PRIMORIYE: THE RISE OF A CRIMINAL STATE

Primoriye: The Rise of a Criminal State

by David Satter

It has long been said that morning in Russia begins in Primoriye,Russia’s enclave on the Pacific. In recent years, however, Primoriyehas achieved a different kind of renown in its relation to therest of Russia — as the most extreme example of the criminalizationof local authority that is affecting the whole country.

Life in the region has all the elements of a good detective novel,including abuses of authority, kidnapping, judicial falsificationand a string of unexplained deaths. It also displays, as a specialfeature, a personal and political battle between the governor,Evgeny Nazdratenko, a close friend of Yeltsin’s former bodyguard,Aleksandr Korzhakov, and the reputed "godfather" ofPrimoriye, and Viktor Cherepkov, the mayor of Vladivostok whosereputation for incorruptibility has led to him being called "theconscience of Russia."

The midnight silence of Vladivostok, the region’s largest city,is frequently broken by the sound of gunfire and explosions andresidents are used to reports of the violent deaths of local "businessmen"as well as the funeral escorts of dozens of expensive cars movingto the accompaniment of police sirens.

The crisis of the region, however, is not simply a matter of criminality.In the last three years, the local authorities in Primoriye havesteadily severed the krai’s connections to the rest of the countryand, with the center’s hold on the region weakening, there aresigns that any attempt to crack down on Primoriye’s criminal powerstructure could call into question the region’s place in the RussianFederation itself.

Loosening Ties

Primoriye presently lives on its ties with Japan, China and SouthKorea, from whom it imports cars, grain, food supplies and householdappliances. To trade with Russia is not advantageous. Accordingto an economist quoted in Izvestiya, it is cheaper to delivera shipment of fish from the Far East to Novorossiisk if you sendit by ship through the Indian Ocean and the Atlantic to SaintPetersburg and then by rail than if you send it overland acrossSiberia. (1)

Primoriye is now tied to Russia by only two threads; the monetarysystem and a unified energy complex. These links, however, aretenuous. Aleksei Bolshakov, the first deputy prime minister, saidduring a recent visit to Vladivostok that "all the conditionsexist for the creation in Primoriye of an autonomous energy system,"(2) and Primoriye’s financial dependence has been undercut bya November 21, 1994 ruling of the president that the leadershipof Primoriye has the right to use ten per cent of the gold minedon the territory of the region to create a reserve fund, whichcould be the first step toward the issuance of an independentcurrency. (3)

In a recent survey, nearly 87 per cent of the inhabitants of Primoriye,resentful of high energy and transportation costs, said that theywere in favor of the creation of a new Far Eastern Republic. Thisfigure may reflect only the temporary success of anti-Moscow propagandabut it is a further demonstration that the mood of people in Primoriyeis hostile toward the center and the success of any attempt byMoscow to impose order in the region is far from guaranteed.

The Rise of Nazdratenko

In 1922, Primoriye was part of the short lived, independent FarEast Republic and the region has long flirted with the idea ofautonomy but the roots of the present crisis go back to 1992 andthe reaction of local factory directors in Primoriye to the beginningof the Gaidar reforms.

Shortly after prices were released in January 1992 and enterpriseswere freed to establish economic connections on their own, thedirectors of 213 of the largest enterprises in Primoriye formedan organization called the Primorsky Corporation of Goods Producers(PAKT.) The ostensible purpose of PAKT was to help large stateenterprises survive the period of transition. In fact, however,PAKT functioned as a mechanism for enabling the directors of stateenterprises to seize personal control of the region’s industry.

PAKT did not produce anything. Its sole purpose was to redistributemoney. Its founders sold the production of their factories toPAKT at minimal prices. The products were then resold at marketprices and the profits were divided among the factory directors.PAKT also appropriated the resources of the factories and usedthem to help the directors to buy up shares in their factoriesas they became privatized.

The leaders of PAKT also sought to gain control of the krai’squotas, licenses and budget. This led them to fall out with VladimirKuznetsov, the region’s governor, who was concerned to encourageoutside investment in Primoriye not to preserve the existing antiquatedindustrial base for the benefit of the directors. PAKT, usingits founders’ connections in Moscow, began to agitate for theremoval of Kuznetsov on the grounds that he spent too much timetraveling. Their candidate to replace him was Nazdratenko, a deputyin the Russian parliament at the time and a former president ofthe Vostok mining company in the city of Dalnegorsk.

In May 1993, Kuznetsov was removed and Nazdratenko replaced him.Nazdratenko’s principal deputies became the leading members ofPAKT.

