The Great Ruble Scam

In Claire Sterling's June 1992 article The Great Ruble Scam, later expanded into Sterling's 1994 book Thieves' World, Sterling described the "criminal penetration of the former Soviet Union by drug cartels and money launderers" during 1990 and 1991.

Summary

Techniques used by the cartels included:

• Fraud
• Counterfeiting the foreign currencies used to purchase rubles, mostly US dollars
• Posting large numbers of short-shell orders on the Russian ruble until its market value dropped
• Buying and destroying Russian food and consumer goods to manufacture a shortage and create a crisis
• Buying rubles at below market value and selling them back to Eastern Bloc banks at the official exchange rate for a large profit
• Corrupting Russian officials to allow for favorable trade terms, exemptions from Russian law enforcement, and theft of Russian property
• Using the gains from these trades to buy Russian raw materials and laundering money through them
• Using the gains from these trades to buy Russia's raw materials industries: mining companies, oil companies, and the like

Istok oil scam

In 1990, Artjom Tarasov bought oil using Russian state subsidies meant to promote the production of heating oil for the poor, sold it to France for an abnormally high price, and kept the money in a Western European account to avoid paying export taxes. Russia would have a shortage of heating oil the following winter.

The case of Artjom Tarasov, free Russia's first accredited ruble millionaire, showed what a sharp businessman could do with a joint venture and sheer brass as free enterprise got under way in Moscow. Tarasov, a young, dapper, and fast-talking deputy in the Russian parliament, formed an independent joint venture called Istok in 1989. Founded by the Moscow Innovation Commercial Bank, it was authorized by the state to conduct various export-import transactions in raw materials and "provide assistance in organizing barter deals with foreign partners." As Tarasov has said himself, he could only carry out such transactions "by using untraditional methods" (his italics). He explained:

Untraditional methods entailed very difficult work, which Istok did. To explain the essence of this work, let me propose shipping a small amount of fuel oil. No one will let you have the oil; the money for the purchase must be borrowed on interest from a commercial bank; no one will provide transportation; and if you find it, carloads are lost mandatorily on the way. The port does not even want to talk because it is overloaded with planned shipments; you find a tanker yourself, and, finally, no one will let you export fuel oil on a Russian license, and no one on the foreign market wants to buy it since its quality is low-grade. We solved all these "little" intermediary problems, and that is why we were untraditional.

Tarasov has never disclosed how he solved the little problems, leaving the Russian press to draw its own conclusions. This is Izvestiya's version, among others: Soon after forming Istok, Izvestiya said, Tarasov went after Russia's petroleum. On behalf of an American associate wanted by the FBI - Marc-David Rich, the biggest tax swindler in American history, about whose Russian swindles more later - he got four million tons of crude out of Russia on a legal export license; he bought at 50 rubles a ton ($5 on the black market then) and sold at $140 a ton abroad.

Food shortage

To encourage the Russian government to comply with its demands, the mafia engineered a food shortage during the winter of 1990-1991.

Its terrible strength emerged in the desperate winter of 1990-91 when, with a free market on the way, food vanished from Soviet shelves. The food was there, but not in the shops.

An Italian TV crew filmed twenty heavily loaded trucks leaving Moscow's wholesale produce market, not one of which unloaded at a retail outlet. Hidden in the basement of shop number nineteen in the October district police found 700 kilos of chicken drumsticks, 400 kilos of butter, and nearly 2 tons of meat. At the Nizhnedevitsk slaughterhouse in the Voronezh region, 1,707 kilos of meat and 50 sheep carcasses were dumped and covered with earth. One hundred and ten tons of rotted vegetables were discovered at a storage facility in the Odessa region. Similar reports came from Syktyvkar, Chernovtsy, Perm, Vladimir, and Suzdal.

Foreign food aid approaching $13 billion over the next winter ran into inexplicable delays...

Three scammers

Starting in mid-1990, Russian authorities halted three transactions for hundreds of billions of rubles.

Jan Zubok

Ukrainian fraudster Zubok Jan Semyonovich (Jan Semyenovich Zubok), under the name "John Ross", obtained the signature of Prime Minister Ivan Silayev for the purchase of 300 billion rubles for $50 billion. Zubok owned a small 6-person company in the US, but claimed to represent a business with deeper pockets known as New Technology and Production International.

Leo Wanta

"Next came a Leo Vanta who, when asked for credentials, proffered an autographed picture of President Reagan." Wanta claimed to represent the New Republic Financial Group, an Austrian company with declared capital of 500,000 shillings ($17,000) but supposedly capable of paying $5 billion for 140 billion rubles, to rise to $50 billion for 300 billion rubles. The deal fell through when the US State Department warned Russia that Wanta was wanted in Wisconsin for credit card fraud. Sterling describes the US Secret Service file on Wanta as "a mile long."

Colin Gibbons

Colin Gibbons, a "professional con-man" from Britain, obtained the support of Deputy Prime Minister Gennady Filshin and Chelyabinsk regional deputy A.A. Sveridov for the purchase of 140 billion rubles for $7.8 billion. Gibbons claimed to represent the Dove Trading Company of South Africa. Sveridov had done business in name of the Ekho Manufacturing Ecological Company, "a brand-new foundation" called Revival of the Urals Countryside, and "a dubious charity" called Eternal Memory to Soldiers.

