After 15 years of tumultuous change in Russia, Moscow is booming and
parts of the city give the impression that they are part of the West.
Tverskaya Street, the capital's principal artery, is filled with
strollers, late model cars and outdoor cafes. On Novoslobodskaya
Street, coffee houses are filled to capacity and consumers crowd the
new "Friendship" Russo-Chinese shopping center. Everywhere, restored
buildings reveal the beauty of Moscow's 19th-century architecture
and, at night, the illuminated façades of the buildings and gleaming
cupolas of the Orthodox churches create an atmosphere of dynamism and
resurgent grandeur.

On July 31, 2002, a milestone of sorts was reached with the
announcement by Vladimir Sokolin, the chairman of the State
Statistics Committee, that Russians' living standards had returned to
the level they had attained before the financial crisis of August
1998. Sokolin said that the real cash incomes of the population in
June 2002 exceeded the August 1998 figures by 5.4 percent.

The atmosphere of the Moscow streets, so stunning in contrast to the
uniformity and shabbiness of the communist era, has evoked the
enthusiasm of Western observers. Michael Binyon, a correspondent of
The Times of London, wrote that, "Many Russians have never had it so
good." Leon Aron, a biographer of Yeltsin, wrote in The Weekly
Standard,

"The produce shortages and ubiquitous lines of the Soviet era have
been forgotten. Fresh and delicious food is available everywhere. For
the first time since the 1920s, Russia not only feeds its people and
livestock but is a net exporter of grain."

And Anders Åslund, an economic consultant and author, wrote in The
Moscow Times, "As the rest of the world sinks into recession, Russia
booms. . . . It is time to realize that Russia is a country that
solves its problems with an efficacy and speed that the West can only
envy."

Unfortunately, however, the true state of Russia is not simply a
matter of surface appearances. The reforms that have remade Moscow's
urban landscape took place without the benefit of higher values, and
they bequeathed to Russia a moral vacuum. The result is that behind
the façade of relative prosperity made possible by its improving
economy, Russia faces underlying problems--criminalization,
lawlessness, disregard for human life and a deep spiritual
malaise--that threaten the country's long-term survival.

The Rule of the Lawless

The lawlessness in Russia defines the tenor of everyday life. Russian
business operates according to the law of the jungle in which the
most basic functions can only be carried out with the protection of
armed force. The impact of criminalization in Russia is evident both
at the street level, in the terror unleashed on society by gangsters,
and in the corrupt operations of the clan system at the highest
levels of power. At the street level, gangsters create a sense of
permanent insecurity for millions of citizens. It is not possible in
Russia simply to run a business. That business must have protection,
which Russians refer to as a "roof" (krysha). This roof is provided
by a criminal gang that protects the businessman from other criminal
gangs (as well as from itself) in return for a share of his income.

The system of roofs is so well established in Russia that entire
regions are divided up between rival gangs, and businessmen turn to
the gangs to settle their disputes and collect their debts. Moral
boundaries in the process become so blurred that many Russians treat
the demand that they hand over a share of their income as a
legitimate obligation.

The only real competitors of the gangs are the law enforcement
agencies. For a long time, the gangs had a near monopoly on extortion
but, as the heads of law enforcement agencies saw the enormous
profits that were possible, they too entered the protection racket.
Today, security firms connected to the ministry of internal affairs,
the directorate for the struggle with organized crime (rubop), and
the Federal Security Service (FSB) also offer protection to paying
clients, particularly in Moscow. The official "roofs" have some
advantages over the criminal ones. They are less likely to betray
their clients and, unlike the gangs, they can be fired. But the
involvement of police agencies in the protection racket undermines
the whole notion of law enforcement and implicitly treats extortion
as a normal part of life.

While the protection racket dominates Russian business at the street
level, the government serves as the roof for oligarchic businesses
that have their own security forces and are not vulnerable to crude
racketeering. When the reforms in Russia began, money was in the
hands of gangsters and black market operators, whereas property was
in the hands of government officials. The first priority of virtually
every new enterprise was therefore to buy government officials. The
successful purchase of one government official made it possible to
buy others, and Russia soon came to be dominated by oligarchic clans
that had, in effect, put the government on their payroll. The result
of this system was a country characterized by both massive poverty
and a striking concentration of wealth. Eight oligarchic groups today
control 85 percent of the value of Russia's top 64 private companies
and the combined sales of the twelve top private companies equal the
revenue of the government.

An example of how the system operates was provided by MDM, one of the
most powerful banking groups in the country. In the years since Putin
acceded to power, MDM acquired Russian industrial giants, including
defense plants, at a speed that would not have been possible without
the protection of the government. It became interested in
Nevinnomissky Azot, one of Russia's largest fertilizer factories,
which had an annual profit of $30 million. MDM met resistance,
however, from the factory's director, Viktor Ledovsky, who set up a
firm through which the workers could buy up shares in the factory. He
then appealed to the government not to sell its stake in an
enterprise that was making a profit.

In response, the tax police of the Stavropol region accused Ledovsky
of hatching a scheme to steal money from the workers. Ledovsky
produced a statement from the Russian Institute of the State and Law
that his activities were legal and that workers' rights were
protected, but this was ignored. He was arrested on July 4, 2001,
ostensibly to prevent him from fleeing the country. Evidence of his
intention to flee was a ticket to Munich purchased in his name on
July 8, four days after his arrest. With Ledovsky in prison, the
Russian Federation Property Fund sold the state interest in
Nevinnomissky Azot for $25 million, virtually the starting price, to
a group representing MDM.

Many of the principal oligarchic clans were united by their
connections to Boris Yeltsin and his immediate relatives, known
collectively as "the family." With the accession of Putin, however,
the family has faced competition from the "Leningraders", for the
most part associates of Putin and veterans of the intelligence
services. The basic situation, however, has not changed.

One of Putin's favorite oligarchs is Oleg Deripaska, the director of
Russian Aluminum, which produces nearly 80 percent of Russia's
aluminum. Dzhalol Khaidarov, a former close associate of Mikhail
Chernoy, a partner of Deripaska with close ties to organized crime,
described how the system works in an interview with Le Monde:

"You ask why Russian Aluminum gained one or another factory. They
will say that the shares were purchased. But if you look, you'll find
that the former shareholder is in prison, became a 'drug addict' or
disappeared. When I worked with Mikhail Chernoy, the group every year
gave bribes of $35 to $40 million dollars a year. It was always
possible to buy a judge, a governor, or a law. In the early 1990s,
they murdered. Now they prefer to file a case or put someone in
prison. They can do anything."

Live and Let Die

Besides lawlessness, the future of Russia is threatened by society's
disregard for human life. In the first place, the low value attached
to human life in Russia is reflected in everyday events. In Russia
today, there are 40,000 murders a year, three times as many as there
were in 1990. This gives Russia the second highest murder rate in the
world (after South Africa). Unfortunately, however, this figure may
be a serious underestimate. According to Russian demographers, in
addition to the confirmed murders there are another 40,000 violent
deaths per year in Russia in which the cause of death--murder or an
accident--cannot be established, and there are 20,000 cases a year
where individuals simply disappear.

According to the journal Demoscope Weekly, the figures for all
categories of violent death in Russia far exceed their Western
equivalents. A comparison of Russia and England, for example, shows
that a Russian is five times more likely to die in a traffic accident
than an Englishman, 25 times more likely to accidentally poison
himself (usually with alcohol), three times as likely to die in an
accidental fall, 31 times as likely to drown, seven times as likely
to commit suicide and 54 times as likely to be murdered.

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