OSCOW, Aug. 18 — In an industrial corner of western Moscow, a sleek set of machines in an old printing plant stamp out thousands of compact discs around the clock. The plant owner, Oleg V. Gordiyiko, a stout, ruddy-faced former metals trader, gives tours with a look of pride.

The plant has attracted attention recently for two reasons. It is suspected by the American music and film industries of turning out counterfeit compact discs. Its other remarkable trait is its location: a sign on the tall factory gate proclaims that the site belongs to none other than the Kremlin.

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Mr. Gordiyiko's plant recently appeared in a list of Russian factories attached to a sharply worded letter on piracy sent by the American ambassador, Alexander R. Vershbow, to the Russian government. Mr. Vershbow wrote that a number of the suspect plants were operating on government property, some even at secret military sites.

The accusation turned a decade-old economic issue into a matter of state and threw the weaknesses of Russian law enforcement into full, unflattering relief.

"It just seemed particularly blatant that a problem of this scale is going on at sites that are government owned," said a United States Embassy official who works on the issue.

Russia's vast pirated-music market is second only to China's. According to the International Federation of the Phonographic Industry, two out of every three music CD's in Russia are counterfeit. Piracy keeps legal album sales low, forcing Russian musicians to keep up frantic touring schedules to stay afloat, industry experts said.

Moscow is not alone in this problem — pirated CD's and videos are available from sidewalk vendors in New York, too — but the problem is huge here. While Russians buy 11.5 million legally made music CD's every year, they buy four times that amount in pirated CD's, some of which are imported from China, according to the federation. . Pirated CD's sell for about $2.50.

"Legal music is a niche market in Russia — it's strange but true," said David Junk, head of Universal Music in Russia. "It's impossible to make serious money in the music business with piracy as it is."

For pirates, government facilities and military factories offer a wall of secrecy that protects against police inspections. For military plants, which now stand mostly idle after a precipitous drop in military procurement in the 1990's, disc production can be a lifeline.

Mr. Gordiyiko, 40, who leads the Intellectual Property Rights Committee at Russia's Chamber of Commerce, vigorously denied accusations of piracy. All 500,000 of the discs produced by his factory each month are legal, he said.

"The ambassador was given the wrong information" by American companies, he said.

Even so, Mr. Gordiyiko acknowledges with a shrug that he had neither the time, resources nor inclination to check that each order he fills has the appropriate legal permission.

"If I have a good printer, and someone prints money on it, why should I be responsible for the counterfeits?" asked Mr. Gordiyiko, who gave his last interview for this article from St.-Tropez, France.

A government official had a similar reaction, when asked about Mr. Gordiyiko. The Kremlin's property office "just leases out the territory," said Vladimir Grigoriyev, an official in Russia's Press Ministry. "They don't particularly care what's being done in there."

Even so, high-level connections appeared to have helped last summer, when the police raided Mr. Gordiyiko's factory and confiscated stacks of discs they said were counterfeit. Soon after, the case was mysteriously closed and the police officers who led the raid were either fired or transferred. Police officials refused to comment on the case.

Mr. Gordiyiko "has strong protection from the government," said Konstantin Zemchenkov, director of the Russian Anti-Piracy Organization in Moscow.

Mr. Gordiyiko said that his ties to the Kremlin's former property manager, Pavel P. Borodin, had not given him an advantage. He said Mr. Borodin considered investing in the factory but settled on being its landlord.

The Russian government has moved against piracy in recent months. A new rule requiring factories to obtain licenses is intended to help bring the industry, unregulated since the Soviet Union's collapse, under control. "Everybody knows we were working to get this industry licensed," Mr. Grigoriyev said. "There was a huge lobby against it. But we put it into law."

Some industry analysts contend that the major Western music and film studios make piracy worse by not manufacturing their products locally.

With a lack of orders for licensed goods, Russian factories sometimes turn to illegal production to stay afloat, said Chris Abel-Smith, the representative in Russia for American Home Entertainment companies, Paramount, Universal and DreamWorks.

Videocassettes are a case in point. Since Western studios began hiring Russian companies to produce them locally, the market for legally made movies on video has improved, Mr. Abel-Smith said.

Even as the government begins regulating large Russian factories, a smaller, new producer is gaining a foothold. On a recent morning at one of Moscow's largest music and film markets, a small stand of pirated recordings of rap music had drawn a small throng of skinny teenage boys.

The salesman, 19, who would identify himself only as Aleksandr, smoothed rows of recordings by rap artists like Public Enemy and Snoop Doggy Dogg.

When asked which of the Russian factories made the discs he was selling, Aleksandr began to laugh along with the boys browsing at his stand.

"I burn them myself," he replied.