How the Mob Gets Rich Off of Recessions

Great article from Roberto Saviano, an author I admire a lot, about how economic climates affect crime, something I argue strongly about in posts about Russian Organized Crime.

http://www.vice.com/read/how-the-mob-gets-rich-off-of-recessions-0000528-v21n12

The Mafia has always profited from economic crisis. Recessions fill up the mob’s coffers and boost its social standing.

In fact crime is one of the few sectors of the economy that thrive in moments of financial decline. Just look at the past decade, when the United States suffered a collapse in its housing market, Italy risked default, and Greece, Spain, and Portugal came to the brink of bankruptcy. During all that time, drug trafficking reached unprecedented heights of prosperity.

It’s always been this way. In the Great Depression, the Italian-American mob, which was already reaping the benefits of Prohibition, saw its business grow even more. The consumption of alcohol and drugs increased as uncertainty about the future caused people to seek refuge in them, the penniless and destitute turned more often to loan sharks, and general hopelessness about the future spurred the rise of Mafia-organized gambling, sports betting, and illegal lotteries.

And it doesn’t end there. The Mafia exploits these moments of uncertainty to validate its organizations and to build consensus in society. After the stock market crashed in 1929, Al Capone decided to mobilize his restaurant and garment businesses to feed and clothe Chicago’s poor. (In the 1980s, Pablo Escobar would reprise this demagoguery when he offered to pay Colombia’s public debt out of his own pocket.)

While politicians and the press worried about how to end the Depression, the Italian-American bosses gloated in the situation, using it as an opportunity to reorganize and relaunch their illicit enterprises. It was during that period, for example, that the Chicago Outfit was consolidated. It was at the end of the 20s that Lucky Luciano came to understand the importance of the heroin trade. And it was in 1931 that gambling was legalized in Nevada and the bosses conquered Las Vegas.

Only in the early 1930s, when America had caught a glimpse of the way out of the crisis, did US institutions begin to truly concentrate on the fight against the Mafia. At that point the first arrests were made: Luciano and Al Capone ended up in jail, but they had established themselves so well during the recession that they successfully managed all of their ventures from prison. And the bosses of the Italian-American Mafia had such power that American intelligence asked their help with security during World War II in exchange for lessened sentences and impunity.

Though history teaches us that in times of crisis it’s necessary to raise our guard against gangsters and racketeers, institutions tend to lower their defenses, handing a carte blanche to organized crime. So it continues today.

Read the rest over at Vice.

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Civil-Military Relations Theory for the Modern World

After the World War II period, the security environment facing the United States has become increasingly complex, with threats coming more from non-state armed groups or new generation offensive capabilities like cyber-attacks. This shift has made successfully delineating civil-military roles more difficult. In conventional military operations where both combatants are states using traditional military strategies, there is an established body of civil-military theory to explain each side’s role in the conflict, with the civilian authority acting as the principle directing the military as its agent to meet civilian defined objectives. While certain aspects of traditional theory as developed by Huntington are still relevant to modern day “grey area” warfare, it is no longer sufficient to explain civil-military relations. Two theories that directly address these new concerns are R.W. Komer’s work on the Vietnam War and Michael Glennon’s double government theory about the role of national security professionals in policy-making. This essay will begin with an examination of how Huntington’s theory of objective control addresses current concerns, and then turn to the other two theorists exploration of modern civil-military issues.

Huntington’s civil-military relations theory, called objective civilian control, focuses on the importance of maximizing military professionalism. Huntington believed that military officers were part of a professional class, similar to lawyers or doctors, which specialize in the management of violence. Huntington points out three criteria for professionalism: expertise, social responsibility, and the building of a separate, professional, military bond. Objective civilian control separates the civilian, political, sphere from the professional military one. Huntington’s theory of objective civilian control and the separation of political and military interests is an important one that is still relevant in the U.S., but even more so in countries that have yet to develop a professional military officer corps. One way that this theory is applicable to the U.S. in its modern day operations is through its work training other countries militaries. The U.S. military has made training and capacity building of other countries militaries a priority in dealing with non-conventional threats worldwide. As threats of terrorism increase in places like Somalia or Nigeria, instead of sending U.S. troops to fight the battles, which is costly and risks U.S. lives, U.S. trainers are working with native militaries to enable them to deal with the threat domestically.[1] Another example of this training is the more formal education that the U.S. War Colleges offer foreign officers, for example, each year the U.S. Army War College hosts approximately 80 senior military officers from 75 different countries.[2] Many of the countries receiving military training from the United States have not achieved objective civilian control over their militaries, so the U.S. military should aim to increase these militaries professional capacity as well as their operational capacity while they are training them.

While Huntington’s theory of objective control still provides an important foundation for thinking about civil-military relations, it does not adequately deal with modern situations where military officers have to take on roles beyond managing violence. For example, in Iraq and Afghanistan the U.S. military had to perform roles related to nation building and development traditionally left to the State Department or USAID. The inability of the and military to successfully manage interagency cooperation, or to perform roles outside of the management of violence, contributed to the deteriorating situation in both countries, and was one of the most important lessons of the early years in both conflicts.[3] This is not a new problem, but was analyzed in depth by R.W. Komer in his RAND study of the Vietnam conflict, “Bureaucracy Does its Thing.” In Komer’s analysis, he explains how large organizations, the military included, tend to be slow to depart from established beliefs and ways of doing things, and to reward conformity rather than creative thinking. In the Vietnam War, the U.S. military relied on a traditional war mindset that resulted in an overly conventional and militaristic response when a more political counterinsurgency response was needed.  Komer recognized that the civilian bureaucracies were just as stuck in their traditional mindsets in the Vietnam War as the U.S. military. In particular, Komer points out that the State Department deferred to traditional thinking on civil-military relations and focused on diplomatic relations with the South Vietnam government rather than becoming involved with ground operations, despite the political nature of counterinsurgency missions. In insurgencies, the military simply has more logistical capacity and manpower to carry out nation building and development projects than civilian agencies, and in many theaters it is too dangerous for civilians to carry out this work. However, even as traditional war becomes less and less common, there is still a lag as agencies are unable and unwilling to change how they think of themselves that results in inefficiencies that learning organizations like insurgencies can exploit, despite their smaller traditional capacity. This is an especially salient point considering that the U.S. military and foreign policy bureaucracies have proven to have a short organizational memory when it comes to non-traditional operations that fall out of the scope of what these organizations consider to be their traditional roles.

