COLUMN ONE : The Mob Rules in New Russia : Organized crime has grown so big and bad that some fear it could threaten the Yeltsin government. Powerful gangs and rampant corruption hobble the move to a free-market economy.

Boris Yeltsin used to run this town. Now the mob does.

The new czar is a former soccer star named Konstantin Tsyganov. Police and fellow gangsters say Tsyganov’s crime organization controls 60% of this rich industrial region, with branch operations in Moscow.

In or out of jail, Tsyganov is a man with clout. During a mob war last summer, his henchmen decided that they needed more than machine guns to battle rivals from the ferocious Chechen mafia. So they hijacked a state-of-the-art tank from a nearby military testing ground and parked it in the central square. The Chechens left town.

Tsyganov’s men make regular deliveries of food, chocolate, tea and medicine to Ekaterinburg’s overcrowded jail. The warden, who says the state has slashed his budget so severely that two inmates died from the poor conditions, shrugs and accepts the booty.

Tsyganov is something of a Russian Robin Hood. His thugs allegedly extract up to a third of the profits from businesses struggling to establish themselves. Yet after he was arrested on extortion charges last spring, invalids, pensioners and the local soccer team wrote letters of protest, extolling his philanthropy and demanding his release. All said they could not survive without his largess.

But while Tsyganov sat in jail, someone used a grenade launcher to blast the Ekaterinburg City Hall and the headquarters of the police organized crime unit. Thugs then gave a bone-crushing beating to a judge who had denied him bail.

Not surprisingly, nearly three-quarters of residents believe that their city is ruled not by the government but by the mafia, according to a 1993 survey. And 56% believe that the police are not fighting organized crime because they have been bought off.

Ekaterinburg is not unique. Organized crime and corruption have become so pervasive that they are choking the development of a free-market system in Russia, according to a growing chorus of officials, business people and victims.

Some believe that the problem could even threaten the Yeltsin government itself.

“The growth of organized crime, permeating the police and local authorities, threatens political and economic development in Russia, creating the conditions for the national socialists to come to power,” said a report sent to President Yeltsin in January.

In his State of the Nation speech Thursday, Yeltsin promised a crackdown on crime, which has seemed to grow as fast as the private sector in the wake of the collapse of the Soviet Union.

He warned that organized crime in particular “is trying to take the country by the throat.”

He called on Parliament to revise the Soviet-era legal code adopted in the 1950s to make it easier to fight crime and corruption.

During the December parliamentary elections, Communists told voters that the Yeltsin administration was more corrupt than the old Soviet system, and ultranationalist Vladimir V. Zhirinovsky promised to convene tribunals to shoot criminals on the spot. Reformers did not make crime a campaign issue, and were trounced.

Determined to deprive his conservative foes of a populist issue, Yeltsin called fighting crime the year’s most important issue, a goal that reflects the realization that the lack of law and order has become a serious political liability.

The Red Star newspaper wrote this month that analysts have for some time predicted that Russia’s estimated 4,000 organized crime groups would consolidate, divide up turf, forge links with foreign criminal networks, buy up key officials and become politicized. Now it is happening, the newspaper asserted.

“It is now clear that this phenomenon . . . poses a real threat to national security, threatening the political and economic development of Russia,” it said.

According to the report to the president by Pyotr S. Filippov, the longtime Yeltsin adviser who heads the presidential Analytical Center for Social and Economic Policy, all owners of cafes, restaurants and retail stores are paying protection money to mobsters, as are 70% to 80% of privatized businesses and commercial banks.

Extortionists routinely demand tribute of up to 20% of the turnover--often totaling more than half the profit, the report said. This “hidden tax to bandits,” as well as price-fixing and monopoly-building by mobsters, increases prices by 20% to 30%, contributing to the further impoverishment of the population, the report said.

Organized crime groups and their shady business partners are all known here by the umbrella term mafia , though they are smaller and far less organized than La Cosa Nostra or Latin American drug cartels.

Collectively, these corrupt bands are blamed for hastening the flight of Russian capital abroad. Russian officials say at least $1 billion a month is flowing into Western and offshore banks that already hold up to $40 billion in Russian deposits. Unofficial sources say the real figures are closer to double that.

Some of the dollars are ferried out of Russia by businesses anxious to protect their money against inflation, confiscatory taxes or mafia extortion. Some of the outflow comes from government credits to industry, which, instead of being invested in rebuilding Russian manufacturing, quickly find their way into foreign banks.