Nazdratenko’s Progress

Once Nazdratenko took office, however, things did not developin Primoriye exactly as the leaders of PAKT had hoped. Nazdratenko’sexperience in the criminalized world of the private Russian miningindustry did not incline him to divide power with his erstwhilebackers and, acting first to rid himself of PAKT leaders who werenot completely loyal to him, he began the process of turning Primoriyeinto a mini-totalitarian state.

Nazdratenko was helped in this respect by the authoritarian policiesof Yeltsin. In October 1993, Yeltsin dispersed the Russian parliament,thereby preparing the way for the abolition of the krai and oblastsoviets which quickly followed. New elections were not scheduledin Primoriye until ten months later.

The absence of legislative oversight created a "window ofopportunity" for Nazdratenko and the krai administration.

Nazdratenko also acted to silence the press. The krai administrationoffered subsidies to publications that were friendly and usedintimidation to silence those that were not. In July 1994, thestudio of Primorsky Commercial TV(PKTV), which had been in oppositionto Nazdratenko, was invaded by supposed robbers who destroyedequipment and murdered an engineer. Shots were fired through thewindow of Mikhail Vosnesensky, the local correspondent for ORTtelevision, and after Aleksei Sadikov, a young reporter, airedan ironic, political commentary on a local radio station, he waskidnapped and taken to a cemetery outside of Vladivostok wherehe was beaten and tortured for nearly 24 hours.

These actions, and particularly the torture of Sadikov, had achilling effect on the press.

Finally, and perhaps, most importantly, Nazdratenko worked toeliminate Cherepkov, Vladivostok’s legally elected mayor.

Cherepkov, a deputy in the krai soviet who had become famous forhelping to expose the conditions in the Naval Base on Russky Islandnear Vladivostok where nearly 1,000 sailors had to be hospitalizedfor malnutrition, was elected mayor in the summer of 1993. Hecame to power at the exact moment that the race to acquire moneyand property in the krai was about to begin and he quickly becameknown as the only major political figure in the krai who not onlywas not enmeshed in corruption but was also determined to combatit.

Shortly after taking office, Cherepkov began to transmit to thefederal authorities documents demonstrating the abuses of thekrai administration and, before long, the first of many Moscowcommissions arrived in the region to check on the activities ofNazdratenko. Information on corruption in Primoriye was collectedand passed on to the presidential administration but the center’sinitial interest in the question led to only cosmetic changesin Primoriye.

Nazdratenko’s reaction, however, was not long in coming. A casecharging Cherepkov with taking bribes was fabricated by the kraiMinistry of Internal Affairs and in March 1994, nearly 200 policewere mobilized and Cherepkov was removed in the middle of thenight from the mayoralty by force. Cherepkov was subsequentlycleared of the charges against him but when, at the end of 1994,it appeared likely that he would return to his post, he was removedas mayor by a presidential edict in connection with the "lengthynon-fulfillment of his duties." The ukaz was arrangedwith the help of Nazdratenko’s influential backers in Moscow who,by now, included Korzhakov.

Cherepkov was not restored to his job until September 1996, followinga nearly two year battle in the courts and only after Nazdratenkohad lost his powerful backers in Moscow but, in the meantime,the citizens of Primoriye had received a pointed lesson. Nazdratenkohad shown that he was sufficiently powerful to eliminate evena popularly elected mayor.

Corruption

Without a free press or independent mayor and legislative branch,corruption blossomed in Primoriye.

One source of corruption was the practice of buying supplies,particularly fuel and energy supplies, from intermediary firmswhich were under the control of the krai administration. The creationof these firms began in mid-1994 under the direction of Vice GovernorMikhail Chechelnitsky, who was the part owner of a private companyfor the sale of oil products. The firms soon proliferated creatinga chain of middlemen capable of raising the price of everythingfrom gasoline and coal to sugar and bread, consuming the budgetaryallotments for the region.

A special investigative commission under the leadership of PytorKarpov, a member of the federal commission on bankruptcy, whowas later arrested himself on charges of bribery, said that Chechelnitskybought fuel for the krai from his own company at artificiallyhigh prices. This seemed to presage an investigation of the wholenetwork of corruption involving the channeling of budget fundsthrough administration controlled intermediaries. On December28, 1995, however, seven months after the Karpov report was released,Chechelnitsky died suddenly after taking tea in the office ofNazdratenko. The autopsy report stated that Chechelnitsky diedof a heart attack but, later, after Yeltsin’s issued an edicton official abuses by Nazdratenko, Chechelnitsky’s body was disinterredand reburied, giving rise to rumors that it had been crematedto render pointless any future court ordered exhumation.

