Abstract
Soon after the Berlin Wall came tumbling down, organized crime from the former Soviet Union came streaming into Europe. Czechoslovakia, at the crossroads, was especially enticing. It could serve as a meeting place or transit point for drugs, arms, or other contraband.
The latest example of Russia's corrupting influence may have taken place in late 2001, eight years after Slovakia and the Czech Republic went their separate ways. In what should have been a clear-cut deal to pay Russia's $3.6 billion debt to the Czechs, Czech Prime Minister Milos Zeman's administration selected Falcon Capital–a shady, obscure financial group–to manage a pay-down scheme.
The agreement involved the sale of $2.5 billion of the debt to Falcon in exchange for a one-time payment of $547 million, and 46 percent of the money owed by Moscow was written off. But many of the details remain secret, and the Czech government refuses to release them. Also under the deal, which runs until 2020, the Russians will sell the Czechs arms and a fleet of civilian transport ships. In the 1990s, the Czechs balked at similar Russian offers, arguing they were joining NATO and wanted their armaments to be in sync with their soon-to-be military allies.
The deal was executed in an “extremely untransparent” manner, says Adriana Krnacova, the director of the Prague office of Transparency International, an organization that monitors government corruption. “Should a government, which is so-called democratic, involve itself in such strange deals, especially when its representatives can't adequately explain the terms of the deal, that the deal is for certain reasons secret?” Krnacova asked me in an e-mail.
How did the Czech Republic get to this point? Seemingly unbreakable connections between government officials and the Russian underworld date back at least to the mid-1990s. In May 1995 Czech law enforcement learned its lesson the hard way when it carried out a swashbuckling raid on the oddly named U Holubu (“At the Pigeons”) eatery.
The Budapest, Hungary, headquarters of reputed mobster Semyon Mogilevich.
Officers that night nabbed a gaggle of Russian gangsters, and the roundup was widely hailed as a firm blow to Russian organized crime. But instead of praise, the police officers who took part received a cool response from higher-ups. The officer in charge, Capt. Zdenek Machecek, was even jailed briefly on trumped-up charges. His name was not cleared until last year.
Many here weren't surprised. Critics say many Czech political and business elites have little interest in solving the problem of Russian organized crime, and the Czech press reports that some leaders are in cahoots with shady people from the former Soviet Union. The country's president, former dissident and playwright Vaclav Havel, has lamented the rise of “mafia capitalism” in his homeland, warning that “the ties of the business mafia reach high into the corridors of power.” That concern is echoed by many here who say this central European nation of 10 million is again being pulled down–little by little and despite NATO membership–by the sway of Russia.
At the U Holubu the night of the raid, a “Who's Who” of the post-Soviet underworld had gathered to fete one of their own, Viktor Averin, the number-two man in the most powerful Russian mafia clan, the notorious Solsnetskaya mafia. Also attending were Sergei Mikhailov, the kingpin of Solsnetskaya; Gafour Rakamov, a heroin trafficker and reputedly the most powerful gangster in the former Soviet Central Asian republic of Uzbekistan; Dzhemal Khachidze, a top drug pusher in Moscow; and Aleksandr Sedov, reputedly one of the most vicious killers in Russia. Not present was Semyon Mogilevich–the owner of the restaurant and an adjoining subterranean bar-cum-bordello, the “Black and White” club.
Mogilevich has steadfastly denied any wrongdoing, saying he is an honest businessman, but according to several law enforcement agencies, the restaurant and club were just a small part of his business interests. A May 1995 report, cobbled together by the FBI along with Russian, German, and Italian law enforcement officials, alleges that Mogilevich's main activities are arms dealing, prostitution, drug dealing, oil deals, and money laundering. One report even suggested he may have peddled nuclear weapons. The Russian daily Vremya Novosti reported on November 28, 2001, that Spanish security officials had issued an arrest warrant for Mogilevich on suspicions he may have pilfered a nuclear weapon from the old Soviet arsenal and sold it to Afghanistan's now-ousted Taliban.
Czech law enforcement had a surprise waiting for the birthday revelers at U Holubu. As musicians serenaded the mobsters, a Czech SWAT team winched down from ropes dangling above the stage. At first, the gangsters thought it was all part of the show, until the police barked at them to lie on the floor. Mogilevich, however, missed the spectacle. In a 1999 interview with the BBC, Mogilevich explained how he escaped the police dragnet:
“By the time I arrived at U Holubu everything was already in full swing, so I went to a neighboring hotel and sat in the bar there until about five or six in the morning.”
The nabbed mobsters also escaped prosecution. Since no crimes had been committed that night, nobody could be charged. Even so, then-FBI director Louis Freeh said the raid had been the most successful ever in the battle against Russian organized crime, recounts Petr Vancura, who served as Czech ambassador to the United States in the mid-1990s and now heads the Prague Institute for National Security.
It was not the first time Prague had played host to such a gathering of underworld figures. In 1992, Russian gangsters and their Italian counterparts convened there for a “summit” to carve up their spheres of influence and avoid needless and bloody turf battles, according to Russian media and the Czech intelligence agency (BIS).
There's really no surprise that the Czech Republic is inviting territory for Russian gangsters. Aside from its central location in Europe, people from the former Soviet Union need very little paperwork to travel there. Most do not need a visa to get in. There are also language similarities, and the beauty of cities like Prague. And since the fall of the Berlin Wall, Czech and Slovak law officials have been in a state of flux brought about by regime change. Unsurprisingly, law officers here admit they were not prepared for the onslaught of organized crime.
“None of us knew when the borders were opened in 1989 what it meant; we slowly learned, not only us but other former East Bloc states, that we weren't prepared in terms of security for organized crime,” said former BIS Director Stanislav Devaty in a 1998 Czech documentary on the Russian mafia.
