THIEVES' WORLD The Threat of the New Global Network of Organized Crime CLAIRE STERLING No one has benefited more from the political changes of the 1990s than international organized crime. Within the space of just three or four years, the world's great crime syndicates have joined in a planet-wide criminal consortium unlike any in history. A Pax Mafiosa has emerged— an agreement to avoid conflict, devise common strategy, and exploit the planet peaceably togeth- er—linking the American and Sicilian mafias, Russian organized crime, the Chinese Triads, the Japanese Yakuza, and Colombia's cocaine cartels. It threatens the liberty, security, and political integrity of the U.S., Europe, and all free societies. For these giants of the underworld, the creation of the European Community in Western Europe and the collapse of the Soviet Empire in the east have erased borders and made the commerce of crime easier than ever. In Thieves' World, outstanding international investigative reporter Claire Sterling traces the stunning advance of this global criminal enterprise since 1990: the proliferation of its criminal interests and growth of its investment capital to a quarter of a trillion dollars, its deepening penetration of worldwide money markets, its spreading powers of blackmail and corruption, and its alarming colonization of Western Europe and America. Above all, Claire Sterling describes the great shift of worldwide criminal attention to eastern Europe and Russia, showing how a country covering a sixth of the earth's land mass has been taken captive by the mafias of the world in partnership with Russian criminals, looting the nation systematically, crippling its economic capacity, contaminating its body politic, and suffocating its political will—all at enormous peril to the West. CLAIRE STERLING, an American foreign correspondent, has been based in Italy for over thirty years. She has reported on European, African, Middle Eastern, and Southeast Asian affairs for The Atlantic Monthly, The New York Times Magazine, The Reporter, Life, Reader's Digest, Harper's, The New Republic, The Washington Post, The International Herald-Tribune, and The Financial Times of London. She is the author of The Terror Network, which was published in twenty-two countries, The Time of the Assassins, and most recently, Octopus. She lives with her husband in Tuscany, and has a son and daughter and two grandchildren. ACKNOWLEDGMENTS I am grateful as always to Dr. Alessandro Pansa of the Servizio Centrale Operativo; he is one of Italy's most gifted policemen. I am indebted once again to Maria Antonietta Calabro of the Corriere della Sera for her meticulous accuracy, knowledge, and judgment. My warm thanks to Joe Serio, who started me on my way in Russia; to Gianna in Moscow; to Rita Wallace in Bonn; and to Dan Starer in New York. A special word of thanks to Jurgen Maurer of the Bundeskriminalamt in Wiesbaden; to Charles Saphos of the U.S. Justice Department, who was ahead of me from first to last; and to Jim Moody of the FBI for his patience and generous assistance. I have no adequate words for my gratitude to Judith Crist, my old and dear friend. CONTENTS Prologue, 13 PART I: THE NEW UNDERWORLD ORDER Chapter One: Happy Families on Treasure Island, 21 Chapter Two: After the Wall, 35 Chapter Three: Crime Without Frontiers, 49 PART II: A MEETING OF LIKE MINDS Chapter Four: The Sicilian Mafia Looks East, 69 Chapter Five: The Russian Mafia Looks West, 90 PART III: THE PAX MAFIOSA Chapter Six: In Europe, 117 Chapter Seven: In America, 142 PART IV: THE GREAT RUBLE SCAM Chapter Eight: The Buildup, 169 Chapter Nine: The Deal, 176 Chapter Ten: The Payoff, 197 Chapter Eleven: The Spinoff, 210 PART V: THE PROBLEM OF THE SOLUTION Chapter Twelve: Getting the Money, 229 Chapter Thirteen: Trust Thy Neighbor (If You Can), 244 Notes, 255 Bibliography, 289 Index, 291 11 PROLOGUE When I finished writing Thieves' World in the autumn of 1993, a few words from a high authority in Washington provided the epilogue. "We think they have given the United States to Yaponchik," he told me.1 "They" are the men guiding the Russian mafia in Moscow. Yaponchik is one of their three most powerful leaders. The idea that a so-called Russian mafia could "give" the United States to a certain Yaponchik would have been laughable only a couple of years ago. Nobody in the West had heard of Yaponchik; not many had heard of a Russian mafia for that matter. The rise of both within a few years—their ability to stake out whole blocks of the planet, half a continent here, another there— conveys all the menace of an international crime community in a phase of stunning expansion, threatening the integrity and even the survival of democratic governments in America, Europe, everywhere. I had watched it happening from the time I began working on this book in 1990. The book