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Triads tighten grip on Russia's far east

By Bertil Lintner

As Chinese Triads in Vladivostok take over the reins of organised crime from Russian groups, Bertil Lintner examines the changing face of Russia's far east.

Organised crime has always been a problem in Vladivostok and Russia's far east, but the last few years have seen a dramatic increase in the number of Chinese Triad groups operating in the region.

Last year alone, an estimated US$200m was transferred from China to the Russian far east--mostly through the Chinese underground banking system (see box: underground banks)--and invested in casinos, hotels, restaurants, and hostess bars. Large amounts have also been invested in illegal logging and fishing deals, with timber and fish being smuggled to China, Japan and South Korea; costing the government millions of roubles every year in lost revenue.

Russia's Minister for Internal Affairs, Boris Gryzlov, has admitted that the far eastern region has the worst per-person crime rate in the country. However, the streets of Vladivostok appear to be safer and much more orderly today than they were a decade ago, when they were under the control of local crime bosses. Then, smuggling rackets, gambling dens and prostitution rings were rife, and kidnappings, drive-by shootings and car bombings were regular occurrences.

The difference now is that most of the old, flamboyant Russian 'godfathers' are gone--and the Chinese Triads have arrived. They are better organised, more discreet, and they view civil disorder as a threat to their criminal enterprises. According to Vitaly Nomokonov, director of the Centre for the Study of Organised Crime at the Far Eastern State University's Law Institute in Vladivostok, the level of crime carried out by these groups has mushroomed.

New order

Chinese gangs control many of the casinos in the region (there are more than a dozen gaming establishments in the Vladivostok area), many Chinese restaurants, and even some Russian hotels and eateries. Many small-time Russian gangsters now work for the Chinese syndicates, either as contacts for local business deals or as security guards at the casinos. The nature of the relationship between local Russian criminals and the Chinese crime bosses is not clear, but it seems that the Chinese are far better organised, and therefore have the upper hand.

The only area which the Chinese do not dominate is the local drug trade, which is still in the hands of Tajik, Kazakh, Chechen and other Central Asian criminals, who bring in heroin from Afghanistan. According to the local police, only ephedrine and small quantities of Southeast Asian heroin are smuggled in from China and North Korea. On two occasions--in 1994 and 1999--North Korean intelligence agents and government officials were caught trying to smuggle Southeast Asian heroin and opium into the Vladivostok area.

Underground banks

Law enforcement officials in Asia believe the Chinese underground banking system handles more money transfers in and out of China than are sent through the official banking system--and now this network has reached the Russian far east.

In Chinese, the system is called hui kuan, "to remit sums of money" or chiao hui, "overseas remittances". Some refer to it as fei chien, "flying money", which is something of a misnomer given that the money never leaves the place where it was paid. Rather, an equivalent amount can be collected almost anywhere in the world where there are ethnic Chinese communities, leaving no paper trail that could be scrutinised by international law enforcement agencies.

The system is a simple and effective one. If a Chinese businessman wants to pay for goods he has imported from Thailand or Russia, he is unlikely to use a local bank. The Chinese renminbi is not convertible, at least officially, and foreign currency transactions are restricted. Banks are also slow and they levy hefty charges on international transfers. Besides, the Thai baht may be convertible but the Russian rouble is not.

There is an easy way around these difficulties. He can go to a travel agency in his local town and pay for the goods in renminbi. Then his Thai or Russian-based business partner can pick up the equivalent in Thai baht, Russian roubles or US dollars at a local money changer in Thailand or Russia.

If the businessman wants to visit his partners in Thailand or Russia, there are restrictions on how much money he can take out of China. But again, a visit to the travel agency will solve that problem. He hands over his renminbi to an agent in China and later gets Thai baht, Russian roubles or US dollars from the money changer in the other country. All that is needed to complete the deal is a coded phone call or e-mail message.

The system is swift, safe and free. And if the goods are illegal--the payments could be for narcotics or other smuggled goods--then secrecy is of utmost importance. The underground banking system creates an extra cash flow for the travel agents through other business deals, for example trading cheap consumer goods. And about once a year, the various members of the network communicate with each other and settle their balances.

