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The Wild East

The Wild East

Mini Teaser: Sinking into poverty amid its natural riches, Vladivostok is almost totally controlled by organized crime.

by Author(s): David Satter

The bluish gray waters of the Golden Horn Bay separate Vladivostok like a moat from the more distant hills, and as the stiff winds blow in from the Sea of Japan, people and cars slip on the ice that coats the city's sidewalks and streets.

The striking vistas and the silhouettes of ships at sea give Vladivostok the feel of a portal to a better future, but the weathered wooden houses and concrete blocks that ascend the crests of hills are a reminder that the settlement Russia created here has never been worthy of its magnificent physical setting. Indeed, it is the contrast between the setting and the grim monotony of daily life that best characterizes this city, where all of the problems of contemporary Russia have reached their most extreme expression.

Home to the once formidable Pacific Fleet, Vladivostok is a place where heat, water, and electricity are now cut off at regular intervals, factories stand idle, resident workers have not been paid for months, and the majority of the population of 800,000 is isolated from relatives by air and rail fares that have become unaffordable.

And these are the least of Vladivostok's problems. Sinking into poverty amid its natural riches, the city is almost totally controlled by organized crime, which creates an atmosphere of generalized fear or, as Mayor Viktor Cherepkov put it, "grudging acceptance of the status quo behind which is terror."

No one feels this pressure more than Cherepkov. Every night, shortly before midnight, he leaves the headquarters of the Vladivostok mayoralty surrounded by armed guards, hurriedly descends the steps leading to the street and, with his guards, enters a waiting car for the ride home. The person Cherepkov believes would like to kill him is Evgeny Nazdratenko, the governor of the Primoriye Krai (region), who was also recently elected, although only after having created in the region a system of nearly totalitarian power.

For four years, the two men have struggled for control of the future of Primoriye and they embody two tendencies that, to varying degrees, are in conflict all over Russia. Nazdratenko, the former president of the "Vostok" mining company in the city of Dalnegorsk, embodies the tendency toward the criminalization of political and economic power and the despoiling of the country's natural wealth. Cherepkov, a former naval officer, is an heir to the democratic movement that overthrew the Soviet Union. He stands for honest practices and the demand that economic transformation take place within a framework of law.
Shortly after the freeing of prices in Russia in January 1992, 213 Primoriye factory directors formed an organization called the Primorsky Corporation of Goods Producers (PAKT). The founders sold the produce of their factories to PAKT at minimal prices, PAKT resold them at market prices, and the factory directors split the difference, using the money to buy up shares in factories as they became privatized. The founders of PAKT then began to seek control of the region's budget, quotas, and licenses, and to this end, they used their connections in Moscow to engineer the removal in May 1993 of Vladimir Kuznetsov, the region's governor, and his replacement with Nazdratenko, a member of the Russian parliament. Nazdratenko named the principal leaders of PAKT as his deputies.

Nazdratenko's advent to power marked the beginning of the rapid criminalization of the region. In October 1993, after the disbanding of the Russian parliament, the regional soviet (local council) in Primoriye was disbanded as well and Nazdratenko began to intimidate the press. In a case that stunned Vladivostok, a young reporter was kidnapped and tortured in a cemetery for nearly twenty-four hours after he aired an ironic political commentary on a local radio station.

The only problem for Nazdratenko was the election of Cherepkov as mayor of Vladivostok in the summer of 1993. Cherepkov, a deputy in the krai soviet, became famous for his role in exposing the conditions at the Naval Base on Russky Island near Vladivostok, where four sailors died of starvation and nearly a thousand others had to be hospitalized. In the mayoral election campaign, he denounced local corruption and defeated eighteen other candidates, receiving more than 67 percent of the vote.

It was foreordained that Nazdratenko and Cherepkov would find it impossible to live together. The region was preparing to privatize state property--buildings, factories, fishing and refrigerator fleets, and harbor terminals--under circumstances in which there would be no legislative oversight or a free press. The privatization process, too, inclined to favor the interests of those tied to the criminal world. But Cherepkov had made it clear that he was ready to fight against corruption and refused to accept gifts of any kind, even flowers.