In order to understand modern civil-military relations, it is important to consider the role of the national security bureaucrats who increasingly control national security policy more than elected political leaders. According to Michael Glennon, this has resulted in a double government where the “dignified,” institutions like the Congress and the Presidency are a façade for the real decision making power wielded by career national security professionals.  This double government did not emerge from conscious effort, but emerged overtime because of systemic and legal incentives baked in the national security structures of the United States. Glennon dubs this class of national security officials and influencers an “efficient” class due to the relative quickness they are able to work compared to the elected officials publically thought to be in charge of national security policy. This efficiency is especially important now that national security covers a wide range of non-traditional threats like terrorism, piracy, and cyber attack that require quick action and a wide range of expertise that elected officials cannot match. Glennon points out that despite running on a platform dedicated to changing the national security policies of the Bush Administration, President Obama has continued most of the same policies. The United States is a democracy, and as the head of the executive branch, the American public expects the President to set the national security agenda, so this double government has subverted U.S. civil-military relations, even if the façade of Presidential leadership remains. Another way that this situation has effected civil-military relations is that some members of this efficient class are even taking over the traditional military role of organizing violence. The best case in point is the use of UAV strikes in counter-terror operations carried out by the CIA. Under President Obama, the CIA has increased the number of UAV strikes and covert operations, carrying out what should be military operations.[4]

As the security environment has evolved and become more complex, theories about civil-military relations are vital to understand the complexity of these relationships. Many older theories still form a relevant core, such as Huntington’s ideas about military professionalism and objective civilian control, but are no longer adequate to cover the evolving roles of both the civilians and the military. As Komer has shown, large organizations like the military or the State Department are slow to change their conceptions of themselves, and have difficulty in adapting to the new roles that modern “grey area” warfare demand. Even though these large institutions have a hard time adapting to new challenges, there is a class of national security officials who operate efficiently, and as shown by Glennon, are increasingly monopolizing national security decision making, and in some cases the actual management of violence itself. Situations as complex as these require robust theories and frameworks to analyze successfully, and require looking both to traditional theorists as well as more modern ones, and even theorists who are not writing explicitly about civil-military relations itself.

[1] Eric Schmitt, “U.S. Takes Training Role in Africa as Threats Grow and Budgets Shrink,” The New York Times, March 5, 2014, http://www.nytimes.com/2014/03/05/world/africa/us-takes-training-role-in-africa-as-threats-grow-and-budgets-shrink.html

[2] The United States Army War College, International Fellows Home (accessed December 13, 2014); available from http://www.carlisle.army.mil/programs/InternationalFellows/index.htm

[3] “Decade of War, Volume 1,” JCOA, June 15, 2012, 25.

[4] Ibid, 3.

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If Two Became One: Economic and Other Implications for Korean Reunification- FSR Blog Post

Below is a great blog post from the Fletcher Security Review, take a look!

http://www.fletchersecurity.org/#!If-Two-Became-One-Economic-and-Other-Implications-for-Korean-Reunification/c1okt/7FDDAAAB-8FB4-4A0C-90C9-FA445EDEBBAA

What will happen to North Korea? For over 20 years, speculation has run the gamut. The small circle of expert academics tend to agree on three possibilities of varying likelihood: (1) military confrontation and subsequent regime collapse, (2) a slow China-like economic liberalization, or (3) implosion of the regime under external pressure. Military confrontation is considered highly improbable, but economic liberalization or regime implosion remains hotly debated.

Reunification has profound economic implications for South Korea and the region. Would it result in a profound shrinking of the South Korean defense budget, or increase due to stabilization efforts? Would there be an influx of working-age men into the economy or systemic dysfunction? Simply put, would the benefits of reunification outweigh the costs?

Sue Mi Terry, a former CIA analyst, argues for the collapse of the regime and the positive benefits that ensue. In  “A Korea Whole and Free,” Terry lays out the positive effects of reunification. John Delury and Chang-in Moon responded by co-authoring  “A Reunified Theory” which attempts to dissect and disprove Terry’s assessment of the climate on the peninsula, arguing for the economic and humanitarian devastation that would result from collapse; they further hold that collapse itself is unlikely, and that economic liberalization is a more viable forecast.

Terry provides a final rebuttal in “A Reunified Theory” establishing a foundation for the reader from which to consider and frame the ongoing dialogue surrounding the question with which we started. What next?

http://www.foreignaffairs.com/articles/142261/john-delury-and-chung-in-moon-sue-mi-terry/a-reunified-theory

-Liam Connolly

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The Uralmash Gang- A Case Study of Russian Organized Crime

The Uralmash gang is a good case study because it demonstrates how by adapting to the changing circumstances of the transition, Uralmash was able to overpower the Vory in one of their traditional strongholds and insert themselves into the political structure. Also, Uralmash provides a strong example of how all of the themes described in this paper interacted and happened in practice. During the 1990s, crime was prevalent throughout Russia, but the Ural Mountains area, and the city of Yekaterinburg, was considered the “gangster capital of Russia.”[1] During the Soviet era, the Urals area contained many prisons and convict labor camps, and due to rules restricting where ex-convicts could live, many of the residents were either ex-prisoners or active criminals.[2] By 1992, in Yekaterinburg, there were four major criminal groups active in the city that employed more than twelve-thousand people in a variety of roles, including as enforcers, accountants and business managers. The gangs had investments in businesses like sports stores, a casino, and especially in the Soviet era industrial plants in the region.[3] From 1992-1993, these criminal groups were involved in a brutal gang war that pitted the traditional Vory against the bandits, including Uralmash. After this war, Uralmash consolidated its control over the Urals, and amassed massive political and economic power. [4]