Another source of corruption was real estate. Anyone controllingleases in a country in the process of privatizing but where propertyrights are still unstable was in a position to collect enormousbribes and become rich almost instantly. The principal giversof bribes were criminal groups, which had amassed capital thatneeded to be laundered through the automobile trade and extortion.They now acquired vast real estate holdings in Primoriye.

Organized crime groups in the city also began openly to offertheir services in lobbying the krai administration, promisingthat they could resolve "any question."

Even organized crime figures, however, were not protected fromenigmatic accidents. In August, 1995, one of the leading criminalauthorities in Vladivostok, Sergei Baulo, an acquaintance of Nazdratenkofrom Dalnegorsk, died after scuba diving with friends. He beganmaking erratic movements while in the water and was pulled outof the water but died in a car on the way to the hospital.

With the local soviets gone, there was no oversight ofthe budget and federal funds intended to pay for salaries andservices now often disappeared or ended up deposited for longperiods in commercial banks at interest rates of up to 160 percenta year before being passed on to their intended recipient.

A final source of corruption was the sea. Fishing quotas couldbe issued in return for bribes or fish could be harvested withoutpermission and the money from their illegal sale deposited abroad.In late 1994, an interest free loan of 1.5 million dollars wasgiven to Andrei Zakharenko, the general director of Primorribprom,a large fishing concern, to catch crab and caviar, ostensiblyto feed the impoverished. When the money disappeared, a commissionwas named by Deputy Premier Anatoly Chubais to investigate andZakharenko was arrested. He spent two months in prison beforebeing freed at the request of Nazdratenko. He was then killedby a bomb placed in the entryway of his apartment building a fewdays later.

Non-Payment

The corruption in Primoriye might have escaped the attention ofthe rest of Russia but it soon began to exacerbate the crisisof non-payment in the region leading to labor turmoil.

Electricity in Primoriye is supplied by Dalenergo, thestate power company, which receives its revenues in the form ofsubsidies from Moscow and payments from residents of the krai.In late 1994, at the insistence of Nazdratenko, Yeltsin reducedthe price of electricity for residents of Primoriye which meantthat the share of federal subsidies was increased. This moneywas paid into the accounts of the krai administration and, almostimmediately, the krai, instead of paying Dalenergo, beganto use the money to plug holes in the krai budget which were believedto be caused by corruption, including the payment of bribes toofficials in Moscow.

The krai administration also created a set of intermediary firmsfor the resale of electricity which either delayed paying Dalenergoor did not pay at all. The result was that Dalenergo didnot have enough money to pay the miners who supplied the krai’spower stations with coal.

The first strikes by Primoriye’s coal miners took place in late1994 and the first hunger strikes in 1995. Finally, the minersstopped supplying the power stations altogether leading to cutsin heat and electricity throughout the region. In some areas,electricity was turned off for 18 hours a day and, since Vladivostokis built on hills, when the electricity was cut off to the pumpingstations, there was no water either.

Finally, in January 1996, Yeltsin signed an order transferring60 billion rubles to pay Primoriye’s striking miners but, of themoney, which arrived in the account of the krai administrationon February 10, only a third was used to pay the coal miners.Nazdratenko explained that the other 40 billion rubles had beenused by him to pay the salaries of the energy workers. This was,in any case, a direct violation of the government’s instructionswhich were to use the money to pay the salaries of the coal miners,many of whom were surviving only on what they could grow in theirprivate plots. In fact, however, the 40 billion rubles transferredto the account of Dalenergo was not necessarily used topay the energy workers either. It was deposited in the Primorbank,which is controlled by the krai administration and where banksecrecy made it impossible to trace the money’s eventual destination.

The result of this maneuver was a new round of non-payment ofwages to coal miners followed by new cutoffs of electricity.

Nazdratenko’s Survival

Despite the corruption and periodic crises in the region, however,Nazdratenko maintained a high level of public support. The reasonfor this was his opposition to two supposed external threats,the Chinese and Moscow bureaucrats.

Nazdratenko’s efforts to "stand up" to China includeresistance to the illegal settlement of the krai by Chinese whoarrived on tourist visas and then tried to stay permanently, andopposition to an agreement on demarcation of the Russian-Chineseborder signed in 1991. According to the treaty, China should receivetwo pieces of land totaling 330 hectares in the floodlands ofthe Tumanna River. Nazdratenko voted for the treaty while a deputyin the Russian Supreme Soviet but once he became governor, hebegan to insist that the transfer of these parcels was harmfulbecause it would make it possible for the Chinese to gain accessto the Sea of Japan thus reducing the role of Vladivostok as thelink between Europe and the Pacific Rim.