But a significant portion of the $1 billion fleeing Russia each month is believed to belong to the mob and its growing business empire. In some cases, gangsters have forced banks to transfer tainted capital abroad illegally--and then killed the bankers who knew where the deposits were kept, according to the report. Bankers now have a high mortality rate; more than 30 were slain last year.

At a time when Russia faces growing unemployment, some would-be entrepreneurs are being scared out of business by the mob. One is 23-year-old Oleg Morozov, who started a private real estate company in Moscow in late 1992.

Morozov is no shrinking violet. In the army, he spent three days in an underground stockade for painting a mocking mural of Felix E. Dzerzhinsky, founder of the Soviet secret police. Morozov said he dropped out of law school when he realized that students were paying bribes to pass exams and could even buy their degrees.

He and a friend cut their teeth in real estate by leasing a hotel floor for the ruble equivalent of $25 per room, and then renting the rooms to foreigners for $110 a night.

“It was perfectly legal, but they never would have let us do it if we hadn’t paid the hotel director and the front desk receptionist,” the former athlete said.

Less than three months after Morozov and a new partner opened a real estate office, racketeers came calling.

“One guy who knew how to talk and four hulking guys with broken noses” promised they would be back in a week to start collecting an unspecified sum in tribute, he said.

Morozov quit then and there. He and others say the only way to stay in business in the face of an outrageous payment demand is to find a “reasonable” mafia that charges low rates--as little as 8%--and provides protection against street thugs and other would-be extortionists. Such “good mafias” are known here as krysha, which means roof , and many business people say it is impossible to function in Russia without them.

Not all gangsters rely on physical force to collect payment. Some merely threaten to report their victims to the tax inspector. Nearly every business fudges its income to avoid taxes that can total 90% of its profit.

In Ekaterinburg, which was called Sverdlovsk when Yeltsin was first secretary of the local Communist Party, a recent government survey of 400 enterprises found one-third were not paying taxes.

Entrepreneurs figure it is cheaper and more reliable to pay the mob than to tangle with the tax police.

Bureaucrats and politicians also are held hostage. Filippov, the Yeltsin adviser, says organized crime leaders are carefully building dossiers on all major government officials and politicians.

In Ekaterinburg, organized crime investigators working in the building that was damaged by the grenade attack say they have evidence that mobsters are not only keeping files on them, but surreptitiously photographing them.

Attempts to crack down on organized crime have failed because law enforcement has been infiltrated with mob informers, Filippov said.

In some places, local officials seem to be cowed by gangsters, while elsewhere they collaborate.

In the old town of Tver, officials will not issue a business license for a coffee shop without getting clearance from the local godfather, Filippov said. In the Volga city of Kazan, only mobsters are allowed to drive foreign cars or Volgas, the Russian luxury sedans; gangsters yank other drivers from behind the wheel and drive off in the prestigious vehicles.

Moscow officials are unable to stop the dangerous and illegal sale of gasoline from the backs of trucks, because the gasoline gangs reportedly pay the traffic police to tip them off when a raid is coming.

With law enforcement compromised and mobsters running amok, the populist promises of neo-fascist leader Zhirinovsky, who campaigned on a law-and-order platform, have a dangerous resonance.

“Failure to take decisive and systematic measures to alleviate the economic causes of crime . . . as well as the absence of political will to fight organized crime, could bring the national socialists to power during the 1996 presidential election,” Filippov wrote.

In an interview, Filippov called for the creation of a Russian equivalent of the FBI to fight organized crime, but with a catch: Not one officer who has served in the police or the KGB should be hired for the unit of “Untouchables.”

The unit’s regional supervisors would be rotated frequently, he proposed, and officers would be dismissed at the first whiff of corruption.

In return, the unit would be permitted to conduct stings and to make preventive arrests to keep suspected gangsters in custody without charges for up to several months.

Such tactics are banned under Russian law, and would raise the hackles of human rights advocates, but Filippov argues that only Draconian measures will suffice.

“We need a white terror,” Filippov said, meaning a righteous purge of evildoers rather than a bloody, Bolshevik “red terror.”

An elite squad of “300 fanatics” could put the mob out of business in short order, he said.

Filippov’s findings about the mob’s grip do not surprise most Russians, who believe that their nation has been plundered by officials in cahoots with criminals.

The police are held in pure contempt by the many citizens who have had occasion to bribe them. The disenchanted often remark that “the state itself is the mafia.”

Every day, the media reinforces the impression that the bad guys are winning, and that no one is safe.

