The Russian oligarchs emerged as business entrepreneurs underMikhail Gorbachev (General Secretary, 1985–1991) using various loopholes during economic liberalization under Gorbachev'sperestroika.[2]Boris Berezovsky, a mathematician and former researcher, became the first well-known Russian business oligarch.[3]
Oligarchs became increasingly influential in Russian politics duringBoris Yeltsin's presidency (1991–1999), a period often dubbed asthe wild nineties; they helped finance hisre-election in 1996. Well-connected oligarchs likeRoman Abramovich,Michail Khodorkovsky, Boris Berezovsky andVladimir Potanin acquired key assets at a fraction of the value at theloans for shares scheme auctions conducted in the run-up to the election.[4] Defenders of the out-of-favor oligarchs argue that the companies they acquired were not highly valued at the time because they still ran on Soviet principles, with non-existentstock control, huge payrolls, no financial reporting and scant regard for profit.[5]
Since 2014, hundreds of Russian oligarchs and their companies have been hit withUS sanctions for their support of "the Russian government's malign activity around the globe".[6][7] In 2022, many Russian oligarchs and their close family members were targeted and sanctioned by countries around the world as a rebuke ofRussia's war in Ukraine.[8]
Following thedissolution of the Soviet Union in 1991,Boris Yeltsin becamePresident of Russia in July 1991, the oligarchs emerged as well-connected entrepreneurs who started from nearly nothing and became rich through participation in the market via connections to the corrupt, but elected,government of Russia during the state's transition to amarket-based economy. The so-calledvoucher privatization program of 1992–1994 enabled a handful of young men to become billionaires, specifically byarbitraging the vast difference between old domestic prices for Russian commodities (such as natural gas and oil) and the prices prevailing on the world market. These oligarchs became unpopular with the Russian public and are often blamed for the turmoil that plagued theRussian Federation following the collapse of the Soviet Union in 1991.[9][10][11][12]
EconomistsSergei Guriev and Andrei Rachinsky contrast older oligarchs withnomenklatura ties and younger-generation entrepreneurs such asKakha Bendukidze who built their wealth from scratch because Gorbachev's reforms affected a period "when co-existence of regulated andquasi-market prices created huge opportunities forarbitrage."[13]
EconomistYegor Gaidar worked in aSoviet Academy of Sciences think tank modelled afterRAND.[19] Gaidar later became the economics editor of theKommunist journal, the official theoretical organ of theCC of the CPSU. He also held various positions, including Prime Minister in the Russian government during 1991–1992.[20] Together withAnatoly Chubais, the two "Young Reformers" were chiefly responsible for privatization in the early 1990s.[21][22][23] According toDavid Satter, "what drove the process was not the determination to create a system based onuniversal 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".[24][5]
With the ascent of Vladimir Putin in the Kremlin the influence of the Yeltsin oligarchs dissipated, as some were imprisoned, such asMikhail Khodorkovsky (pictured here) andMikhael Mirilashvili, while others emigrated, sold off their assets or died under suspicious circumstances, such asVladimir Vinogradov andBoris Berezovsky. A number of Yeltsin oligarchs first came under fire for allegedtax evasion.[27][28]Vladimir Gusinsky of MediaMost andBoris Berezovsky both avoided legal proceedings by leaving Russia, and the most prominent,Mikhail Khodorkovsky ofYukosoil, was arrested in October 2003 and sentenced to 9 years. This was subsequently extended to 14 years, and after Putin pardoned him, he was released on 20 December 2013.[29]
A second wave of oligarchs emerged in the 2000s, friends and former colleagues of President Putin either from his years in the St Petersburg municipal administration or his Dresden tenure in the KGB. Examples are the director of the institute where Putin obtained a degree in 1996,Vladimir Litvinenko,[30] and Putin's childhood friend andjudo-teacherArkady Rotenberg.[31]Gennady Timchenko was close friends with Russian leaderVladimir Putin since the early 1980s.[32][33] In 1991, Putin gave Timchenko an oil export license.[13] These oligarchs worked in close cooperation with the government, displacing a system of crony capitalism with a system of state capitalism whereby the new oligarchs benefited from financing by state-owned banks and access to public procurement projects.[34]
