SUBJECT: THE LUZKHOV DILEMMA
Classified By: Ambassador John R. Beyrle. Reason: 1.4 (b), (d).
1. (C) Summary: Moscow Mayor Yuriy Luzhkov remains a loyal member of United Russia, with a reputation for ensuring that the city has the resources it needs to function smoothly. Questions increasingly arise regarding Luzhkov’s connections to the criminal world and the impact of these ties on governance. Luzhkov remains in a solid position due to his value as a consistent deliverer of votes for the ruling party. Unfortunately, the shadowy world of corrupt business practices under Luzhkov continues in Moscow, with corrupt officials requiring bribes from businesses attempting to operate in the city. End Summary.
Overview: The Kremlin’s Luzhkov Dilemma
2. (C) Moscow Mayor Yuriy Luzhkov is the embodiment of political dilemma for the Kremlin. A loyal, founding member of United Russia and a trusted deliverer of votes and influence for the ruling party and its leader, Prime Minister Putin, Luzhkov’s connections to Moscow’s business community – the big and legitimate as well as the marginal and corrupt – has enabled him to call for support when he needs it, to deliver votes for United Russia, or to ensure that the city has the resources it needs to function smoothly. Luzhkov’s national reputation as the man who governs the ungovernable, who cleans the streets, keeps the Metro running and maintains order in Europe’s largest metropolis of almost 11 million people, earns him a certain amount of slack from government and party leaders. He oversaw what even United Russia insiders acknowledge was a dirty, compromised election for the Moscow City Duma in October, and yet received only a slap on the wrist from President Medvedev.
3. (C) Muscovites are increasingly questioning the standard operating procedures of their chief executive, a man who, as of 2007, they no longer directly elect. Luzhkov’s connections to the criminal world and the impact that these ties have had on governance and development in Moscow are increasingly a matter of public discussion. Although Luzhkov was successful in winning court-ordered damages from opposition leader Boris Nemtsov for his recent publication “Luzhkov: An Accounting,” Nemtsov and his Solidarity-movement allies were heartened by the fact that the judge did not award damages on the basis of the corruption accusations themselves, but rather on a libel technicality.
4. (C) Few believe that Luzhkov will voluntarily relinquish his post prior to 2012, when the Moscow City Duma must submit a list of mayoral candidates to Medvedev for his selection. United Russia will probably call on Luzhkov’s political machine and his genuine public support to deliver votes for them in the 2011 State Duma elections, as well as the 2012 Presidential contest. With no apparent successor in line, and with no ambitions beyond remaining mayor, Luzhkov is in a solid position. The evidence of his involvement – or at least association – with corruption remains significant. This cable presents that side of Luzhkov – one that bears not only on Luzhkov and his handling of local politics, but on Putin and Medvedev as they move toward the 2012 elections.
Background on Moscow’s Criminal World
5. (C) The Moscow city government’s direct links to criminality have led some to call it “dysfunctional,” and to assert that the government operates more as a kleptocracy than a government. Criminal elements enjoy a “krysha” (a term from the criminal/mafia world literally meaning “roof” or protection) that runs through the police, the Federal Security Service (FSB), Ministry of Internal Affairs (MVD), and the prosecutor’s office, as well as throughout the Moscow city government bureaucracy. Analysts identify a three-tiered structure in Moscow’s criminal world. Luzhkov is at the top. The FSB, MVD, and militia are at the second level. Finally, ordinary criminals and corrupt inspectors are at the lowest level. This is an inefficient system in which criminal groups fill a void in some areas because the city is not providing some services.
6. (C) XXXXXXXXXXXX told us that Moscow’s ethnic criminal groups do business and give paybacks. It is the federal headquarters of the parties, not the criminal groups, who decide who will participate in politics. XXXXXXXXXXXX argued that the political parties are the ones with the political clout; therefore, they have some power over these criminal groups.
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Crime groups work with municipal bureaucrats, but at a low level. For example, the Armenians and Georgians were formerly heavily involved in the gambling business before city officials closed the gambling facilities. These ethnic groups needed protection from law enforcement crackdowns, so they sought cooperation with the municipal bureaucrats. In such scenarios, crime groups paid the Moscow police for protection.
Luzhkov’s Links to Criminal Figures
7. (S) XXXXXXXXXXXXXXXXXXXXXXXX
8. (S) According to XXXXXXXXXXXX, Luzhkov used criminal money to support his rise to power and has been involved with bribes and deals regarding lucrative construction contracts throughout Moscow. XXXXXXXXXXXX told us that Luzhkov’s friends and associates (including recently deceased crime boss Vyacheslav Ivankov and reputedly corrupt Duma Deputy XXXXXXXXXXXX) are “bandits.” XXXXXXXXXXXX. XXXXXXXXXXXX said that the Moscow government has links to many different criminal groups and it regularly takes cash bribes from businesses. The people under Luzhkov maintain these criminal connections. Recently, ultranationalist LDPR opposition party leader Vladimir Zhirinovskiy strongly criticized Luzhkov and called for him to step down, claiming that Luzhkov’s government was the “most criminal” in Russian history. This remarkable denunciation, carried on state TV flagship Channel One, was widely seen as an indirect Kremlin rebuke of Luzhkov.
9. (S) XXXXXXXXXXXX told us everyone knows that Russia’s laws do not work. The Moscow system is based on officials making money. The government bureaucrats, FSB, MVD, police, and prosecutor’s offices all accept bribes. XXXXXXXXXXXX stated that everything depends on the Kremlin and he thought that Luzhkov, as well as many mayors and governors, pay off key insiders in the Kremlin. XXXXXXXXXXXX argued that the vertical works because people are paying bribes all the way to the top. He told us that people often witness officials going into the Kremlin with large suitcases and bodyguards, and he speculated that the suitcases are full of money. The governors collect money based on bribes, almost resembling a tax system, throughout their regions. XXXXXXXXXXXX described how there are parallel structures in the regions in which people are able to pay their leaders. For instance, the FSB, MVD, and militia all have distinct money collection systems. Further, XXXXXXXXXXXX told us that deputies generally have to buy their seats in the government. They need money to get to the top, but once they are there, their positions become quite lucrative money making opportunities. Bureaucrats in Moscow are notorious for doing all kinds of illegal business to get extra money.
10. (S) According to XXXXXXXXXXXX, Luzhkov is following orders from the Kremlin to not go after Moscow’s criminal groups. For example, XXXXXXXXXXXX argued that it was only a public relations stunt from Putin to close gambling. XXXXXXXXXXXX said he did not see the sense in suitcases of money going into the Kremlin since it would be easier to open a secret account in Cyprus. He speculated that the Moscow police heads have a secret war chest of money. XXXXXXXXXXXX said that this money is likely used to solve problems that the Kremlin decides, such as rigging elections. It can be accessed as a resource for when orders come from above, for example, for bribes or to pay off people when necessary. XXXXXXXXXXXX postulated that the Kremlin might say to a governor that he can rule a certain territory but in exchange he must do what the Kremlin says.
11. (C) Notwithstanding Luzhkov’s solid position, some of our contacts believe that cracks have appeared in his armor, due
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