protection against other criminals and racketeers, guarantees the collection

of debts, assists in dealings with the bureaucracy, and lends money at rates much

more favorable than those of the banks. As evidence of his community support,

when Konstantin was arrested on a racketeering charge, a large group of disabled

persons, retirees, and members of the local soccer team sent a letter of protest to the

authorities, emphasizing his good works and demanding his release. 

Because of the corruption and ineptitude of government, those segments of the society that one would normally expect to oppose organized crime—public organizations,

political movements, and the population at large—instead support it. Ironically,

organized crime provides stability and fuels the economic engine. This stability and

economic stimulation, however, come at a very dear price in the long run.

International threats

The organized crime threat to Russia’s national security is metastasizing into a global

threat.26 The criminal organizations that dominate organized crime in the Urals have

begun to make their presence known in many other countries as well, operating both

on their own and in cooperation with foreign groups. The latter cooperation often

comes in the form of joint money-laundering ventures. According to information

compiled by regional law enforcement authorities, criminals from the Urals region

have been responsible for a number of violent crimes (mainly killings for hire) in

Central and Western Europe, Israel, Canada, and the United States. But the economic

impact of their criminal activity is what is, perhaps, more distinctive about them. 

The Uralmash and blues criminal networks in particular are suspected of involvement

in illicit trafficking in such dangerous products as weapons and nuclear materials.

Various kinds of hazardous materials have been moved across the porous borders of

the Caucasus and Central Asia with the active assistance of criminal groups from

those areas. It is a matter of considerable concern to Russian leaders that the smuggling of otherwise legal raw materials deprives Russia of export income and undercuts the world market value of these materials. 
26

T H E T HREAT OF R USSIAN O RGANIZED C RIME

TO THE U NITED S TATES

Russian organized crime, or what has been generically referred to (inappropriately in our view) as the Russian Mafiaa

in the United States, is an umbrella

characterization that captures a variety of crime groups and criminal activities.

In some instances, the crimes and forms of Russian criminal organizations in

the United States differ from those of Russian organized crime elsewhere in

the world, including in Russia itself. This is explainable in part by differing

external environments and criminal opportunities. In the United States, the

label “Russian” actually refers to a variety of Eurasian crime groups. These

include Armenians, Ukrainians, Lithuanians, and persons from the Caucasus

region of the former Soviet Union (e.g., Chechens, Dagestanis, Georgians). It

is estimated that some 12 to 15 loosely categorized criminal groups that have

international ties to Russia or other former Soviet republics are currently

operating in the United States. These groups, which we will also conveniently

label Russian organized crime, together have some 500 to 600 members.

The threat and use of violence is a defining characteristic of Russian organized

crime in the United States. Violence is used to gain and maintain control of

criminal markets, and retributive violence is used within and between criminal groups. The common use of violence is not surprising, since extortion and

protection rackets are such a staple of Russian criminal activity. Contract murders, kidnapings, and business arson have all been employed by Russian

organized crime. Arson is used against businesses that refuse to pay extortion

money. An example of this violence is reflected in the 1999 convictions of six

members of what is referred to as the Gufield-Kutsenko Brigade in New York

on Federal racketeering charges involving terrorizing business owners to

extort money.

The most defining characteristic of Russian organized crime in the United

States is the nature of its criminal activity. With the principal exceptions of

extortion and money laundering, Russians have had little or no involvement

in some of the more traditional types of organized crime, such as drug trafficking, gambling, and loan sharking. Instead, these varied criminal groups

are extensively engaged in a broad array of frauds and scams, including health

care fraud, insurance scams, stock frauds, antiquities swindles, forgery and

fuel tax evasion schemes. Recently, for example, Russians have become the

main purveyors of credit-card fraud in the United States.
27

Russian organized crime is adept at changing criminal activities and diversifying into new criminal markets. Financial markets and banks, for example,

have become new targets of criminal opportunity. In a recent case in point

(United States v. Alexander Lushtak), it was alleged that the defendant carried

out a multimillion-dollar investment fraud scheme and the subsequent laundering of nearly $2 million of the proceeds of that scheme by depositing the

moneys in an account at the Bank of New York. In United States v. Dominick

Dionisio, et al., two persons alleged to be associated with La Cosa Nostra and

an alleged member of the “Bor” Russian organized crime group were charged

with operating a multimillion-dollar investment fraud and laundering the proceeds of the scheme.

