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The Russian MafiaPrivate Protection in a New Market Economy$

Federico Varese

Print publication date: 2001

Print ISBN-13: 9780198297369

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/019829736X.001.0001

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The Contract and the Services

The Contract and the Services

Chapter:
(p.102) 5 The Contract and the Services
Source:
The Russian Mafia
Author(s):

Federico Varese (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/019829736X.003.0006

Abstract and Keywords

A variety of actors operate in the market for protection in Russia, and in order to establish how they interact with each other and with their clients/victims, Chs 4 and 5 present an in-depth study of a particular Russian setting: the city of Perm, in the Ural region. Having established the need for protection and investigated the sources of protection in Ch. 4, Ch. 5 looks at protection contracts and the services that criminal protectors are able to offer. It offers a glimpse of who is more likely to escape the grips of criminal protection and obtain state protection. The data used are based mostly on evidence from interviews with (among others) small kiosk owners, businessmen, and private individuals that were carried out in 1994–95, and between 1996 and 1999.

Keywords:   businessmen, criminal protectors, kiosk owners, Perm, private individuals, private protection, protection, protection contracts, Russia, state protection

All interviewees who paid protection money to criminals had entered into long‐term contracts with their respective ‘roof’. Below, I explore the nature of the contract and the services offered, while in this section I concentrate on the supply of one‐off protection services.

Although such services were not used by any of the entrepreneurs I interviewed, they do occur. According to one subject (B15), some entrepreneurs ‘moved around’ and considered it convenient to use criminal groups on a one‐off basis.

The criminal group charges from 20 to 50 per cent of the value of what it retrieves for the businessman. Such a way of using the ‘roof’ enables the businessman to avoid paying a monthly fee. Some consider it very convenient. But they are wrong. Sending a criminal group which is not a permanent protector to settle disputes for you most probably means that the firm will never see its money again and may itself become indebted to the criminals (B15).

The following is a case of one‐off service, though it involves not an entrepreneur with a fixed establishment, but an ordinary citizen (Y1).1

One of the few people to speak fluent English and Italian, Evgeniya is the granddaughter of a ‘Hero of the Soviet Union’, a fighter‐pilot who died during the Spanish Civil War and to whom a street is dedicated in the city. Her father was a factory worker and her mother a doctor. At high school, she was an active member of the Komsomol and became head of her school committee. In this capacity, she went to the meeting of the (p.103) Perm Komsomol executive and met all the future party and city officials. Acquainted with the new entrepreneurial class of the city, she has worked extensively as a translator for major factories and enterprises in the city, including those linked with the so‐called ‘shady elements’. She has lived in Italy for a number of months and has travelled extensively in Turkey and Eastern Europe.

Evgeniya wanted to buy a flat for her husband to live in once their divorce was finalized. After searching for some time, she decided on a flat that had been recently privatized. A man called Yurii apparently owned the flat. A price that suited both parties was agreed upon. The notary (chosen by Evgeniya) certified all the documents and drew up a contract. The two parties agreed that in the contract the sum really exchanged should not be quoted in order to avoid paying excessive taxes. They quoted a fictitious sum, considerably smaller than the real amount.

Evgeniya started to move her husband's belongings into the new flat, when Yurii's wife and her son, who maintained that they owned the flat, confronted her claiming that Yurii had no power to sell it without their consent. They also added that Yurii had escaped with all the money and that they did not know where he was. At this point, Evgeniya went to a lawyer and found out that the two claimants were in the right: the flat was owned by two persons (Yurii and the son of Yurii's wife, Aleksei), so it had been privatized illegally only in Yurii's name. For the privatization to be legal, the relevant papers should have included Aleksei's name. The lawyer confirmed that Aleksei was entitled to half of the flat and that Evgeniya should compensate him.

Despite knowing that the privatization was illegal, Yurii sold the flat to Evgeniya. He pocketed the money and disappeared. Aleksei, Yurii's son, could reclaim the flat, as long as he paid Evgeniya the (nominal) sum stated in the contract.

Evgeniya was taken to the Civil court by Aleksei and his mother who claimed the flat back. After a number of months, the judge settled the dispute as follows: Evgeniya was to keep the flat but was obliged to buy Aleksei a one room‐flat in a similar city location or hand him the equivalent sum in cash. Aleksei was to sign a document stating that he was satisfied with the final arrangement and only then could Evgeniya legitimately possess the flat.

Evgeniya was far from happy about the settlement. She did not know whether Yurii really escaped with the money or was part of a conspiracy with the rest of the family, but at that point it did not really make any (p.104) difference to her. She had been swindled and intended to do something about it.

Evgeniya decided to turn to a powerful criminal group, which was operating in the city. This group was known to be in charge of the Lenin district, the central part of the city. An old friend of hers, Igor', also active in the Komsomol, was now working as a bookkeeper for this powerful criminal group. He offered to help.

At first she explained the situation to Igor', who reported it to his office. Shortly afterwards, she was granted an appointment and went to present the case herself at the group's headquarters. A clerk, a university graduate, inspected the papers. During a second meeting, she was introduced to a deputy of the group, who called her by name, though they had never met before. At this second meeting, a number of men came along, while during the first meeting only Igor', Evgeniya, and the office clerk were present. It took roughly four months before the criminals decided to take action on Evgeniya's side. According to Evgeniya, the group took so long, because it ‘inquired into the other family's standing and found out that it was not connected to any “powerful network” ’. She was also confident that the clerk had given a genuine report to the boss and found her to be in the right.

