It accounted for 35 percent of the Soviet Union's income until oil and gas became big money makers in the 1980's. But that number plunged to roughly 4 percent in Russia after President Boris N. Yeltsin liquidated the state monopoly in 1992. And with the collapse of the economy, many local producers failed and foreign distillers began to export vast quantities of grain alcohol to Russia and neighboring countries.

But when the Russian government slapped heavier tariffs on imported alcohol in the mid-1990's, the black market exploded, opening up more opportunities in the trade for the ubiquitous Russian mob. Now, untaxed, smuggled and home-brewed vodkas -- known as samogon -- are believed to account for more than half of the estimated 568 million gallons consumed in Russia annually.

The economics of the smuggling scheme are straightforward: the alcohol can be bought in the United States and shipped to Russia for far less than it would cost a Russian company to produce it legally or illegally in that nation, law enforcement officials said.

''Organized crime realized you can buy grain alcohol for dirt cheap in the United States and export it for free,'' said Bruce Gourlie, an F.B.I. special agent in Newark who has traveled to Eastern Europe in connection with the case. ''By smuggling, you can make a tremendous amount of money, because the tariffs are so high because they're trying to protect the domestic alcohol industry.''

As a result, over the last few years a new class of bootleggers developed, riding shotgun on convoys of huge tanker trucks hauling illegal alcohol across the borders of Georgia and other countries into Russia. Enormous seizures became commonplace, and in at least one case, according to government news agency reports, smugglers with guided antitank missiles clashed with the border police, who halted their convoy of 550 tanker trucks.

About the same time, another class of lower-level bootlegger was shipping grain alcohol to Russia and Ukraine by sea, disguising it as cleaning products. Now, a federal grand jury in Newark is hearing evidence in the case, several officials said.

Court papers show that one Russian immigrant involved in the scheme pleaded guilty in April to a single count of conspiracy and is cooperating with federal prosecutors in Newark. Also cooperating in the case, according to the court papers, is a Missouri distillery founded in 1856 that made its name selling rye whiskey in Wild West saloons and recently got caught disguising its grain alcohol for shipment to the wild East.