I grew up at the tail end of the Cold War. I hardly knew anything about politics and economics. Communist countries had planned economies where a central government decided how much each citizen earned and produced. Moreover, I was told that the people lived in fear of the KGB, both foreign and domestic security services, that monitored the citizens daily movements. As a child, my classmates teased that Russian women were fat, old, and ugly.
Fast forward nearly 25 years, now the Russia is controlled by Putin and the “oligarchs”, the billionaire captains of Russian industry, who all have strong ties to the KGB. Furthermore, the Russian mafia has become a new fixture in Hollywood films. And, contrary to what I heard as a boy, Russia is a factory of models:
I don’t understand how a Communist country can, in a short while, be controlled by the ex-KGB types. Neither The New York Times nor the Wall Street Journal has explained how that transition happen particularly well. Misha Glenny‘s McMafia answered many of my questions about the turbulent period from Gorbachev to the present day. Glenny is Russian and used to work as a journalist for The Guardian, BBC. Currently, he is a visiting professor at Columbia University’s Harriman Institute.
The book takes the reader on a tour of organized crime and focuses particularly on Eastern Europe, Africa (Nigeria, South Africa), East Asia (Japan, China, India, Dubai), Latin America (Mexico, Colombia), British Columbia, and touches upon cyber crime.. According to Glenny, “organized crime and corruption flourishes in regions and countries where public trust in institutions is weak.” That sounds like of like some West African countries that I know, e.g. Nigeria, Mali.
I recognize not every one will have a chance to read this fascinating book. I’m going to share some of what I learned here:
Chapter 1: Ilya Pavlov
Until his untimely death by sniper bullet on March 7, 2003, Pavlov was one of the richest (estimated net worth of $1.5 billion) and powerful men in Central and Eastern Europe. Born in 1960, Pavlov was the son of a bar and restaurant owner in Sofia, Bulgaria. “‘At the time, being a barman or waiter conferred considerable social status,'” said Emil Kyulev because it created opportunities to hang out with “tough guys” and members of the security services.
Pavlov started as an accomplished wrestler in the 1970s which earned him considerable status. “A pro in all but name, the successful wrestler could expect public acclamation (and fringe benefits such as casual sex on tap), money, an apartment, and a car (the latter two being out of the reach of all but the most feted youngsters),” writes Glenny.
In 1982, Pavlov married Toni Chergelanova whose father, Petur Chergelanov, worked in Bulgaria’s secret political police, the Darzhavna Sigurnost (DS).
Darzhavna Sigurnost (DS)
At the time, the DS participated in the highly lucrative trade of smuggling drugs, arms, and high-tech. “‘Smuggling is our cultural heritage…we know how to make those boundaries [across the Balkans] disappear. We can cross the roughest sea and traverse the most forbidding mountain. We know every secret pass and, failing that, the price of every border guard,’ explains Ivan Krastev, Bulgaria’s leading political scientist. The DS seems to have been involved in a number of illicit businesses:
- 1960s – DS established Kintex “which enjoyed a near monopoly on the export of arms from Bulgaria and sought out markets in trouble spots like the Middle East and Africa”
- 1970s – DS expands role of Kintex to also “smuggle weapons to African insurgent groups, but soon the channels were also being used for illegal people trafficking, for drugs, and even for the smuggling of works of art and antiquities”
- Kaptagon, a Bulgarian amphetamine, was sold to the Middle East; in the other direction, “some 80 percent of heroin destined for the West European market would cross into Bulgaria from Turkey… and into the hands of the DS.”
- Due to pressure from Moscow in the 1970s, Bulgaria was selected to develop its electronics industry. In order to circumvent the regulatory body preventing the sale of sensitive high-tech equipment with possible military uses from making its way from the West to the Soviet Union, the DS established companies in the West to make purchases of these equipment and sell them to the USSR.
Ilya Pavlov’s father-in-law, Petur Chergelanov, headed the Military Counter Intelligence which controlled all of Bulgaria’s borders.