Nazdratenko also fought for the aforementioned reduction in thecost of electricity, which was paid for in the final analysis,by the krai’s energy crisis, and for the reduction of the hightransport costs which have isolated residents of Primoriye fromtheir relatives in other parts of the country.

Nazdratenko’s supposed role as defender of the region in combinationwith the intimidation of other potential candidates made it possiblefor him to be elected governor in December 1995 with 70 per centof the vote. His greatest source of strength, however, has notbeen local support but rather the backing that he enjoyed in Moscow.It was this support in Moscow which protected Nazdratenko in theface of reports by nearly 50 government commissions testifyingto Primoriye’s massive corruption.

Defiance

Had Korzhakov continued to be a close aide of Yeltsin, Nazdratenkowould have probably remained untouchable. His support in Moscowweakened dramatically, however, in June with the firing of Korzhakovand Deputy Premier Oleg Soskovets and the appointment of AnatolyChubais as head of the presidential administration. It was reportedlyat Chubais’s instigation that Cherepkov, after a two year struggle,was restored to his post as mayor of Vladivostok.

Chubais’s ascendancy in Moscow was accompanied by the need todemonstrate who was in charge in the Kremlin. Perhaps the bestway to do this was to remove someone and Nazdratenko was suitablebecause of Primoriye’s crime and the strikes which were roilingthe region.

On August 5, a Kremlin spokesman told journalists that 60 billionrubles intended for the coal miners did not reach its destinationbut instead was deposited at interest in banks friendly to Nazdratenkoand that the governor had created a system of intermediary firmsto buy electroenergy which lived comfortably at government expense.A period of ten days was established to check on the situationin Primoriye and it was assumed that on the basis of the results,Nazdratenko would be removed, especially since Yeltsin had issuedan edict in June giving himself the right to remove disobedientgubernators.

On August 14, while a control commission was still working inPrimoriye, however, a new presidential edict was issued warningNazdratenko about his "incomplete" fulfillment of hisduties and obliging him in the course of a month to bring theenergy situation in Primoriye under control. This meant that Nazdratenko’sremoval, at the very least, had been postponed.

The Federal Energy Commission then ordered the krai administrationto raise the price for electricity in the region. This, however,would have led to a loss of support for Nazdratenko on the partof the population and the krai Duma refused to raise the priceof electricity and denounced the central authorities. It thenscheduled a referendum on trust in Nazdratenko for September 22.

The referendum was later canceled but the lines of confrontationhad been drawn. In the event of a challenge, Nazdratenko was preparedto defy the central government and there was no guarantee in sucha situation that Moscow could prevail.

Speaking unofficially, a Constitutional Court judge has statedthat the president has no right to fire a popularly elected governorand that it would be unconstitutional to institute direct presidentialrule in the krai. Such a move would also be opposed by the otherelected Russian governors. (4)

This leaves only the possibility of removing Nazdratenko afterstarting a criminal case on the basis of materials from the generalprocurator. But this now appears unlikely. The weak Russian centeris ill prepared to quarrel with well entrenched local leaderson corruption grounds, particularly when the threads of corruptionoften lead to the center itself.

Under the circumstances, the only real threat to Nazdratenko,as well as the only check on Primoriye’s criminality, is presentedby Cherepkov who, in his first months since returning as mayor,has resolved the energy crisis in Vladivostok by paying for coaland fuel directly, without the benefit of intermediaries.

Cherepkov’s physical security, however, is far from assured. Heis guarded on a 24 hour basis by a security detail provided byChubais and he has already received reports that contracts havebeen offered on his life.

In the meantime, Nazdratenko’s position continues to strengthen.In October, Aleksandr Lebed announced his solidarity with Nazdratenko,"in light of the attempts to separate the Far East"from Russia and, on December 4, Nazdratenko appeared before theExtraordinary Energy Commission and once again attributed theeconomic problems of the krai to the high price of energy andcalled for the complete subsidizing of the cost of energy fromMoscow.

Under the circumstances, Primoriye will almost certainly continueto go its own way. As polls show, the population of the krai ismore receptive to Nazdratenko’s attacks on Moscow and the Chinesethan it is concerned by the threat of corruption and criminalityin its own region and so removing Nazdratenko may be possibleonly if the center sends in troops.

Nazdratenko, for his part, however, is not interested in eithera conflict with the federal authorities or the secession of Primoriyefrom the Russian Federation. He wants only to be free to despoilthe resources of the krai and to establish his own dictatorship.And this, for the moment at least, he has achieved.

NOTES:

1. Izvestiya, October 8, 1996, p.8

2. Ibid., p.1

3. Ibid., p.8

4. OMRI Analytical brief, No. 337, September 18, 1996