The Vory: Russia’s Super Mafia

DATE: 17:00 – 18:00, Monday 23 April 2018
VENUE: The Henry Jackson Society, Millbank Tower, 21-24 Millbank, London, SW1P 4QP
SPEAKER: Dr. Mark Galeotti, Senior researcher at the Institute of International Relations
Author of “The Vory: Russia’s Super Mafia”
EVENT CHAIR: Edward Lucas, Senior Vice-President at the Center for European Policy Analysis (CEPA) Former senior editor at The Economist

Good afternoon, ladies and gentlemen, and welcome to the Henry Jackson Society. My name is Andrew Foxall and I oversee the Russia and Eurasia programme here. I am delighted that this afternoon we have with us two genuine, I think it is fair to say, experts where Russia is concerned. Mark Galeotti, senior researcher at the Institute of International Relations in Prague and Edward Lucas, now former senior editor at The Economist. The point of today’s discussion really is first of all to mark the release of Mark’s book, The Vory: Russia’s Super Mafia. I am sure many of you will have seen the great reviews that have been written on it, included by Simon Sebag Montefiore in the Evening Standard. Mark will give a 10-15 minutes introduction of his book, cover some of its key themes and Edward will then respond and serve as a discussant in part. We will then open up the floor to question and answers.

First of all, please join me in welcoming both our guests. [Applause]

Do I actually have to use this microphone? I apologise, I have a stinking cold but will try and croak my way through an introduction. I will not try and give my splendid book full justice, because you should go out and buy it. What I really want to do – because the book covers the sort of full historical trajectory and the different variations and nuances of Russian gangsterdom – what I really want to do is focus on the present day and one particular aspect thereof that I think is salient for those of us who do not live in Russia, which is precisely the relationship of the state to organised crime and the growing indications that we have of the fact that the Russian state is using organised crime as an instrument. That is really where I am going to focus, but obviously happy to answer questions on any aspect if you are really interested in late 19th century horse thieves or whatever.

We often see Russia described as a mafia state. It is a really nice, snappy line. Maybe because I am an academic pedant, I am not entirely happy with it because I think it conceals more than it actually reveals. One would imply from that either the state is completely controlled by organised crime or that the state completely controls organised crime. Neither of these is quite the case. We have a situation in which there is a regime dominated by an elite which is clearly a kleptocratic and indeed thoroughly unpleasant collection of individuals. However, to think that Russia is simply about the money is, I think, an mistake. Look at Putin, he is not a man likely to retire to the life on a Caribbean island and a life of golfing and yachting. This is a man whose vices are primarily about power and whose interests are also about historic legacy and his self-identified mission to make Russia great again. You have this interesting tension between a ruler who – let’s be honest, does not need to worry about money because he has all of the Russian Federation as his piggy bank – and who is primarily there for, it is almost kind of like an autocrat’s Maslow’s pyramid of needs. You have all the money you want, but then you want power – global power. His views are primarily dominated by his political agenda presiding over an elite who is essentially kleptocratic, which in many cases is frankly discomforted by Putin’s new crusade against the West, but can do nothing about it. We talk about oligarchs. Another problematic phrase. It made more sense in the 1990s when the people we call oligarchs were independently rich and powerful. Now if you are a rich and powerful Russian, you are a rich and powerful Russian as long as the state is willing to allow you to be a rich and powerful Russian, or until the point when a more powerful, sharper tooth predator in that particular eco system decides otherwise. That has been the case frankly since Khodorkovsky and been particularly illustrated by the whole Ulyukaev affair.

This is not a state that is purely dominated by economic interests, in that respect. Conversely, this is not a state that completely controls organised crime; sometimes we see this ‘oh, well the FSB and the federal security service controls organised crime’, whatever, but not really. That is not the way things have worked out. What Putin has done has been to domesticate organised crime. It is still there, it is still doing its crimes, but we saw this right at the beginning of his presidency, 1999 – 2000. You know, he came to power on a very strong law and order platform, and a lot of people believed it. I remember talking to one very senior criminal who literally did the thing of sleeping with a packed suitcase under his bed, so that if one of his informants in the local police said ‘you are going to be arrested’, he could grab that, head to the airport and get out. He never had to use that suitcase. It very quickly became clear that Putin did not have a problem with organised crime. What he had a problem with was anything that challenged the state. It is interesting, it is something I heard from both sides – both people from the underworld side but also someone who is from Moscow police who is responsible for putting out the word.

Instead, this new social contract was in effect created. You will do your crimes and the police will try to catch you, however if you do anything that looks like a challenge of the state you will be treated as an enemy of the state, which is a much more uncomfortable thing to be. For example, we had during the Second Chechen War a very clear message put out to the criminal diaspora of Chechens that do not let us get any sense that you are providing guns or money or people to the rebels. There was a gathering of the elders of the Chechens, [inaudible], a criminal community and they decided they had too good a thing going on and therefore they would abandon Chechnya to its own devices. Interestingly enough, the only case that we have pretty good evidence of for example al-Qaeda money – you remember al-Qaeda, it was great War on Terror once upon a time, before it was replaced – when they provided money to buy guns for the rebels, it was actually a Slavic Russian gang that took that. When it was offered to the Chechens, they said ‘we are alright, thank you very much.’

