How the Invasion of Ukraine Is Shaking Up the Global Crime Scene
"What's happening in Ukraine now matters to criminals from Bogotá to Beijing."
Two policemen walk past armed men standing guard at the entrance of the Mejlis of the Crimean Tatar people (the single highest executive-representative body of the Crimean Tatars) in Simferopol on September 16, 2014. Photo by MAX VETROV/AFP/Getty Images
As Putin's "little green men" were taking Crimea back in March, I was speaking with both cops and gangsters in Moscow who saw this as a great business opportunity—a chance for Russian gangs to move into new turf, make new alliances, and open up new trafficking routes.
They were thinking far too small. Already it has become clear that the conflict in Ukraine is having an impact on not just the regional but the global underworld. As one Interpol analyst told me, "What's happening in Ukraine now matters to criminals from Bogotá to Beijing."
Crime, especially organized crime, has been at the heart of the events in Ukraine from the start. Many of the burly and well-armed "self-defense volunteers" who came out on the streets alongside the not-officially-Russian troops turned out to be local gangsters, and the governing elite there have close, long-term relations with organized crime. Likewise, in eastern Ukraine, criminals have been sworn in as members of local militias and even risen to senior ranks, while the police, long known for their corruption, are fighting alongside them.
Now Ukraine is beginning to shape crime around the rest of the planet.
While it was only to be expected that Crimea and eastern Ukraine might be integrated even more closely into the Russian organized crime networks, it looks as though Ukraine's gangsters are perversely stepping up their cooperation with their Russian counterparts even while Kiev fights a Moscow-backed insurgency.
Just as the Kremlin was setting up its new administration in newly annexed Crimea, so, too, were the big Moscow-based crime networks sending their smotryashchye—the term means a local overseer, but now also means, in effect, an ambassador—there to connect with local gangs. In part, they're interested in the opportunities for fraud and embezzlement of the massive inflow of federal development funds perhaps $4.5 billion this year alone—and the newly-announced casino complexes to be built near the resort city of Yalta. They're also looking to the Black Sea smuggling routes and the opportunity to make the Crimean port of Sevastopol the next big smuggling hub.
These days, the Ukrainian port of Odessa is the smugglers' haven of choice on the Black Sea. There's Afghan heroin coming through Russia and heading into Western Europe through Romania and Bulgaria, stolen cars coming north from Turkey, unlicensed Kalashnikovs heading into the Mediterranean, Moldovan women being trafficked into the Middle East, and a whole range of criminal commodities head out of Odessa Maritime Trade Port, along with its satellite facilities of Illichivsk and southern ports. Routes head both ways, though, and increasingly there is an inward flow of global illicit goods: Latin American cocaine (either for retransfer by sea or else to be trucked into Russia or Central Europe), women trafficked from Africa, even guns heading to the war zone.
The criminal authorities of Odessa, who have more than a nodding relationship with elements of the "upperworld" authorities, have done well on the back of this trade, charging a "tax" in return for letting their ports become nodes in the global criminal economy. But all of a sudden, they face potential competition in the form of Sevastopol. The Crimean port may currently be under embargo, but it has powerful potential advantages. The main criminal business through Odessa is on behalf, directly or indirectly, of the Russian networks; if they chose to switch their business, then perhaps two thirds of the city's smuggling would be lost. The Russian Black Sea Fleet is based in Sevastopol, and military supply convoys—which are exempt from regular police and customs checks—are a cheap and secure way to transport illicit goods. Finally, the links between the gangsters and local political leaders are at least as close in Crimea as in Odessa. So, if the criminals of Sevastopol can establish reliable shipping routes and are willing to match or undercut Odessa's rates, we could see a major realignment of regional smuggling.
Why does it matter if the ships dock at Sevastopol rather than Odessa? Because if the former can offer lower transit costs and new routes, then not only does it mean the Crimeans can take over existing smuggling business, it also makes new ventures economically viable. For example, already, counterfeit cigarettes are being smuggled to northern Turkey, having been brought into Crimea on military supply ships. Perhaps most alarming are unconfirmed suggestions I have heard from Ukrainian intelligence services—admittedly hardly objective observers—that some oil illegally sold through Turkey by Islamic State militants in Syria might have been moved to Sevastopol's private Avlita docks for re-export.