  1. a) Gang Warfare between Uralmash and the Vory

The Vory maintained unrivaled control of the Ural’s criminal underworld up to the 1980s, until a group of sportsmen formed the Uralmash gang to take advantage of local factories need to get around Soviet era red tape.[5] In the Soviet Union, if a factory needed certain parts or materials, they had to go through a bureaucratic process that could take months. Uralmash specialized in facilitating underground trade between businesses and factories, while taking a cut from each deal and becoming rich in a short period. The gang then used this wealth to start taking over the traditional crime markets from the Vory, until they became the most powerful crime syndicate in the Urals, and one of the most powerful criminal groups in all of Russia.[6]

The Vory did not give up their control of the Urals willingly and initially tried to push their ideology and thief’s code onto the new criminal groups. However, Uralmash refused to pay respect to the Vory’s traditions, and in 1992, gang warfare broke out that featured assassinations, torture, kidnapping and explosions. The balance of power quickly shifted after Uralmash formed a special hit squad made up of former Soviet Special Forces and military personnel to kill their rivals.[7] Uralmash, and other new style gangs, were more disciplined than the thieves were, had more resources, and were more willing and able to use force. As a result, the Vory lost their control of the city, and retreated back to their traditional criminal activities and control over the prison system.[8] Uralmash’s use of violence, and the creation of their highly trained hit squad, allowed them to take control of Yekaterinburg, and shortly after the conclusion of the war, most of the businesses in the city were paying protection money to them. By 1997, Uralmash’s estimated income exceeded that of the whole city of Yekaterinburg, which had a population of 1.5 million people.[9]

  1. b) Uralmash: Political-Criminal Nexus

The Uralmash group further consolidated its control over the Urals region by penetrating the political system. This control included a number of local government officials and a law office that the group used to exert influence on police. On a national level, the gang supported President Yeltsin, and Yeltsin even sent the gang a personal letter of thanks.[10] If the police did not cooperate with the gang, Uralmash would use force against them. For example, members of Uralmash threw grenades at the organized crime unit’s building on two occasions in 1993.[11] The gang became so confident in their power and control of the city that they formed a political movement in 1999, which they called the Uralmash Social Political Union, or OPS.[12] The OPS had the resources and connections to be successful in politics, but Uralmash’s reputation for brutality made it difficult for them to compete openly. In order to change their image, OPS turned to widespread charity activities like developing youth sports leagues and giving food and televisions to elderly residents.[13] Through these actions, as well as an anti-drug campaign that included using force against drug dealers in Yekaterinburg, the OPS managed to gain public support and in the 1999 election to the Duma, the OPS candidate lost by only 1%.[14]

Uralmash took advantage of the Ural region’ rich natural resources, such as timber, jewels and rare metals and their subsidized pricing during the Yeltsin administration to easily gain more wealth than the Vory, whose code prevented engaging in sustained trading.[15] Uralmash was also willing to take advantage of highly trained former soldiers, whereas the thieves stuck to their prohibition of accepting members who had worked for the state. Also, overtime as Uralmash consolidated their control over the Yekaterinburg economy, they relied less on violence and more on smart investments, and membership shifted from thugs to accountants and businessmen. Another important part of Uralmash’s success was its ability to create an international business and criminal network that extended to China, the United States, Germany, and beyond.[16] In order to protect these investments, Uralmash corrupted members of the local government and police force, and through creating the OPS political party came close to obtaining open political power.[17]

  1. c) Vertical Disintegration

Uralmash was one of the most successful Russian gangs to emerge from the transition to capitalism, but their story is a microcosm of the evolution of organized crime in Russia. The beginning the transition, in the early 1990s, was marked by the creation of new criminal groups and the waning of Vory power and traditions. During this period, Russian crime rates increased from the intense competition between the new groups, leading an elimination of weaker groups and a consolidation of organized criminal groups.[18] As these larger criminal groups consolidated power, they began relying less on violence and more on financial investments and legitimate business along with collecting taxes from entrepreneurs under their protection. After the groups have established a base of economic power, they attempt to further legitimize themselves and become regular business groups, and even in some cases politicians.[19]

Vadim Volkov defined this progression as vertical disintegration. The key difference between the Vory and the bandits is that the bandits did not view themselves primarily as criminals, but as businessmen who used violence. As the bandits eliminated competition, consolidated power, and became more enmeshed in the market and in power structures they had less need to resort to violence. Instead of developing an elaborate criminal code, the bandits increasingly followed the dictates of the market, and violence became seen as bad for business. As the former bandits started controlling more companies and assets, the makeup of the groups changed from thugs to accountants and lawyers, usually with a few former soldiers or KGB for when force was still necessary. The thugs are decommissioned, and many then go on to become common criminals or drug dealers, and contribute to disorganized crime with little or no political linkages. The leaders of the bandits, however, often managed to move up from working class backgrounds to the upper-middle class and elites of Russian society.[20]

[1] James O. Finckenauer and Yuri A.Voronin, “The Threat of Russian Organized Crime,” Issues in International Crime, National Institute of Justice, June 2001, 10.

[2] Ibid, 11.

[3] Handelman, 80.

[4] Volkov, 117.

[5] Ibid, 116.

[6] Handelman, 77-78, 86.

[7] Finckenauer and A.Voronin, 15.

[8] Volkov, 117.

[9] Satter, 241.

[10] Finckenauer and A.Voronin, 18, 21.

[11] Satter, 242.

[12] Yulia Solovyova, “No to Drugs, Yes to Uralmash?,” The Moscow Times, December 4, 1999. http://www.themoscowtimes.com/news/article/tmt/269202.html

[13] Satter, 244.