Likewise, the overt, extravagant violence on the streets which so marked the 1990s, that was no longer acceptable because that made it look as if the state was no longer in control of the streets. Interestingly enough, the number of contract killings by organised crime in 2016 was almost the same level as in 1996, but we heard about it much, much less and people cared about it much, much less. Because in 1996, it might have been by a drive-by shooting, a machine-gunning of a restaurant, a car bomb that also wipes out half a dozen of civilians. 2016 it is just the target, the targets drive a bodyguard and no one cares, because they think ‘well, if they killed you it is because you are in that world anyway’, one less thug.

So, the state sets the rules and so long as organised crime appreciated that it was dominated by the biggest gang in town, which is of course the state, everything is fine. However, now we have this increasingly sharp geopolitical competition. Obviously, we saw the signs before, but especially since 2014. We have Putin who is trying to leverage a country with an economy smaller than Spain’s, a dramatic lack of soft power and so forth, and try to force us recognise it somehow as a global power. As a result, the Russians have become tremendously efficient in looking at every single instrument that is available. What Putin has created in effect is something I would like to call a mobilisation state. This is not totalitarianism, it is not North Korea, there is private business and civil society, there are journalists doing journalist things. However, like most states in a state of existential war, and let us be honest, Putin regards Russia as, wrongly clearly, in an existential struggle for its place in the world, for its distinctive civilisation, all these kinds of things. As far as Putin is concerned, any element of Russia, any institution, any individual, can be asked, required, to do what the state needs. Whether that is an oligarch, who needs to stomp out money to support some populist movement or alternative media website, or whether it is a journalist required to push a particular line over MH17 or whatever else; whether it is a bank required to create a new position to provide cover for a spy – all these things. When the state asks, you do.

Organised crime is by no means exempt from this. We see more and more examples of the use of Russia’s widespread organised crime for state purposes, and why this is particularly important is because Russian organised crime is the most transnational of all various global phenomena. It is in some ways the first truly post-modern, post-industrial mafia. It has established itself, not in terms of dominating territory outside of Russia, but instead of dominating markets. It is the wholesale supplier, the service provider, to the mafias of the world.

Take a look at the UK – very, very little evidence of what we might think of as Russian organised crime being done on the ground. It is not the Russians selling heroin, even though a third of the heroin that comes to the UK comes via Russia. It is not Russia doing all these other kinds of crimes that tends to get caught by the police. Often when you track back – where do they get their heroin, where do they get their trafficked women, where do they launder their money and so forth – it is clear that there is a very strong Russian connection. That is how the Russian organised crime world has expanded, by becoming service providers to everyone else’s gangsters. That means they are particularly prevalent even they are invisible on the streets.

We have seen a whole host of individual cases – for me, still the most striking was when we saw the Estonian security officer Eston Kohver kidnapped in a particularly brazen cross-border raid by Russian, they are all security commandos. He was not even involved in, or deemed to be, intelligence activity, he was investigating cigarette smugglers. However, it later transpired that those cigarette smugglers were being used as a) low-level intelligence assets by the Russians and b) as part of the price for being allowed to traffic across the Russian border without hindrance, they were in effect being taxed. A certain proportion of their profits went into ‘chyurnaya kassa’ – black accounts – moneys that had no clear Kremlin fingerprints, which could then be used for whatever active measures or intelligence activities Russia desired.

We have seen assassinations in Turkey of Chechen fundraisers, some obviously by Russian state officials – agents – but others by criminals hired for the purpose. We have seen a host of cases, I am not going to go through the whole list, but we have seen a proliferation of these cases. That does not mean that every Russian gangster is a part-time Russian spy any more than every Russian financial institution is necessarily, all the time, being used as an instrument of the state. What it does mean, though, is that we can never be quite sure, because the point is – the way it works – is when the Russians want something done they will look at what instruments are at their disposal and use whichever ones suit them the most. Maybe today, here, it is a spy. There, it is military operations. Somewhere in between, it might be criminals. I think this is the nature of the challenge that we face and it is something that I have tried to sketch out in the book and other writings of mine: not only do we face a problem with the fact that Russian organised crime act as a force multiplier for underworlds elsewhere, where they acquire access to the services and goods that they would not otherwise and therefore become more efficient and harder to police, but that they can also be activated when necessary by the Kremlin as instruments of the state. I think I will stop here.

Thank you very much, Mark. Edward, over to you.

Well, thank you very much, indeed, for the chance to share the platform and some thoughts. Mark is too modest to promote his book bluntly, but I will do so. Please buy one copy for yourself and another copy for the most influential person you know, whether that is an MP or a senior official or someone else and then beat them over the head with it until they read it. This is absolutely vital reading, not only for understanding Russia but also for understanding the difficulties we face from the hybrid warfare threat from Russia. I reviewed Mark’s book in The Times a couple of weeks ago, and that is why I have a copy like this whereas you all have nice ones and mine is full of my extremely scruffy notes and some of the points I wanted to make in the review I did not have room for so I might make a couple of that. I think the first and most important one is that there is often a misunderstanding in the West where we think that there is a tension between of what one might call the spooks and the crooks and that is the way to understand Russia.

