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in the House of Representatives

MONDAY, JUNE 27, 1994

Mr. Chairman, I welcome the opportunity to address the members of this committee on the subject of Russian organized crime. Today, I will describe the activity and nature of Russian organized crime, its growing influence in all levels of Russian institutions and society, and the danger it poses to the stability of Russia and US national security interests. I will also address the potential for Russian organized crime involvement in the acquisition and transport of weapons of mass destruction, particularly nuclear weapons and materials. Then I will address the role of intelligence to understand, and to help thwart, these criminal organizations.

With me this afternoon are Tony Williams, Deputy Chief of the Russian Affairs Division of the Office of Slavic and Eurasian Analysis; and Bryan Soderholm, Coordinator for International Organized Crime for the Directorate of Intelligence. After I finish my statement to your subcommittee, I will ask them to join me, and together we will endeavor to answer your question about these important issues.

In testimony before the Terrorism, and International Operations Subcommittee of the Senate Foreign Relations Committee in April, I discussed the world-wide threat posed by international crime. I described how powerful crime organizations were built upon narcotics trafficking, alien smuggling, and financial and bank fraud. With the huge resources derived from such activities, organized crime groups are able to forge international links and develop sophisticated technical and marketing expertise to further enhance their wealth and influence. Operating outside the law with a strong proclivity for violence to impose their will, international crime organizations work to undermine the authority of governments, disrupt local economies, and exponentially drive up the rate of violent crime.

There is a major difference between the challenge posed by organized crime and that posed by nations who have been our adversaries. As a rule, nations do not exist in a constant state of conflict. Even during the long struggle of the cold war, when cooperation was not feasible, communication was possible. From quiet diplomacy to public demarches. From hotlines to summitry, the means could be found to limit or settle disputes.

With organized crime, there is no possibility for diplomacy, demarches, hotlines, or summits. These tools have no meaning to groups whose business is the criminal exploitation of individuals and even governments through threats, intimidation, and murder. When the sheer size and power of international organized crime can endanger the stability of nations, the issues are far from being exclusively in the realm of law enforcement--they also become a matter of national security.

Russian organized crime is a unique subset of international organized crime that requires a special focus.

First, Russia is a country of enormous strategic interest to the United States, not the least because of its huge arsenal of weapons of mass destruction and significant inventory of weapons grade materials.

Second, we have a major stake in the outcome of Russia's painful effort to effect a transition from communism to democracy and a market economy, and therefore a significant interest in factors that could undermine stability, weaken civil institutions, and impede reform efforts.

Third, Russian organized crime has quickly become an international menace, conducting operations far beyond Russian borders and reaching even our own shores. For these reasons, we need to understand the complex role of Russian organized crime, the strength of its capabilities, and the extent of its influence on the evolution and development of public life and institutions.

Organized crime is not a new phenomenon in Russia or Soviet history. During the Soviet era, criminal groups and the black market often functioned as an extension of the Communist party and the KGB. In fact, the Communist party and KGB used criminal groups and the black market as a second, parallel economy to further their own goals and enrich their own organizations. They had their own codes, traditions, and loyalties.

In the late 1980's, we saw strong indications that state control had begun to wane. Many of these criminal organizations outlived the state which fostered them and took on a life of their own. This `old guard,' however, has been severely challenged by a surge of upstarts.

Since the breakup of the Soviet Union, we have seen a dramatic rise in new criminal groups that operate independently without regard for whatever ground rules for criminal activity that might have existed before. The `new Mafia,' as it if often referred to, does not abide by the old customs established by the traditional Russian underworld.

The diffuse nature of criminal activity in Russia and the other former Soviet republics presents a difficult adversary to track. The absence of readily identifiable or consistent profiles makes these Russian-style `Mafias' harder to define or categorize than their more tightly knit western counterparts. But taken together, they are often just as powerful, influential, and dangerous.

Complicating the problem for Russian law enforcement is the involvement of former KGB and military officers in organized crime. With their KGB and military background, special training, and contacts with former colleagues, these individuals offer valuable skills and access that can increase the power and influences of Russian criminal groups who tap into them.

