Glinkina: Crime and Corruption

Main Idea: The liberalization of the Soviet Union provided high governmental officials and top managers with an opportunity to take advantage of the system to reap huge profits. The police force also deteriorated and organized crime became a huge part of Russian life.

Organized Crime
An estimated 200,000 active criminal groups existed in Russia by the mid-1990s.

Retail markets in every Russian city are controlled by gangsters who collect a share of the revenues of each vendor.

It is estimated that from 1992 to 1994, over 20 percent of the petroleum output and one-third of the metals production were smuggled out of the country.

At one point, 70% of the raw materials shipped from Russia by rail through Lithuania never reached their legal destination, Kaliningrad. Railway personnel and costums officials conspired in these operations.

Government information indicates that roughly 70 to 80 percent of banks, as well as state and private companies, make payments to recketeers and corrupt officials.

Due to the access to former KGB operatives and the fact that law enforcement was lax, the cost of a professional murder in Russia is low.

Privatization
Most enterprises were privatized by the mid-1990s.

The first phase of "official" privatization entitled individual Russians to vouchers that were redeemable for cash or a share of industry. Criminal elements began to collect these vouchers through various means. With the vast amounts they collected, these groups bought up most desirable enterprises at giveaway prices.

Corrupt privatization aggravated Russia's financial woes, as the state disposed of valuable assets at extremely low prices.

The Oligarchs
A young, unscrupulous economic elite known as the oligarchs now controlled much of the Russian economy.

They were able to use their influence to influence government appointments and sway elections.

From the outset, the oligarchs have been reluctant to invest to modernize production.

The wealth of Russia was shunted abroad.

Illegal capital flight has also helped them shield their gains from taxation, undermining the capacity of government to finance itself adiquately.