The aim now was to extract a declaration from Aleksei stating that he had received a sum sufficient to buy a one‐room flat in a similar location of town. Evgeniya had no intention of paying such a sum to Aleksei. The group went to Aleksei's house, where, according to what Evgeniya was later told, they found Aleksei and his mother having dinner. They explained politely the situation to both and handed over the piece of paper. Aleksei at first refused to sign. He was then beaten up. After a few hours, he agreed to sign. My source for this, again, is Evgeniya, who assured me that the man had only been pushed around a bit, while his mother was not touched. Aleksei was just over 18.

Once the paper had been signed, the group's thugs went away. The party met again in front of the judge. At this meeting, Evgeniya was not accompanied by her lawyer, as before, but by Igor' and one of the thugs who had beaten up Aleksei a week or so earlier. Aleksei was alone and handed the signed paper to the judge. I asked Evgeniya whether she thought the judge had understood what was going on. She replied in the affirmative: ‘For sure, but he also knew that I had been cheated by this family, therefore he did not say anything. In fact, he smiled.’ After a brief (p.105) inspection of the papers, the judge issued a sentence that ruled Evgeniya was now the legal owner of the disputed flat.

Evgeniya had to pay a fee for this service. She was told that fees ranged from 55 to 60 per cent of what the customer had saved. In her case, however, a discount was applied, because she was a good friend of one member of the group and a person of importance in the city.

The case of Evgeniya is significant in two respects: the excessive taxation pushed her outside the framework of the law and induced her to sign a fictitious contract. Once she was outside the framework of the law, she fell prey to a swindler. At that point, she could not resort to the services of the state. She had two options: either using the services of a state ‘roof’ or criminal protectors. Evgeniya did not belong to the former nomenklatura, not even via her family: although her grandfather was a ‘Hero of the Soviet Union’, neither of her parents held nomenklatura positions. During the interview, Evgeniya never mentioned trying to explore this channel.

She knew Igor' well enough to ask his advice and help. Igor's group supplied her with a one‐off service. A standard price applied in cases similar to that of Evgeniya, however she was offered a discount, or, at any rate, so she was told. It appears that the relative standing of the customer mattered in deciding how much she should pay. The criminals ‘kept their word’ and delivered the service they promised to Evgeniya. Some years after this event was narrated to me, as this book was going to press, I learned that Evgenya and Igor' married and that they have a daughter together. It might be indeed proof that one‐off protection services do turn into long‐term relationships.

Long‐Term Protection Contracts

All business people who paid protection money had entered into long‐term contracts with their respective ‘roof’. We first explore the interaction between kiosk owners and the criminal racket that controls the Visim neighbourhood where some of the kiosks were operating (K2, K3, K4, and K5).

Both Sasha's and Inna's kiosks were the only ones that were not open at night, did not sell alcohol, and were not paying protection money. At the time of the interview, Inna had owned her kiosk for almost three months. During this period, she did not receive a visit from the local racket. She (p.106) did not know why they had not yet come, but offered one possible explanation, that her kiosk was not making enough money to be of interest (K1).

Since Inna did not have first‐hand knowledge of the local racket, we have to turn to other kiosk owners for the details of protection in the area. All kiosk owners (K2, K3, K4, and K5) told the same story.

After the first or second month of operation had elapsed, ‘some strong athletic gentlemen approach you and say: “I am from such‐and‐such, and he wants to see you’ ” (K2). Reportedly, they are extremely polite. The kiosk owner already knows that these men will arrange a meeting with the district boss, the brigadir. The meeting takes place quite soon after the owner is approached, invariably during the night, and does not last long, usually ten minutes. The brigadir ‘comes around with his briefcase and looks like a businessman’ (K4). Although the brigadir has an office in the district, the meeting is held in his car. This is a puzzle: apparently the office would be a suitable environment, as far as secrecy and convenience are concerned. Moreover, some kiosk owners reported having visited the office during the day. The choice of meeting near the kiosk appears to be a way of showing respect for the new customer. It is also a chance for the brigadir to exhibit his fancy car to petty kiosk owners. Andrei said that the brigadir drew his attention to the car's high quality music system.

During that meeting a number of questions are settled: first, the amount of the ‘fee’. Was it a percentage of the overall turnover, a percentage of profits, or a fixed sum? Various authors have presented divergent data concerning this point. In a report prepared for President Boris Yeltsin in February 1994, the Analytical Centre for Social and Economic Policies claimed that ‘three‐quarters of private enterprises in Russia are forced to pay a percentage (10 to 20) of their earnings to criminal gangs’.2 Jones and Moskoff document that ‘[in the last years of the Soviet regime] 75 per cent of Moscow's co‐operatives and 90 per cent of Leningrad's co‐operatives made payments to racketeers. . . Sometimes racketeers expected their extortion money to be a fixed percentage of the co‐ops' income’.3 This would explain, they argue, why many co‐operatives want to keep their earnings secret. In fact, some newspapers reported that ‘for a fee, racketeers can determine the size of their demands from exact figures about the co‐operatives’ incomes from the local soviets'.4

Other sources point to a different conclusion. Trud wrote that in 1988, out of 6,000 reported cases of racketeering, in almost half (2,800) the ‘fee’ (p.107) requested was 500r. In 535 cases it clustered at 1,000r. and in 928 instances, protectors tried to extort more than 1,000r.5

