For Russia Investors `Protection' Is a Must
Russian officials call organized crime a `direct threat to national interests' - a letter from Moscow
PRESIDENT Boris Yeltsin and other top officials are outspoken about the need to bring Russia's runaway crime under control, especially corruption and mafia activity.
At a "law enforcement summit" at the Kremlin earlier this month, President Yeltsin warned: "Organized crime has become a direct threat to Russian national interests."
But conversations with American businessmen and aid workers indicate that Russian law enforcement officials will have a tough time taking on the mafia here. The mob seems omnipotent and omnipresent, they say.
If you want to do business in Russia, dealing with the mafia is simply a fact of life, says Charlie Sung, a West Orange, New Jersey-based restaurateur. This month, along with several Russian partners, Mr. Sung opened the Panda Chinese Restaurant in Moscow. "Especially for a retail store or a restaurant, it's not safe to open without `coverage,' " Sung says euphemistically. "You don't want to have problems, like a broken window.
"A lot depends on your Russian partners," he continues. "They must be strong and have good connections."
Sung first considered opening a Chinese restaurant two years ago, when a pair of Russian patrons at his New Jersey restaurant proposed the idea. A prime downtown Moscow location was found, but renovation proved to be a tedious process. Sung has been closely involved in every step of the process, except in dealings with mobsters.
"I don't want to know details," he says. "My partners just let me know what I have to do, and I do it."
Despite the problems, Sung says he plans to expand. He wants to open restaurants in St. Petersburg and Riga, Latvia, as well as add a delivery service in Moscow. "I didn't realize it would be this bad," he says of the mafia's influence. "But there's good potential for Chinese food here."
"Mafia" is an amorphous term in Russia. A few ethnic groups are notorious for having powerful mafias, especially Chechens from the Transcaucasus region. But the word "mafia" is used for just about any organized criminal group in the country.
The mob's activity does not just cover business. Even those in Russia working on foreign assistance programs are unable to operate outside the mafia's sphere of influence.
Mary Louise Vitelli is the director of the Coal Project, which operates under the auspices of a US humanitarian effort called Partners in Economic Reform. The program aims to help modernize Russia's coal industry.
Recently, Ms. Vitelli and six Russian Coal Project employees went to a Moscow train station. The plan was to have two employees accompany 25 parcels of supplies, including methane gas detectors, on a train bound for Kemerovo, a mining center in the Kuzbas region of Siberia.
But just as they started to load the boxes on to the train, they were approached by three young men in long, dark leather coats, who started asking lots of questions, such as where the boxes were going. "I thought they might be customs, or something," Vitelli says. "I didn't think mafia right away."
Any initial doubts were soon dispelled, however, when the mobsters demanded $40,000 to ensure that the parcels reached their destination. "I just laughed," she says.
With the train's departure time nearing, Vitelli began negotiating a price, but was unable to reach an agreement. "The whole time train personnel saw what was going on, but did nothing," she adds.
Eventually, she worked out a deal in which the two Coal Project employees, along with four of the 25 boxes, were allowed to get on the train - in exchange for 40,000 rubles (about $67). They reached Kemerovo safely, but Vitelli still has 21 boxes sitting in her living room.