Business oligarch is a near-synonym of the term "business
magnate", borrowed by the English speaking and western media from
Russian parlance to describe the huge, fast-acquired wealth of some
businessmen of the
former Soviet republics (mostly
Russia
and
Ukraine) during
privatization in Russia and other post-Soviet states in 1990s.
Businessmen with great wealth from these countries were commonly labeled
(simply) "oligarchs" in Russian regardless of whether they had real
political power, as the term "oligarch"
would imply.
Post-Soviet Russian oligarchs
The Russian oligarchs are business entrepreneurs who started under
Mikhail Gorbachev during his period of market liberalization.
Yeltsinian
oligarchs
By the end of the Soviet era and during
Mikhail Gorbachev's
perestroika, many Russian businessmen imported or smuggled goods
such as
personal computers and
jeans
into the country and sold them, often on the
black market, for a hefty profit.
During the 1990s, once
Boris Yeltsin took office, the oligarchs emerged as well-connected
entrepreneurs who started from nearly nothing and got rich through
participation in the market via connections to the corrupt, but elected,
government of Russia during the state's transition to a market-based
economy.
The oligarchs became extremely unpopular with the Russian public, and
are commonly thought to be the cause of much of the turmoil that plagued
the country following the collapse of the Soviet Union.[1][2]
The Guardian described the oligarchs as "about as popular with
your average Russian as a man idly burning bundles of £50s outside an
orphanage".
Post-Soviet business oligarchs include relatives or close associates
of government officials, even government officials themselves, as well
as criminal bosses who achieved vast wealth by acquiring state assets
very cheaply (or for free) during the
privatization process controlled by the
Yeltsin government. Specific accusations of
corruption are often leveled at
Anatoly Chubais and
Yegor Gaidar, two of the 'Young Reformers' chiefly responsible for
Russian privatization in the early 1990s.[citation
needed] According to David Satter, author of
Darkness at Dawn, "what drove the process was not the determination
to create a system based on
universal values but rather the will to introduce a system of
private ownership, which, in the absence of law, opened the way for the
criminal pursuit of money and power."[citation
needed] In some cases, outright criminal groups in
order to avoid attention assign front men to serve as executives and/or
'legal' owners of the companies they control.
Although the majority of oligarchs were not formally related with the
Communist Party of the Soviet Union, there are allegations that they
were promoted (at least initially) by the communist apparatchiks, with
strong connections to Soviet power structures and access to the monetary
funds of the
communist party. In official media, oligarchs are usually pictured
as the enemies of "communist forces". The latter is a
stereotype that describes political power that wants to restore
Soviet-style communism in Russia.
During Yeltsin's presidency, oligarchs became increasingly
influential in politics and played a significant role in financing the
re-election of Yeltsin in 1996. With the insider information about
financial decisions of the government, oligarchs could easily increase
their wealth even further. The
1998 Russian financial crisis hit some of the oligarchs hard,
however, and those whose holdings were based on banking lost much of
their fortunes.
The most influential and exposed oligarchs from the Yeltsin era are
Boris Berezovsky,
Mikhail Khodorkovsky,
Alex Konanykhin,
Mikhail Fridman,
Vladimir Gusinsky,
Vitaly Malkin and
Vladimir Potanin.[3]
Potanin, Malkin and Fridman are the only ones of the list to have
made it to the Putin era. The others "have been purged by the Kremlin",
according to
The Guardian.[4]
Oligarchs during Putin's presidency
Diminishing power
The power of oligarchs diminished significantly after
Vladimir Putin became president,[citation
needed] though others have become oligarchs during
his time in power and often due to personal relations with Putin, such
as the rector of the institute where he obtained a degree in 1996,
Vladimir Litvinenko.[5]
During Putin presidency, many oligarchs came under fire for various
illegal activities, particularly
tax evasion in the businesses they acquired. However, it is widely
speculated and believed that the charges were also politically
motivated, as these tycoons have fallen out of favour with the Kremlin.
Vladimir Gusinsky (MediaMost) and
Boris Berezovsky both avoided legal proceedings by leaving Russia,
and the most prominent,
Mikhail Khodorkovsky (Yukos
oil),
was arrested in October 2003, and sentenced to 9 years, which was
subsequently extended to 14 years.
The most famous oligarchs from the Putin era include
Roman Abramovich,
Oleg Deripaska,
Mikhail Prokhorov, and still
Vladimir Potanin and
Vitaly Malkin.
Roustam Tariko, one of Russia's most successful businessmen and the
creator of
Russian Standard Vodka and the owner of
Russian Standard Bank, is a rare case of an oligarch in that he did
not get rich by capturing state assets during privatization, but created
his empire completely from scratch.
The defenders of the out-of-favor oligarchs (often associated with
Chubais's party—the
Union of Right Forces) argue the companies they acquired were not
highly valued at the time because they were still run on
Soviet principles, with non-existent stock controls, huge payrolls,
no financial reporting and scant regard for profit. They turned the
businesses—often vast—around and made them deliver value for
shareholders. They obtain little sympathy from the Russian public,
though, due to resentment over the economic disparity they represent.
In 2004,
Russian Forbes listed 36 billionaires of Russian citizenship,
with an interesting note: "this list includes businessmen of Russian
citizenship who acquired the major share of their wealth privately,
while not holding a governmental position". In 2005, the number of
billionaires dropped to 30, mostly because of the
Yukos
case, with Khodorkovsky dropping from #1 (US$15.2 billion) to #21
(US$2.0 billion).
Billionaire, philanthropist,art patron and former KGB agent
Alexander Lebedev has criticized the oligarchs, saying "I think
material wealth for them is a highly emotional and spiritual thing. They
spend a lot of money on their own personal consumption." Lebedev has
also described them as a bunch of uncultured ignoramuses, saying "They
don't read books. They don't have time. They don't go to exhibitions.
They think the only way to impress anyone is to buy a yacht." He also
notes that the oligarchs have no interest in social injustice.[6]
Oligarchs in
London
A significant number of Russian oligarchs have bought homes in
upscale sections of
London,
United Kingdom, which has been dubbed "Moscow on Thames".[7]
Some, like
Boris Berezovsky,
Konstantin Kagalovsky and Abram Reznikov, are
expatriates, having left Russia permanently. Most own homes in both
countries as well as property and have acquired controlling interests in
major European companies. They commute on a regular basis between
EU and Russia; in many cases their families reside in London, with
their children attending school there. In 2007, Abram Reznikov bought
one of Spain's mega recycling companies,
Alamak Espana Trade SL, while
Roman Abramovich, considered the wealthiest of the oligarchs, bought
the English football club,
Chelsea F.C., in 2003, and has spent record amounts on players'
salaries.[8]
2008 global recession and credit crisis
Since July 2008, according to the financial news agency
Bloomberg L.P., Russia's wealthiest 25 individuals have collectively
lost US$230 billion (£146 billion). The fall in the oligarchs' wealth is
closely linked to the meltdown in Russia's stock market, as the
RTS
Index has lost 71% of its value, due to the
capital flight after the
Russia/Georgia conflict.[9]
Billionaires in Russia and Ukraine have been particularly hard hit by
lenders seeking repayment on balloon loans in order to shore up their
own balance sheets. Many oligarchs took out generous loans from Russian
banks, bought shares, and then took out more loans from western banks
against the value of these shares.[6][10]
One of the first to get hit by the global downturn was
Oleg Deripaska, Russia's richest man at the time whose net worth was
US$28 billion in March 2008. As Deripaska borrowed money from western
banks using shares in his companies as collateral, the collapse in share
price forced him to sell holdings to satisfy the
margin calls.[6][10]
See also