Oligarchs became increasingly influential in Russian politics during
Boris Yeltsin's presidency (1991–1999); they helped finance his
re-election in 1996. Well-connected oligarchs like
Roman Abramovich,
Michail Khodorkovsky, Boris Berezovsky and
Vladimir Potanin acquired key assets at a fraction of the value at the
loans for shares scheme auctions conducted in the run-up to the election.[2] 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-existent
stock control, huge payrolls, no financial reporting and scant regard for profit.[3]
Since 2014, hundreds of Russian oligarchs and their companies have been hit by the
US sanctions for their support of "the Russian government's malign activity around the globe".[4][5] In 2022, many Russian oligarchs and their close family members were targeted and sanctioned by countries around the world as a rebuke of
Russia's war in Ukraine.
Yeltsin era, 1991–1999
During
Mikhail Gorbachev's
perestroika (
c. 1985–1991), many businessmen in
Russia imported goods such as personal computers and jeans into the country and sold them for a hefty profit.
Once
Boris Yeltsin became
President 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 a
market-based economy. The so-called
voucher privatization program of 1992–1994 enabled a handful of young men to become billionaires, specifically by
arbitraging 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 the
Russian Federation following the collapse of the Soviet Union in 1991.[6][7][8][9]
Emergence
Economists
Sergei Guriev and Andrei Rachinsky contrast older oligarchs with nomenklatura ties and younger-generation entrepreneurs such as
Kakha Bendukidze who built their wealth from scratch because Gorbachev's reforms affected a period "when co-existence of regulated and
quasi-market prices created huge opportunities for
arbitrage."[10]
The majority of oligarchs were promoted (at least initially) by the Soviet apparatchiks, with strong connections to Soviet power-structures and access to the funds of the Communist Party.[3][11][12]Boris Berezovsky himself was Head of the Department of System Design at another Academy of Sciences research centre. His private company was established by the Institute as a
joint venture.[13]Mikhail Khodorkovsky started his business importing computers under auspices of the
Komsomol-authorised
Center for Scientific and Technical Creativity of the Youth in 1986, briefly serving as a deputy secretary of the Komsomol for a district in Moscow in 1987. His move into banking two years later was funded with the support of Komsomol alumni working in Moscow city government. Later, he served in the Russian government as an adviser to the prime minister and a deputy minister of fuel and power while still running his business.[14]Vladimir Vinogradov was the chief economist of Promstroibank, one of the six banks existing in the Soviet Union,[15] previously serving as the secretary of
Atommash plant Komsomol organisation.[14]
Political support
Economist
Yegor Gaidar worked in a
Soviet Academy of Sciences think tank modelled after
RAND.[16] Gaidar later became the economics editor of the Kommunist journal, the official theoretical organ of the
CC of the CPSU. He also held various positions, including Prime Minister in the Russian government during 1991–1992.[17] Together with
Anatoly Chubais, the two "Young Reformers" were chiefly responsible for privatization in the early 1990s.[18][19][20] According to
David Satter, "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".[21][3]
With the ascent of Vladimir Putin in the Kremlin the influence of the Yeltsin oligarchs dissipated, as some were imprisoned, such as
Mikhail Khodorkovsky (pictured here) and
Mikhael Mirilashvili, while others emigrated, sold off their assets or died under suspicious circumstances, such as
Vladimir Vinogradov and
Boris Berezovsky. A number of Yeltsin oligarchs first came under fire for alleged
tax evasion.[24][25]Vladimir Gusinsky of MediaMost and
Boris Berezovsky both avoided legal proceedings by leaving Russia, and the most prominent,
Mikhail Khodorkovsky of
Yukosoil, 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.[26]
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.[27] Examples are the director of the institute where Putin obtained a degree in 1996,
Vladimir Litvinenko,[28] and Putin's childhood friend and
judo-teacher
Arkady Rotenberg.[29]Gennady Timchenko was close friends with Russian leader
Vladimir Putin since the early 1980s.[30][31] In 1991, Putin gave Timchenko an oil export license.[10] These oligarchs worked in close cooperaton 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.[32]
An economic study distinguished 21 oligarchic groups as of 2003.[10] 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.[33][34] 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.[35]
The ten most-prominent oligarchs of the early Putin era included
Roman Abramovich,
Oleg Deripaska,
Mikhail Prokhorov,
Alisher Usmanov,
Viktor Vekselberg,
Leonid Mikhelson,
Arkady Rotenberg,
Gennady Timchenko,
Andrey Guryev and
Vitaly Malkin.[36] In 2004, five years after Putin's ascend 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 the
Yukos 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.[37][32]
Daniel Treisman proposed using a term "silovarch" (
