Mob rules Russian thugs: Organized crime's muscle and violence threaten economic stability.

February 07, 1996

WHEN MOSCOW POLICE found Alexei Butenko's body, the 26-year-old banker's throat had been cut, his cheeks sliced open and his abdomen perforated with stab wounds. While investigation is continuing, there is little doubt about the outcome: he was another victim of growing mob violence in the former Soviet Union.

Contract killings of anyone dealing with money -- ranging from bankers and entrepreneurs to television executives -- has become commonplace in Russia as mobsters try to take over privatized businesses or hit rivals' companies. While Moscow still is a relatively safe big city for ordinary people, executives routinely travel with body guards and security services are among local growth industries.

Under communism, mafiya thrived. In cities like Rostov-on-Don, state-owned food stores were run by mobsters. In Moscow, public markets were controlled by crime syndicates. It can be argued that whole republics -- Kazakhstan comes to mind -- were under the rule of organized crime which masqueraded as the local communist party. These local satraps sent falsified cotton production figures to Moscow and pocketed the difference.

As communism collapsed, technocrats wasted no time in funneling party money to ostensibly private companies, including ventures with foreign partners. Meanwhile, criminals freed from fear of the Kremlin formed alliances with former KGB men. In some cases they cooked up outlandish scams, in others they took over firms by whatever means necessary.

The absence of an adequate legal infrastructure and accepted business practices has left legitimate business owners with little protection. Moscow's first 24-hour supermarket, located not far from the Kremlin, reflected these realities. An Irish company with retail experience in the Soviet Union started it in cooperation with local investors. But soon after the venture proved successful, the Russian partners came to a board meeting accompanied by gunmen and informed the Irish they had made enough money and were no longer needed.

Despite its market potential, Russia has attracted scant foreign investment. Other countries offer far fewer risks.

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