The system of corruption that developed in Primoriye under Nazdratenko resembled the tentacles of an octopus with the krai administration as the animal's hungry maw. One tentacle was the creation of a network of intermediary firms under the krai administration's control through which it was possible to buy supplies. Another was the outright theft of budgetary funds or their deposit for long periods at interest in commercial banks. Still another was the granting of leases on strategic real estate in return for bribes, usually from members of the criminal world. And another was the granting of fishing quotas in return for bribes.

When Cherepkov took office, he tried to fight these practices. He learned that buildings in the historic center of the city were being rented for almost nothing. He responded by introducing competitive bidding for leases, thereby filling the city budget and eliminating abuses but evoking the fury of the krai administration. He also tried to learn the puzzling details of the krai's purchases of oil products and he began to eliminate the middlemen in the production and sale of bread.
All of these actions intensified his conflict with the krai administration and his personal conflict with Nazdratenko. Soon the mayoralty on Ocean Prospekt, known as the "grey house", and the krai administration building a few blocks away on Svetlana Street, known as the "white house", became the command posts of two warring administrations, with the latter trying to deprive the former of its sources of revenue.

On February 6, 1994, Cherepkov was visited by a man named Volkov, who presented himself as an Afghan war veteran and requested an office for an Afghan veterans' organization in Primoriye. Cherepkov instructed his staff to look into the matter. Four days later, Volkov approached Cherepkov as he was leaving work and thanked him for giving him an office. Cherepkov said, "You could not have received an office." Volkov said, "I've never received such hospitality as I've received from you." He then took off the blue beret he was wearing, threw it on Cherepkov's table, turned and quickly left. He later stated that the beret contained money. Volkov, who had depicted himself as a businessman from Nakhodka, was later revealed to be Valery Bugrov, a senior police lieutenant in the Spassky district of Vladivostok.

On February 11, a search began in Cherepkov's office. In the course of the search, police found 1.2 million rubles wrapped in a tube, along with a piece of paper that "Volkov" later claimed was used to wrap the money that he gave to the mayor. At the same time, a search was carried out in Cherepkov's home, where, in the torn pocket of an old coat, police found one million rubles in an envelope and, on a bookshelf, a Swiss Omega watch.
At 5 a.m., Cherepkov was removed from the mayoralty at gunpoint and taken to the city procurator, Vyacheslav Yaroshenko, who was expected to sanction his arrest. Yaroshenko, however, found it hard to believe that Cherepkov had accepted a bribe. In the end, he refused to sanction Cherepkov's arrest and, in this way, probably saved his life. Cherepkov had been warned by an anonymous caller that a cell was ready and that, if he were arrested, he would be murdered in jail with the killing made to look like a suicide.

The removal of the elected mayor led to protests in Vladivostok. Eventually the case against Cherepkov was taken out of the hands of the local procurator and transferred to the Moscow office, where the investigation turned up ample evidence that Cherepkov had been the victim of a provocation. Cherepkov's fingerprints were not found on any of the items that were said to have been used to bribe him. Instead, experts found on the money and the paper wrapper the fingerprints of the persons who were conducting the case against him. Two of the civilian "witnesses" who had been present at the search of Cherepkov's office turned out to be the wife and nephew of the man who was conducting the investigation, Vladimir Dudin. In the end, instead of charging Cherepkov, the general procurator charged Dudin and three police officers with fabricating a case. They are now awaiting trial.

Nazdratenko, however, appealed to President Boris Yeltsin to fire Cherepkov despite the mayor's exoneration. Within two days Yeltsin signed a decree removing Cherepkov for the "lengthy nonfulfillment of his duties." According to information from Interior Ministry sources quoted by Izvestiya, a bribe of four billion rubles was paid by the krai administration to members of the presidential administration to obtain the decree. Cherepkov then left for Moscow to spend the next year and a half fighting for his reinstatement, while Nazdratenko tightened his grip on Primoriye.

