One of Russia's most powerful mob bosses was shot dead by a sniper in broad daylight in central Moscow on Wednesday, in a suspected contract killing.

Aslan Usoyan, 75, better known by his mob name "Ded [Grandpa] Hasan", had survived at least two previous attempts on his life.

Media images of police swarming in the courtyard of a faded pre-revolutionary mansion and rumours of conflict between rival underworld gangs revived memories of the violent and chaotic Moscow that President Vladimir Putin has worked hard to present as long gone.

Usoyan, an ethnic Kurdish Yezidi originally from neighbouring Georgia, had built a vast criminal empire stretching across the former Soviet Union. He is believed to have been in a conflict for years with fellow crime boss Tariel Oniani, known as Taro, as the two battled for territory.

The war has been bloody. Many of those killed were Usoyan lieutenants working in Sochi, home to highly lucrative construction projects as the resort prepares to host the Winter Olympics in 2014. The most high-profile victim was Vyacheslav Ivankov, better known as "Yaponchik [Little Japanese]", who was killed by a sniper rifle in Moscow in 2009. The FBI suspected him of being a leading Russian crime boss in the United States following the fall of the Soviet Union.

An unnamed source in Russia's security services said that Usoyan is likely to have fallen victim to a clan war.

"The assassination carried out on Wednesday was probably the result of Aslan Usoyan's conflict with 'thieves in law' clans headed by immigrants from Georgia," the source told the state-run Interfax news agency, using Russian mafia terminology.

Usoyan was shot as he left a restaurant in central Moscow at 2:30pm. Police later found six bullet casings from a Soviet-designed AS Val in a building across the street. One bullet hit Usoyan in the head. Another two struck a passerby – the woman has been hospitalised with injuries to her leg and chest, Russian press reported.

Usoyan survived an assassination attempt in September 2010, after being shot in the stomach by a sniper. His associates refused to deny rumours of his death for weeks, out of concern for his safety.

On Wednesday, the tabloid Life News published a photograph of Usoyan's corpse.

Mark Galeotti, a professor at New York University who specialises in the Russian mafia, warned that the murder of as powerful a figure as Usoyan would likely lead to further warring.

"My suspicion is we are going to be seeing blood on the streets," Galeotti said. "It's likely this will lead to violence as a new leader tries to assert his power, with other gangs trying to nibble away at Usoyan's legacy."

"The Russian underworld is a much more volatile place than it was five years ago," he said. "It's not the 1990s – but, particularly because of the influx of Afghan heroin and the opportunities created by the Sochi Winter Olympics, the old pecking orders are in question."

A US diplomatic cable released by WikiLeaks in 2010 described Russia as a "virtual mafia state".