Who Are Russia’s Oligarchs and Can They Sway Putin?
Russia’s oligarchs included some of its earliest entrepreneurs from when Mikhail Gorbachev loosened Communist Party control.
(Bloomberg) -- Plenty of countries have super-rich business leaders with political influence. Russia took this to a different level. The wealthy, connected men who enabled and profited from the transformation of Russia’s economy and society under President Boris Yeltsin came to be known as oligarchs. (An oligarchy is government by a small group of people.) Though Russian billionaires these days are routinely called oligarchs, their role in society has changed under President Vladimir Putin, complicating efforts to target them as a way to punish Russia’s government for the invasion of Ukraine.
1. Who are the oligarchs?
Russia’s original oligarchs included some of its earliest entrepreneurs from when Mikhail Gorbachev loosened the strictures of Communist Party control in the late 1980s. They made fortunes in the 1990s as Russia, under Yeltsin, was transformed from the capital of the Soviet Union into a primitive state of capitalism. Yeltsin’s government expedited that process by privatizing state assets at deep discounts, putting massive wealth in the hands of a select few -- some of whom then struck a deal to use their fortunes and media assets to help Yeltsin defeat a resurgent Communist Party to win re-election in 1996. That deal came to be known as “loans for shares,” as the government placed its cash in the banks of oligarchs, took the money back as loans, and then defaulted on them. In essence, the oligarchs got state assets in exchange for state money. Significantly, these oligarchs also exerted sway on Yeltsin’s administration, influencing policy and in some cases serving in formal government positions.
2. What became of that group?
A few remain active in business: Vladimir Potanin, Russia’s wealthiest individual, who heads MMC Norilsk Nickel PJSC, the world’s largest producer of refined nickel and palladium; and Mikhail Fridman and Petr Aven, whose commercial bank, Alfa Bank, became the anchor business of Alfa Group, a holding company that today owns interests in telecommunications and retail. Others fared considerably less well after Putin succeeded Yeltsin in 2000. Mikhail Khodorkovsky was stripped of his wealth and imprisoned for a decade on tax-evasion and money-laundering charges that he says were retribution for supporting political parties opposed to Putin. Freed in 2013, he lives in exile in London and continues to criticize Putin. Boris Berezovsky and Vladimir Gusinsky fled Russia as they faced similar jeopardy. Berezovsky was found dead at his home near London in 2013. Alexander Smolensky largely dropped from public view after 2005.
3. What is Putin’s issue with oligarchs?
By the time Putin emerged as the all-but-assured successor to Yeltsin, the early oligarchs were widely despised by the Russian public, and Putin promised they would “cease to exist as a class.” Two oligarchs in particular -- Gusinsky and Berezovsky -- drew his wrath because their media businesses were covering him critically. In a July 2000 meeting at the Kremlin with 21 leading business tycoons, Putin laid down the law: They could remain titans of industry but had to stay out of politics. “Rather than eliminate oligarchs as a class, Putin has institutionalized them and, to an extent, tamed them into more seemly behavior,” a 2002 Washington Post story noted.
4. Who are today’s oligarchs?
Some Russians who accumulated wealth in the Yeltsin era further prospered under Putin. They include well-known multibillionaires Oleg Deripaska, Roman Abramovich, Alisher Usmanov, Viktor Vekselberg, Mikhail Prokhorov and Vagit Alekperov. In “Putin’s People: How the KGB Took Back Russia and Then Took On the West” (2020), Catherine Belton points to “a new caste of oligarchs, all of them Putin’s KGB-connected associates from St. Petersburg,” whom Putin installed at the helm of strategic sectors of the economy in a process that became known as “Kremlin Inc.” (Before entering politics, Putin was a foreign intelligence officer with the KGB, the former Russian secret police and intelligence agency.) Many of these newer oligarchs are longtime friends of Putin, such as Gennady Timchenko, who met and befriended the future president as he was coming up the ranks as deputy mayor of St. Petersburg and sparred with him at a judo club in the city. (Timchenko controls Volga Group, an investment firm with interests in energy, transportation and construction, and has a net worth of about $11 billion.) Others in this category include Yury Kovalchuk, the biggest shareholder in Bank Rossiya, who co-founded with Putin a dacha cooperative outside St. Petersburg; and Arkady Rotenberg, another former judo sparring partner of Putin, who sold gas-pipeline construction firm Stroygazmontazh in 2019 for about $1.3 billion.
5. Do they all steer clear of politics?
Pretty much, as memories remain vivid of Khodorkovsky’s 10 years in prison. The oligarchs’ tacit agreement not to criticize Putin was on display after Russia invaded Ukraine on Feb. 24. Several Russian billionaires issued statements criticizing the conflict, but stopped short of condemning Putin himself. Fridman told Bloomberg that “to say anything to Putin against the war, for anybody, would be kind of suicide.”
6. Can they sway Putin?
That’s the hope, at least, behind sanctioning them. But the Russian billionaires who have been sanctioned say they have little influence over Putin. Fridman, who owns a stake in one of Russia’s biggest banks, said he’s never even met Putin one-on-one. The U.S. has had sanctions in place against some of these billionaires for years, dating to Russia’s 2014 annexation of Crimea.
7. Are all Russian billionaires oligarchs?
The U.S. Treasury Department seemed to suggest so in 2018 when it published a list of 96 purported oligarchs that was virtually identical to Forbes magazine’s roster of Russian billionaires. But while it’s true that many of the country’s billionaires have the superyachts and luxury real estate that have become associated with the oligarch lifestyle, many haven’t been sanctioned by Western governments so far. As to what level of wealth, private-sector power and Kremlin connections makes a billionaire an oligarch, that’s in the eye of the beholder.
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