The expulsion of Cherepkov from office and his subsequent removal as mayor, even in the absence of criminal charges, had demonstrated that Nazdratenko was now unchallengable, and the business activities of the krai administration soon made the same point. Connoisseurs of budgetary matters observed that in 1994, 40 percent of the budget of the krai (about 350 billion rubles) was covered under the heading of "other expenditures." What was included under this heading was later partly established by nearly fifty commissions sent from Moscow to examine the financial activities of the krai administration:

--The krai administration received a billion rubles from the government for the delivery of food products to the north. The products were never received and the money never accounted for.

--The federal government approved a cross-border barter deal as payment for Chinese firms participating in the construction of the Ussurisk electric heating station. Metals and fertilizer worth 3 billion rubles were exported. Russia, however, received in exchange goods with a value of only 500 million rubles. What became of the remaining 2.5 billion rubles was never established.

--An associate of Nazdratenko, Andrei Zakharenko, received an interest-free loan of $1.5 million to catch crab and caviar, supposedly to feed the poor. The fish products were never delivered and the money never returned. Shortly after a commission was named in Moscow to investigate the matter, Zakharenko was killed by a bomb placed in the entrance of his apartment building. Krai officials later explained that the crab and caviar had been purchased but lost in the Kobe earthquake.

In addition to a tendency to misplace money from the federal budget, the krai administration bought supplies at exorbitant prices from intermediary firms that they controlled. Oil supplies, for example, were bought from a plant in Komsomolsk on Amur instead of from suppliers in Eastern Siberia whose prices were 30 percent lower. This practice was authorized by another vice governor, Mikhail Chechelnitsky, who directed a firm financed from the budget of the krai that represented the interests of the plant in Primoriye.

A special federal investigative commission began looking into abuses in the purchase of oil products and mentioned Chechelnitsky. Soon afterward, the thirty-seven year-old died suddenly, reportedly after taking tea in Nazdratenko's office. The autopsy report listed the cause of death as a heart attack, but his body was later disinterred and reburied, giving rise to rumors that it had been cremated to head off a possible court-ordered exhumation.

The krai administration established close ties with Primoriye's criminal groups, many of which acquired vast real estate holdings in Vladivostok. The most important gang in the region became that of Sergei Baulo, who came to Vladivostok from Dalnegorsk at the same time as Nazdratenko. At first, Baulo was little known and little noticed, but he set up office next door to the building of the krai administration and his power in the criminal world began to grow rapidly.
According to sources quoted in Izvestiya, it was Baulo who collected from the criminal world the four billion rubles paid to the presidential administration to arrange the decree removing Cherepkov. Additional money was also collected and reportedly appropriated by a campaign organizer. Baulo was in a position to name this person but, some months later, he became mysteriously ill while scuba diving and died on the way to the hospital.

Nazdratenko's corruption was extreme even by the standards of contemporary Russia, but despite the reports of innumerable federal commissions attesting to it, no action was ever taken against him. One of the reasons was that Nazdratenko enjoyed the backing in Moscow of Alexander Korzhakov, Yeltsin's bodyguard and tennis partner, and of Deputy Premier Oleg Soskovets.

Cherepkov, meanwhile, entered a judicial maze in Moscow in his efforts to have the decree removing him from office overturned. According to the Russian Constitution and the law on local self-government, the president did not have the right to remove a legally elected mayor. But Cherepkov, who by now was living in a single room in Moscow, made no headway in the courts.

In the end, the situation in Primoriye was changed not by the efforts of Nazdratenko or Cherepkov but by a change in the power balance in Moscow. In June 1996, on the eve of the presidential election, Yeltsin resolved the feuding in his entourage by firing Korzhakov, Mikhail Barsukov, the head of the Federal Security Service (FSB), and Soskovets. Anatoly Chubais, the former chief of the privatization effort, became head of the presidential administration. The significance for Primoriye was clear: Chubais was an enemy of Nazdratenko.