To generate money, Russian organized crime groups are actively engaged in the illegal transport and sale of narcotics, weapons, antiques, icons, raw materials, stolen vehicles and some radioactive materials, and the transport of illegal immigrants. They are also targeting the financial sector, particularly the acquisition of banks in order to launder profits as well as fraudulently obtain government loans. They also engage in large scale extortion and brutally enforce their demands through deadly violence.

The impact of President Yeltsin's decree will not be known for some time, but the strong influence of organized crime in all aspects of social, economic, and political life in Russia, as well as many of the former Soviet republics, suggests a difficult and agonizing future. It is not unreasonable to imagine a Darwinian process of survival of the fittest, with many of these criminal groups eventually eliminated or absorbed by stronger rivals. Those groups left could be very large, sophisticated, and influential. And they will pose a long-term threat to Russia--and to the international community.

When the security of weapons of mass destruction--nuclear, chemical, biological, advanced conventional, as well as nuclear materials such as highly enriched uranium and plutonium--is factored into the equation, the stakes can become dangerously high for Russia itself and for the U.S.

Russian criminal organizations have created an extensive infrastructure consisting of front companies and international smuggling networks. This infrastructure, built on ties to corrupt military, political, and law enforcement officials, could be used to facilitate the transfer and sale of these weapons and materials.

In addition, organized crime groups certainly have the resources to bribe or threaten nuclear weapons handlers or employees at facilities with weapons grade nuclear material. In many cases, employees at such institutes are poorly paid, or not even paid at all, for months on end.

Some of our traditional intelligence tools for monitoring nuclear weapons and the command and control infrastructure in the former Soviet Union are quite relevant. Also relevant are new intelligence techniques which we are continually developing on many types of proliferation problems. We use them and other techniques to piece together potential international webs of communications and transportation, front companies, and the like. Proliferation is among the most difficult of intelligence tasks, requiring all aspects of our world-wide intelligence networks--human intelligence, communications intelligence, and imagery from reconnaissance satellites.

But let me point out that despite considerable press speculation to the contrary, trading in nuclear weapons and materials is not the primary or even secondary business of organized crime groups in Russia today. The usual extortion, weapons and narcotics trafficking, and financial fraud activities currently are too lucrative to be abandoned for the high profile and risky acquisition weapons of mass destruction. But we can ill afford to assume that because brokering such transactions has not yet been an activity of consequence, we can relax our guard and be confident that such a contingency will not develop in the future.

Specifically, we cannot rule out the possibility that organized crime groups will be able to obtain and sell nuclear weapons or weapons grade materials as a target of opportunity. We are especially concerned that hostile states such as Iran, Libya, and North Korea may try to accelerate or enhance their own weapons development programs by attempting to acquire weapons of mass destruction or weapons grade material through organized crime groups.

While organized crime groups appear to be the logical brokers or purveyors of nuclear weapons and materials, individual criminal acts in this field must also be considered. Indeed, most of the cases of nuclear related smuggling that we are aware of involve desperate individuals or small groups, with no apparent links to organized crime, simply trying to make fast money. A disgruntled military officer where a nuclear weapon is stored, or an employee at a research institute with access to weapons grade nuclear materials are also in a position to steal and pass on the deadly contraband.

Earlier this month, Russian Counterintelligence Service officials announced the arrest of three men who were found to have in their possession three kilograms of enriched uranium.
A janitor at an unspecified facility near Moscow apparently smuggled the material out of the plant where it was stored.

The Russian government has made it clear that they want to prevent the proliferation of all weapons of mass destruction and materials. President Yeltsin has said that, `The proliferation of nuclear and other categories of weapons of mass destruction within the country and beyond cannot be allowed.'

We welcome the efforts of the Russian government, including particularly its security services, to play a key role in non-proliferation, and we support the priority they give to this effort. They face a daunting task: not only are political and economic pressures undercutting the ability of the central government to implement export guidelines and properly secure the facilities with nuclear weapons and materials, but the Russian law enforcement and security services must themselves battle with increasing difficulty against corruption.

To date, we have not detected any nuclear warheads or significant quantities of weapons-grade materials being smuggled out of the former Soviet Union. There are, however, numerous cases in which low-enriched uranium, medical and other radioactive isotopes, and scam materials, notably red mercury and osmium, have been offered for sale on the black market. Press reports routinely assert that Russian organized crime groups are intimately involved in some of these activities.