And then there's Karlovy vary, a town nestled between gentle hills on the western fringes of the Czech Republic, not far from the German border. For centuries this enchanting spa town–known as Karlsbad in German–has been drawing the rich and powerful to drink from its sulphur springs. Many have come from Russia, from czars to communist chieftains. Peter the Great swore a dip in the city's fabled thermal springs improved his sexual potency. Today, Russia's so-called nouveau riche are flocking to Karlovy Vary in droves.
Semyon Mogilevich in 1999.
The Russian presence is palpable. Shops sport Cyrillic signs, there's a Russian-language daily, and a gilded onion-domed Russian Orthodox church overlooks the town. The Russians have been so smitten with it that many have decided to stay, as many as 15,000, according to various estimates. Not so evident is Russian control of the town's economic life. Many of the spa hotels are in Russian hands, according to the mayor's office. Czechs here believe the new hoteliers are Russian mobsters.
Just over 10 years after Russian troops filed out of their country, the Czechs in Karlovy Vary are wary of this Russian reoccupation. As one waiter put it, “What the Russians weren't able to accomplish with machine guns, they've accomplished with money.”
The mayor, Josef Pavel, is bullish on Russian investment. And the fact that the town's Russian patrons could be mafiosi does not appear to worry him. “We've had no troubles,” he says. “If they are [mobsters],” a local police spokesperson said, “then the good news is they consider Karlovy Vary a peace zone, a haven of prosperity.”
With car bombings and contract killings in Russia a common occurrence for gangsters, Russia's top mobsters seem eager to seek safe haven abroad for themselves and their families.
The Czech intelligence agency has raised alarms in report after report over the expanding Russian influence in Karlovy Vary. But the BIS isn't talking about the Russian mafia–it's worried about the FSB, the successor to the KGB.
Experts, including those at Jane's Intelligence Review, have said there are links between Russia's organized crime and the government's spy services. These ties blur the lines between legitimate business, espionage, and mafia goings-on. As former BIS Director Ollder Cerny told UPI in April, “It is also not easy to distinguish between traditional Russian intelligence operations, the freelance efforts of organized crime, and legitimate business interests, because sometimes they shade into one another.”
In 1997 the BIS reported that the Russian intelligence services had purchased a significant amount of real estate in Karlovy Vary. And the German weekly Der Spiegel estimates FSB real estate holdings there at $30 million. The magazine's 2000 report grimly noted: “They are a few kilometers from Germany's border and inside NATO territory–what could be better?”
A spokesman for the mayor, however, refutes Der Spiegel's charges.
“If Der Spiegel had proof of it, I wish they'd share it with us,” Jan Kopal says.
The FSB's spy net is cast beyond Karlovy Vary, the magazine reported, with links that reach all the way to Prague. A 1998 BIS report estimated that about half of the 400-person staff at the Russian embassy in the Czech capital–which maintains a staff three times larger than it does in Warsaw–is comprised of secret service agents. That report also said that Prague is ground zero for the management of all Russian espionage activities for the whole of Europe.
The BIS says that Russian spies are bent on influencing their government's policies, noting a Russian-orchestrated disinformation campaign in the 1990s to derail the Czech bid to join NATO. The Russian mafia is also trying now to work behind the scenes to wield influence over the Czech government, according to the BIS. In its annual 2000 report, the BIS noted a parallel rise in mafia activity along with a shift in tactics. Already well ensconced in the Czech Republic, the mafia is now shifting gears, buying into legitimate businesses such as financial and real estate investments, trade in raw materials, and manufacturing, according to the 2000 BIS report.
“They attempt to penetrate economic spheres, gain interest in strategic economic sectors, and they try to cause corruption of state administration and influence decision-making,” warned the Ministry of Interior.
Judging by recent reports, the tactics may be working.
More than a few eyebrows were raised by the leaked memorandum on a meeting in November 2000 of the “Permanent Russian-Czech Committee on Economic and Scientific Cooperation” at the Czech Trade and Industry Ministry. In it the Czech government agreed “to provide the Russian government with preferential information” on plans to privatize the Czech energy sector and to treat Russian and Czech companies equally in the bidding process.
Some former Czech law enforcement officials have made dubious choices on the company they choose to keep. One former police investigator, Joseph Doucha, now works as a lawyer in a firm whose top clients include questionable Russian businessmen. And as the Czech weekly Respekt reports, the former director of the BIS, Karel Vulterin, now runs Prague's Simek Casino, which is reportedly tied to the Russian espionage services.
Czech Interior Minister Vaclav Grulich got so fed up with efforts to derail his investigations into organized crime that he resigned in 2000, noting that a top aide to former Prime Minister Milos Zeman actually shut down two departments on organized crime.
The aide in question was old-school communist Miroslav Slouf, whose stature in governing circles had worried many, including Havel. Slouf's influence has also raised red flags in Washington–in May 2000, the U.S. embassy in Prague reported that former communist officials had a worrying influence over the government. Slouf was also reported in Respekt to have traveled with a Czech delegation on an unexplained trip to Iraq in early 2000. The U.S. embassy dispatch also mentioned that Prague was edging toward non-friendly states.
Following the spring elections, one of the first moves Vladimir Spidla made after taking over for Zeman was to quietly push Slouf out the door. But Czech law enforcement authorities still steer clear of probing Russian organized crime, contends former ambassador Vancura. He claims the Czech police have been “ordered” not to look into such matters.
Vancura is one of the few notable Czech voices to speak out. “It's not like it was under communism when they literally ruled [Czechoslovakia],” he says. Now, “the Russians are eager to gain back as much control as they can.” Asked if the Czech Republic's security is threatened, he takes no time in answering, “Of course.”