[14] Ibid, 247.

[15] Handelman,  77-78, 87.

[16] Finckenauer and A.Voronin, 18.

[17] Volkov, 118-120.

[18] Ibid, 76.

[19] Finckenauer and A.Voronin, 29.

[20] Volkov, 122-125.

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The Globalization of Russian Organized Crime

Another important trend in Russian organized crime is globalization. Expansion happened quickly after the transition- by 1993 the Russian police claimed that crime groups based in the former Soviet Union conducted business in twenty-nine nations.[1] Different parts of the world were important for Russian gangsters for different reasons. The nearby former Soviet states had all developed similar political-criminal nexuses, so many comrade criminals were able to rely on former political or intelligence service ties to create linkages across countries.[2] In particular, the Baltic countries are an important transshipment point for Russian organized crime, both for their access to the Baltic Sea and for their membership in the European Union. As Russian criminal groups expanded their operations into nearby countries, crime rates in those countries spiked, for example, in Estonia in 1994 there were 100 murders related to organized crime in a country with a population of only 1.15 million people. This was a result of gangs fighting for control over Estonian smuggling routes for precious metals, drugs, and weapons to the rest of Europe.[3]

Another important country for Russian gangsters is Israel. After 1989, the Jewish population of the Soviet Union was eligible for Israeli citizenship, and within a decade, there were more than 1 million Russians in Israel, which made up more than 15 percent of the Israeli population.[4] Israel’s large Russian population was an ideal place for criminal bosses to hide from Russian law enforcement or rival gangsters. Israel also did not have laws against money laundering in the 1990s, and did not require its banks to check on the origins of deposits, which made it an important financial hub for Russian organized crime to store and move their money.[5] The Russian criminals did not merely hide out in Israel, or use the country to launder money, but also took over the $400 million per year Israeli prostitution market, and established links with corrupt Israeli politicians.[6]

As Russian criminal groups expanded outward, they increased their links with other organized crime groups, such as the Sicilian Mafia, the Japanese Yakuza, and the American Cosa Nostra.[7] The Russian gangsters also established legitimate businesses and purchased real estate around the world. Increasing global integration and the collapse of the Soviet Union made these new ventures and partnerships possible.  During Soviet times, there were strict controls on emigration, so Russian criminals were not able to expand their reach internationally, but after the transition, the government eased these controls, making it easier for any Russian to travel abroad. In addition, with the establishment of private enterprises, it became easier for Russians to trade beyond the old Soviet bloc. Just as modern corporations were able to take advantage of improved transportation and communication networks, so too were organized criminal groups. The expansion of Russian organized crime includes several activities that threaten stability wherever it touches, including murders for hire, money laundering, extortion, smuggling of natural resources and even trafficking of weapons and nuclear materials.[8] Another major threat, as seen in Israel, is that Russian bandits will attempt to recreate their PCNs in other countries, or use, and undermine other countries financial systems to hide their political corruption.

[1] Handelman, 57.

[2] Shelley, “81.

[3] Liis Lill, “Estonia,” in Russian Organized Crime: Recent Trends in the Baltic Sea Region, ed. Walter Kegö & Alexandru Molcean (Stockholm, Sweden: Institute for Security and Development Policy, 2012), 58.

[4] Glenny, 101.

[5] William A. Orme Jr., “Israel Seen as Paradise for Money Laundering,” The New York Times, February 21, 2000. http://www.nytimes.com/2000/02/21/world/israel-seen-as-paradise-for-money-laundering.html

[6] Webster, William H., Russian Organized Crime and Corruption: Putin’s Challenge (Washington D.C.; CSIS Press, 2000), 20.

[7] Fred Burton and Dan Burges, “Russian Organized Crime,” Stratfor, November 14, 2007. http://www.stratfor.com/weekly/russian_organized_crime#axzz3KU3P3NuG

[8] Handelman, 257.

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Krysha- Organized Crime and Private Protection in Russia

In the first years of the 1990s, violence and crime were rampant in Russian cities. Crime rose by 33 percent from 1991 to 1992, and in 1993, the murder rate increased 27 percent while crimes committed with firearms rose an astonishing 250 percent.[1] The rise in violence was not only from gang-wars, but also from crimes against the new entrepreneurial class. Since the entrepreneurs could not rely on the police for protection, they were easy targets. In 1993, the Interior Ministry recorded 93 known murders of entrepreneurs.[2] Even ordinary Russian citizens became targets. After the government privatized housing, gangs targeted vulnerable owners, such as the elderly or those without families, to gain the valuable new property. In Moscow, from 1992-1997, 20,000 people disappeared after selling their housing- most of whom are believed to have been killed. The gangs bribed building supervisors for the names of good targets, and officials for help with registering the sale, and relied on the fear and indifference of the target’s neighbors to carry out their crimes.[3] The Russian people referred to the lawlessness and moral confusion that the transition created as bespredel, meaning without limits, which reflected the lack of restraint the corrupt officials and bandits had in their greed, and the destruction that they caused.

For most Russians, bespredel was a horrible, dispiriting, condition, but for criminals, it was a fantastic business opportunity. Krysha, or roof, is probably the most important word for explaining how the bandits functioned. Russian law and law enforcement were insufficient for business to carry out normal business functions, such as collecting debt or enforcing contracts, and the police could not, or would not, protect businesses and entrepreneurs from theft or physical harm. In order to avoid these problems, Russian businesses needed a private protection agency, or krysha. According to a Russian government report from 1993, 70-80% of private companies in major cities paid 10-20% of their profits in tribute to organized criminal groups.[4] If a company did not have a roof, they were open to exploitation by any criminal group until they obtained one. However, once a business had a krysha, they could rely on the reputation of that group as a form of deterrence- some gangs even started printing stickers with their names on them so businesses under their protection could put them on their doors to avoid being hassled by other gangs.[5]