On the one hand, they have these dreams of being a great power again, restoring a sphere of influence, regaining respect, being treated as a superpower – on the other hand, they just want to steal money. And that somehow if we can exploit the difference between these two aims, that would be the way of sorting things out and I am not sure that is quite right really. I think that it is true at some level – that you have Russians who simply want to get rich and you have others who are fairly uninterested in stealing and are very interested in other things – but I think seeing this as a fundamental dichotomy within the Russian state is a mistake and leads us into a rather simplistic approach on sanctions, when we think sanctions are really very simple. You apply sanctions to the Russian elite, the Russian elite will then say to Putin ‘your foreign policy is costing us money’ and Putin will then say ‘oh, dear, sorry I will not do that anymore’ and give back Crimea to Ukraine. It is a lovely political science approach, but I think it is not the way it works. We can maybe get into that a bit more in the discussion, that Russia is both a kleptocracy and a spookocracy. One has to see it in both ways. Although there is some tension, more important is to see these things as reinforcing themselves.

As Mark says in his book, the state is the biggest gang in town. Although the state does not act like an organised crime gang in the sense that it has supposedly elected politicians, supposedly appointed officials and things that look like structures, and it does not make its money simply from terrorising car parks, trafficking women and running other kinds of traditional organised crime operations. Actually, the way it works is very much reminiscent of an organised crime gang and perhaps the best example of that is if you look at the case of Sergey Magnitsky. I guess everybody in the room knows this story of a whistleblower who came across an enormous fraud, not perpetrated against a western investor but perpetrated against the Russian taxpayer – 230 million dollar tax refund paid out in one lump on Christmas eve. As someone who has run an organisation in Russia and knows what it is like dealing with the tax authorities, I can tell you that getting any money out of them for anything, however good your case is, is extremely difficult and to get a totally unjustified tax refund on Christmas eve is a sign of very good political connections and indeed, that was what it was.

It was a bunch of people in the perversely named Department for the Prosecution of Economic Crimes, in the Interior Ministry, which was actually not prosecuting economic crimes but perpetrating economic crimes – in this case against the Russian tax payer. Poor Mr. Magnitsky was told, that if he would switch sides and blame his former employer Bill Browder for this fraud then he would be let out of jail, otherwise he would stay there. Indeed, he refused to do that very admirably and was beaten to death after a year of ill-treatment, which is why we know have these Magnitsky sanctions. Please park on one side any tendency you have to think that this spook-crook dichotomy is the way to understand Russia.

What is more important is to realise how organised crime is part of the hybrid warfare toolkit. It is part of the hybrid war that the Russian state is waging against its own people, where they use both gangsters and gangster-like [inaudible], but it is also part of the hybrid warfare, which they wage against the West. As Mark said, and this is absolutely vital, you cannot tell. When you look at someone claiming to be a Russian orthodox priest, he may well just be a Russian orthodox priest ministering the diaspora abroad, or they may be running a scam or they may be an intelligence officer or they may be something else. When you meet someone who looks like a banker, maybe he is just really a banker, maybe he is also an intelligence officer, maybe he is also, or she, running a money laundering scam. You meet someone who is a Russian lawyer, as indeed happened in the United States a couple of years ago, and she may indeed be a Russian lawyer, maybe trying to sell information or may also be a Russian intelligence officer and maybe some organised crime connection too.

That is the difficulty we have, that in our system we think very much in terms of silos. Mark is a professor, that means he does professor kinds of things, Andrew is a think tanker, I write books. We have a diplomat here, we have a [inaudible] official here, we have business people here, and we think that these are fairly clear categories and that is what makes our system what it is and worth defending: a policeman is not also involved in organised crime, a politician is not also an intelligence officer and a banker is not also involved in promoting money laundering, actually perhaps that is the case down the road in the City of London.

We have these quite clear professional, ethical, legal boundaries between different bits of our system and those bits are blurred in Russia. One of those blurrings are between the world of organised crime and the rest of society. Mark portrays in his historical bits, which he was unfairly dismissive of, the absolutely brilliant way he describes it, the way in which alcohol prohibition under Gorbachev gave the gangsters a chance to become respectable. Whereas in the 60s and 70s and early 80s, no respectable middle class Russian member of the intelligentsia wanted anything to do with people who had bits of their body missing, tattoos and spent a lot of time in jail. Suddenly, these were the people who would get you the vodka you needed to celebrate your daughter’s wedding or indeed son’s wedding. The way in which that perestroika sort of botched the reforms of the Gorbachev era allowed the mafia, which had been forged in the Gulags, penetrate into the rest of society with results we live with to this day. It is very well displayed there.

The third important point, I think, is that we often criticise Russia, rightly, for failing to globalise properly. It is not part of the sophisticated, modern, globalised economy. If you look at global supply chains, maybe you buy some nickel, maybe you buy some aluminium from Rusal, possibly buy some weapons if you are the Syrians, or actually they get them for free. It is quite rare to find places where the sophisticated part of the world economy have deep roots within Russia. Maybe aerospace and space and so on, these are exceptions rather than the rule. The really big exception to this is the world of organised crime. I just want to read you a particularly good paragraph here from Mark’s book, which on my copy is on 197, but you will buy the book and read it.