was supposed to have been about a predictable surge of organized crime in Western Europe as its inner borders went down. But such simple notions were soon swept 13 PROLOGUE aside by the uncontrollable forces set loose in the course of that momentous year. Organized crime was transformed when the Soviet Empire crashed, and with it a world order that had kept mankind more or less in line for the previous half-century. As the old geopolitical frontiers fell away, the big crime syndicates drew together, put an end to wars over turf, and declared a pax mafiosa. The world has never seen a planetwide criminal consortium like the one that came into being with the end of the communist era. Perhaps something like it would have come sooner or later anyway. Most of the big syndicates had worked with one or more of the others for years, the Sicilian Mafia with all of them. But the opportunities opening up for them in 1990 were immense—fabulous—and they responded accordingly. International organized crime, an imaginary menace for many in 1990, was a worldwide emergency by 1993. The big syndicates of East and West were pooling services and personnel, rapidly colonizing Western Europe and the United States, running the drug traffic up to half a trillion dollars a year, laundering and reinvesting an estimated quarter of a trillion dollars a year in legitimate enterprise. Much of their phenomenal growth derived from the fact that they had the free run of a territory covering half the continent of Europe and a good part of Asia—a sixth of the earth's land mass, essentially ungoverned and unpoliced. The whole international underworld had moved in on post-communist Russia and the rest of the ex-Soviet bloc: raced in from the day the Berlin Wall fell. Where Western governments tended to see Russia as a basket case, the big syndicates saw it as a privileged sanctuary and bottomless source of instant wealth. Russia had a runaway black market, a huge potential for producing and moving drugs, an enormous military arsenal, the world's richest natural resources, and an insatiable hunger for dollars of whatever provenance. Furthermore, it had a rampant mafia of its own, in need of Western partners to make the most of these prospects. Even before the Soviet Union disintegrated altogether, the Sicilian, American, Colombian, and Asian mafias were hooking up 14 PROLOGUE with the Russian one, forming a borderless criminal underground that circled the globe. All have been growing prodigiously rich since then by swapping their dirty money for Russia's real estate, factories, shops, and above all weapons and raw materials, bought on the cheap and sold for up to a thousand times more abroad. Twenty billion dollars' worth of raw materials alone were exported illegally from Russia in 1992: petroleum, timber, titanium, cesium, strontium, uranium, plutonium. Thousands of crooks and swindlers were involved, native and otherwise, many of them loners. But the big player was the Russian mafia and its foreign partners. Though these last were making and laundering ten times as much in the rest of the world, this was the easiest, safest, and most miraculously lucrative way ever invented. Colombia's cocaine cartels are paying twenty cents and more on the dollar to bring their drug money home clean today. The Sicilian Mafia makes more by laundering it for them in Russia than by dealing the cocaine itself.2 And this is undetectable investment capital when it comes out of Russia, filtering into money markets, stock and commodity markets, business, industry, and commerce, largely in the West, helping to underwrite the most massive and insidious criminal assault in history. Western authorities are staggered by the strength of the attacking forces and the speed of their advance, driven home by the Russian mafia's startling performance. It took just two years for Yaponchik to move from a prison camp in Siberia to the Russian mafia's top command in New York. Russia's Serious Crimes Investigator had warned me of something like this. "You people in the West don't know our mafia yet. You will, you will," he had said. He did not say how soon, however. Yaponchik (Vyacheslav Ivankov) had barely gotten out of prison when I first went to Russia in the autumn of 1991. Sentenced to fifteen years for robbery, he had done eleven. He left Siberia in a private chartered plane and was welcomed home with a grand champagne party at Moscow's posh Metropol Hotel.3 For Yaponchik was no ordinary Russian crook. He was one of the chosen of Russia's ancient Thieves' World, according to Russian police, an 15 PROLOGUE aristocrat of his profession and keeper of its code: "a thief within the code." (See Chapter 5.) By the time I came across his name that autumn, he had already moved on to Berlin where his mafia colleagues had landed in force after the fall of the Wall.