Russian Organized Crime Infiltrates Economy, Threatens Foreign Investment

BUSINESSMAN Boris Berezovsky almost became a statistic last week - yet another victim of the gangland-style killings threatening to become a daily fixture of Russia's increasingly violent criminal underworld.

Mr. Berezovsky, head of the giant LogoVAZ car distributor and a leader of the All-Russia Automobile Alliance (AVVA) was sitting in his limousine in rush-hour traffic last Tuesday when a car bomb exploded. Police say the powerful, professionally made device was triggered by remote control.

The incident appeared to be yet another failed contract murder. But there are indications that the attack could also have implications for United States businesses operating in Russia. Russian sources say the bombing could have been an attempt by organized crime rings, which have a strong interest in sales of used - and often stolen - foreign cars, to block AVVA's plans with the US firm General Motors Corporation (GM) to fund a privately financed joint venture to manufacture cars in Togliatti.

Organized crime, stemming from long-entrenched bribery and corruption, has flourished since the Soviet state dissolved. Some reports say rival gangs vying for position in Russia's fledgling market economy have carved up the capital into as many as 10 spheres of influence, which are completely under their control. The police, many of whom are corrupt themselves, are largely powerless to cope with the problem. Consequently, politicians such as ultranationalist Vladimir Zhirinovsky advocate shooting all suspected criminals on sight.

Russia's ``mafia'' now runs many key businesses, not only shady operations such as prostitution and drug-dealing, but also legitimate enterprises from the tiniest street kiosk to the most influential bank. Some Western observers have warned that Russian gangsters have even gained access to nuclear technology, which they could use for international blackmail. Police revealed last week that in March they had detained three men with seven pounds of highly enriched uranium stolen from a top-secret Russian plant, but officials said the substance was not enriched to a sufficient degree to make nuclear weapons.

Violence has become so intrusive that many Muscovites carry guns to protect themselves. Kidnapping and hostage-taking occur almost daily. Police say crimes involving firearms or explosives have risen 45 percent in the first five months of this year compared with the same period last year, and organized rings are threatening to become the largest impediment to both Russia's political stability and the future of President Boris Yeltsin's economic reforms.

Last week, Mr. Yeltsin unveiled several new measures to combat organized crime, which he has called his top priority. On Friday, he told a Kremlin news conference that he had ordered his security forces to cleanse the ``criminal filth'' from the country. ``Criminal forces are trying to occupy key positions in the economy, and even bursting to go into politics,'' he warned.

The attack against Berezovsky was the third bombing in Moscow in a week and the latest in a series of Mafia-style assaults against Russia's top bankers and businessmen.

The explosion's impact blew out the windows of a building across the street. Berezovsky escaped with minor injuries, but his bodyguard was severely wounded and his driver, a young father of two, was killed.

Earlier that day, another businessman was maimed by a car bomb. A few days earlier, a boy died after a package he found on the hood of a car turned out to be a bomb.

``We think the attack was a terrorist act aimed not only at Berezovsky as a person,'' says AVVA spokesman Vasily Titov. He hinted that the incident could have been related to the project between GM and AvtoVAZ, the Russian automobile giant that last year entrusted AVVA to seek foreign investors for $3 billion plant in Togliatti on the Volga River.

``Berezovsky is representative of a new generation of Russian businessmen who are trying to implement new industrial projects,'' Mr. Titov says. ``There are a lot of people in this country who are against the creation of this type of economy.''

Rising crime has already taken its toll on foreign businesses in Russia. Some large companies have chosen to wait before investing to gauge the political situation, and several small-time entrepreneurs who were unwilling or unable to pay protection money have already fled.

``I generally advise companies that are coming here that they be very careful in selecting, reviewing any potential partners in terms of their reliability, the history of the company or the group, their financial standing, credibility,'' says Joe Condon, executive director of the American Chamber of Commerce in Moscow. The branch has set up a security committee with the US Embassy to advise Americans how to protect themselves from unscrupulous business partners, he says.

The GM spokesman, when asked if last week's bomb attack against Berezovsky could make GM rethink its deal with AVVA, declined to comment. But he said a LogoVAZ storeroom had been bombed last year, and the firm's main car storage area is guarded by tanks. He added that personal safety was a primary concern of GM employees in Moscow.

Last week, the special Russian riot police raided the Radisson-Slavjanskaya, Moscow's only American-managed hotel. As foreign diners watched in horror, police dressed in camouflage fatigues toting automatic rifles stormed the hotel lobby and arrested 10 alleged members of two rival Mafia clans.