He says, ‘The Russians are willing to deal with other criminals of near enough any type of ethnicity or structure. It is an irony that gangsters from a society in which racist, even xenophobic, views are still quite common, are the new internationalists. Eager to cut deals with anyone and happy to recruit not just agents but partners outside of their community. A genuine credit card fraud helps to illustrate the extent to which Russians have seamlessly integrated themselves into multinational enterprises. A Vietnamese shopkeeper in California would covertly duplicate a customer’s credit card information. This was then transmitted to Chinese criminals in Hong Kong and next to Malaysia. There the data was embossed on false credit cards. These were couriered by air to Milan where near [inaudible] gangsters from the Camorra sold them to a Russian group in the Czech Republic. The cards were then flown to Prague and distributed to agents who flew out to the major cities of Europe where they almost, but not quite, maxed out their cards buying luxury goods. These goods were then flown back to Moscow for sale in retail outlets. What could be a better example of today’s global supply chains?’

Plenty more of fascinating stuff like that in the book which is on sale for a mere —

15 pounds.

15 pounds. So that is the interplay between Russian organised crime and abroad. It is often overstated and Mark makes the point that the great worries we had in the 1990s about the remorseless way in which Russian organised crime extended its tentacles from so-called Eastern Europe to Central Europe into Western Europe, those fears appear to have been rather unfounded and instead the foreign presence was a bid for a foreign leader, a cost centre rather than a profit centre. We can get on to that in the discussion.

I want to finish off with two questions for Mark. One is a philosophical one, where he said that the Russian state – if you can call it that, or a ruling gang or a regime or whatever other phrase you would like – will tolerate crime as long as it is not a challenge to the state. I would argue, and maybe this is a naïve Western question, but it may occur to many people and I would like an answer to it: is not all crime a challenge to the state? Crime inherently breaks the state monopoly of violence. If you are beaten up for not paying money into a protection racket, that is a breach of the state’s monopoly of violence. Only the state is allowed to do things to you like take away your property and lock you up. If there are alternative power structures, who exercise political economic power, that is a rival to the state.

The second question, which is more practical than philosophical, is what to do? Imagine that you have been transposed here, down the road to the Home Secretary’s office in Marsham Street. You are sitting there opposite Theresa May and she says ‘I do not have anything on my desk at the moment – no particular worries – I have got plenty of political capital, the government is really ready to go with a nice, big project and I have decided to make the big project Russian organised crime. Give me a to do-list. What do I have to do?’

Excellent. Brilliant stuff, Edward, thank you very much indeed. Mark, I was going to invite you to respond to Edward’s points anyway, but start with the questions if you wish or some of the broader points that he makes.

Sure, well, given that they are such easy questions I will be able to dispense from them very quickly.

In terms of is crime an inherent challenge to the state, I think even by saying that you will actually again be sort of displaying Western silo-ing. Look, the Russian state, the reason why it is such a tactically effective user of hybrid war, is because it is a hybrid state. It does not operate by the same basics of precepts that we have adopted in the West. It does not regard a gangster beating someone up for not paying a debt as a challenge to its monopoly of violence because it chooses not to assert that. If anything, it sub-contracts.

In this respect, it is a little bit like Japan. Until 1991 when they passed their anti-[inaudible] law, the Yakuza – Japanese organised crime – was legal. Every year the Yakuza would give a list of their members to the police, they would have business cards with type-ins and everything else. A lot of the activity the Yakuza did was illegal, but not the actual gangs. One of the reasons for this kind of bizarre situation is because for a long time the sense was that organised crime was able to in effect control disorganised crime. That in fact, you did not need much of a police force. If, because the shopkeeper paid his insurance to the local Yakuza, someone came and threw a brick through the window and stole something – yes, you could go to the police, or you could go to the Yakuza, for whom this was now a matter of honour. They would find who did the brick heaving and, in their own unique way, express their dissatisfaction. In that sense, it was a social breach.

Interestingly, what has happened is we have a state which have decided on all kinds of things it does not bother with and therefore is happy to allow, but it is also happy to keep things fluid so that it chooses to define. Yesterday, what you did was fine – maybe today, perhaps because you beat up the wrong person or whatever, it is not fine. Yes, in logical terms, in the same way as turning a blind eye to embezzlement, of course it debilitates the state dramatically. 40 per cent of the defence budget, in one way or another, is subject to embezzlement and so forth – that is according to the main military prosecutor! Nonetheless, this is the operating system. In some ways, it has become one of the ways in which you pay your bureaucrats and keep the elite comfortable.

Let’s move away from philosophy, to the whole what is to be done thing. The first thing I would have to do is to actually tell the Home Secretary that you will have to bring some of your colleagues in, because this is not simply a Home Office matter. It is also an FCO matter and MoD matter, and other agencies. The second thing is, well, is our concern, as it were, to fix Russia? If so, we are going to be here a long time working out a strategy for that, but you know, we cannot do. What we can do is obviously address how it impacts us, the UK, and, well we are still in the European Union, the European community as a whole.