An economic study distinguished 21 oligarchic groups as of 2003.[13] Between 2000 and 2004, Putin apparently engaged in a power struggle with some oligarchs, reaching a "grand bargain" with them. This bargain allowed the oligarchs to maintain their powers, in exchange for their explicit support of – and alignment with – Putin's government.[35][36] However, other analysts argue that the oligarchic structure has remained intact under Putin, with Putin devoting much of his time to mediating power-disputes between rival oligarchs.[37]
The ten most-prominent oligarchs of the early Putin era includedRoman Abramovich,Oleg Deripaska,Mikhail Prokhorov,Alisher Usmanov,Viktor Vekselberg,Leonid Mikhelson,Arkady Rotenberg,Gennady Timchenko,Andrey Guryev andVitaly Malkin.[38] In 2004, five years after Putin's ascent to power,Forbes listed 36 billionaires of Russian citizenship, with a 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 theYukos case, with Khodorkovsky dropping from No. 1 (US$15.2 billion) to No. 21 (US$2.0 billion). A 2013 report by Credit Suisse found that 35% of the wealth of Russia was owned by the wealthiest 110 individuals.[39][34]
Daniel Treisman proposed using a term "silovarch" (silovik and oligarch) for a new class of Russian oligarchs with backgrounds in Russian military and intelligence.[40]
On 30 January 2018, theU.S. Treasury published a "list of oligarchs" as part of a document known as the "Putin list" which was compiled under the requirement of theCAATSA Act.[41][42] According to the document itself, its criterion for inclusion was simply being a Russian national with a net worth of over $1 billion.[43] The list was criticised for being indiscriminate, and including critics of Putin.[44]
According to the financial news-agencyBloomberg L.P., Russia's wealthiest 25 individuals collectively lost US$230 billion (£146 billion) from July 2008 to July 2017.[45][46][47] The fall in the oligarchs' wealth relates closely to the meltdown in Russia's stock market, as by 2008 theRTS Index had lost 71% of its value due to thecapital flight after theRusso-Georgian War of August 2008.[48]
Putin (left) withOleg Deripaska (right) in the Kremlin in March 2002
Billionaires in Russia were particularly hard-hit by lenders seeking repayment onballoon loans 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.[49][50] One of the first to get hit by the global downturn wasOleg Deripaska, Russia's richest man at the time, who had a net worth of 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 themargin calls.[49][50]
Putin era, 2022 invasion of Ukraine and international sanctions
After the2022 Russian invasion of Ukraine, Canada, US, and European leaders with the addition of Japan, took unprecedented steps to sanction Putin and the oligarchs directly.[51] In response to thesanctions, the targeted oligarchs started to hide wealth in an attempt to prevent the Western nations from freezing their assets.[52] These sanctions intend to directly impact the Russian ruling class as a response for their perceived contribution and acquiescence to the war with Ukraine. Although the sanctions miss some of the richest oligarchs, the impact on the war is unknown due to Putin's power over those that were sanctioned.[53] Since the invasion began, nine of the Russian oligarchs' yachts have turned theirnavigation transponders off as they sail to ports where they are less likely to be searched and seized.[51]
Putin (left), withPetr Fradkov (right) in the Kremlin in May 2019
Several dozen business people with family connections to top politicians include President Putin’s younger daughterKaterina Tikhonova, who through her investment fund has been the recipient of numerous large contracts from state-owned energy companies.[56] Her former husbandKirill Shamalov runs the largest Russian petrochemicals company Sibur as well as his own investment fund.[57]
The son-in-law of Foreign MinisterSergei Lavrov runs an investment fund with assets exceeding $6 billion. Andrey Ryumin,[58] the son-in-law ofViktor Medvedchuk, President Putin’s former closest ally in Ukraine, runs another investment fund with large agricultural holdings which have become recipients of state subsidies for import substitution (Rouhandeh 2022).Petr Fradkov, the son of a former Prime Minister and head of the Russian foreign intelligence service, Sergei Sergeevich Ivanov, the son of the former head of the presidential administrationSergei Ivanov, and Andrey Patrushev, the son of the current head of the Russian Security CouncilNikolai Patrushev have all joined the ranks of the oligarchs.[59][circular reference]
The list of oligarchs and business executives who have risen to prominence and who have been sanctioned after Russia's invasion of Ukraine includes:
