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The Changing Role of Oligarchs in Russia

 7 min read / 

The so called oligarchs are a common topic in Russia since the fall of the Soviet Union. This distinct and very small group of people, which is sometimes even referred to as a social class, is often targeted by the Russian society through pop-culture, satirical jokes, and everyday conversations. The oligarchs are perceived very negatively, because, in the minds of Russian people, they symbolise corruption and social inequality. The biggest rise of this group of people happened during the Presidency of Boris Yeltsin. However, Yeltsin’s successor, Vladimir Putin, tried to change the role of oligarchs in Russia. The question to ask here is whether it worked or not.

Who are the oligarchs and how did they emerge?

Initially, the term “oligarch” can have many different meanings. Oligarchy was firstly defined and examined by Plato and Aristotle, who defined it as a rule of the few for the benefit of the few. Today in political science term “oligarchy” usually refers to a form of the government by a small group. Russia, however, was never really governed by a small group of oligarchs. Thus, calling these people in Russia “oligarchs” might be confusing, and the definition of the oligarch in the Russian context has to be further specified. At first, it was used in Russia to describe certain affluent and influential Russian businessmen who helped Yeltsin to be re-elected in 1996. Thus, influencing Russian politics through their immense wealth was an inherent part of being an oligarch in Russia. These definitions, however, refer more to the oligarchs under Yeltsin’s rule. After Putin’s struggle against this small group of people, its political influence diminished and today this term refers just to wealthy business tycoons, which do not influence Russian politics anymore.

One might ask, where did these oligarchs come from? How is it possible that this so called “class of oligarchs” emerged in Russia? The main reason for that is obviously Russia’s communist past and thus, development of oligarchic capitalism in Russia was a clear Soviet legacy. Firstly, the characteristics of the economy during the Soviet socialist regime, such as economic-centralisation and monopolism, are basically innate to Russian oligarchic capitalism as well. Secondly, some of today’s oligarchs are former communist bureaucrats due to the fact that they were already in charge of big companies during the Soviet era and when the privatisation happened, they just transformed their control into ownership rights. This leads to one of the main reasons for the emergence of the “class of oligarchs”, fast economic transition and corrupted privatisation. Moreover, it is important to emphasise that the Russian economy is dependent on natural resources which are nowadays embodied by large corporations. Consequently, a certain level of political power must somehow fall into their hands.

The oligarchs under Yeltsin’s rule

This period in Russia is sometimes referred to as a period of state captured by business. This was caused by the lack of a clear separation of business from government. Thus, the oligarchs could be very influential in terms of Russian politics due to the fact that they were always playing a main role when the regime needed any type of support, especially during elections. Basically, the unwritten deal existed between the ruling politicians and few businessmen to transfer huge state assets in exchange for an oligarchs’ financial support. Yeltsin’s presidential election in 1995 could serve as a glaring example of this reality. After his re-election, the class of oligarchs literally thrived. They controlled the media and so it was obvious that through media the oligarchs could influence people’s votes. Boris Yeltsin also had a very influential group of advisors, which were known as “The Family”. His daughter, Tatyana Dyachenko was part of it, the same as for instance, one of the most prominent oligarchs, Boris Berezovsky. In other words, under Yeltsin’s rule the oligarchs played an extremely important role not only in defining Russian economy, but also in defining and influencing Russian domestic and foreign policy.

The oligarchs under Putin’s rule

Vladimir Putin, on the other hand, decided to change the role of oligarchs in Russia. Putin’s main priority was to make the presidential administration the dominant political institution. His presidential campaign in 2000 was very anti-oligarchical. He basically announced the end of the oligarchs. However, in reality he did not really want to get rid of the big business. What he intended to do was to take control over them and deprive the oligarchs of their political power. Putin’s main strategy was to create an equidistance in relations between the state and the business, which however, later became more reminiscent of subordination. He arranged a meeting with all the prominent Russian oligarchs and introduced the so called “new rules of the game”. These rules could be briefly described by one sentence: as long as the oligarchs paid taxes and did not use their political power (at least not against Putin), Putin would leave them be. Those, who accepted these rules were later very successful. Some of the oligarchs who have cooperated with Putin have even increased their wealth. The glaring example of these people were for instance Roman Abramovich and Oleg Deripaska, who created an empire that made 70 per cent of Russia’s aluminium industry ending up under their control and completely avoided scrutiny. Nevertheless, whilst these oligarchs were not even touched, others like Gussinsky, Berezovsky and Khodorkovsky experienced imprisonment and exile.

Fighting the corruption or ousting potential political rivals?

This leads to the fact that Putin’s struggle against oligarchs would be admirable if it was not so selective. These selective attacks apparently provoked suspicion that it was not directed against corruption but against Putin’s critics and especially his potential political rivals. For instance, Vladimir Gussinsky was the owner of the second largest television network, NTV, and a newspaper Segodnya. His media criticised Putin and especially his politics on Chechnya. Gussinsky was arrested although there were reports, which claimed, that charges against him were flawed. There is no need to say that Gussinsky apparently started focusing on the media business mainly to gain political influence. Berezovsky was also apparently always more interested in politics than business. He was also politically very influential and, what is more important, opposed Putin with his political party called Liberal Russia. He was exiled and spent the rest of his life in London until he was found dead in his bathroom, where he allegedly committed suicide. Khodorkovsky defied Putin too by loudly criticising corruption in Putin’s government and supporting opposition parties and independent media. Furthermore, as a Chairman and CEO of Yukos he intended to build his own pipeline, which would gravely affect Russia’s foreign policy. This issue obviously must have made him an enemy for Putin. He was also imprisoned and his stakes in Yukos were expropriated. Thus, it seems to be clear, that Putin got deliberately rid of only those oligarchs, who defied him and intended to influence Russian domestic and foreign policy.

So, the role of oligarchs under Putin’s rule did change. The oligarchs were mostly deprived of their political influence and the power they were enjoying under Yeltsin’s rule. Furthermore, not only their political influence diminished, but their overall influence in the Russian economy decreased as well. Nevertheless, the class of oligarchs never disappeared as Putin had promised in his presidential campaign. Politically uncomfortable people were removed, but those with no political aspirations or those who were for Putin as their leader, stayed untouched, although they could be accused of many crimes the as the same as Gussinsky, Berezovsky and Khodorkovsky were. Thus, the suspicion that this whole struggle against corruption and oligarchs was just an excuse to get rid of politically uncomfortable people who could undermine Putin’s authority is and should be present.

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