We have to operate along multiple strands. The issue of dirty money – London is of course one of the prime money launderers in the world – but not just for Russians. Transparency International looked at the amount of dodgy money in the London property market and only one sixth of that money did they reckon was Russian. If we actually regard having dirty money, kleptocrats, and the kind of organised criminals who are successful enough to do not have to have tattoos but have suits – and are businessmen with a portfolio of interests – if we regard not having Russians one here as a good thing, we might want to give some thoughts if having no kleptocrats here is a good thing, rather than just thinking, well, it depends on your passport is. We need to address that they are money launderers, but that is something that can only be done on a truly multinational basis if we want to do more than just cleanse the British system. If we close our banks to these people, they will go to Frankfurt or Delaware or to Dubai.

Secondly, I do not think we need more laws. What we need is more resources and more latitude for the authorities to actually enforce them. Given that in Britain we do not exactly face the issue of Russian gangsters on the streets, it is much more related to white-collar crime and these long criminal supply chains. Investigations into these are incredibly personnel consuming, requires usually high-end skills – forensic accountants and so forth, which are not, unfortunately, as common as they might be within government service. For some strange reason you get more money working for Deloitte or whatever.

There is also considerable possibility that it will never come to a successful prosecution. These are really hard to prosecute. Simply investigating them has a disruptive impact, but how we tend to assess our law enforcement agencies is basically on results and that mean cases taking through to prosecution. If that is the index, then inevitably the pressure will be for them not to look at these cases. They are lengthy, resource intensive and of questionable outcome. So what we actually need to do is to provide the resources but also the latitude for these agencies to say ‘Look, investigate these people, make their lives as miserable as you can. If you can, put them in prison and freeze their funds and so forth – that is great – but if you cannot we will not punish you, we will not regard that as a failure – we will just accept that that is the nature of the task we have given you.’ That is a key need.

Third, and final – I mean I could go on for the next 40 minutes or whatever – element is actually in terms of expertise and knowledge. It is this extraordinary absence of — Britain still has top-ranking, global, intellectual and academic institutions and practices – not enough of that in my opinion makes it through to government service. It is not a critique of the individual officials, mainly, it is just simply about the fact that Russia has not been regarded as important enough for long enough – I mean, we disastrously underfunded Russian expertise in the late 90s and early noughts – and frankly, we are still not doing anything about that. This is not a plea for money for universities and such like, it is a plea for those smart people who do know Russia, who know Russian and know Russians, and how the Russians work – these are people we need to see in government service. And kept looking at Russia, not for example in the classic Foreign Office manner, you do your three years stint in Moscow and then it is the Middle East desk and next it is the embassy in Buenos Aires. I understand the importance of the rounded generalist, sometimes I would like to see a little more expertise and depth.

So, understand Russia, unleash the law enforcement agencies and resource them more effectively, and clearly also do something about the money factor because frankly, the people we worry about are not individual street-level sociopaths. They are businessmen who just regard having crime as part of their portfolio as the easiest way to get lots of money and all the nice perks in life that that involves. If they cannot make money, there is no point in being a criminal.

Thank you Mark. That leaves 25 minutes or so for question and answers. All I would ask is if you do want to ask a question is raise your hand and introduce yourself by saying your name and if you represent a particular organisation and feel free, of course, to ask both of the speakers questions. I assume you are happy taking questions.

Thank you very much. [inaudible] Grant, Institute for Statecraft, but asking a question in a personal capacity. I was the first person to comment on The Times’ website on Edward’s review of the book and my comment was essentially the problem with the book is not the many people who need to read it, who will, but the even larger number of people who should read it who won’t. My question, Mark – and I know Edward has had this issue himself – is your comment towards the end about bringing in academia. We are very well placed here, and a few other countries, Scandinavia certainly, with expertise. Mobilising these forces, particularly academia, what kind of reaction have you had from academia and where are you going to speak, either in the US or here, particularly outside of London and in university towns? Because I have seen at Cambridge, very severe criticism of the views Edward is expressing from quite frankly people who should know better. Quite frankly. I would just finish off with a comment about the facilitation role, or the service role, I hope every law enforcer takes that away. They are the lubricants, are they not? So who is listening to you and perhaps who is not?

Before you answer, we will take a few questions together if we may. The gentleman here.

Robert [inaudible], freelance civil engineer. I worked for the Russians for a couple of years in Liberia, towards Severstal and it would be interesting to hear you view on companies[inaudible].

David [inaudible], retired teacher. I have not read your book yet obviously, I am just interested in the structure. The Vory sounds like one organisation, with obviously many branches – is there a central committee? Is there a boss in the top of a skyscraper in Moscow or is it run by Putin? What is the central structure of it, or is that irrelevant?

Let me focus on this point, I mean actually, I am currently in Prague although I am spiralling back to London. I am not speaking outside of London on this trip. The most basic point is that it is clearly not my place to fix British universities and I think there are a lot of smart people on both sides of the debate. I think the point is this, academics are by definition – and I include myself in this category – pain in the backsides in so many ways. We prise our intellectual autonomy, we sometimes make a fetish out of that, and there is a sense of automatic mistrust of the authorities. That is not necessarily a bad thing. First of all because they are also there as some kind of fact checkers in some ways and second, the point is that it is just not about getting academics to come talk to MPs – however, hopefully, useful that is – I think it is more that we have an existing critical mass of expertise within the UK. It is precisely not simply people who have done PhDs and so forth but people who have worked with Russians in Liberia. It is people who maybe taught English in Chelyabinsk for two years, before going on to something else. The interesting thing is Russia has been considered for so long, in most cases, unless you are a state agent or a lawyer, knowing Russian is a bit of a dead end. Actually we need to tap in to the existing thing and just to be perfectly honest, the intelligence and security community has done that really quite effectively, I think. We need to think more broadly nowadays. Precisely because hybrid warfare takes place across the whole spectrum of government and what expertise we need to understand it. For example, DEFRA really need a Russia section. Generally speaking, we need to tap into the broader expertise not just academia.