Legitimate businesses such as the movie business and textile industry have

become targets of criminals from the former Soviet Union, and they are often

used for money laundering. A major 1999 money laundering case is illustrative of this recent Russian organized crime activity. That case also involved the

Bank of New York (BONY).

In 1999, four individuals and two companies were indicted by the United

States in connection with the laundering of more than $7 billion (some estimates range up to $10 billion). Two of those indicted subsequently pled

guilty. This case exemplifies a number of the most threatening characteristics

of Russian organized crime. First, the moneys laundered apparently represented a mix of criminal proceeds and money being hidden to avoid regulation by

the Russian government. This means that Russian organized crime is using

institutions such as BONY to launder criminal money, but also to assist

Russian businesses and individuals in moving their assets out of Russia so as

to evade Russian law enforcement and tax officials. Further, the BONY case

illustrates diversification and, even more importantly, a blend of legal and illegal activities that increases the difficulty for U.S. law enforcement in combating money laundering by Russian organized crime. Finally, Russian organized

crime clearly has the capacity to tap professional know-how in its financial

schemes. As this case and the stock fraud cases demonstrate, some of those

associated with Russian organized crime work primarily in the legitimate sectors of the economy. This blend is suggestive of the Urals situation, with the

long-term implication that the deeper Russian organized crime penetrates the

legitimate economy, the more difficult it will be to dislodge it.

a. See Finckenauer, James O., and Elin J. Waring, Russian Mafia in America,

Boston, MA: Northeastern University Press, 1998.
28

The regional department for combating organized crime in the Urals estimates that

the theft and export of strategic and precious metals, especially aluminum and copper, is a major source of income for the region’s criminal organizations. This highly

profitable illicit business is aided and abetted by a tangled web of intermediaries,

including foreign firms. Those officials charged with managing the metals aid the

thefts, and foreign delivery is made possible by the payment of bribes for the necessary export licenses. The stolen raw materials are sold abroad through well-organized

networks, and the moneys received in payment are deposited into accounts held in

foreign banks by “shell” companies that exist only on paper. 

The arsenals, military units, and defense facilities based in the region are the sources

of weapons dealt in arms trafficking. Criminal organizations exploit the weakened

military discipline, poor morale, and corruption of military command staff to obtain

weapons through both theft and purchase. These arms are then sold abroad via the

thriving black market in arms and defense equipment. The regional authorities

report that the items purchased range from ammunition and small arms to short- and

medium-range missiles and that the countries of the Middle East are a particularly

lucrative market for these sales. 

Money laundering in Russia is facilitated by weak frontier, customs, and financial

controls and the pervasive corruptibility of officials. Profits from arms and drug trafficking and from prostitution, for example, are transferred abroad through banks

and other financial institutions. This is usually done by means of fraudulent commercial contracts. In these money-laundering schemes, the Urals criminal organizations are second to none—and that includes the Moscow-based criminal groups.

Examples of their handiwork are found in various countries. In Belgium, they have

founded a large company for trading in rare and nonferrous metals. They run trading companies in Germany, act as intermediaries between Ural Airlines and Western

businessmen, and control individual traders operating in the United Arab Emirates

and Greece. They also import criminal capital to be laundered through investment

and the banking sector in Yekaterinburg. According to law enforcement sources, one

Yekaterinburg-based bank is jointly owned by a local criminal group and members

of the Italian-American and Sicilian Mafia organizations.

THE FUTURE OF ORGANIZED CRIME

IN THE URALS

What is generally true throughout Russia is especially so in the Urals. As businesses

arose or spun off from the old command economy in topsy-turvy fashion, they

quickly exceeded the state’s ability to regulate and protect them. Since many of 
29

those who became engaged in the new businesses already had criminal roots, and 

the businesses themselves were enmeshed in old black-market and shadow-economy

practices, it was not a great leap to the resulting general criminal contamination of its

economy that Russia currently suffers. As a consequence of this criminalization, it is

impossible to envision today any new commercial activities appearing that will not 

be under the control of organized crime. 

The shape of organized crime in the Urals seems to have formed around two factions into which the elite of the traditional criminal world (the blues) has split.

