The Russian Orthodox Church is mired in illegal or dubious business schemes ranging from money-laundering to selling candles at extortionate mark-ups, according to a report that was condemned by the Church yesterday as the work of atheists.

The fast-expanding communion had financed its growth through exploitation of parishioners, systematic tax evasion and international trading in oil, diamonds, cigarettes and alcohol, says a Moscow institute set up to study Russia's shadow economy.

The Church, which says its money-making activities are vital to maintain its independence from the state, had entered the bottled mineral water business with what was now one of the country's best-known brand names. It had charged increasing amounts for holy ceremonies and burial plots, and priced offertory candles at up to 40 times their wholesale value, the study said.

A church spokesman yesterday attacked the authors of the report - one of whom, Mikhail Edelstein, is the son of an Orthodox priest - as "the heirs of military atheism" of the Soviet era. "There are forces in this country that disapprove of the Church's new independence and its role in society," Viktor Malukhin, of the Moscow Patriarchate, said. "It's a great shame that Soviet prejudices live on in some academic circles."

Mr Malukhin denied that the Church was involved in money-laundering but did not address the report's more detailed claims. These include bribe-taking by senior clerics in return for sought-after jobs; the failure of larger churches to declare profits of up to 150,000 a year from the sale of icons, candles and grave sites; and criminals' use of the Church's tax-free status on sales of gold ornaments.

One myth destroyed by the Moscow study is that of tight control from the top. Geraldine Fagan, of Britain's Keston Institute, which monitors religious freedom in the former Soviet Union, said: "The impression is one of complete and utter chaos."

The Church has never been forced to answer similar past claims or to publish open accounts, even though Russian law requires them. President Putin is unlikely to press for action, not least because he and Patriarch Aleksi II share a KGB past. The Patriarch's codename as a Soviet-era informer was Agent Drozdov. (posted 21 September 2000)