I cannot really comment much on Severstal for all kinds of reasons, including specifically a non-disclosure agreement I signed in relation to a court case, which was not specifically or directly about Severstal but impinged on it enough so that I feel constrained. What I would say is that all of the big Russian extracting raw material and sort of processing, shall we say, industries operate in a fascinating kind of worlds. Obviously, they are commercial agencies. They are also, generally speaking, considered to be national champions. Therefore there are a strong political dimension to do they get the contracts and what they do. Secondly, or thirdly rather, because of the nature of where they often operate, both at home in Russia and abroad, they tend to be in the wilder jurisdictions, which means that, certainly back in Russia, they tend to have more closer links to organised crime. These are the people who, again, are the service providers in another way. A journalist is getting a little bit too outspoken about the massive pollution you are dumping in the local river – well, a lot cheaper than fixing your emissions is actually having the journalist thrown out from a fourth floor window. The local mayor maybe is not as forthcoming as he might be – well, there are ways to bridging that conceptual gap and often organised crime act as the facilitators to make sure everything goes smoothly. What we often have is an interesting cultural dimension. Again, I am not making this specifically about Severstal – you might think it fits into your experience or not – the company itself finds itself torn between needing to fit into to western norms because it operates in global markets and so forth and yet also coming from a much more complex and informal environment. How it often manages those two is an interesting challenge. Not a very satisfactory answer to you, I apologise. I made of it what I could.

David, your point on the central organisation. The Vory was basically the common culture. The subculture of which all the gangsters and their gangs felt they subscribed to. It is a little like saying the made men. Is there a central organisation? I mean, it would be great if there were a sort of council meet, ideally in an extinct volcano around a mahogany table. But no. What we find are, depending on how you count, between 12 and 18 fluid networks that are dominant but very, very loose. When I say this is post-industrial, is striking to which extent this is not one – you cannot say that oh, well these are the ten most powerful gangsters in Russia. Well, you can say these are the ten most powerful gangsters in Russia, but you cannot say these are the ten guys who run organised crime in Russia. It is not that kind of a structure. Often the challenge for law enforcement is that they are constantly looking at the pyramid, they want to find out who is the Godfather, the lieutenants and so forth and I keep saying that it does not necessarily work that way. To the point where I kind of describe one anecdote in my book where I was talking to some European police analysts about this and we had gone back and forth, and eventually one of them threw up his hands and said this is not gangs it is just a bunch of Facebook friends. In some ways that is actually the most accurate description. People who loosely connect but run all kinds of criminal deals. It is very complex and a flat rather than hierarchical structure.

Can I just come in rather briefly? One thing that I feel very strongly here is that we need to listen to our allies more. A lot of the stuff – and perhaps the single most annoying thing – is when people especially in this city say that we now suddenly have these terrible problems with Russia. If these problems are new to you it is because you have not paid attention. I am delighted that people are waking up, but everything we see now in the so-called old west we saw in the Baltic states in the 90s. The Balts warned us; we had Estonians, Latvians, Lithuanians and actually Ukrainians and Georgians, Poles and others – all telling us back in the 90s to watch out for this connection between organised crime and intelligence and business and energy and the Russian Orthodox church and so on. We just ignored those warnings and patronised and belittled the people giving them to us. Now suddenly we are realising that they were right. There is a lot of expertise in these countries. I used to call them the Frontline States but now, I think that those are London, Paris and Berlin actually. There is a lot to learn from that.

The other sort of gloomy thing I noticed is that despite the heightened awareness now – the hawkish camp has grown, which is very good because people like me and Mark are no longer considered as mad men as we were ten – twelve years ago –and this go into your contrarian point, that there are now people saying very loudly that this shows our Russia policy has been wrong since 1991 – we made an enemy of Russia. Russia was a friend in 1991 and while we, the Great British public, was not looking you expanded NATO, you have done all these things and now Russia is an enemy. They are even going around Britain bumping people off so the first thing we ought to do is get into reverse gear and stop having this policy that is annoying the Kremlin so much. I think this is wrong in every respect. Its perhaps most articulate exponents is Peter Hitchens in the Mail on Sunday, but I noticed that that is growing too so maybe we should be pleased that we are getting more supporters on our side even though the other side is growing stronger too.

Okay, so I will take the next round of questions.

A question to you both, what do you see as Putin’s future and what might bring about his demise?

Hi, Will [inaudible]]. I am just asking about the relationship between businesses and organised crime, and the national champions in particular and Edward you mentioned sanctions. What happens when you have a national champion that is sanctioned, does the state then step in and admit its hand and ties in there or get another fish with sharper teeth to come in and replace them?