According to Glenny, “the DS’s leadership calculated that Communism did not have long to last.” In 1986, Bulgaria passed Decree 56 which allowed the creation of joint-stock companies or private enterprises. As Stanimir Vaglenov, a Bulgarian journalist who specializes in corruption and organized crime, “the security services founded the first company a week after Decree 56 came into effect. And within the first year, members of the DS had founded 90 percent of the new joint-stock companies.”
In 1988, Pavlov registered Multiart for the import/export of antiques and high art. One of its directors was Dimitur Ivanov, boss of the Sixth Directorate of the DS. Ivanov introduced Pavlov to Andrei Lukanov, the country’s lead reform Communist and soon-to-be prime minister. This triumvirate controlled all the necessary pieces to operate a successful venture in Eastern Europe: Lukanov held the reins the the political machine, Ivanov had influence over the security services, Pavlov and “his wrestler friends provided the muscle.”
Apparently the three of them would approach the Communist-appointed directors of the state-owned factories with an offer they could not refuse:
“Pavlov told the director that from that point on, he would be buying raw materials not directly from the Russians at the subsidized price but from one of [Pavlov’s] companies at the world market price. And then instead of selling the end product directly to the consumer, the director would have to sell it at a knock-down price to another of [Pavlov’s] firms, which would then sell it on the open market. He controlled the entrance and exit to the factory — the Spider Trap.”
Pavlov replicated this practice by creating “these holding companies in virtually every branch of the Bulgarian economy, in agriculture, in transport, in industry, energy.” This enormous entity became known as Multigroup.
Glenny relatively brief account of Albania seems like a roadmap of what happened across Eastern Europe. “By 1991, 14,000 secret policemen were kicking their heels and looking for work in a country where the economy was contracting at an alarming rate.” These security personnel came from the secret police, counter-intelligence, special forces, border guards, homicide detectives, and traffic cops. “Their skills included surveillance, smuggling, killing people, establishing networks, and blackmail.”
Meanwhile, sports societies — home of wrestlers, boxers, and weightlifters — became increasingly disenfranchised. The wrestlers initially controlled the distribution network for stolen cars. “By 1992, the wrestlers enjoyed a near stranglehold on Bulgaria’s major cities, although in some areas they faced competition from protection rackets run by ex-policemen and security officers.”
“The brighter sparks among them combined the skills of the two professions — sportsmen for muscle, policemen for networking.” These wrestler/security organizations came to dominate the economy — SIC, VIS, TIM became the “market leaders”. They presented themselves as “insurance companies”. If you paid them, then your car would not be stolen. “This was not just extortion. If your vehicle was stolen when already insured with SIC, the thugs would work hard to get it back.”
They also provided security services to those who could pay, e.g. the oligarchs. Some oligarchs chose to create their “own in-house goon squad.”
Apparently, each country’s wrestler/security organizations specialized in different illicit trades:
- Former Yugoslavia: arms and cigarettes
- Bulgaria: stolen cars
- Ukraine: trafficking of migrant labor and women
Glenny explains that the transition from the planned economy to a capitalist one was too abrupt. “[T]he hopelessly weak states that emerged throughout the former Soviet Union and Eastern Europe had simply no capacity to define what was ‘legal’ and what was ‘illegal’… Those who positioned themselves well in the first three years after the end of Communism were often in a position to make up the rules of their brave new world.”
This is an abbreviation of what I learned from Chapter 1. I had never thought much of either Bulgaria nor Albania. Glenny also delves into the trafficking of women and how the West basically set up these Eastern European countries to be overwhelmed by the former’s superior goods.
Personally, I think much of this could be relevant in the future if I spoke to someone from one of these Eastern European countries. Before reading Glenny’s book, I had a naive understanding of how they moved from Communism to capitalism. Sure, it was hard but now we’re all in the same capitalist boat. Clearly, I am not as informed as I would like to be.