silovik and oligarch) for a new class of Russian oligarchs with backgrounds in Russian military and intelligence.[38] Billionaire and former KGB agent
Alexander Lebedev has criticized these new 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 [art] exhibitions. They think the only way to impress anyone is to buy a yacht."[39]
On 30 January 2018, the
U.S. Treasury published a "list of oligarchs" as part of a document known as the "
Putin list" which was compiled under the requirement of the
CAATSA Act.[40][41] According to the document itself, its criterion for inclusion was simply being a Russian national with a net worth of over $1 billion.[42] The list was criticised for being indiscriminate, and including critics of Putin.[43]
2008 global recession and credit crisis
According to the financial news-agency
Bloomberg L.P., Russia's wealthiest 25 individuals have collectively lost US$230 billion (£146 billion) since July 2008.[44][45][46] The fall in the oligarchs' wealth relates closely to the meltdown in Russia's stock market, as by 2008 the
RTS Index had lost 71% of its value due to the
capital flight after the
Russo-Georgian War of August 2008.[47]
Billionaires in Russia were particularly hard-hit by lenders seeking repayment on
balloon 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.[39][48] One of the first to get hit by the global downturn was
Oleg 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 the
margin calls.[39][48]
Putin era, 2022 invasion of Ukraine and international sanctions
After the
2022 Russian invasion of Ukraine, Canada, US, and European leaders with the addition of Japan, took unprecedented steps to sanction Putin and the oligarchs directly.[49] In response to the
sanctions, the targeted oligarchs started to hide wealth in an attempt to prevent the Western nations from freezing their assets.[50] 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.[51] Since the invasion began, nine of the Russian oligarchs' yachts have turned their
navigation transponders off as they sail to ports where they are less likely to be searched and seized.[49]
Several dozen business people with family connections to top politicians include President Putin’s younger daughter
Katerina Tikhonova, who through her investment fund has been the recipient of numerous large contracts from state-owned energy companies.[54] Her former husband
Kirill Shamalov runs the largest Russian petrochemicals company Sibur as well as his own investment fund.[55]
The son-in-law of Foreign Minister
Sergei Lavrov runs an investment fund with assets exceeding $6 billion. Andrey Ryumin,[56] the son-in-law of
Viktor 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 administration
Sergei Ivanov, and Andrey Patrushev, the son of the current head of the Russian Security Council
Nikolai Patrushev have all joined the ranks of the oligarchs.[57][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 of
Russian 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.[63][64]
Katerina Tikhonova (President Putin's second daughter and deputy chair of the Russian Union of Industrialists and Entrepreneurs)[65]
Andrey Valerievich Ryumin (Executive Director of
Rosseti PJSC (formerly, until August 2014, known as Russian Grids, Chairman of Board, son-in-law of
Viktor Medvedchuk. Medvedchuk is a pro-
Kremlin Ukrainian politician and a personal friend of Russian President
Vladimir Putin.)[10][67][68][69]
Andrey Patrushev (son of the Secretary of the
Security Council of RussiaNikolai Patrushev.
Nikolai Patrushev served as the director of the
Federal Security Service (FSB) from 1999 to 2008. Belonging to the siloviki faction of president
Vladimir Putin's inner circle,[70] Patrushev is believed to be one of the closest advisors to Putin and a leading figure behind Russia's national security affairs.[71] Patrushev is seen by some observers as one of the likeliest candidates for succeeding Putin.)[72][73]
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 1982
New York City), daughter of the Minister of Foreign Affairs of the Russian Federation
Sergey Lavrov.[95] Vinokurov was added to the
EU Sanctions List on 9 March 2022 for providing a substantial source of revenue to the government of the Russian Federation during the
Russo-Ukrainian War.[96][97]
The British Government policy encouraged the flow of foreign capital into the United Kingdom, for example through the
foreign investor visa routes, introduced during
John Major's
premiership in 1994, one-fifth of whose recipients since 2008 are Russian citizens.[98]
Roman Abramovich bought the English football club
Chelsea F.C. in 2003, spending record amounts on players' salaries.[104]Alexander Mamut invested £100m to
Waterstones bookstore chain after acquiring it in 2011 for £53m. According to its managing director
James Daunt, the intervention saved Waterstones, which managed to make its first annual profit since 2008 in 2016.[105] He remarked that continued Russian ownership would've been "catastrophic" for the chain in 2022.[106]
^"What a carve-up!". The Guardian. 3 December 2005. Retrieved 14 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. Retrieved 14 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. Retrieved 25 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, in Good 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.