[inaudible] Michel from Hungary. Edward mentioned that there is an awful lot to learn from the former Soviet countries and my question is actually about a segment of that, and that is Georgia. Georgia, after the Rose revolution, really cleaned up its Vory class and by expert statements – I do not know Mark if you endorse this – beforehand, or certainly before 1991, half of the Vory was actually from Georgia so it is really a strong Vory culture. Now, Georgia has cleaned it up, at least for now, for good. There are many questions about this experience but also what is the implications for Russia? Did they move to Russia? Simply, what is the implications of this for Russia?

Putin’s future – can you overdose on botox? In some ways, we should weep for poor Mr. Putin. I think he is bored with his kind of position, a tedious need to handle day-to-day management of the country, which he does not actually do these days. On the other hand, he is also locked into his position. How does he step down? How does he go and enjoy his millions? I think he is looking for a successor, someone he feels he can trust, but also a constitutional structure which allows him to both have security and some degree of traction on the political process. The interesting thing is if he will ever feel that he has that security. This has always been Russia’s problem. It is also, incidentally, a gangster problem. How does a Godfather step down? In the book I talk about a particular figure, the Georgian [inaudible], who clearly had been trying to step down, and then he was assassinated. It is not necessarily a good example. Mortality may well step in but what I do say is, barring some particularly extraordinary events, I do not see Putin being toppled or constrained. The one thing Putin does understand very well is power. His grip on the security apparatus, particularly since he created the National Guard under one of his more rabid supporters who is Zolotov. Zolotov is definitely not a person who would have many qualms about breaking legs left, right and centre. I think he is fairly secure. Again, this comes back to the point that we won’t see oligarchs persuading him to be a good boy. Really the question is whether he is able to step down before mortality does the job for him.

The relationship between business and organised crime and what happens when a national champion is sanctioned – if only one could imagine one such being sanctioned. The point is this: organised crime does not operate you might say at the stratospheric levels of Russia. If you are an oligarch-type figure or the head of a state economic institution, or a minister, you do not have personal dealings with gangsters. You have dealings with people who have dealings with people who have dealings with people. The classic example of that will be the Sochi Winter Olympics, where ridiculously padded contracts were given to the Rotenbergs, some of Putin’s closest friends and the most obvious beneficiaries of these padded contracts. When one looks at the actual building of the Sochi facilities, it is clear that organised crime was involved, not least in ringing in trafficked labour, labour gangs from Central Asia, who were brought in and forced to work very, very hard and then, before the job was nearly done – before pesky journalists started to come – their role was also to get these people out and get them back to Central Asia so that there were no incriminating evidence. When you look at it, it is not that the Rotenbergs actually subcontracted organised crime; there is a whole chain of different intermediaries.

On the other hand, this issue of what happens with sanctioned industries raises for me one of the most fascinating paradoxes of sanctions. This whole notion that sanction rich Russians and this will bring about peace. Actually, if we sanction them, we make them more dependent on the Kremlin and if anything we encourage them to move their money back to Russia. Putin has been pushing this so-called de-off shoreisation for a long time. Russians do not want to move their money back to Russia, because they know that it is all owned by the state and the money is not secure. It can be stolen very easily. However, if they feel that it can be frozen just as easily in the West, there might be a point when they think, okay let’s move it back. In the long-term, this begins to debilitate Russia, because if it continues to basically recompense people who get sanctions or corporations and things, it is draining its resources to do so, but in the short-term it actually empowers Putin. It makes people more dependent on Putin’s favour. It is not a reason not to do it, I am saying let’s do it with a clear understanding that if we sanction oligarchs and kleptocrats we do so because we think it is important to sanction oligarchs and kleptocrats rather than because we think this is an instrument that will actually change Russian policy tomorrow.

Finally, Georgia. This is the interesting thing; I mean Georgia still has organised crime now even though it has kind of expelled the Kanonieri – the Vory. In fact, there is a chapter on the Georgians in the book. The interesting thing is precisely the displacement factor. Most of these Georgian gangsters went to Russia. Many of them also went to Europe. In fact, it was recently an ‘Operation Trojka’ a major European multinational operation against Georgian organised crime across Europe, where they are more involved in real organised crime rather than on a more strategic level. I can totally understand why Georgia would want to do it and it was very useful to have a criminal class that sort of self-defines itself. One of the problems is increasingly that the Vory in Russia no longer feel the need to tattoo themselves, the code or whatever. They are becoming much more like other gangster, hiding in plain sight. The main thing is that we need to be aware of the displacement issue. I have no problems with the Georgians wanting to cleanse themselves of the Kanonieri, but on the other hand we need to understand that, actually, sometimes what we do can have impacts on other countries. If they are our allies it is a bad thing, if they are not – if they go back to Russia – it is not necessarily a problem for us.

The paradox is that Putin needs a Putin. He needs someone to do for him what he did for Yeltsin. Perhaps the only lesson for us is that we never heard of Putin until Putin turned up so perhaps the next Putin will be just as obscure as the first Putin.

I am aware it is three minutes to six, and I have three people who want to ask questions. I will take them all, if I can, just make your questions short please and I will ask Mark and Edward to respond similarly short.

George [inaudible], I was wondering how these organised crime groups are perceived in the cultural sphere of Russia and the Russian public? Are they idealised or are they feared? How does it work?