My findings among kiosk owners in the Visim sub‐district point to the conclusion that, during this night meeting in the car, the brigadir sets a fixed amount. The kiosk owners are asked to pay a fixed sum at regular intervals, usually monthly. The sum paid was 10,000r. per day, a sum, which they considered rather small, and one, which did not affect their overall earnings (a little more than $US2.00).6 Kiosk owners praised the ‘fair’ tax system managed by the brigadir and despised the predatory state equivalent (K2, K3, K4, and K5). Olga, who has a kiosk in a different part of town reports the following: ‘When the racket comes, my cousin pays to a man called Roma. He comes and asks for my cousin. He decided the date and the sum to pay. It is a fixed amount every month, 200,000r. ($US03.84) for the kiosk in the centre and 100,000r. ($US21.90) for the one in the suburb. This sum of money is not too big. Some people have to pay 200 [dollars] a month. It does not bother us too much’ (K9).

There is a reasonable explanation why the sum should be fixed rather than a percentage of profit or turnover. The resources needed to gather information on each kiosk would be exorbitant. Since all these kiosks operate in a similar area, they could be taken to be ‘homogeneous’ from the mafioso's point of view. And in fact they are so, as far as their location, the goods sold, and the dimension of their establishment are concerned. The differences in profits and therefore the forgone income that the mafioso suffers from charging the same fee to all is negligible compared to the cost of gathering information for each kiosk owner. By choosing a fixed sum, the mafioso saves bargaining time with each kiosk owner. Also, he avoids comparisons among kiosk owners on who got the best the deal. Such comparisons may in turn fuel dissatisfaction. Furthermore, mafiosi seem to settle for round sums of money.

During the night meetings, brigadir and kiosk owner agree on the details of the payment. They agree on a date for passing the money over, which is kept secret by the kiosk owner. On that date, invariably at night, an emissary from the brigadir, a boevik, comes to collect an envelope containing the money. The boevik will mention the nickname of the brigadir and the salesperson will hand him the envelope. The boevik utters a sentence similar to the one he said the first time they met: ‘I am from Mr Such‐and‐such’ or ‘I work for Mr Such‐and‐such’. The name given is the brigadir's nickname.

In principle, it might happen that the envelope is handed to the wrong (p.108) person, but in fact this has never happened to the kiosk owners in Visim. The predetermined date is a safety device: only the real racketeer knows when his man is supposed to collect the envelope. Neither he nor the kiosk owner has an interest in letting other people know about it.

The only other person who knows the crucial date, and might have an interest in cheating both parties, is the salesperson. The kiosk owners reported that they had never had any problem, but three (K2, K3, K4) told me the following story. Once a salesperson gave the envelope to the wrong person, or at least so she claimed. According to her, she was given the right name and so she handed over the money to him. A few hours later, the real racketeer came and was told that his money had been given to somebody else. The kiosk owner was called from home and promised to find the money for the following week. After a few inquiries, the racketeers decided that the salesperson was trying to cheat both owner and racketeer. She was punished for this. The safest strategy, adopted by some kiosk owners, is not to entrust the envelope to the salesperson, but to supervise the transaction directly (K2, K5, K7).

All the other shop owners and business‐people I interviewed (and paid protection money) had also entered into long‐term contracts with their respective ‘roof’. The payment took place once a month and the sum was supposed to be a percentage of the profit of the business, usually within the range of 10–20 per cent of profits. The ‘roof’, however, did not calculate the exact amount each month. During the first few months of operation, the ‘roof’ sent an expert accountant to evaluate the profit of the business. Such a person might spend considerable time in the shop during this period, or only few hours, depending on the how complex it was to establish the turnover of the business. The accountant would become the person best acquainted with the ups and downs of the company. He was the person who reported to the ‘roof’, but was also the one who could obtain delays in the monthly payment. ‘These people are very civilized, they understand the problems of the business; they can wait and allow you to raise money. They are not pirates’ (B6).7 Eventually, the accountant could judge what the rough monthly turnover of the business would be and charge accordingly. What was calculated as a percentage of the profit then became, in effect, a fixed monthly payment. Only in case of major expansion of the business would the monthly fee be re‐evaluated. The business‐person was supposed to inform the ‘roof’ of any change in profits, but cheating did occur.

(p.109) Sanctions

Kiosk owners cannot avoid paying for protection. If they refuse to pay, sanctions can be extremely severe. During the night of 14 March, 1994, a kiosk on Cosmonaut Leonov street, in the Industrial District, was burned. The owner and the salesperson—a woman of 24—perished in the fire. According to eyewitnesses, the day before, unknown people had already threatened the seller and had broken glass in the kiosk window. The seller reported the incident to the owner of the kiosk, T. S. Dzhafarov, and refused to continue to work in such an atmosphere of threats and fear. Dzhafarov did not give in and hired a new seller the same day. In the evening, unknown people visited the kiosk once more, but Dzhafarov managed to scare them off. The owner himself stayed overnight in his kiosk, which operated day and night, to help the newcomer. At around four o'clock in the morning, a window was broken and the place was set on fire. The construction, being full of empty wooden boxes, was engulfed very quickly by the fire. The metal door of the kiosk was sealed from the outside, so the two people could not escape.8 Some kiosk owners agreed that the act of locking the kiosk from the outside signalled that it was a racket's operation (K2, K4, K6).