Organized criminal groups are rational economic actors whose goals are profit maximization, not violence. Since the market for firms needing protection was so vast, there was little need for the gangs to battle over specific businesses. Also, rather than primarily relying on violence to solve their client’s problems, gangs arranged meetings, or strelkas, to negotiate solutions. A strelka was a form of arbitration where companies in dispute would both send their krysha to negotiate an agreement. The agreement would then become binding for both companies. It was common for the gangs to have several of these meetings daily, and the majority of them ended peacefully. All protection rackets were obligated to go to strelkas to represent their companies, and success depended on each gang’s reputation, as well as the ability to read the situation for potential violence.[6] The Russian Federation had a system of normal arbitration courts that were reasonably well organized and effective at coming to agreements. However, the courts were much less successful at obtaining settlements after rulings due to the ability of the losing party to hide their assets across multiple bank accounts, or to transfer assets to friends and family. A krysha is much more effective at enforcing agreements because they have the capacity to use force in cases of non-compliance.[7]

Many businesses preferred dealing with organized criminal groups instead of the state. Part of the reason was that the criminals took ten to thirty percent of a firm’s profit, but the state took up to ninety percent in taxes and fines.[8]  The racketeers were originally only interested in exploiting the businesses, but with so many criminal groups present in the 1990s, the market became competitive. Because of this, businesses could demand more from their private protection agencies. In this way, for most emerging businesses, the criminal groups responded to the demand for order and predictability, and replaced the official law enforcement system. The Russian police were not able to adapt to the new free-market system, and in many cases were too understaffed or corrupt to be effective. It is not surprising that the New Russia Barometer survey found that in 1994, seventy-one percent of Russians distrusted state institutions, and seventy percent distrusted the police specifically.[9]

The role of the bandits as violent entrepreneurs who provided services to firms is distinct from the traditional criminal activities of the vory that came before them. This divergence first started during the perestroika economic reforms under Gorbachev, when in 1988 the new law on cooperatives allowed limited private enterprise.[10] The Vory are thieves and smugglers, so they depend on the ability to be inconspicuous to carry out their work, whereas the bandits depend on developing a reputation for both the ability to settle disputes and carry out acts of violence if necessary. This difference even manifests itself in outward appearances. The Vory should be able to blend into their environment, and since the Vory v Zakone are in charge of managing the group’s communal funds, if they conspicuously show wealth it will cast doubt on their reliability. However, for the bandits, conspicuous shows of wealth, or physical strength from bodybuilding, actually benefits their reputations and ability to conduct business. In addition, the two groups play different roles in the economy. Unlike the bandits, the Vory do not produce anything, or establish long-term mutually beneficial relationships with clients.[11]

The rise of the bandits mirrors the rise of Russian capitalism because the Russian state was unable to adapt its institutions to the new system as quickly as it adopted radical new reforms. The Vory thrived as thieves and smugglers during the Soviet times because the communist economy was not efficient in producing and allocating goods that Russian consumers wanted. The strict rules of the thieves’ code left the Vory ill suited to adapt to the new criminal world of the transition period. The bandits considered Vory tradition an irrelavent relic of the past. Even the authority of the vory v zakone weakened under the new circumstances of bespredel- instead of earning it through long prison stays and formal rituals new criminals were simply buying the title. The new circumstances were best suited for what sociologist Vadim Volkov defined as “violent entrepreneurs,” groups that specialize in the use of force to make money on a reoccurring basis.[12] The bandits violent entrepreneurship filled an institutional gap that both the traditional criminal elite and the new Russian Federation were unable to, and despite their violence, provided a degree of stability necessary for the establishment of Russian capitalism.[13]

[1] Stephen Handelman, Comrade Criminal: Russia’s New Mafiya (New Haven: Yale University Press, 1995), 3.

[2] Celestine Bohlen, “Graft and Gangsterism in Russia Blight the Entrepreneurial Spirit,” The New York Times, January 30, 1994, http://www.nytimes.com/1994/01/30/world/graft-and-gangsterism-in-russia-blight-the-entrepreneurial-spirit.html?src=pm&pagewanted=1

[3] Satter, David, Darkness at Dawn: The rise of the Russian Criminal State,” (New Haven: Yale University Press, 2003), 224-225.

[4] Celestine Bohlen, “Graft and Gangsterism in Russia Blight the Entrepreneurial Spirit,” The New York Times, January 30, 1994, http://www.nytimes.com/1994/01/30/world/graft-and-gangsterism-in-russia-blight-the-entrepreneurial-spirit.html?src=pm&pagewanted=1

[5] Volkov, Vadim, Violent Entrepreneurs: The use of force in the making of Russian Capitalism (Ithaca: Cornell University Press, 2002): 70.

[6] Glenny, Misha, “McMafia: A Journey Through the Global Criminal Underworld,” (New York: Random House, 2009), 59-60.

[7] Varese, Federico, The Russian Mafia: Protection in a New Market Economy (Oxford: Oxford University Press, 2001): 42-46.

[8] Glenny, Misha, “McMafia: A Journey Through the Global Criminal Underworld,” (New York: Random House, 2009), 54.

[9] Varese, Federico, The Russian Mafia: Protection in a New Market Economy (Oxford: Oxford University Press, 2001), 39.

[10] William H. Webster, Arnaud de Borchgrave, and et. al, Russian Organized Crime: Global Organized Crime Project (Washington D.C.; CSIS, 1997), 26.

[11] Volkov, Vadim, Violent Entrepreneurs: The use of force in the making of Russian Capitalism (Ithaca: Cornell University Press, 2002), 58-60.

[12] Volkov, Vadim, Violent Entrepreneurs: The use of force in the making of Russian Capitalism (Ithaca: Cornell University Press, 2002), 27-28.

[13] Glenny, Misha, “McMafia: A Journey Through the Global Criminal Underworld,” (New York: Random House, 2009), 60-61.

