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Business oligarch
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Business oligarch is a near-synonym of the term "business magnate". The choice of the word oligarch denotes the significant influence such wealthy individuals may have on the life of a nation. However, in modern Russia it is very common to apply this term to any business tycoon, regardless of whether or not he or she has real political power. The term came into wide circulation after the collapse of the Soviet Union, in reference to a small group of individuals who acquired tremendous wealth, significant political influence and often even have controlled mass media in some post-Soviet republics.
Description
The Russian oligarchs are business entrepreneurs who started under Gorbachev during his period of market liberalization.
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Encyclopedia
Business oligarch is a near-synonym of the term "business magnate". The choice of the word oligarch denotes the significant influence such wealthy individuals may have on the life of a nation. However, in modern Russia it is very common to apply this term to any business tycoon, regardless of whether or not he or she has real political power. The term came into wide circulation after the collapse of the Soviet Union, in reference to a small group of individuals who acquired tremendous wealth, significant political influence and often even have controlled mass media in some post-Soviet republics.
Description
The Russian oligarchs are business entrepreneurs who started under Gorbachev during his period of market liberalization. Rare goods, such as PCs and jeans, were smuggled into the country and sold on the black market for a hefty profit, an unforeseen consequence of partial market liberalization with still excessive trade restrictions. In the 1990s, 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 democratically 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. 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 includes 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 levelled at Anatoly Chubais and Yegor Gaidar, two of the 'Young Reformers' chiefly responsible for Russian privatization in the early 1990s. 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." 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.
In the Putin era, other oligarchs have come under fire for various alleged illegal activities, particularly the tax evasion in the businesses they acquired. However, it is widely believed that the charges are politically motivated, as since these tycoons have fallen out of favour with the Kremlin. Vladimir Gusinsky (MediaMost) and Boris Berezovsky both escaped justice by running out of Russia, and the most prominent, Mikhail Khodorkovsky (Yukos oil), was arrested in October 2003, and sentenced to 9 years.
Their defenders (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 ($15.2 bln) to #21 ($2.0 bln).
Billionaire, philantropist, and art patron 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. According to Lebedev, some members of this exclusive list - known as the golden 100 - are now down to their last $100m USD, the über-rich equivalent of skid row, due to the 2008 global economy downturn and credit crisis.
"Moscow on the Thames"
A significant number of Russian oligarchs have bought homes in an upscale section of London, England, which has been dubbed "Moscow on the Thames". Some, like Boris Berezovsky, are expatriates, having left Russia permanently. Most own homes in both countries, and commute on a regular basis; in many cases their families reside in London, with their children attending school there. 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.
2008 Global Recession and Credit Crisis
Since July 2008, according to the financial news agency Bloomberg, Russia's wealthiest 25 individuals have collectively lost $230bn (£146bn). 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 Russia invaded Georgia.
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.
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 $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.
Claims that Vladimir Putin is a billionaire
Former State Duma Speaker Ivan Rybkin claimed that President Vladimir Putin "is the biggest oligarch in Russia" and that Russian businessmen Gennady Timchenko, Mikhail Kovalchuk, Yuriy Kovalchuk, and Roman Abramovich are "looking after Putin's business interests and swallowing up a vast share of the nation's financial flows" . Such claims have been supported later by Russian political insider Stanislav Belkovsky
. Economist Anders Åslund, author of "Russia's Capitalist Revolution" , described this story in his Moscow Times article:
- "Everybody around Putin is completely corrupt, but many think that the president himself is honest. In February 2004, presidential candidate Ivan Rybkin named three men as Putin's bagmen, including Gennady Timchenko, the co-founder of the Gunvor oil-trading company. After Rybkin made this statement, he vanished from the political stage. In September, the Polish magazine Wprost wrote that Timchenko, a former KGB officer and member of Putin's dacha cooperative in St. Petersburg, has a net worth of $20 billion. Officially, Timchenko sells the oil of four Russian oil companies, but how are the prices determined to generate such profits?
- In an interview in Germany's Die Welt on Nov. 12, Stanislav Belkovsky, the well-connected insider who initiated the Kremlin campaign against Yukos in 2003, made specific claims about Putin's wealth. He alleged that Putin owned 37 percent of Surgutneftegaz (worth $18 billion), 4.5 percent of Gazprom ($13 billion) and half of Timchenko's company, Gunvor (possibly $10 billion). If this information is true, Putin's total personal fortune would amount to no less than $41 billion, placing him among the 10 richest in the world."
When asked at a press conference on February 14, 2008 if these allegations were true, Putin was quoted as saying the following in response: "This is true. I am the richest person not only in Europe, but also in the world. I collect emotions. And I am rich in that respect that the people of Russia have twice entrusted me with leadership of such a great country as Russia. I consider this to be my biggest fortune. As for the rumors concerning my financial wealth, I have seen some pieces of paper regarding this. This is plain chatter, not worthy discussion, plain bosh. They have picked this in their noses and have smeared this across their pieces of paper. This is how I view this."
See also
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