The owner of five kiosks in Visim also had his kiosks burned down. For two days in a row, masked people set the kiosks on fire and locked the sellers inside. They did not, however, throw any flammable mixture through the window, but simply set fire to the wooden structure. Once the arsonists were gone, the sellers were able to call for help and were released. On the third day, no seller would agree to work for the kiosk owner. Rumours spread that the remaining kiosks would have been set on fire with serious consequences, without allowing the sellers to escape.9 A further incident that I recorded is that of a kiosk owner who was tortured with an iron and later dropped half‐conscious on the side of a street. Later the police picked him up. According to the police officer who informed me of the case, he had refused to pay protection money (M2).

A major case of a business‐person who tried to conceal income from his ‘roof’ took place in Perm in 1993–4. It involved a firm selling alcohol. The business‐person in question was a rather well‐known medical doctor who stopped practising and started his own business. He opened a commercial enterprise called West‐Ur that sold spirits, especially vodka. Alongside this legal operation, he developed an illegal one, acquiring (p.110) vodka from a factory. The doctor was—according to Boris Sorokin, head of the anti‐organized crime unit—'under the control of criminals, to whom he paid hundreds of millions of roubles'.10 One of the most powerful criminal groups in the city supplied protection to the company and shared the profits (according to Sorokin this amounted to 10 per cent).11 At the end of the first two years of the operation the business was not so profitable: cheap vodka had entered the market and profits had shrunk. At this point, the doctor decided to start another business, but he did not tell his ‘roof’. After roughly six months, the criminal group discovered it had been cheated and a violent quarrel ensued on company premises. Apparently, the criminals were beating the doctor, with the intention of killing him. During this violent discussion, one n.c.o. from the Special‐Purpose Militia Unit (OMON), Aleksandr Zuev happened to be passing in the corridor and entered the room. Zuev, who was not in uniform, inquired as to the quarrel and the head of the criminal group turned around and shot him. The killing of the officer upset the modus vivendi that the city militia and the criminal groups of the city had reached. At that point, all the most important criminal figures, including the medical doctor, went into hiding, afraid of police retaliation (J1). The death of the policeman led the militia to launch an operation devoted exclusively to combating organized crime in the city, Operation Signal. It lasted several weeks and led to the confiscation of weapons and the arrests of various individuals, including Bari Zykov, the brother of a well‐known criminal figure, Yakutenok.12

The Services

Protection Against Khuligany

Does the racket provide any form of protection to kiosk owners? During the first meeting, the brigadir leaves a phone number with the owner. In case of need, the kiosk owner can phone his or her protector. However, there are contradictory stories as to the effectiveness of the racket in protecting the kiosk.

The racket does not really defend us against small khuligany. I am afraid that here it is not like St Petersburg. There, the racket punishes even those who dare to break the glass of a kiosk. But here, they do not.

(p.111)

We indeed phone them sometimes to get help, but nobody ever answers. It is always impossible to find them. They intervene only if another organized gang enters their territory. But even then, we have to give them a very detailed account of the event, plate numbers, etc. What they always tell us is that ‘you must deal with local people yourself’ (K3).

Aleksandr confirmed this. ‘Recently, something was stolen from my kiosk so I phoned our brigadir. I knew who had taken the stuff but he did not do anything. Anyway, it was really our fault because the two salespersons were drunk’ (K4). Olga had a similar experience:

When we still had links with a factory producing vodka, we had a storehouse in a garage. The storehouse was robbed and there were goods for 15 million roubles. We asked the militia first but it did not do anything. Then we tried to find the goods ourselves. You see, it was possible to trace them since they had a specific date and were not sold by anyone else in Perm. We found the liquor in a kiosk, the date also matched and the kiosk owner had no purchase certificate for these goods. We went then to militia again and militia said that there was not a sufficient proof. At this point, we asked Roma [the boevick]. We promised him 30 per cent of the 15 million if he was able to retrieve the goods. Then we promised 50 per cent but Roma refused, saying that it is not his business (K9).

In another instance, not only did Roma not help Olga to retrieve the merchandise she lost, but appears to have been involved in a minor fraud against the kiosk itself, although it is not clear how ‘guilty’ Roma actually was. ‘Once, somebody came and claimed to be a friend of Roma. We could not check that. He bought a lot of merchandise and paid with counterfeit money (200 dollars). Later, we called Roma and told him what happened; we were very upset about it. After some time, the man came back, brought several kilos of butter as a gift. Maybe it was Roma who told him to come back and compensate us for what he had done’ (K9).

Petr displayed a very positive attitude towards the mafia, though he stressed that a man should also be able to rely upon his own force. He praised in particular the mafia's efficacy in returning stolen goods: ‘If I go to the mafia, it will take one day to get my merchandise back: the person who stole it from me will come to me on his knees, return everything and also compensate me for the loss of the working day’ (K2). Anvar has a similar, positive view of the racket:

The only organization that helps me is the racket. Without the racket, I would not be able to survive. I myself protect the kiosk at night. But if the racket were not present, my business would collapse. Thank God the racket exists. What (p.112) they do is punish anyone who makes trouble for me. I can report the car plate to them, or describe someone's appearance, and they will make sure these people are punished (K5).

Neither Anvar nor Petr referred to any specific event, although they were very confident regarding the efficacy of the racket.

Kiosk owners do not leave it to the racket to protect their establishments at night. Aleks employed an evening guard, who would spend the night in the kiosk, sitting next to the salesperson. This person was paid to sit in the kiosk and intervene in case his help was required. Anvar and Petr did the night‐guarding themselves, spending most of the evening in their own car which they parked nearby. ‘I go out at night to check that everything is OK at the kiosk. If there is some danger, I go out of the kiosk, I close the door and deal with it. So, in the first instance, you always rely upon yourself’ (K2).