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The Political-Criminal Nexus in Russia

When the political establishment collaborates with the criminal underworld, they form a political-criminal nexus (PCN). PCNs undermine state-building, rule of law, and the trust between the state and its citizens that is required for good governance.[1] While the Vory were willing to work with corrupt officials, they maintained a clear separation from the state. However, the new class of post-Soviet criminals, who the Russians called bandits, did not have the same prohibitions against becoming directly involved. Some of the bandits even became politicians, for example, in 1995, eighty-five people with criminal records ran for parliament.[2] Many officials were also involved in criminal activities beyond normal corruption, and carried out many of the same activities as the bandits. This increased inter-mixing between the criminal and the official, and the mutual enrichment, enabled a subversion of the Russian state on a grand scale.

Many of the officials who were involved in organized crime or corruption came from the nomenklatura class. The nomenklatura were the top Soviet officials, and numbered more than one million people. These officials were members of the Communist Party who the Party put on special lists of candidates for top positions. During Soviet times, the nomenklatura developed an internal system of loyalties, hierarchies, hostility to outsiders, and propensity for criminality that rivaled the Vorovskoi Mir.[3] The nomenklatura owed their loyalty to the party and each other, not to the state, so they used Soviet laws and the justice system to advance their interests rather than state interests. Importantly, these officials were only accountable to each other, meaning that they had immunity from prosecution unless the Party authorized legal action to go forward. If a corrupt official had managed to have the right connections and loyalties, they could get away with serious crimes without worries of being prosecuted.[4] When the transition to capitalism and democracy became inevitable, the nomeklatura made sure that they gained control of the privatization process, and using this control managed to trade their previous control for economic wealth that bought political power.[5]

The most flagrant example of theft committed by this PCN happened during the privatization process itself, where bureaucrats and criminals were able to take control of former Soviet assets at vastly discounted prices. During the transition, President Yeltsin’s administration liberalized prices on many everyday goods, but natural resources like oil, metals and diamonds remained subsidized at prices discounted as much as forty times world market prices. The sale of these natural resources used to benefit the state, but during the reform period, the export of these resources became privatized. This absurd situation allowed those with start-up money and political connections to become fantastically wealthy merely by buying subsidized natural resources and exporting them at market rates.[6] The process of privatization increased the bonds between the criminals and the former nomenklatura.  The officials needed the funds from the criminals to purchase the natural resources, and the criminals needed the political access that the bureaucrats had. Also, as the bureaucrats bought the natural resources, they need the criminals to protect their shipments, and to ensured that all the contracts related to their shipment and sale were enforced.[7]

The former nomeklatura used their connections and new wealth to form a new kind of criminal, which journalist Stephen Handelman called “the comrade criminal.”[8] In post-transition Russia, there were many of these comrade criminals. In 1993, more than forty-six thousand Russian officials were charged with crimes of corruption and abuse of office, and in 1998, Anatoly Kulikov, the Russian Minister of Interior, reported that state officials were responsible for a large part of the 30,000 crimes recorded that were associated with privatization.[9][10] The comrade criminal is especially capable because they had access to the coercive power of organized criminal groups as well as the power of the bureaucrats stamp to approve deals and convert illegally gotten goods into legal ones. By 1997, according to estimates by Russia’s Ministry of Internal Affairs, about 2/3 of Russia’s economy was under some kind of control by organized criminal groups, including the majority of the banks.[11] During the transition, the goal was privatization and democratization as quickly as possible. Because the priority was changing the system, rather than clearing out the corrupt nomeklatura, the same people responsible for the failures of the Soviet Union were able to maintain their power while becoming even wealthier than before. These corrupt officials would not have been as successful without the threat of criminal violence, or protection. The connections between corrupt officials, organized crime, and business grew so tight during the transition period that it was difficult to tell the two groups apart.[12]

The corruption was public knowledge throughout Russia, and it resulted in businessmen not registering their companies with the state out of fear that bureaucrats would sell their financial information to gangs who would then extort them.[13] This resulted in tax money that should have been going to the state to pay off debts, and provide desperately needed social services, instead going to criminals for protection. These same criminals then bribed the bureaucrats for state protection as well as for cooperation in their criminal enterprises. Making the situation worse, these swindlers did not keep their money in Russia; from 1991 to 1997 capital flight from Russia is estimated at $300 billion.[14] The PCN’s blatant greed and corruption, and the chaos on the streets, influenced how the Russian people thought of democracy and capitalism, and for some Russians, prompted a desire for a return to strongman rule, stunting the chances of the Russian Federation developing into a truly free society.[15]

[1] Roy Godson, “The Political-Criminal Nexus and Global Security,” in Roy Godson, ed., Menace to Society: Political-Criminal Collaboration around the World (New Brunswick, NJ: Transaction, 2003), 1.

[2] Konstantin Kanterev, “Presidential Representative Says Criminals Competing for Seats in Novosibirsk

Legislature,” article from Novaia Sibirre printed in Institute for EastWest Studies (IEWS) Russian Regional

Report 2, no. 40, November 20, 1997.

[3] Stephen Handelman, Comrade Criminal: Russia’s New Mafiya (New Haven: Yale University Press, 1995), 96-98.

[4] Louise I. Shelley, “Russia and Ukraine: Transition or Tragedy?,” Trends in Organized Crime 4, no. 3 (Spring 1999): 83-84.

[5] Matt Bivens and Jonas Bernstein, “The Russia You Never Met,” Demokratizatsiy: The Journal of Post-Soviet Democracy 6, no. 4 (Fall 1998):  639.

[6] Glenny, Misha, “McMafia: A Journey Through the Global Criminal Underworld,” (New York: Random House, 2009), 56-58.

[7] Louise I. Shelley, “Russia and Ukraine: Transition or Tragedy?,” Trends in Organized Crime 4, no. 3 (Spring 1999): 90-91.

[8] Stephen Handelman, Comrade Criminal: Russia’s New Mafiya (New Haven: Yale University Press, 1995), 70.