We cannot take these stories lightly even though the transactions in low grade nuclear materials and radioactive isotopes do not pose a proliferation threat per se because they cannot be used to make nuclear weapons. However, some of these materials and isotopes could be a terrorist tool if combined with a conventional bomb to produce low level, but still lethal, radioactive contamination.

Last Summer when I testified before this committee, I discussed by concerns about proliferation of weapons of mass destruction to rogue or hostile regimes. In my testimony, I noted that we must also anticipate the possibility that hostile groups, specifically terrorist groups, might also acquire these weapons with or without state sponsors. The bombing of the New York World Trade Center certainly heightened our sensitivity to the possibility that a terrorist incident could involve such weapons.

We have no evidence that Russian organized crime groups are supplying or even attempting to supply terrorist groups with highly destructive weapons. Nonetheless, we should not rule out the prospect that organized crime could become an avenue for terrorists to acquire a destructive weapon.

In sum, Mr. Chairman, the possibility of organized crime groups gaining access to nuclear weapons and materials has profound national security implications for the United States. The inherent difficulties of dealing with an essentially criminal target that affects our national security interests are compounded in Russia--a country that is still undergoing a radical transformation as it comes to grips with the staggering problems left in the wake of over 70 years of communism.

Russia's wrenching reform is a long-term problem, and we applaud the efforts being made by the Russian government to make meaningful change. But during this tumultuous time of change and uncertainty for Russia, and all of the republics of the former Soviet Union, it is essential that we continue to increase our efforts to collect and analyze intelligence that can help us understand and thwart the threat of organized crime.

Mr. Chairman, the intelligence community has been actively collecting information on international organized crime since the 1980's. Even prior to the breakup of the Soviet Union, we were particularly watchful of Russian organized crime. Let me now address the ways in which we are meeting the challenges posed by Russian organized crime.

To bring more resources to bear upon this problem, I have established in the National Intelligence Council the position of national intelligence officer for global and multilateral affairs. In this position, Dr. Enid Schoettle will be doing a strategic review of this issue and oversee estimates on organized crime. Our National Intelligence Officer for Strategic Programs, Keith Hansen, facilitates important analysis of nuclear security in the former Soviet Union for the whole intelligence community.

We are also devoting more resources to organized crime issues within the intelligence community, as well as to tracking of proliferation of weapons of mass destruction. The Nonproliferation Center, for example, works closely with the National Intelligence Council and elements of the Directorate of Intelligence and Directorate of Operations supporting new collection and analytic efforts. We have also formed several working groups in the intelligence community to pool and coordinate both collection and analytic resources on organized crime. These groups systematically brief and provide intelligence to the FBI as well as other agencies and policymakers. I intend continually to review our resource commitments to this important set of issues.

There is no one body of expertise that will win the battle against organized crime. Because of the complexity and diffuse nature of this problem, it will take the combined efforts of historians and sociologists, many of them with Russian and other language skills, to study these groups. It will take financial analysts and economists to understand and expose the transactions and money laundering schemes of these criminals. It will take technical experts to track efforts by organized crime to circumvent safeguards against proliferation of weapons of mass destruction. It will take political analysts and regional specialists to assess the impact of organized crime on political and economic stability in the former Soviet Union. And because of the transnational nature of this threat, it will take cooperation with law enforcement bodies, both here and abroad, including the FBI, Customs, Immigration, and foreign security services.

Let me conclude with a final point. Our battle against international organized crime will not be like wars we have fought against nations. The adversaries in this struggle are criminal enterprises that wear no uniforms and have no patriotic ideals. They feed off of societies' weaknesses, corrupting the normal course of life, and destroying civic culture. Their quest for profit mocks all laws, mores, and values. They erode what hope is left in nations newly emerged from totalitarianism that are desperately struggling toward stability, democracy, and a better life.

In what threatens to follow the Era of the Cold War--we may, sadly, come to call it the Era of Anarchic Proliferation--the danger of breakdown of legitimate authorities in many nations becomes even more alarming. The specter of these enormously destructive tools of war in the hands of criminal groups with the capability of passing them on to hostile powers compels our vigilance and commitment.

Winning this war will not be easy nor will it be quick. Victory will not be seen in decisive events, but will come in increments. In the end, I am confident we can prevail if we persist and work together on these new and very troubling problems.

Thank you, Mr. Chairman.

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