[inaudible], I am an Austrian journalist and was a correspondent in Russia and now I am a correspondent here and Russia never leaves you. I would like to ask what the British government should do, not only in terms of sanctions but also in terms of legislation in order to get a grip on Russian organised crime.

[inaudible]. It was just quite astonishing not to hear the words cyber warfare. I just wanted to know, given the fact that it seems to be the tip of the spear of organised crime and given that events of late, what do we know about the Russian cyber warfare programme, its structure and who is actually calling the shots.

Bernhard Herman, what evidence is there of Russia’s diplomatic networks aid the Vory?

Culture. It is striking that you can scarcely take a taxi in Moscow and it is not playing Radio Chanson, which is basically playing criminal songs and such like. Putin himself is often using criminal slang. We would be faintly surprised if Theresa May started sounding like an extra in Peaky Blinders. The Russians do not regard it as surprising. One of the issues is that, actually ironically, the gangsters are at least honest thieves compared to the dishonest thieves whom they know run the country. That is actually one of the most depressing ironies.

What should the British government do? I have already talked about that so I will let that be and move on.

Cyber warfare, well, obviously there is a large amount of cyber crime. In some ways, it is not actually the most important impact of Russian criminality compared to one third of all the heroin and everything else. The interesting thing is that we have seen the Russian Federal Security Service, when they want to create their own cyber warfare branch they just find themselves a bunch of hackers and basically say well, you either go to prison or work for us and, not surprisingly, they start to work for them. They actually arrested a bunch in December, for a variety of reasons but one of them is probably because, well, they are still hackers, they were just using the fact that they now had all the access codes of being in the FSB to continue to do the things they had done before. Yes, this is a problem, but, actually, increasingly it is one the Russians themselves are facing.

Finally, diplomatic networks aiding the Vory. What one can do is actually point to that sometimes Russian criminals get arrested and the Russians does not really care and other times we see whether it is Viktor [inaudible] the arms dealer or [inaudible] the hacker who was in Prague up until very recently, an incredibly strong campaign being waged trying to keep them out or being extradited to above all the United States. It seems fairly clear, and frankly, talking to Russians within the Foreign Ministry, with more or less a wink or a nod they are willing to acknowledge that these are people who is regarded as important to the state or they might know something. If it is all right, I will stop here, but we can see the extent to which diplomatic facilities are sort of used for those criminals who are useful to the state compared with the others.

Very briefly, I think the closest contact with the organised crime world is probably the Interior Ministry and the FSB. It would be impossible – more unusual – to have a diplomat or someone from the Russian foreign security service working directly alongside someone with tattoos.

In terms of what the British government should do about it, Mark has touched upon it, I think expertise and that we should enforce our own laws. We should be much tougher with other countries that facilitate Russian money laundering.

The thing I want to end on is that we need to think about this both in terms of resilience and in terms of deterrence. Resilience is making sure that Russian hybrid tactics do not work – and that is everything from improving our criminal justice, our country’s intelligence services, cleaning up our financial system, bolstering the military defences and that we have looked at every one of the 20 different elements of the hybrid warfare toolbox and say what can we do to gather our allies and make this ineffective. If it is ineffective, they will not do it.

There are some tactics where resilience does not help. Bumping someone off in Salisbury, for example. Then you need to have a deterrent. You need to have something that the Russians think, ouch, that is going to hurt and then they will not do whatever it is that we are worried about. There I think that very rapid escalatory financial sanctions would be useful, and I have been strongly promoting the idea of financial snap exercises. The Russians do military snap exercises which are a real pain in the whatever, when suddenly 3 o’clock in the morning thousands of Russian troops jump out of bed and get into vehicles, you see nuclear weapons being loaded up on launchers. Tremendous activity. We have to wake people up, satellites need to look down to see what is happening and in the end nothing actually happens. It is a standard part of the Russian toolkit and they do it a half dozen times every year, and every year it is a big waste of nerves for us.

We should do the same on the financial side. We should have a weekend when we get together a task force of ten, twenty countries and say, right, just imagine little green men have turned up in eastern Latvia, there has been something else in Ukraine, or whatever, what are you going to do? In the next 24 hours see how many Russian assets you can freeze and seize. Although we should be pretty secret about the way we do that we should be extremely public about it the following month and say we did that, this was a combined NATO-EU exercise involving twenty, thirty countries and we identified and froze – because we did not actually do it, it was an exercise – 30 billion euros worth of Russian assets. We will do the same in three months time and the target is to get up to 75 billion. That would really scare the Russians. By doing it, we would get better at it, and if, for example, it turns out, take a hypothetical example, that freezing a Russian bank account in Russia is actually quite difficult, we ought to do it over the weekend. We would then have a very blunt conversation with Austria, not a NATO member, where we would say that actually we find this quite difficult when we did our exercise. We will do the exercise again in three months and we suggest that we work together with the banks and the finance industry so next time we can freeze them. Or it could be Cyprus or any other country. We get better at doing it by practising it, but also send this incredibly powerful deterrent message to the Russians that if you do something that we do not like we can do something that you really do not like.

An excellent point to end on, Edward. Thank you. We started a minute late and we are finishing three minutes late but forgive me from our collective tardiness. Please join me in thanking both of our speakers.


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