[9] Stephen Handelman, Comrade Criminal: Russia’s New Mafiya (New Haven: Yale University Press, 1995), 285.

[10] Louise I. Shelley, “Russia and Ukraine: Transition or Tragedy?,” Trends in Organized Crime 4, no. 3 (Spring 1999): 95.

[11] William H. Webster, Arnaud de Borchgrave, and et. al, Russian Organized Crime: Global Organized Crime Project (Washington D.C.; CSIS, 1997), 2.

[12] Glenny, Misha, “McMafia: A Journey Through the Global Criminal Underworld,” (New York: Random House, 2009), 69.

[13] Stephen Handelman, Comrade Criminal: Russia’s New Mafiya (New Haven: Yale University Press, 1995), 88.

[14] William H. Webster, Arnaud de Borchgrave, and et. al, Russian Organized Crime: Global Organized Crime Project (Washington D.C.; CSIS, 1997): 38.

[15] Stephen Handelman, Comrade Criminal: Russia’s New Mafiya (New Haven: Yale University Press, 1995), 277.

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Bandits: Understanding the Post-Soviet Russian Criminal Class

Unlike the traditional mafia in Italy, or crime groups in Columbia or Mexico, criminal organizations in Russia were not based on ethnic ties, but built from groups of people with similar backgrounds.[1] Many of the bandits had ties to the Soviet state, and unlike the prison-hardened Vory, they tended to take a more practical approach to criminality and profit making.  The three most common backgrounds of the bandits were sports, the military, and the police and intelligence agencies.  These three sources were ideal because they all had suitable experience for violent enterprise, and had developed strong bonds amongst their members. Another reason was that each of these groups lost much of their funding and societal privilege after the collapse of the Soviet Union, creating a large pool of unemployed men. This section will explain more about each recruitment source, and the different roles they played in the underworld during the transition period.

In the Soviet Union, there were no professional sports leagues, so all athletic organizations depended completely on the state for support. In addition, Soviet values considered sports prestigious, so success in sports was an avenue to social advancement. The transition to the Russian Federation and the decay of the Soviet values left most sportsmen without their previous sources of funding and respect.[2]  Many popular sports in Russia had already trained members in the art of violence, including boxing and martial arts, and by training and competing together the sports groups had already developed the strong bonds of trust necessary for organized criminal groups. These sports groups were among the first of the new criminal groups in Russia, and started out as racketeers during the perestroika period under Gorbachev that first allowed limited private enterprise. So many athletes filled the ranks of the new criminal groups that the Vory called them “sportsmensy”, or sportsmen, as a form of derision to mock their reliance on brawn instead of intelligence.[3]

The Army, especially soldiers who fought in the Afghanistan War, was another major source of organized criminals in the 1990s. After the Afghanistan War, and the establishment of the Russian Federation, the military demobilized about two million men.[4]  Many of the young soldiers who fought in Afghanistan found they had little chance to be successful in the new Russian society, and found it hard to adjust to civilian life. They had gained transferable skills in the application of violence, and had developed tight bonds with other soldiers, making it easy to find recruits to form criminal groups. Many racketeering and protection agencies in the 1990s had names such as the Herat Association, Afgantsy, and Afganvent to reference the members shared experiences.[5] Even within the military, soldiers were often poorly paid, and even many officers lacked the apartments that the military was obligated to provide. Active-duty military involvement in organized crime ranged from using military vehicles to transport illicit items across borders to black-market weapons sells. In 1996, the military committed approximately 6,000 crimes and over 100 generals and other top defense officials were investigated for corruption.[6]

Just like sportsmen and Afghan veterans, many police and security officials lost their jobs in the transition time-period. From 1987-1989, 55,000 police were discharged, and in 1992, 63,000 security professionals left the service. During a 1992 conference on organized crime, then Russian Interior Minister Viktor Erin estimated that one in five became involved in organized crime.[7] Many of the most-talented security professionals left police and intelligence agencies to join private protection agencies that paid up to fifteen times higher than the state. Due to the cutbacks and desertions, the state security organizations lacked the talent or manpower to deter organized criminals, or solve most crimes after they had been committed. In addition, many of the police that remained were more interested in turning to crime to subsidize their meager pay than in fighting it. [8] In the 1990s, gangs formed within police units took on roles such as protecting mob bosses as bodyguards, facilitating drug smuggling, and racketeering.[9] The role of the security service in organized crime is particularly destabilizing, because it rightly makes citizens unwilling to turn to the police for help, and necessitates the need for alternate private sources of protection.

When forming the Russian Federation, the Yeltsin administration disenfranchised large portions of the population that had experience in the application of violence and had enjoyed positions of privilege in Soviet society. This disenfranchisement was logical in many ways, the Russian Federation did not need the three million man army of the Soviet Union, could not afford it, and the army and state security services all had the potential to threaten the new state. However, these reforms and demobilizations had unintended consequences that should have been foreseen. If you take away legitimate opportunity from those whose only marketable skill is the application of violence, especially from groups who are already well organized and disciplined, it will result in organized violence. In the case of Russia, these groups were able to thrive because of the lack of state ability to enforce, or even administer, the laws necessary for the new capitalist system. In the case of the formation of the Russian Federation, the transition created both the supply and demand for this new form of violent entrepreneurship.

[1] Christina Wenngren and Walter Kegö, “Sweden,” in Russian Organized Crime: Recent Trends in the Baltic Sea Region, ed. Walter Kegö & Alexandru Molcean (Stockholm, Sweden: Institute for Security and Development Policy, 2012), 37.

[2] Varese, Federico, The Russian Mafia: Protection in a New Market Economy (Oxford: Oxford University Press, 2001), 57-58.

[3] Volkov, Vadim, Violent Entrepreneurs: The use of force in the making of Russian Capitalism (Ithaca: Cornell University Press, 2002), 61.

