The Capital Of Crime

An oil executive is gunned down with a rocket-propelled grenade in rush-hour traffic. A city-council member is indicted for running a murder-for-hire ring. Another gets his head blown off by a car bomb. Thugs beat an anti-corruption crusader with rubber truncheons. Organized crime is so pervasive that it even gets its hooks into people after they're dead--but before they're buried. The local cemetery business is reportedly controlled by a ruthless gang, one run by a local "businessman" called "Kostya the Grave."

This is St. Petersburg, hometown of the just-inaugurated president of Russia, Vladimir Putin. Elected in part because of his tough-guy image and a promise to impose "a dictatorship of the rule of law" amid the chaos of post-Soviet Russia, Putin could find no better place to start than the city of his birth. St. Petersburg, the elegant city of Pushkin and the Winter Palace, is today a place where the "rule of law" gets trumped by an older principle: might makes right. In Russia's most esthetically graceful city, the line between commerce, politics and organized crime is about as thin as the cross hairs on a sniper's rifle. All too often in the place where Putin grew up, the Kalashnikov is a more important business tool than a computer.

St. Petersburg's story since the collapse of communism mirrors Russia's: boundless hope followed by bitter betrayal. In the late 1980s the former tsarist-era capital, famous for its canals and Baroque architecture, was the home of democratic activists who eventually toppled the Communist Party. The leader of that movement, the late St. Petersburg chief executive Anatoly Sobchak, became the unlikely political godfather to ex-KGB agent Putin; Putin in turn will start staffing his government this week with a wide range of friends and familiar faces. The "St. Petersburg government," as the Russian press now calls it, that Putin will install includes former security-agency pals like Nikolai Patrushev, the current chief of the FSB (successor agency to the KGB), as well as a handful of free-market liberals who are likely to get top economic positions.

But what Boris Yeltsin officially christened "Russia's Cultural Capital" has now become something else entirely: Russia's criminal capital. Since 1997, according to law-enforcement statistics, more than 200 contract murders have taken place in St. Petersburg. Among these have been prominent politicians (chart). But for a period earlier this year businessmen in industries from beer to electronics to oil were being killed at a rate of almost one a week. Many of these hits have been brazen, designed to attract the maximum amount of public attention.

Most of these cases have never been solved. Investigations into the two most-shocking recent political hits have gone nowhere. In the autumn of 1998 two assassins gunned down liberal lawmaker and human-rights activist Galina Starovoitova at close range in the stairwell of her apartment. "The Starovoitova assassination was like an announcement by the mafia that they have taken power," said Aleksandr Shchelkanov, a local legislator and anti-corruption crusader. Those present at the creation of the New Russia--led by former economic-privatization chief Anatoly Chubais--gathered at her funeral, knowing that the bad guys were very much in control of democracy's Russian birthplace. Yuli Rybakov, now a member of the national legislature in Moscow, who is running for governor of St. Petersburg, pulled down red Soviet flags in St. Petersburg's Communist Party headquarters in 1991, and replaced them with the Russian tricolor. "I did this with my own hands," he said. "Now I sometimes wonder why I even bothered."

Only 18 months earlier the same crowd had gathered to bury another liberal. Mikhail Manevich had been a deputy governor in charge of property privatization in St. Petersburg. He had been particularly close to Chubais, Yeltsin's economic tsar. A sniper assassinated Manevich in the summer of 1997 as he was riding to work. At his funeral, Chubais spoke memorably: "I want to say to those who pulled the trigger, and those who paid for this with their dirty stinking stolen money, we will get all of you." Nearly three years later Manevich's killing remains unsolved.

How and why did the city turn into a shooting gallery? Those, like Putin, who were loyal to Sobchak, tend to blame his successor, Vladimir Yakovlev, who beat Sobchak by just 27,000 votes (Putin was his campaign manager) in 1996. Critics accuse Yakovlev of letting organized crime flourish in St. Petersburg for the last four years and claim many in his administration are deeply corrupt. But in post-communist Russia, nothing is quite that simple. Despite his proclaimed commitment to reform and his pro-democracy image, Sobchak, in the view of most political analysts now, was anything but a democrat; he treated the elected city council with disdain and tried to rule by decree instead. When Yeltsin dispersed Russia's national Parliament in 1993, Sobchak did the same locally. He then conjured up by decree a new part-time legislature--one custom-made to be toothless. Concentrating so much power in the executive branch inevitably led to abuses of power. Sobchak, for example, gave himself the right to hand out city-owned real estate.

