Transcript Bill Tupman University of Exeter

Bill Tupman
University of Exeter
The Underground Economy in Russia
The Inheritance
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Barter economy
private use of public property
distrust of private enterprise
Non-convertible currency
“znakomiy” system
Soviet system ran on “tolkach” and “blat”
Top-down corruption; “presents” customary
Figures for Russian organised
crime
• 8,000 groups. 200 global conglomerates
• relationships with groups in 50 other
countries [FBI director]
• Transparency Int. puts Russia at 4th most
corrupt country
• MVD estimates 40% private business. 60%
state owned enterprises, 50-80% of banks
controlled by organised crime
More chilling statistics
• Privatisation: 55% of capital and 80% of
voting shares transferred to domestic and
foreign criminal capital
• $200-300 billion has suffered capital flight
• contract murders running at 500 per annum
• Life expectancy down from 69 to 57.7
• GDP falling by 6% per annum [43% since
91]
Illegal Transnational Businesses
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Drugs
extortion
auto theft
prostitution
alien smuggling
“traffic in people”
contract murder
• Bank fraud
• tax fraud
• stock fraud and
manipulation
• metals/minerals
smuggling
• illegal arms dealing
Four centres of criminality
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Vory v zakone [historical criminals]
former nomenklatura
ethnic groups
geographical and functional groups
Vory v Zakone
• Labour camp origin - Tsarist beginnings
• Effectively ran the camps and financed
criminal enterprise outside
• Tight code of behaviour: no job; no
cooperation with authorities; no court
testimony; no family; no military service
• changing and losing respect now
Nomenklatura
• Tyenova/ shadow economy without which
Soviet system could not have functioned
• bribes, payoffs, corruption
• underground barter economy
• very difficult to change this system, because
all senior political and administrative
figures graduated from it.
Ethnic groups
• Chechens
• Armenians, Azerbaijanis, Dagestanis,
Georgians, Ingush
• Internationally active
• violent
• but importance exaggerated: 70 out of 3,000
crime groups have a purely ethnic base
Territorial and functional groups
• May run an area of a town
• May specialise in cars, lorries etc.
• May have a shared background eg Afghan
war veterans
• May work for a particular individual
• More familiar face of organised crime; fit
US definition of “gang”
Krysha system
• Means “roof”: system of patronage and
structured corruption “protection”
• Requires connection with bank
• Deep penetration of government structures
• deploys armed force, either illegal, “private
security” or a local or national government
unit of militsiya [30% of personnel
involved] or army
Sources
• http://www.ex.ac.uk/politics/pol_data/under
grad/Websites.html
• Global Organised Crime project, Russian
Organised Crime Report
• Radio Free Europe Special Report on
Russian banks
• Aricles in Citizens for a Safer Society site
The Big 7 FIGs
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Alfa
Inkombank
LogoVAZ
Menatep
Most
Oneximbank
SBS-Agro
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Customs accounts
Customs,China,Mosco
Berezovsky
Russian govt
Moscow
Finance min,Customs
Money-laundering
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Why do it, if you’re a bank?
Avoid taxes
defraud overseas aid donors
distorted idea of nature of capitalism
don’t believe the playing field is level
Areas requiring study
• KGB methods of funding agents and
operations: shell companies?
• Non hard currency trade with developing
countries: Asian bankers as middlemen;
hawala and chitty style?
• Exchange of prostitutes for goods. Standard
measure of exchange?
• Drugs as currency
But does it matter?
• Chicago group would say “it’s just the
market finding ways around excessive
taxation and draconian anti-business
legislation”
• West worried about potential instability and
possible military conflict
• West benefiting from capital flight
Problems
• Inhibiting growth of civil society
• Impoverishing Russians in public sector
• can’t have a market economy without a cash
economy
• Rule of law a bad joke
• Undermining chance of democracy
• Increasing likelihood of return to
authoritarianism