Some of those who up to now have made their careers in crime appear to be moving away from criminal activity and instead are trying to emulate their white-collar

brethren. Professional criminals from the old-style criminal underworld who have

proven themselves particularly adept at running gambling businesses or at trading

drugs or weapons undergo “retraining” or “retooling” to shift over to the more highpowered white-collar crime world. They invest and launder their illegally gotten

gains and attempt to assimilate into business and government, apparently viewing

such a move as both less risky and more lucrative. Their objective appears to be to

maximize their profits, but to do so in ways that are safer than continuing their

criminal activity. Thus they are active in real estate, banking, and foreign trade.

Others from the world of career criminals, however, continue to do what they have

always done—running rackets, controlling prostitution, dealing in stolen automobiles,

and so on. Unlike their colleagues who are making the transition, the latter criminals

must continue to worry about their competition in the criminal world, as well as

about law enforcement. The gangs and organized criminal groups specializing in violence will undoubtedly continue their criminal exploits, but it is unlikely that they

will rival the power and influence of such economic criminal networks as Uralmash.

The nature of organized crime in the Urals has also changed. Economic influence 

is becoming more important than physical influence. The leaders of the economic

organized crime networks do not wield absolute power like “godfathers.” Resolution

of disagreements and conflicts occur less and less through resort to violence.

Instead, mutual economic self-interest seems to dictate these resolutions.

The greatest threat to the West, and to the United States in particular, arises from

the expansion of Urals-based criminal activities abroad. The most enterprising 

of the criminal networks in the Urals are rapidly transforming themselves into

transnational criminal organizations. They take their substantial capital and look

for opportunities to launder their money and pursue various kinds of business and

criminal activity on the global scene.
30

As the transnational groups accumulate money, power, and influence, government

agencies charged with combating them are actually declining in capacity and effectiveness. Neither the federal nor the regional governments possess the resources to

counter the burgeoning problem of organized crime. What is more, at all levels of

government the political will necessary to tackle the problem seems to be distinctly

lacking. As a result, we anticipate that organized crime networks will only become

stronger and more powerful in the near future. And because of the deep penetration

of the legitimate sectors of the economy, dislodging and suppressing these networks

will only be accomplished by means of a costly and lengthy effort, in which the

United States can anticipate having to play a major role.

Notes 

1. Cockburn, Patrick, “Gang Shoots Dead Businessman Who Confronted Mafia,”

Independent Newspapers (U.K.), July 11, 2000.

2. Gurov, A.I., Red Mafia, Moscow: Samotsvet Publishing House, 1995; “A Study of

Organized Crime: Russian-American Dialog, The Collection of Articles,”

Conference report, Moscow State University, Moscow, 1997; Voronin, Y.A.,

Criminology, St. Petersburg: Academy of the Ministry of Internal Affairs, 1998.

3. For example, O’Kane, J.M., The Crooked Ladder, New Brunswick, NJ:

Transaction Publishers, 1992. 

4. According to this law, vory were forbidden from working at legitimate jobs, 

paying taxes, fighting in the military, and cooperating with law enforcement.

Vory had to give up their families to devote themselves to a life of crime. In

addition to fighting to uphold the rigid code of rejection of and resistance to the

law-abiding world, vory had to contribute to a communal criminal fund called

an “obshchak.”

5. Gurov, A.I., Professional Criminality: Past and Present, Moscow: Judicial

Literature, 1990: 207; Luneev, V.V., The Essence of Organized Crime: The 

Russian-American Dialog, Moscow: Moscow State University, 1997: 34.

6. Handelman, Stephen, Comrade Criminal, New Haven, CT: Yale University Press,

1995: 56.

7. See Simis, K.M., USSR: The Corrupt Society, trans., Jacqueline Edwards and

Mitchell Schneider, New York: Simon and Schuster, 1982; and Vaksberg, A., 

The Soviet Mafia, New York: St. Martin’s Press, 1991.
31

8. See Voronin, Y.A., Criminology (see note 2).

9. Ibid.

10. Ibid.

11. Ibid.

12. Ibid.

13. Ibid.

14. See The Commentary of the Criminal Code of Russia, Moscow: The Institute of

State and Law of the Russian Academy of Sciences, 1996.