Andrei employed a more elaborate system:

At night I employ a well‐built man, his wife and their dog, who do the selling and the guarding at my kiosk at the same time. I pay them a fixed amount for providing security. They do not have guns, just the dog. Some other people use spray. I also let this couple charge whatever price they want so they can make some extra money. They can bargain for themselves at night (K3).

For night‐guarding, Sasha relies on a nearby drivers' training organization (STK) called Orbita. This establishment is checked at night by a hired guard. Sasha has struck a deal with the guard, according to which he looks after Sasha's kiosk during the night and Sasha compensates the guard in kind. Nevertheless, he brings home all his valuables from the kiosk every night.

Protection Against Militia Harassment

No evidence of the racket being able to help reduce militia and authorities' harassment emerged. Olga, who by 1999 was still operating three kiosks in the city, had developed a special relationship with an official in the militia who would help when needed.

Olga: Each district in the city is run like a different republic, they all have different rules and regulations. For instance in this one there is a special health commission [medvytrezvitel'] that comes to check things in the kiosk, but it operates only in this district. When they come they always find something wrong.

Q: And what do you do, do you pay them in order to avoid the fine?

A: No, we let them write the report, then we approach a friend of ours that (p.113) works in the militia, a major. He goes to the office and removes the report from the file. Once another militia person came, a woman, and found some faults in our selling centre. We went again to the major and did not go to her office, nor gave her anything. She came once more and showed that she was very upset because we had not gone to her to settle the matter, and found another fault with the kiosk, this time it was very obvious it was a pretext. But we still went to the major and she did not come back.

Q: Do you pay him then?

A: No, he is good acquaintance, he never abuses his position of power with us. Surely sometimes we help him, for instance recently his mother died and he asked to borrow 2,000r. to pay for the funeral. We lent the money to him and then said that it was OK, there was no need to pay us back. Sometimes he comes, we have a drink together, we offer him a drink (K9).

Olga, in effect, relies on two ‘roofs’. One resembles the political protection enjoyed by big conglomerates in Russia and the cosy relationship between sectors of the state apparatus and some businessmen, such as Konstantin and Leonid. On the other hand, she also pays to a banditskaya krysha.

Credit

Aleksandr, who was dissatisfied as far as protection against drunken customers and petty thieves (khuligany) went, used the services of the brigadir in the following instance.

Once I was fined 5 million roubles but I did not have the money to pay the fine. So I decided to pay a bribe to the militia. I approached the militia officer directly, but they asked for a lot of money. I had to borrow money. I met the man who, in the end, lent me the money in the office of the brigadir (K4).

The racket arranges for money to be lent and kiosk owners consider it an option (see above, p. 92). Anvar, who did not make use of the system, said:

I did not ask the racket for money because I tried to raise the money I needed [to start my business activity] myself. However, I know that they always charge an interest rate that is lower than the bank's. The main difference is, however, that they want the money back right on time. If you are supposed to give the money back after five months and the sixth month has elapsed and you have not paid yet, then they will either raise the rate of interest or come and ask for the money. In the latter case, they will estimate what you have—such as the kiosk or the flat—and make you pay (K5).

(p.114) What emerges from Anvar's testimony is that kiosk owners are not forced to borrow from criminal structures and, moreover, they know very well the consequences they would face in case of a delay in the payment. They rationally evaluate pros and cons of each option. Anvar was fortunate enough to be able to utilize other channels.

The racket can help to retrieve loans. Gennadii, for instance, had lent money to a business partner, who had not returned it.

Gennadii: Nobody applies to the court of arbitration to settle disputes. For instance, for eight months, someone, who has yet to return it to me, has owed me 3,000 dollars. I did not even think of going to the court. You know, even if they recognize that you have the right over that money, the debtor can always declare himself bankrupt and you will never see the money again. So I asked my ‘roof’ for help, but the debtor went into hiding and we have not found him yet.

Q: What happens if you find him and he has no money?

A: It is his problem, let him borrow it from someone else (B6).

Grigorii could fit well the description of the business‐person who owed money to Gennadii. He borrowed 15 million roubles to invest in buying a quantity of sugar at a very good price. However, the deal did not materialize and his debt rose immensely. He could not return the money and was kidnapped, beaten up, his house robbed and his wife and child threatened. We met in the sitting room of his flat. There were numerous doors and locks and to get into his flat, one had to go through three armour‐clad doors. One of these doors was on the stairs, protecting the corridor from people coming up the stairs, and two were at the door of his apartment. He explained how the underground credit system operates.

To obtain credit from legal banks is extremely difficult. If that channel is unavailable to you, you then turn to ‘unofficial’ structures, basically criminal ones. They operate in two ways: either they oversee the lending of money that comes from people they know; or, if they want, they can lend their own money. Interest rates are variable. If you are a good acquaintance of theirs, you might even be able to borrow for nothing; they will not charge you anything. The most important thing is that you repay on time (B5).

Grigorii was not running a business when he applied for a loan. He did not have a ‘roof’, either official or criminal. He had what seemed a good ‘business idea’ and tried to put it into action. He claimed that not having had a ‘roof’ is the reason why his business adventure went wrong and (p.115) why he was now faced with the prospect of further harassment from the criminal world. ‘I was a nobody: I had no friends in high places nor among criminals’ (B5).