By Sobchak's own admission, he used this power to bestow apartments on friendly bankers, businessmen and cooperative newspaper editors. Another scheme, dubbed the "food for metals" scandal, happened on none other than Putin's watch, when he was the city's deputy in charge of investment and trade. In 1992, under the guise of saving St. Petersburg from famine, Putin came up with a plan to ship $122 million worth of raw materials abroad in exchange for food. He signed deals with 19 companies to act as middlemen. The food never showed up, the money disappeared and the local legislature conducted an investigation and called for Putin's head. Sobchak didn't give it to them, but a precedent was set: the city was in the business of cutting huge deals without the oversight of the local legislature.

The organized-crime gangs that now are so powerful in St. Petersburg existed well before Sobchak left town. Sobchak, who denied any links to corruption, left for Paris in 1997, returned to St. Petersburg last year and died of a heart attack in February. Throughout the early 1990s "mafias" that had grown out of the Soviet-era black market were quickly building up capital--and power. In St. Petersburg, by far the strongest of these was a crime syndicate called the Tambovskaya Gruperovka, or the Tambov Gang, which ran extortion and loan-sharking rackets. According to informed sources in St. Petersburg's political establishment, the Tambov Gang, by the mid-1990s, had become more ambitious: it sought to establish a foothold in the local government by backing a candidate for governor--and eventually it settled on Yakovlev. Yakovlev's campaign spent lavishly, though no proof has ever surfaced that some of the money came from the Tambov Gang. Afterward Yakovlev offered Putin a job in his administration. Putin turned it down, and soon ended up in Moscow.

That was a wise move. In December 1996, Anatoly Ponidelko, then the city's police chief, publicly announced that the Tambov Gang had gained undue influence over Yakovlev's city hall. Yakovlev angrily denied the allegations--as he has ever since--and promptly arranged Ponidelko's dismissal. The group's business interests proceeded to expand considerably. In his book "Bandit Petersburg," investigative journalist Andrei Konstantinov wrote that the Tambov Gang holds stakes in much of St. Petersburg's petroleum, real-estate and banking sectors. The group's leader, according to Konstantinov's book and St. Petersburg press reports, was Vladimir Kumarin. He changed his name to Vladimir Barsukov, and in 1998 was named vice president of the St. Petersburg Fuel Co., an executive position in a business in which at least three of his colleagues at competing firms were killed in a period of two years. In a rare interview with a Russian newspaper last year, Kumarin said he was a respectable businessman, not a mob boss. He also denied the Tambov Gang's existence: "We don't conduct any meetings and we don't have any membership payments."

Even without the mafia, Yakovlev has plenty of supporters who will play rough when the governor's interests are threatened. In 1998, days after federal lawmakers Starovoitova and Rybakov sent an open letter to the city council harshly criticizing Yakovlev, the homes of their legislative aides were searched by police. Oleg Sergeyev, a city council member and pediatrician, complained of corruption in Yakovlev's health-care bureaucracy, and introduced legislation to try and clean it up. He was then attacked in his apartment stairwell by assailants wielding rubber truncheons. The attackers broke his nose, ribs and skull, but took no money or valuables. (Yakovlev's opponents question what he has done to stop these activities.) And in October of last year, Viktor Novosyolov, a powerful city council member and onetime Yakovlev ally, was killed when two men walked up to his car as it stopped at a traffic light, placed a bomb on the roof and detonated it. The blast decapitated Novosyolov. The victim was reputed to have organized crime ties, but had broken with Yakovlev and was about to support another candidate in next week's governor's election. According to several city-council members, Novosyolov had compromising material on Yakovlev that he was ready to make public.

Yakovlev's critics say that he has always managed to be out of town during the city's major contract hits (Manevich, Starovoitova, Pavel Kapysh and Novosyolov). Yakovlev has repeatedly denied that his administration has any involvement in organized crime. The late Sobchak didn't buy it. "What happened to [Mikhail] Manevich is on Yakovlev's conscience," he said in the summer of 1997.

After he succeeded Yeltsin on Dec. 31, Putin seemed intent on putting the man who beat his former boss on notice. At Sobchak's funeral, a tearful Putin said that Sobchak died "as a result of persecution" from his political enemies, a clear reference to Yakovlev. No one would have been surprised if Putin backed the popular former prime minister Sergei Stepashin to challenge Yakovlev in the election scheduled for May 14. Instead, Putin unexpectedly endorsed Valentina Matviyenko, a deputy prime minister and relative political lightweight who never caught on with the St. Petersburg electorate.

Then, last month, the newly elected president apparently decided that there would be no war with Yakovlev at all. He forced Matviyenko to withdraw her candidacy, and clandestinely met with Yakovlev recently. Who said what in that extraordinary meeting remains a closely guarded secret. But political sources in St. Petersburg believe Yakovlev offered--and Putin accepted--a straightforward deal: loyalty to the Kremlin in exchange for a free ride to re-election next week. For Putin, it may seem better to deal with the Devil he knows, even in his own hometown.