On January 28, 1991, a meeting took place at Zurich's Hotel Savoy between nine or ten Russians led by Russian Deputy Trade Minister [Vladimir Kozlov] and the Gibbons group including Gibbons, Paul Pearson, David Frye, Leo Wanta, Jack Tremonti, Martin Gulewicz, Vladimir Rozenberg, Igor Chernyafsky, and Omar Khan.

David Frye would later allege that Gibbons was a KGB spy sent in to trap and expose Boris Yeltsin.

Associated individuals

• Paul Pearson - partner of Colin Gibbons
• David Frye - partner of Colin Gibbons, based in Johannesburg.
• Jack Tremonti - partner of Leo Wanta
• Martin Gulewicz - partner of Leo Wanta
• Vladimir Rozenberg
• Igor Chernyafsky
• Omar Khan
• "Mr. X" - anonymous informant to Sterling who described the operation as "a Western privately orchestrated economic Jihad "
• Michael Preisfreund - Named by Mr. X as one of five key figures along with Wanta, Tremonti, Gulewicz, and Mr. X himself.
• Robert Hutschenraiter - involved in half-billion ruble deal with Preisfreund.
• Franz Mikulitz - involved in deal with Preisfreund of between 1 and 2.6 billion rubles.
• Georg Horvath - involved in 1 billion ruble deal with Preisfreund.
• Francesco Campana - lawyer for Jack Tremonti, also involved in trading.
• Roberto Coppola - owned diplomatic credentials as ambassador to Italy from Algeria, Antigua, Bulgaria, Equatorial Guinea, Fiji, Gabon, Israel, Romania, Russia, and the Solomon Islands. Named by Wanta as the source of 2,000 tons of stolen Russian gold. There is allegedly a telephone intercept confirming the sale, which was heard by Judge Roberto Sapio.

Associated companies

• New Technology and Production International - company of Jan Zubok
• New Republic Financial Group - company of Leo Wanta
• Dove Trading Company - company of Colin Gibbons
• Golden Eagle of Zurich
• Van Lynch of Knightsbridge, London
• Eurofin of Geneva
• Balaton N.V. of Holland - provided funding to Dove
• Global Tactical Services - company of Jack Tremonti
• Anthem - company of Leo Wanta
• Transatlantik Foundation - company of Michael Preisfreund
• Consulting Liberty Corporation - company of Michael Preisfreund
• Amberhaven - company of Michael Preisfreund
• Impex GmbH - company of Franz Mikulitz
• Comalco International - involved in trade of 1 billion rubles with Preisfreund
• Anker Bank - Managed trade between Comalco and Preisfreund
• Atlalanos Ertekforgalmi Bank

Larouchite allegations

Dean Andromidas and Jeffrey Steinberg of the Lyndon Larouche publication Executive Intelligence Review named additional persons as involved in the trades. Their claims and accusations include:

• Helmut Raiser - owner of Consen engineering firm, "in the middle of a multibillion-dollar capital flight operation against Russia", "directly involved" in Nordex and "other shady Swiss financial figures closely linked to Geopol"; also chair of Bohlen Industries, member of Geopol, linked to Krupp.
• Robert Maxwell - British MI-5 hired by Gorbachev to invite Western capital, died in November 1991.
• Kevin Maxwell and Ian Maxwell - Robert's sons, employees of Nordex, stole millions of dollars from Nordex pension funds.
• Grigorii Loutchanski (Grigory Luchansky) - Owner of Nordex group which worked with Robert Maxwell.
• Valentin Pavlov - Prime Minister, oversaw Robert Maxwell.
• Vladimir Kryuchkov - KGB chief, oversaw Robert Maxwell.
• Boris Pugo - KBG chief, protected Nordex group.
• Iso Lenzlinger - On the board of directors of Nordex and Consen, attorney for these businesses.
• Alfred Hartmann - former CFO of BCCI, Swiss head of Rothschild, former Swiss head of Lavoro National Bank
• Laurent Murawiec - managing director of Swiss think tank Geopol, British spy, involved in the bombing of the Argentina Jewish Community Center, and a former Larouchite who left the fold.

Stolen gold

From Sterling's footnotes:

The estimated reserves of two thousand to three thousand tons were cited by Lawrence Malkin in the International Herald Tribune, Oct. 17, 1991; also The Washington Post was cited in the International Herald Tribune, Sept. 30, 1991. The remaining 240 tons in the Central Bank was reported by Grigori Yavlinsky to G-7, Herald Tribune, Sept. 30, 1991. Izvestiya of Nov. 5, 1991, reported five tons of gold and platinum exported illegally from the U.S.S.R. in the previous six weeks.

Leo Wanta named Roberto Coppola as responsible for the theft of gold. Wanta provided Sterling with a copy of a memo showing his company offering to sell 2,000 metric tons of gold held in Kloten, Switzerland to Faisal S. Khan of the El-Siraat Trading Company of 112 Lakeview Terrace, Oakland, NJ.

Contemporary ruble trade

Although the activities of Zubok, Wanta, and Gibbons were stopped, hundreds of billions of rubles were being traded in Europe by early 1991. Poland made note of a literal trainload of rubles on its way to Belgium and Italian police overheard negotiations for multi-billion ruble transfers in their wiretaps. Among those selling rubles was Hamza Turkuresin, "closely associated with Calabria's criminal 'Ndrangheta, and with a group known to be laundering cocaine money for Colombia's Medellin cartel."

See also

• Mega Oil - US operation in Azerbaijan possibly involving alliances with Russian organized crime
• Far West LLC - Alleged alliance of Russian, Ukrainian, and Chechen state and organized crime