The following is another instance of a debtor, Vitalii, who could not return the money he borrowed. It was narrated to me by Volodya G. (B17). Vitalii was the commercial director of a firm selling Bounty bars in Perm. Vitalii and the owner of the company had struck a deal with a company in Moscow. According to the deal, the Perm company would have received the Bounty bars at a very profitable price, but the deal however was only on offer for a week. After this, the Moscow company would sell the Bounty bars to someone else. In order to obtain the Bounty bars within the time set by the Moscow company, Vitalii and the owner of the company needed to borrow 10 million roubles.

Vitalii explored three different sources of capital. At first he asked the suppliers themselves to lend him the money, but they refused. Then he asked a bank in Perm. The bank agreed to consider his request, but the process would have taken more than a week. Vitalii did not have time to wait for the bank to review his case, and asked some businessmen for the money as a bridging loan. The businessmen lent Vitalii the 10 million roubles and charged him 10 per cent a day. Volodya took the money, went to Moscow and bought the Bounty bars. However, the situation backfired: the bank decided not to lend the money to Vitalii, moreover, Bounty bars were not selling as well as expected. In the meantime, interest rates were skyrocketing. In ten days, the debts had become 20 million roubles. Vitalii, who had negotiated the debt, was left alone to face the lenders. He did not have the money and asked for the debt to be renegotiated. But the deal he obtained was even worse: the lenders were willing to wait, but wanted 20 per cent a day.

In another instance, the debtor was simply killed. Although the people who were eventually convicted worked for a ‘private protection firm’, they clearly wanted to signal that it was an (Italian) mafia murder. The victim was put into a metal barrel and cement was poured over the body. The barrel was thrown into the river Las'va and it resurfaced not long after.13

Elimination of Competitors

The reader may recall Inna's ‘price war’ at a selling spot in Dobryanka.14 The day after the ‘price war’, the same seller started to put pressure on (p.116) them, by resorting to some thugs (balbesy) who tried to scare them away. ‘Fortunately’, Inna and Sasha had entered a protection contract, so they could continue to sell in that area: ‘(the second day), we tried to negotiate a common price in a civilized way. But this person refused and called his own balbesy. Fortunately, we also had our own people and the matter was eventually settled’ (K1).

Anvar recalls another instance of genuine protection against competitors. Anvar recalled the story as if it referred to a friend of his, however his resentment towards his colleagues—and in particular Petr—15 led me to suppose that it had, in fact, happened to him. Nevertheless, I could not obtain confirmation of this from other kiosk owners.

A kiosk owner, let's call him Maksim, had just opened a kiosk. He was able to sell alcohol at a considerably lower price than his immediate competitors because he was being supplied with newly unloaded, untaxed merchandise by friends. Customers flocked to Maksim's kiosk. In the meantime, the other owners started to get nervous. They approached Maksim who was, by that time, paying protection money, and tried to convince him to raise his prices. He stubbornly refused. Irritated by Maksim's reply, the kiosk owners wanted to punish the ‘unlawful’ competitor. However, they knew that he had started to pay protection money and could not proceed without informing the local brigadir, especially as Maksim would have immediately understood from where the harassment was coming from and would himself have complained to the brigadir. So they informed the brigadir of their intentions. To their surprise, he did not allow them to proceed. Shortly afterwards, the brigadir himself, rather than a deputy, went to Maksim's kiosk and informed him of the danger he had been in. He also asked Maksim to come to a reasonable agreement with the other kiosk owners. In particular, he suggested that Maksim raise the price of the liquors sold at his kiosk. Anew meeting with the other kiosk owners took place at a city restaurant, and eventually Maksim raised the price of his alcohol. Olga narrates a similar case.

In one instance the ‘roof’ helped. When we wanted to open a third kiosk, the neighbouring Azerbaijani also wanted to open a new kiosk, and therefore a conflict between us emerged. The two ‘roofs’ settled the conflict. The two ‘roofs’ met and, after the meeting, they agreed that we could open the next kiosk. We also clashed over prices: they were charging much cheaper prices than we were, but now we have come to an agreement.

However, since the incident regarding the opening of the new kiosk, we had no more problem with the Azerbaijani, no more conflict of interest although we (p.117) had some arguments, like you have with your own neighbours. But we did not need again to use our ‘roof’. This is because the Azerbaijani understood that we also are ‘serious’ people, not just naive (K9).

Community Disputes

According to a respondent, effective ‘roofs’ may supply a business‐person with a ‘whole network of services, starting with delivery of goods and ending with the acquisition of privileged credit’ (B2). Stepan put it as follows: ‘What can you ask your “roof” to do for you? In principle everything, even asking them to beat up your wife's lover. You just have to make them understand the situation’ (B14).16 The following instance, which derives from the court hearings of a criminal case against a gang headed by a man called Plotnikov (see below, pp. 126–9), testifies to this. On 1 December 1989, a girl called Lena S. was attacked and beaten up by Roman M., her boyfriend. Lena went to Igor' Lun'kov, a friend of hers and member of Plotnikov's group, to complain. Lun'kov phoned Roman and threatened him. He also informed Roman that Plotnikov could not come personally to take revenge on him (the group leader was healing the wounds caused by an explosion at the market) but that he would come as soon as possible. Lun'kov added that it was no use for Roman to go into hiding because they would find him anyway. After a second phone call, and after much worrying on Roman's part, Lun'kov offered Roman a way out: they settled for 5,000 roubles as compensation to the girl. ‘We do not want to kill you, said Lun'kov, ‘just find the money.’ When Plotnikov, Moroz, and Lun'kov visited Roman, he was taken to the hippodrome, where a razborka (‘discussion’) ensued. Moroz said he would kill Roman if he did not pay the money requested. In due course, Roman paid the sum, which was divided among the three men and Lena S.17

Uncertainties

Despite an entrepreneur's efforts to foster a lasting relationship with his ‘roof’, uncertainties always loom on the horizon, as in the event of the sudden death of one's protector. Until a new ‘roof’ is found, the entrepreneur may run high risks.