The Ukraine conflict is also leading to increased organized crime in the rest of Ukraine proper. Protection racketeering, drug sales, even "raiding" (stealing property by presenting fake documents, backed by a bribed judge, thereby allegedly proving that the real owner signed away his rights or has unpaid debts) are all on the rise. To a large extent, this reflects a police force still in chaos (those who backed the old regime face charges and dismissal) and looming economic chaos. It is also a reflection of the country's endemic corruption: The international non-governmental organization Transparency International ranks Ukraine 144 out of 177 countries in its Corruption Perception Index, and although the national parliament confirmed a new anti-corruption law in October, it will take years to make a difference.
And this isn't just a Ukrainian problem. Preliminary reports from European police and customs bodies also suggest increased smuggling into Europe, and not just of Ukrainian commodities. Latin American cocaine, Afghan heroin, and even cars stolen in Scandinavia are being re-exported through Ukraine into Greece and the Balkans. According to my sources in Moscow, there is also an eastward route bringing illicit goods into Russia. In September, for example, the police broke a gunrunning ring that was spread across six regions of Russia and was caught in possession of 136 weapons, including a mortar and machine guns.
Most of this business again depends on the Russian crime networks. As a result, even ethnic Ukrainian criminals are now trying to forge closer strategic alliances with the Russians, even while their two countries are virtually at war. The Muscovites I spoke to on both sides of the law and order threshold pointed to such western Ukrainian nationalist strongholds as Lviv and Ivano-Frankivsk as places where, suddenly, Russian gangster business is welcome. Of course, even as their gangsters are collaborating, Kiev and Moscow are scarcely talking—and any lingering police cooperation has essentially collapsed.
Where organized crime flourishes, so too do the shadowy financial businesses that launder their cash. Ukraine's financial sector is notoriously under-regulated and cozy with dubious customers, from the kleptocrats of the old elite (Prime Minister Yatsenyuk has claimed that $37 billion disappeared from the state's coffers during former President Yanukovych's four-year reign) to organized criminals. Still, relatively little international money has traditionally flowed into and through Ukraine's banks, not least because other jurisdictions such as Cyprus, Latvia, and Israel offer equal opportunities with greater efficiency.
However, these other laundries are beginning to become less appealing, not least as countries clean up their acts under international pressure. So just at the time when the world's criminals are looking for new places to clean their ill-gotten gains, Ukraine's are both desperate for business—the country's economy is tanking, having shrunk by 5 percnet over the past year—and increasingly connected to the Russians, the global illegal service providers par excellence. Already, I understand that a US intelligence analysis has suggested that they will be used not only covertly to allow Crimea's embargoed businesses and gangs to move their money in and out, but also to offer up their laundering services to the world. And the world seems to be interested: According to a US Drug Enforcement Administration analyst, who spoke on condition of anonymity, in September, a sizeable payment for Nigerian methamphetamine bound for Malaysia actually passed through Ukrainian banks.
As the varangians—slang for gangs from Moscow and European Russia—become increasingly strongly entrenched there, working with an array of local criminals, they bind Ukraine all the more tightly with the global underworld. Ukraine has all the resources and facilities of a modern, industrial nation, like ports and banks, but not the capacity to secure and control them. This kind of potential black hole is a priceless asset for the world's gangsters.
Of course, there is one last way the Ukrainian conflict could have a wider criminal impact. If Kiev is finally able to defeat the rebellion in the east, then what do the gangsters who fought for the rebellion do? Some of the most powerful might be able to cut deals with the government or find refuge in Russia, but Moscow shows no signs of wanting to incorporate hundreds of disgruntled and impoverished gun-happy thugs. If what happened after the 1990s civil wars in the Balkans is a guide—and many analysts think it will be—then they will seek to head into Europe and North America. There, they are most likely to turn to criminal activities that draw on their skills and experiences. One French prosecutor I spoke to called them "the next Albanians," referring to the violent and dangerous gangs, especially from Kosovo, that flowed into Europe in the late 1990s and early 2000s.
Europe in particular might find itself hard-pressed to respond. The Ukrainian authorities may well be willing to help, but they probably lack the ability to provide much usable intelligence. Meanwhile, the Russians, who probably have the best sense of who the fighters actually are, seem increasingly unlikely to provide any assistance. Jörg Ziercke, head of Germany's BKA, its equivalent of the FBI, recently complained that assistance from Moscow in dealing with Russian organized crime was drying up.
Forget tit-for-tat embargoes. One of the most effective responses to Western sanctions at the Kremlin's disposal may be to encourage the criminalization of Ukraine, and do nothing to help Europe and North America cope with the fallout.
Dr. Mark Galeotti is Professor of Global Affairs at New York University's School of Professional Studies – Center for Global Affairs and an expert on transnational crime and security issues. Follow him on Twitter.