Teaser: The Moscow mayoralty and its unofficial alleged ties to organized crime is the next battlefront in the ongoing Kremlin Wars

Teaser:

Summary:

Editor's Note: This piece is part of STRATFOR's ongoing coverage of the latest developments in the power struggle within the Kremlin.

Analysis:

The Kremlin Wars -- a power struggle between Russia's two main political clans, led by Deputy Prime Minister Igor Sechin and Deputy Chief of Staff Vladislav Surkov -- have spread to new battlefronts. The newest is the Moscow mayoralty, a position STRATFOR sources in Moscow say could be left vacant within the next year by Moscow Mayor Yuri Luzhkov's forced retirement. More important, Luzhkov's alleged "shadow portfolio" of running the Moscow Mob, the powerful Russian organized crime (OC) syndicate, will be up for grabs when he steps down.

Luzhkov himself is an institution in Moscow. He has served as mayor since 1992. He and his wife Elena Baturina -- who runs Russia's largest construction group and is the country's only notable female oligarch -- are politically and economically one of the most powerful couples in Russia. Now in his fifth term in office, the 73-year-old Luzhkov thus far has been seen as indispensable to the Kremlin because of his alleged ability to oversee the political aspects of the Moscow Mob's operations. At the same time, he has been difficult to deal with politically because of the independence he has as mayor of Moscow, and has therefore often run afoul of Russia's chief decision-maker, Prime Minister Vladimir Putin.

Putin is expected to make sure that whoever replaces Luzhkov as Moscow's mayor also receives the alleged OC "portfolio," in order to maintain government oversight over the most powerful OC group in Russia (and arguably one of the most powerful in the world). This makes Luzhkov's replacement an immediately powerful figure -- and the opposing Kremlin clans will fight wildly to get one of their own into that position.

Russian OC is an integral lever of state power in Russia. Russia's size traditionally has made government control over the entire territory tenuous during times of a weak central state. During those times, OC has provided employment opportunities and power for Russia's entrepreneurial minds. After the collapse of the Soviet Union, for instance, many members of Russia's intelligence services easily integrated themselves into the OC groups that emerged from the shadows in the early 1990s to replace the crumbling state in the economic, political and even judicial spheres.

 

When the state is strong -- as it has been with Putin as president and then prime minister -- it can either expend extraordinary energy on countering OC or include it under the umbrella of the state, essentially regulating it. The latter is almost always the preferred option, since so many connections between former and current intelligence operatives and OC already exist. Currently, the Russian state is looking to increase its influence over domestic OC groups, for three main reasons:

• Money: The Russian shadow economy -- essentially the production of banned products and services, tax evasion and criminal activity (especially racketeering) -- is a significant part of the overall economy. According to data from Russia's statistical service released in January, the shadow economy equals approximately 20 percent of gross domestic product and is set to expand as the labor market deteriorates due to the economic crisis. OC controls this economy and its manifestations outside the country, though trafficking weapons, drugs and people. The government essentially taxes this economy by having political oversight over -- or through direct kickbacks from -- OC activities at various regional levels. This means that regional political bosses are crucial to controlling the flow of money from the shadow economy to government coffers.



• Influence abroad and at home: Russian OC, through its own networks and those of former and current Federal Security Service (FSB) and Foreign Intelligence Service (SVR) personnel in its midst, has a large overseas presence. Main hubs for OC operations are London, Tokyo, Dubai, Istanbul, Paris, Rome, Amsterdam, Prague, New York and Miami. Thus the Russian government can use OC elements for intelligence, sabotage and even diplomatic service abroad. This also gives the Kremlin plausible deniability, since OC's actions are always extrajudicial and are assumed, but rarely proven, to be directly linked to the state. Central Europe, where Russian OC often "negotiates" deals with local politicians on Moscow's behalf, is full of examples of this. Russian OC's influence also extends domestically by allowing the Kremlin to use OC to pressure regional politicians, businessmen or journalists without using government organs.



• Control of criminal activity: Ultimately, the Kremlin wants Russia to run with minimal internal discord, which means making sure that OC activities are contained. OC gives the government a way to evict businesses not approved by the state while maintaining a veneer of impartiality. Conversely, foreign investors in Russia understand that racketeers will impose a political/security protection fee -- called a krysha -- on their profits, but the government can use its control of OC to make sure the fee is predictable and not exorbitant, and that OC operates in a way that allows government-approved businesses to operate in Russia.

The crime syndicates' day-to-day operations are managed by the bosses of the various mobs.

However, STRATFOR sources in the Kremlin say Putin feels the Russian state has grown significantly stronger since the 1990s and that time is ripe to institutionalize political oversight of the Moscow Mob as part of the Moscow mayoralty, thus separating it from Luzhkov as a person. Putin is expected to roll Luzhkov's alleged role in the Moscow Mob into the next mayor's portfolio, making it a tool of the state. 

The uncertainty over Luzhkov's replacement leaves room for competition between the two Kremlin clans. Sechin's clan, made up of the siloviki (members of the Russian intelligence community with positions of power in government and, in some cases, OC), would seem to have the upper hand. The FSB is the backbone of Sechin's clan, and because that organization has so many links to Russian OC, it would only make sense for the Moscow mayoralty to fall within the Sechin clan's purview.

 

But Surkov, who heads the other powerful political clan, has other ideas. He sees the upcoming vacancy in Moscow as a quick way to strike an important balance to the FSB's oversight of Russian OC and therefore outmaneuver his nemesis, Sechin.