The latest travesty was the Feb. 1 assassination of a revered publisher who had brought out the works of exiled novelist Alexander Solzhenitsyn.

Sergei Dubov was gunned down as he left his Moscow home for a morning jog. Police said the killing had all the earmarks of a professional “hit,” and newspapers speculated that Dubov had a fatal financial disagreement with the mob.

If crime abounds, punishment is rare.

Gangsters are far more likely to be slain by rivals than arrested. The conviction of a bribe-taking bureaucrat or a corrupt cop would be sensational news here; but such stories almost never appear.

Despite the torrent of allegations of corruption exchanged by Yeltsin supporters and their foes in the Supreme Soviet last summer, not a single high-ranking official has appeared in the dock.

“The prosecutor’s office is an exclusively political tool,” said Igor Baranovsky, an investigative reporter for the Moscow News. “It will never work against the party in power.”

Low-level officials do get nabbed, but these cases get little publicity. In 1993, the Interior Ministry logged about 13,000 crimes by government officials, ranging from abuse of power to forgery, theft and graft.

The ministry also opened 8,000 extortion case files last year, said Gennady F. Chebotarev, the first deputy chief of the Interior Ministry’s organized crime control department.

If the vast majority of bribes and shakedowns go unreported, it is not only because of fear, but because “both sides are satisfied with the arrangement,” Chebotarev said.

In Ekaterinburg, even the police admit that Tsyganov is a well-liked man. Supporters say it is because he gave fledgling entrepreneurs what their government has been unable to provide: protection against petty criminals and other extortionists, reliable debt collection, a well-connected “friend” to run interference with meddling bureaucrats and, sometimes, financing at much lower interest rates than banks offer.

Even if much of his capital was extorted from businesses or stolen from state enterprises, Tsyganov was trying to make his 30-odd companies into a legitimate business empire, they said.

Police paint a less flattering portrait of Tsyganov, who is being held in the nearby city of Perm because the local jail is not secure enough. Tsyganov’s thugs once tried to batter a businessman into signing over half of his company, said Vyacheslav I. Latyshev, deputy head of the Ekaterinburg organized crime department. When the man stoically refused, Tsyganov allegedly poked a knitting needle in his ear until he signed.

The terrified victim is in hiding, and another potential witness is under heavy police guard after being shot.

Latyshev believes that both men will eventually testify against Tsyganov. But he bemoans the lack of a program to protect, relocate or give new identities to the few witnesses willing to stand up against the mob.

In an interview in Trud newspaper this month, Yeltsin’s ousted economic guru and deputy prime minister, Yegor T. Gaidar, pointed out that “organized crime thrives by uniting with corrupt bureaucrats. Without this union, organized crime could not exist.”

No Ekaterinburg officials have been charged with protecting Tsyganov. Russia has no financial disclosure requirements for public servants, so it is impossible to investigate whether there are official ties to Tsyganov-owned firms.

Corruption is hardly a new phenomenon in Russia.

In czarist times, historian Nikolai Karamzin wrote, one could sum up his country’s plight in a single word. “ Voruyut, “ he wrote--”They are stealing.”

Soviet officialdom was also notoriously corrupt. What makes the current situation so troubling is that the state has relinquished central economic control without first dismantling state-run monopolies, safeguarding ownership rights or stripping bureaucrats of their near-absolute powers, analysts said.

Organized criminals, inside and outside the massive Soviet-era bureaucracy, have rushed in to fill the vacuum.

“The state monopoly was replaced by a criminal monopoly,” said Yuri Y. Boldyrev, who was fired as Yeltsin’s top corruption investigator last summer after complaining that the administration lacked the will to stop the plunder. “There is practically not a crime-free sphere in our economy.”

Russia’s legions of ministries still have unchecked power to decide which firms should be given valuable export licenses, which ones should get loans, which ones should be given special tax breaks, all with a lack of public accountability that creates a paradise for payola.

“If in Italy corruption means handing out construction contracts, in Russia it means handing over buildings that are already built, giving land plots away for free and handing out various privileges,” Boldyrev said.

Gaidar argues that corruption cannot be fought with police methods unless its rich economic source is eradicated.

For example, government credits to industry are tightly rationed, and it has become common for recipients to pay kickbacks in return for the valuable loans. As long as all bounty flows from the state, graft will be hard to curb.

“If we are serious about fighting organized crime, the battle must be based on limiting the absolute power of the bureaucracy,” Gaidar said.

Reporter Sergei Loiko in The Times’ Moscow Bureau contributed to this report.