Dudayev’s aggressively nationalistic, anti-Russian policies began to affect not only the Chechen economy, but also Russia as a whole. Russia’s economic ties with the newly independent Transcaucasian states of Georgia, Armenia, and Azerbaijan were severely disrupted. Train robberies became common with hundreds of trains and thousands of carriages plundered.

Ninety percent of petroleum products produced in Chechnya were sold abroad illegally with the spoils appropriated by the republic’s leaders. Chechnya became Russia’s main hub of financial fraud, where huge amounts of counterfeit banknotes and fraudulent payment documents were forged causing massive damage to Russia’s financial system. From 1991 to 1994 alone, Russia’s economic losses caused by the “Chechen factor” amounted to $15 billion.

The removal of all judicial, customs, and tax controls by the Chechen authorities transformed the province into a safe haven for criminals from all over Russia. Each month from 100 to 150 unsanctioned international flights were made from the Grozny airport. Chechnya became a transit base for drugs and weapons smuggling. Some of the Chechen warlords turned drug barons, owning heroine-producing facilities. The illicit drug industry yielded profits comparable to or better than those from oil extraction and refining.

Chaos and economic dislocation created ideal conditions for criminal business when the only means of subsistence for many locals became working in hemp and poppy fields or pushing drugs through Chechen criminal networks across Russia, the Transcaucasian region, the Baltic states, and Eastern Europe.

Maskhadov’s administration tried to overcome the degradation of Chechen society by attempting to reorient the republic’s state and judicial systems toward Islamic tenets and values and even by seeking to institute a code of Islamic laws known as Shariat. The move to Shariat was designed to strengthen the presidential authority by giving it an elevated religious status and to use strict Shariat norms to combat the rising crime rate.

However, the introduction of the Shariat code had an opposite effect. Far from propping up Maskhadov’s authority, it led to a complete disintegration of the judicial system, as armed groups took the law into their own hands under the banner of enforcing Islamic norms.