Said Gutseriev (Russian-British businessperson, the son ofRussian oligarchMikhail Gutseriev. Since 2018 he has been included by Forbes into the list of wealthiest businessmen in the world. In 2021 his fortune has been estimated at $1.7 billion.[65][66]
Andrey Valerievich Ryumin (Executive Director ofRosseti PJSC (formerly, until August 2014, known as Russian Grids, Chairman of Board, son-in-law ofViktor Medvedchuk. Medvedchuk is a pro-Kremlin Ukrainian politician and a personal friend of Russian PresidentVladimir Putin.)[13][69][70][71]
Andrey Patrushev (son of the Secretary of theSecurity Council of RussiaNikolai Patrushev.Nikolai Patrushev served as the director of theFederal Security Service (FSB) from 1999 to 2008. Belonging to thesiloviki faction of presidentVladimir Putin's inner circle,[72] Patrushev is believed to be one of the closest advisors to Putin and a leading figure behind Russia's national security affairs.[73] Patrushev is seen by some observers as one of the likeliest candidates for succeeding Putin.)[74][75]
Alexander Vinokurov (Owner of the privately held investment company Marathon Group (Russian company) and largest shareholder of retailer Magnit. Vinokurov is married to Ekaterina Vinokurova (née Lavrova) (born 1982New York City), daughter of the Minister of Foreign Affairs of the Russian FederationSergey Lavrov.[97] Vinokurov was added to theEU Sanctions List on 9 March 2022 for providing a substantial source of revenue to the government of the Russian Federation during theRusso-Ukrainian War.[98][99]
The British Government policy encouraged the flow of foreign capital into the United Kingdom, for example through theforeign investor visa routes, introduced duringJohn Major'spremiership in 1994, one-fifth of whose recipients since 2008 are Russian citizens.[100]
Roman Abramovich bought the English football clubChelsea F.C. in 2003, spending record amounts on players' salaries.[106]Alexander Mamut invested £100m toWaterstones bookstore chain after acquiring it in 2011 for £53m. According to its managing directorJames Daunt, the intervention saved Waterstones, which managed to make its first annual profit since 2008 in 2016.[107] He remarked that continued Russian ownership would've been "catastrophic" for the chain in 2022.[108]
Dubai and Israel have been havens for oligarchs fleeing sanctions.[109][110][111]
TheUAE has become a prominent destination for relocation of yachts, real estate, and private banking services linked to sanctioned Russian elites. In May 2022, the 118-metre Motor Yacht A, owned by oligarchAndrey Melnichenko, was anchored inRas al-Khaimah, UAE, where it remained largely intact despite international sanctions.[112]
Russian purchases of UAE real estate also surged: Russians spent over US $6.3 billion onDubai property in 2022 as non-resident buyers, many linked to high-net-worth individuals and oligarchs.[113]
^Mueller, Andrew (3 December 2005)."What a carve-up!".The Guardian. Retrieved14 June 2020.Putin, able to see matters rather straighter than Yeltsin, realised two crucial things about the oligarchs: that they were potentially more powerful than him, and that they were about as popular with your average Russian as a man idly burning bundles of £50s outside an orphanage (according to one 2004 poll, only 18% of Russians opposed wholesale renationalisation of the country's resources).
^Granville, Johanna (Summer 2003)."The Russian Kleptocracy and Rise of Organized Crime".Demokratizatsiya:448–457.The Russian state has metamorphosed into a full-fledged 'kleptocracy' – dedicated to enriching those in power and their associates, usually organized criminal groups.
^Satter, David (2003). "The History of Reform".Darkness at Dawn: The Rise of the Russian Criminal State (reprint ed.). New Haven: Yale University Press (published 2004). p. 46.ISBN9780300105919. Retrieved14 June 2020.... 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.
^Treisman, Daniel; Shleifer, Andrei (21 March 2004)."A Normal Country".Foreign Affairs. Retrieved25 January 2023.
^Putin: Russia's Choice. Richard Sakwa, (Routledge, 2008) pp. 143–150[ISBN missing]
^Playing Russian Roulette: Putin in search of good governance, by Andre Mommen, inGood Governance in the Era of Global is Neoliberalism: Conflict and Depolitisation in Latin America, Eastern Europe, Asia, and Africa, by Jolle Demmers, Alex E. Fernández Jilberto, Barbara Hogenboom (Routledge, 2004)[ISBN missing]
^Andrey Rudakov. (July 14. 2022). “Putin’s daughter has a big new job at Russia’s most powerful business lobby,”.Fortune Magazine website Retrieved 26 January 2023.
^Guardian staff. (10 March 2022). “Russia: the oligarchs and business figures on western sanction lists,”.The Guardian website Retrieved 26 January 2023.
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