Life is not always easy, of course. I will tell you a story. My brother is a businessman in Ufa [a city 200km. south of Perm] and his protector [brigadir] was killed in a confrontation between criminals [razborka] over the control of spheres of influence. So he was without protection [‘roof’] for a while. During (p.118) that period, he was robbed and badly beaten up. He was unconscious for three days in hospital. His difficulties were solved when he got another ‘roof’. All his goods were returned, except his health, of course (B14).

In another instance, the death of the ‘roof’ led to a police raid. A bordello was under the protection of Krest, a well‐known Perm criminal, until he died in 1998. Not long afterwards, the police raided the bordello. While searching the papers of the keeper, Mrs Alieva, it was found out that she had been paying Krest regularly. In one year (1997), she had paid 270 million r. (almost $US47,000).18

The ‘roof’ is not necessarily advancing the interest of its client all the time. It may decide to switch to another customer and turn against its earlier customer. The consequences of such a switch may be deadly. Mr Suslov, the general director of the Perm company ‘Initsiator’, was assassinated in 1994. The militia arrested members of a criminal group of eleven people in connection with the murder, headed by a man called Troitskii. Some members of the group proved to be connected to the firm. The police discovered that the group was operating as the firm's ‘roof’. The police arrested Suslov's partner, who confessed to having conspired with the group to kill Suslov. He had promised to share a substantial part of the profits of ‘Initsiator’ with the group and had paid them an extra sum for the murder in advance.19

When Two ‘Roofs’ Meet

Entrepreneurs who are both protected may come into conflict with each other. When they cannot handle the matter on their own, the respective ‘roofs’ are called in. Leonid Sharov, law correspondent for Obshchaya gazeta, reported on how widespread and somewhat elaborate ‘outlaw courts’ could be in Moscow. ‘To my knowledge’, he writes, ‘fifty such trials took place in Moscow last year. This information comes from a certain Moscow attorney who was invited to participate in several sessions of “outlaw courts” as a legal expert. So in all likelihood, such courts are actually more widespread.’ In one instance, a businessman dissatisfied with the Arbitrazh court decided to use his criminal connections to settle a dispute. The other party had criminal protectors as well and a rudimentary court was organised, and even outside lawyers were summoned. At the end of the ‘trial’, the lawyer representing the businessman told Sharov: ‘things had not worked all that easily with the criminals. But still, they had worked out.’20

(p.119) Four Perm entrepreneurs among those interviewed resorted to their ‘roof’ to settle matters with partners or competitors who were also protected. Stepan, for instance, was involved in a bitter dispute over the quality of a shipment of liquor produced by a firm based in the Perm region. The two companies could not reach a settlement and a meeting [strelka] ensued. ‘We drove to a meeting place outside the city, where we met the other group. The two brigadiry exchanged greetings and, almost right after, the group's leader started to insult me. In the process, he was making the most unreasonable demands. My side was doing nothing for the time being and I was quite shocked. Then, my side started to shout and make the same sort of demands on the other businessman. Then, we were made to step aside and the two groups started to negotiate among each other’ (B14).

Once the matter has been decided, the two groups perform the ‘ritual of hand‐shaking’: the two brigadiry shake both hands, rather than just one, as people do in ordinary situations.21 Stepan added that the brigadiry appeared to enjoy the situation, while he did not (B14). The strelka described above was the most elaborate recalled by my interviewees. Other instances occurred in expensive restaurants, where a lavish dinner is served after the matter has been settled successfully. Both groups are invited to the dinner, although the entrepreneurs pay the bill, noted Sergei.

Evgeniya's experience shows how ordinary individuals may end up searching for criminal protection. Excessive taxation led the two parties to draw a fake contract and, when a dispute arose, the actors involved could only resort to private protectors. Business people enter into long‐term relationships with their ‘roofs’, cannot avoid paying, and the money charged tends to be a fixed sum. A round sum provides an obvious ‘focal point’, just as natural barriers like rivers, mountain ranges, or parallels of latitude are focal points for agreements in international boundary disputes.22

Do the criminals offer any protection? The racket of the Visim sub‐district does not seem to consider protection against khuligany as its duty. The racket does not seem able to protect kiosk owners against militia harassment, and kiosk owners are either victimized by officials or have to develop their own ways to secure special treatment with officials. There is evidence that the racket offers some protection against competitors and assistance in obtaining credit, although at very tough conditions. Also, (p.120) community disputes have been referred to local criminals and reports suggest that some service has been delivered.

Should we conclude that the protection offered by criminals is bogus? Even the most efficient police system would find it hard to protect everybody all the time. This does not prevent customers (or citizens) from wishing for increased efforts. Similarly, Hong Kong Triads do not leave their men on the premise of the establishments they protect and customers protest.23 We might conclude that the banditskaya krysha we have been looking at offers protection, which is not entirely bogus but could be massively improved.