Many of the leaders of the indigenous Russian organised crime groups that previously dominated the region have been killed in turf wars, while others have gone out of business or died in mysterious circumstances. The last of the city's big Russian crime bosses, Evgeny Petrovich Vasin, nicknamed "Dzhem" ("Jam") died of a heart attack in October 2001. Another Russian had a heart attack in an aircraft when he was flying to Vladivostok to attend Vasins funeral.

Somewhat ironically, says Nomokonov, it was Vasin who first brought mainland Chinese Triads to Vladivostok to counter competitors from European Russia and Central Asia, who had flocked to the area after the collapse of the Soviet Union in 1991. In the mid-1990s, Vasin paid several visits to Shenyang in Chinas northeastern Liaoning province. His first partner in crime, who later rose to become the main organised crime figure in Vladivostok, was a Chinese known as "Lao Da," or "Elder Brother". Lao Da already controlled a large part of Vasin's businesses and after his death, he is believed to have discreetly taken over what remained.

Ethnic tension

Large-scale Chinese migration to the Russian far east has made it easier for the Triads to prosper in the region. As a result of Stalins ethnic purges in the 1930s, Vladivostok--once a predominantly Chinese city-- was until recently the only major port city in the Pacific Rim without a Chinese community. Now, Chinese merchants from across the border sell clothes, tools, toys, watches and other cheap consumer goods in a sprawling new market in one of the city's eastern suburbs.

There is still no Chinatown as such in the city. The new immigrants live scattered in the suburbs--or they are concentrated in other far eastern towns such as Ussurijsk and Blagoveshchensk and in the smaller township of Pogranichnyi, where they outnumber the European population.

Facing racial prejudice and the threat of deportation, many choose--or are forced--to work for ethnic Chinese groups linked to the Triads. Local sources in Vladivostok assert that every stall owner in the city's Chinese market has to pay protection money to the gangs. The gangs also arrange for bribes to be paid to some local officials to make sure the vendors are not sent home, as many of them do not have visas.

The problem of cross-border crime and illegal migration was deemed important enough to be highlighted in a joint declaration by Russian president Vladimir Putin and his Chinese counterpart Hu Jintao, that was signed on 27 May. Russia and China agreed to create a joint working group to curb the uncontrolled movement of people across the common border.

The rise in Chinese organised crime and illegal migration have fuelled racist attitudes towards all Chinese, even ordinary businessmen who are actually victimised by the Triads through their protection rackets. Some sources, however, argue that the prevailing perception that Chinese migrants are coming like a 'tidal wave' is grossly exaggerated. In a paper presented to the San Diego State University in January 2001, Russian academic Mikhail Alexseev emphasised that Chinese migration to the Russian far east is not remotely similar to the Chinese presence in New York, San Francisco, or even Moscow.

But threat perceptions are important for local attitudes. After all, there are some 100 million people in Chinas northeastern region, while the population of Russia's far eastern Federal District--an area two-thirds of the size of the USA--is not more than seven million. Even if the number of newly arrived migrants from China did not exceed 200,000, or a mere 3% of the total population--a figure often mentioned in the local press--many locals see it as a trend, and believe that in another decade or two, the numbers could be much higher.

Russia's far east may be too poor to attract huge numbers of migrant workers, who are better off at home in China. But there is plenty of land, and thousands of Chinese farmers have settled in the border areas, where they grow vegetables and other crops.

More importantly, business opportunities abound, especially in the booming underground economy. Although it may be a trickle rather than a flood, Nomokonov called the movement of people across the border "unstoppable" and said that the authorities must make sure is does not "damage Russia's national interests".

How well connected in high places are the Triads is difficult to determine, but enforcing the law, and curbing corruption within the police and local government, has never been easy in this remote corner of Russia. Gryzlov noted that out of 151 bribery cases filed in 2001 and 2002, only 20 made it to court--and, in the end, only one of the suspects received a prison sentence. Late last year, the police actually arrested Lao Da and about a dozen of his associates, but the case collapsed, and not one of them was brought to court. The local police are tight-lipped about Lao Da and are even unwilling to discuss his existence--which goes a long way to show how influential he has become, and how much "Russia's national interests" have been undermined by the arrival of Chinese organised crime in the Far East.

This article first appeared in Jane's Intelligence Review, September 2003

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