[4] Mark Galeotti, “The Criminalisation of Russian State Security,” Global Crime 7, no. 3-4 (August-November 2006), 478-479.

[5] Volkov, Vadim, Violent Entrepreneurs: The use of force in the making of Russian Capitalism (Ithaca: Cornell University Press, 2002), 12.

[6] William H. Webster, Arnaud de Borchgrave, and et. al, Russian Organized Crime: Global Organized Crime Project (Washington D.C.; CSIS, 1997), 1.

[7] Varese, Federico, The Russian Mafia: Protection in a New Market Economy (Oxford: Oxford University Press, 2001), 56-57.

[8] Satter, David, Darkness at Dawn: The rise of the Russian Criminal State,” (New Haven: Yale University Press, 2003), 113.

[9] Mark Galeotti, “The Criminalisation of Russian State Security,” Global Crime 7, no. 3-4 (August-November 2006), 478.

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The Vor v Zakone: Soviet Era Organized Crime

Organized crime was radically different during the Soviet era than in the post-Soviet era. Officially, the Communist Party taught that there was no organized crime in the Soviet Union, but in reality, organized crime thrived in the vast networks of prisons and labor camps established during Stalin’s rule.[1] Organized criminals called those prison networks, and their society, the Vorovskoy Mir, or Thieves World. The Vorovskoy Mir had a clear hierarchy, over which Vor v Zakone, or Thieves in Law, ruled. As the name states, the Vory followed a strict set of rules that dictated how a thief was expected to live, one that demanded complete loyalty, and against which transitions could be punished by death. The thieves saw themselves as separate from Soviet society, and forbid any collaboration with the Soviet State. Despite this enforced separation, the group’s rules were probably a closer manifestation of communist ideals than the Soviet state. These rules dictated that thieves could only make money from criminal activity, could not save wealth, should rarely resort to violence, and had to contribute earnings to the obshchak, the communal fund that the Vor v Zakone distributed equally amongst the thieves. [2]

Just as the post-Soviet class was shaped by the dictates of their circumstances, so too was the Vorovskoy Mir. Many of the inhabitants of the Thieves’ World spent most of their lives in the prison system, and even outside of the prison, Soviet laws revoked ex-convicts rights to a job or residence in major cities. [3] The Vory imposed order on prison life, and created their own justice system called the Thieves’ Court where the Vory v Zakone handed out punishments for infractions of the thieves’ code. As judges, the Vory v Zakone gained authority from their ability to interpret the law, and this authority granted them respect and honor that extended outside of the prison walls. This allowed the gang leaders to maintain control, and run criminal enterprises while incarcerated.

The prison system in the Soviet Union also created a unique opportunity for the political and criminal class to interact. In the Soviet Union, it was common for political prisoners, including political figures, to be in the same prisons as common criminals. The Vory prohibited working with the official state, but welcomed opportunities to collaborate with corrupt officials. This collaboration resulted in a mutually beneficial smuggling operation. The Vory controlled large sections of the black market, such as caviar, spare parts, and automobiles. The black market was essential in communist countries to get around the inefficiencies of the Soviet command economy, and during the last years of the Soviet Union was valued at an estimated $60.5 billion.[4] The Vory were unquestionably the most powerful criminals in the Soviet Union, however, the transition to the Russian Federation created new criminal challengers who had little respect for the Thieves’ traditions and rules.

[1] Stephen Handelman, Comrade Criminal: Russia’s New Mafiya (New Haven: Yale University Press, 1995), 29.

[2] Serguei Cheloukhine,”The Roots of Russian Organized Crime: From Old-Fashioned Professionals to the Organized Criminal Groups of Today,” Crime, Law and Social Change 50, no. 4, (December, 2008): 358.

[3] Stephen Handelman, Comrade Criminal: Russia’s New Mafiya (New Haven: Yale University Press, 1995), 34-35.

[4] Stephen Handelman, Comrade Criminal: Russia’s New Mafiya (New Haven: Yale University Press, 1995), 28-29.

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Is North Korea One Big International Crime Family?

http://www.fletchersecurity.org/#!Is-North-Korea-One-Big-International-Crime-Family/c1okt/49D23918-94C7-4FB2-BF79-2913E1E31F10

Please find my new blog post for the Fletcher Security Review below.

North Korea has little in the way of traditional domestic or international economic activity. Since the end of the Cold War and the collapse of the Soviet Union, North Korea has lost its major sponsors and trading partners. Inside North Korea, the state cracks down on private economic activity while the state managed economic system is decaying. During the 1990s, conditions in North Korea were so dire that millions died in a famine while in South Korea, Koreans continued to prosper. However, despite these circumstances, the North Korean regime has continued to function and to spend millions on luxury items, like a new ski resort, private island retreats and elaborate palaces for the ruling elite. North Korea has also continued to pursue its nuclear and ballistic missile programs despite economic troubles and sanctions. This monograph helps explain these contradictions by showing how the North Korean regime has turned to full-scale criminality to evade sanctions and provide much-needed funds. Unlike other states that allow criminality, either through corruption or other means, the North Korean state has taken an active part in all stages of drug production, counterfeiting, smuggling, etc. Paul Kan, Bruce Bechtol, and Robert Collins do an excellent job of systematically exposing North Korea’s illicit activities and explaining their importance.

“Money and war” serves as the theme for the coming issue of Fletcher Security Review, and organized crime plays a significant role in contributing to instability as well as financing war and conflict. When combating the efforts of transnational criminal organizations, law enforcement techniques are appropriate, but criminal states protected by sovereignty makes such efforts much more difficult. Examining the lessons learned from the most established and prolific case studies are important as weak and failing states become more engaged in criminal activities. “Criminal Sovereignty,” represents worthy review of this literature and serves as an important foundation for interested parties, especially with another Kim family member leading the North Korean state who has shown no desire to alter this current modus operandi.

http://www.strategicstudiesinstitute.army.mil/pdffiles/pub975.pdf

-Leon Whyte

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