The corruption in Primoriye led to labor unrest in the region. The failure of the krai administration to pay Dalenergo, the state power company, with money provided from the federal budget had left the company unable to pay the miners who supplied the krai's power stations with coal. The miners, in turn, began to strike, forcing cutbacks in electricity that also affected the pumping stations, depriving residents of water. In January 1996, Yeltsin ordered 60 billion rubles to be paid to Primoriye's striking miners, but in fact only a third of the money was used for that purpose. Nazdratenko claimed that the other 40 billion was used to pay the energy workers.

In an apparent move to demonstrate that he was in control, Chubais began to take action against Nazdratenko. On August 14, a Moscow district court restored Cherepkov to his post as mayor, ruling that Yeltsin, with his decree firing Cherepkov, had violated eight articles of the Constitution, three federal laws, and five of his own edicts defining the procedures for local self-government. On the same day, another presidential decree informed Nazdratenko about his "incomplete" fulfillment of his duties and gave him a month to bring the energy situation under control. This seemed to presage the removal of Nazdratenko. However, the krai Duma, which is filled with Nazdratenko loyalists, denounced the central authorities and scheduled a referendum on public trust in Nazdratenko for September 22.

Cherepkov, meanwhile, prepared to return to Vladivostok to take back his job as mayor, despite warnings that he ran the risk of being killed. In the end, the federal government backed off on its implicit threat to remove Nazdratenko. Cherepkov returned to Vladivostok accompanied by a security detail made up of Chechen war veterans provided by Chubais. Thus the stage was set for the region's present cold war.

The situation in Primoriye has now settled into a kind of nervous somnolence. Governor and mayor do not meet, and Cherepkov has received information that a contract for $100,000 has been offered on his life.

The term of the krai Duma, which is dominated by Nazdratenko supporters, expired on January 15 but members have refused to leave. Instead, rejecting protests from the krai procurator, they have voted to extend their term for a further two years and are preparing to impeach Cherepkov.

Nonetheless, Cherepkov has had some successes. He ameliorated the energy crisis in Vladivostok shortly after reclaiming his mayoral office by paying for coal and fuel directly, without the benefit of intermediaries. The city came through the winter with minimal disruptions compared to previous years. Cherepkov has also expressed his determination to establish free public transport, a fixed price for bread, and a new municipal legal code. These proposals have made him a hero to many of Vladivostok's poorest citizens. What he has not done, however, is stem the massive plundering of the region's wealth. Such plundering, according to some federal commissions, threatens the economic well-being not just of Primoriye but of Russia as a whole.

Primoriye is very rich in natural resources. The Sea of Okhotsk, which is almost surrounded by Russian territory, is considered the most fertile fishing ground in the world. The Russian Far East accounted for 15 percent of the world's gold production in the mid-1980s and nearly a quarter of its diamond production. The timber reserves of Primoriye and two other Far Eastern regions, Khabarovsk and Amursk, are estimated as equal to about half the timber reserves of the entire United States, including Alaska.

But the region is mired in a poverty that seems ineradicable. Vladivostok is where the Soviet culture of universal equality and mass poverty reached the Pacific, and despite the new restaurants and casinos, and the Japanese and Korean goods in the stores, that culture continues to define most people's lives. One still sees laundry hanging out to dry from the balconies of gray apartment buildings, patches of dirt roads and wooden houses on barren hills, and dented, unwashed streetcars and packed buses plying the streets.

For the natural wealth of the region to begin to be used, it is necessary not only for Nazdratenko to be removed, but for the whole system that he helped to put in place to be uprooted. Nazdratenko could be removed if a criminal case were started against him by the general procurator. But given the resilience of his Moscow connections, a far better bet for reform is his being voted out of office in an election contest with Cherepkov.

Such an election could mean the dawn of a new day for Primoriye, which now has the feel of occupied territory. For it to happen, Cherepkov will have to show more skill both in handling the city's problems and in assuring his own physical security than ever before.

Essay Types: Essay