15. See Organized Crime, no. 3 (1996).

16. The research methods employed in this case study reflect the complex and

unique difficulties in conducting empirical studies of organized crime. Organized

crime is by nature a hidden phenomenon. Penetrating it not only is very difficult, but can be dangerous as well. Law enforcement penetrates organized crime

for investigative purposes by using surveillance, wiretapping, eavesdropping,

informants, and undercover investigators. These primary methods for collecting

information are not, however, tools generally available to the researcher. As a

result, researchers must depend to a considerable extent on secondary methods

and materials; namely, studying law enforcement reports and interviewing

agents and investigators. Both were done in this case study.

In addition, researchers can take advantage of the investigative work done by

journalists. Although journalism is not governed by the same rules for testing

the reliability and validity of information as is scientific research, much valuable

information can be gleaned from the media. Local newspaper coverage was also

used heavily in this case study of organized crime in the Urals. In this case

study, because of the pervasiveness of corruption, and because of the desire of

powerful individuals to keep much of this material from being publicized, both

law enforcement and media sources had to be handled with extreme caution.

17. A number of persons are named here as being involved in criminal activity.

Some names are proper names, others are only nicknames, and some are only

first or last names. These have been taken from police reports that were made

available or from media (mostly newspaper) accounts and are thus as they were

recorded in those sources. The leaders involved here were the brothers Grigory

and Konstantin Tsyganov.
32

18. The brightest representatives of the criminal leadership in the region in the late

1980s were such thieves-in-law as Khorkov, Chinar, and Cherepanov, and such

gang leaders as Trifon and Ovchina. One particularly distinctive figure among

this group was Avarenok, the so-called “ideologist of the blues,” and a traditionalist in the criminal world. 

19. The key figures in this central group were Oleg Vagin, Mikhail Kuchin, Ivan

Kazarian, Sergey Malofeev, and Sergey Dolgushin.

20. Oleg Vagin, a leader of the central group of Uralmash, actively cooperated with

various leaders of criminal organizations based in Moscow. The latter included

Leonid Bilunov, who was head of the Lyuberetskaya criminal group, and

Vladimir Tolmachev, who was a major Moscow banker.

21. This team was under the leadership of Sergey Kurdyumov. The first victim of

the Kurdyumov team was Oleg Vagin, the leader of the central group that was

affiliated with the Uralmash network. Vagin was killed by machine gun fire in

downtown Yekaterinburg on October 26, 1992. Nikolai Shirokov, who headed

another affiliated criminal group that specialized in bootlegging, gas stations,

and a taxi business in Yekaterinburg, was murdered in Budapest in 1993, along

with three of his bodyguards. In November 1996, one of the assassins (Sergey

Terentiev) involved in these crimes was arrested at Sheremetyevo airport in

Moscow, and by 1997, 16 others had also been arrested and charged.

22. To counter the Kurdyumov assassination team, the central criminal group set up

its own team for “elimination,” headed by Georgy Arkhipov. The Arkhipov team

blew up an I1–76 plane on an airfield in Budapest, assassinated Konstantin

Doronin (vice president of the Urals trade house), and made an attempt on the

life of Konstantin Tsyganov of Uralmash. When police arrested Arkhipov in

Tallinn, Latvia, in 1995 and liquidated the team, they found a huge cache of

weapons, including antitank rockets, grenades, explosives, and ammunition.

They also found that in addition to Yekaterinburg, Arkhipov had apartments in

Anapa, a small city in the south of Russia, and in Hungary and Latvia as well. 
33

23. In the period 1992–98, the following persons were murdered by professional

killers: A. Tarlanov (a leader of white-collar organized crime); V. Ternyak

(leader of a criminal group and president of the European-Asian Company); 

S. Malofeev (leader of the central group and president of the Pyramid holding 

center); S. Dolgushin (criminal leader and president of the business club); 

V. Kasintsev (director of the Union of Afghanistan Veterans); G. Tsyganov

(founder of the Uralmash criminal group); and V. Benyaminov (a leader of 

the Syrian community in Yekaterinburg and co-owner of the Elisaveta shop

that was allegedly used for money laundering). 

24. Chinar, Avarenok, Khorkov, and others.

25. U.S. Government Interagency Working Group, “International Crime Threat

Assessment,” December 2000: 68.

26. Williams, P., ed., Russian Organized Crime: The New Threat, special issue, 2 (2/3)

(1996).
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