We should resist the conclusion that everything works smoothly in a world where the local racketeer becomes a ‘stationary bandit’, a criminal with a long‐term interest in the prosperity of the business he protects.24 Uncertainties are numerous. Even in the more successful cases of interaction between criminals and business people, unpredictable events, such as the death of one's protector, may occur and disrupt (at the very least) business activities. Furthermore, the ‘roof’ can decide to switch to another client and dispose of his previous ‘customer’. Protection is a private good supplied to a specific individual. If another individual comes along and offers a better deal to the ‘roof’, the latter might consider the proposition. Individuals in such a world are not ‘citizens’, with secure rights to protection. They are not even ‘customers’ in a market with standard rules the suppliers are compelled to abide by.

When a dispute arises between two clients who subscribe to the same criminal group, no problem ensues. The agency enforces a decision that is binding for both. No difficulty arises also in the case where one party is protected and the other is not, as in the case of Evgeniya and the family that sold her the flat. Potential difficulties arise when the disputing parties are protected by different agencies. A rather elaborate interaction ritual among two groups has been described by Stepan. The evidence is not yet sufficient to establish whether ‘standard rules’ are applied to ‘standard cases’, or—as in the case of the Sicilian mafia—each case is adjudicated on its own merit.25 Nevertheless, the meeting of the two ‘roofs’ described above is evidence of the fact that criminal groups might eschew warfare in favour of arbitration and interagency co‐operation. Nothing would stop them colluding with each other at the expense of the customers, as long as they can stop customers from switching to another ‘roof’.

Notes:

(1.) All the names have been changed.

(2.) Filippov, 1994: 2, emphasis added.

(3.) Jones and Moskoff, 1991: 85–6, emphasis added.

(4.) Novoe russkoe slovo, 15 Jan. 1990, quoted by Jones and Moskoff, 1991: 85.

(5.) Trud, 19 May 1990, quoted by Jones and Moskoff, 1991: 85.

(p.233)

(6.) The average daily turn‐over of the kiosks in Visim was 220,000–250,000 roubles and was distributed as follows: 30,000–50,000 went to the sellers and garbage collectors; 70,000–80,000 for taxes; 40,000 to night protection (K1–9).

(7.) Flexibility is reported also in some instances in Moscow. The owner of a dental clinic in Moscow maintains, ‘I pay in cash the first of each month—a respectable person with a briefcase arrives in a Volvo 850. This summer we installed new equipment, and I told the krysha: “Guys, I've had very big expenses, so I can't pay for three months.” They did not bother me for three months, but at the end of the period, exactly on the first of the month, the guy with the briefcase showed up once again.’Moscow Times, 31 Oct. 1995. A racketeer interviewed by Moskovskaya Pravda (4 Feb. 1992) put it as follows: ‘the important thing is not to be too greedy. The “taxpayer” should continue to work, make profit, have an interest in increasing his capital and not go and hang himself out of despair or, worse, report us to the police.’ Reportedly, criminal protectors in Moscow allowed their victims to delay payment after the August 1998 crisis. See Moskovskii Komsomolets, 22–29 Oct. 1998.

(8.) Zvezda, 22 Mar. 1994.

(9.) Zvezda, 22 Mar. 1994.

(10.) See the interview with Sorokin in Zvezda, 27 May 1995.

(11.) Zvezda, 27 May 1995.

(12.) Zvezda, 11 June 1994; Zvezda, 27 May 1995; Zvezda, 28 Nov. 1995; J1. The Chief of city UVD, Col. Salakhov, declared in a Nov. 1995 interview: ‘Now I have the names of the killers of sergeant Vlasov. These are the hardened criminals Semenov and Popov, with previous convictions. They were arrested and the pistol that killed Vlasov was confiscated. They have been charged with two murders, two cases of causing severe bodily harm with lethal consequences, and of nineteen robberies. I hope that they will not be released on bail’ (Zvezda, 28 Nov. 1995).

(13.) Dos'e 02, 4 Apr. 1997.

(14.) See above, p. 90.

(15.) Anvar's resentment towards Petr (and vice versa) was probably due to the fact that both engage in the informal economy (the informal economy is defined as trading in licit goods obtained eluding established rules. See Castells and Portes, 1989). Petr used to buy his merchandise from a warehouse, which did not issue quality certificates. In this way, he was able to save some money, though not as much as Anvar. This is how Petr put it: ‘I could buy my stuff from the warehouse either with quality certificates or without certificates. This certificate is mandatory, but obviously more expensive. So I bought goods without the certificate and got fake certificates’ (K2).

(16.) Along the same lines, Evgeniya asserted: ‘The “roof” is able to solve any problem, not only of a professional nature, but also, personal; for instance, (p.234) if you need a car, or to get your telephone connected quickly, or if you have problems with your flat’ (Y1).

(17.) See the article by Irina Krasnosel'skikh in Zvezda (29 Dec. 1990). This section is based on her reports and the additional information I gathered by interviewing Mrs Krasnosel'skikh (J1).

(18.) Argumenty i FaktyAIF‐Prikam'e (supplement), 28 July 1999.

(19.) Interview with Boris Sorokin in Zvezda, 27 May 1995 and M4.

(20.) Obshchaya gazeta, 17–23 Aug. 1995.

(21.) Mafia bosses in the movie The Godfather (Dir. Francis Ford Coppola, 1972) greet each other in same way.

(22.) For the concept of ‘focal point’ see Schelling, 1960.

(23.) Chu, 1996: 115.

(24.) See e.g. Olson, 2000.

(25.) Cf. Gambetta, 1993a: 7.