(C) Daily Kos This story was originally published by Daily Kos and is unaltered. . . . . . . . . . . Fifty Shades of ‘Oligarch’ [1] ['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.', 'Backgroundurl Avatar_Large', 'Nickname', 'Joined', 'Created_At', 'Story Count', 'N_Stories', 'Comment Count', 'N_Comments', 'Popular Tags'] Date: 2023-02-15 If you read the Business Insider article that I referenced in my previous story right to the very end you may have noticed a rather peculiar comment in the last paragraph: “The spokesperson said Deripaska wasn't an oligarch because he became a billionaire before Putin came to power and wasn't involved in politics.” This statement – as absurd as it may seem – has left me wondering: what is an oligarch, really? What makes someone an oligarch and are we always using this term correctly when talking about Russian billionaires? And why don’t we use that same term with respect to tycoons from other countries – whether from China, UAE, Saudi Arabia or indeed any other country? I’ll explain in the end why I came to think it might not be the worst of ideas for us to answer these questions and to differentiate between the shades of ‘oligarchs’, so please bear with me. Rule of the few What image pops into your head when you hear the word ‘oligarch’? A thieving fat cat who rubs shoulders with corrupt politicians, influences social and political scenes, and leads an over-the-top gaudy lifestyle. While tawdriness is not necessarily the defining trait of an oligarch, the political and social influence is, according to the most basic definition of the term. The term may have proliferated thanks to rich Russians, but its origins are ancient Greek. Oligarchy translates literally as ‘rule of the few’ and describes a power structure, in which power rests with a small cohort of people distinguished by either noble background, family ties, wealth or other traits. However, when it comes to Russia things usually get a little more complicated than just a simple definition from a dictionary. As the Washington Post wrote last year: “In Russia, there are two generations of oligarchs — the old and the new.” Let’s take a look at them and see if there are perhaps even more nuances. The Seven Bankers The original bevy of oligarchs is a relatively small overnight rags-to-riches group of ‘businessmen’, which emerged from the collapse of the Soviet Union in the early 90s. Their connections within the Soviet and later Russian apparatus allowed them to participate in rigged auctions and privatisation schemes, when the new Russian government was selling swaths of state-owned enterprises across a number of industries – from oil & gas to metals to shipping – for kopeks on a ruble to people closely-linked to the Kremlin. The group of original Russian oligarchs together with President Yeltsin In most cases, the architects of those privatisation schemes – or rather scams, as they effectively ripped off the Russian population creating a huge inequality gap between the super-rich and the poor – were their biggest beneficiaries. Perhaps the most notorious such deal was the so-called ‘loans-for-shares’ scheme that was proposed by one of the original oligarchs Vladimir Potanin, who remains Russia’s richest man to this very day. To cite the Washington Post again: “These early oligarchs were not entrepreneurs who built things from the ground up. Instead, they would buy cheap assets such as refineries, mines and factories from the state, then sell them for a quick profit. In one such example, Abramovich bought the state-owned oil company Sibneft for $250 million in 1995, then sold it back to the government for $13 billion a decade later.” The ‘loans-for-shares’ scam minted the original cohort of Russia’s oligarchs who reigned the country through the 90s. But to enjoy uncontested dominance and unlimited wealth they had to eliminate the looming threat of communist restoration, which could result in renationalization of unlawfully seized state assets. To prevent that the oligarchs joined forces. “In spite of internal conflicts, the group worked together in order to re-elect President Boris Yeltsin in 1996, and thereafter to successfully manipulate him and his political environment from behind the scenes.” Wikipedia The group that became known as ‘The Seven Bankers’ included most of the participants of the ‘loans-for-shares’ scheme and was headed by one of Russia’s most notorious oligarchs Boris Berezovsky, who among other things was known for making a fortune smuggling weapons to terrorists. In one of his interviews to the Financial Times Berezovsky named all members of the group: Mikhail Khodorkovsky, Mikhail Fridman, Vladimir Vinogradov, Vladimir Gusinsky, Vladimir Potanin and Alexander Smolensky. Each one of them helped bankroll the re-election campaign of President Yeltsin, their anti-communist hedge. Meeting of the unofficial ‘Seven Bankers’ club. In the middle are its key people Boris Berezovsky and Vladimir Potanin Successful re-election of President Yeltsin gave these oligarchs complete control over the access to budget money and basically all investment opportunities inside the country. Their ownership of the gigantic information resource of the major TV channels helped them churn out new narratives and form President Yeltsin’s opinion on almost all matters. “Those who didn't want to walk along them were strangled.” – wrote Russian journalist Andrey Fadin who later was killed in a car accident (though was it really an accident…?). The ‘Silovarchs’ At the turn of the millennium the Kremlin welcomed its new permanent resident Vladimir Putin. It is widely believed that those very oligarchs who were manipulating ailing President Yeltsin installed Putin in power, thinking they could continue pulling the strings the same way that they did for almost a decade. When Putin first came to power, he promised to fight the oligarchs – a typical populist promise. In fairness, that he did. But with a few caveats. Rather than eliminating them as a class he simply reined them in. The oligarchs soon learned their wealth was conditional on obedience to Putin. The few of them who tried to go rogue ended up quite badly. Mikhail Khodorkovsky, for example, spent ten years in prison after he supported Putin’s political rival. Boris Berezovsky, who was heavily critical of Putin, was forced into exile and died under strange circumstances in his mansion in London. Mikhail Khodorkovsky behind bars. Khodorkovsky was once Russia’s richest oligarch and a member of the ‘Seven Bankers’ club before his arrest in 2003 The deal was simple – you swear your allegiance to Putin, or you end up like Khodorkovsky or Berezovsky. The ‘smarter’ ones like Abramovich, Potanin or Fridman did exactly that and still sit comfortably on hefty fortunes to this very day. But the tables had turned and now they had to run the President’s errands with little to no influence over him. Along with ensuring his grip on the ‘old guard’, Putin minted a new one. He put large state-owned companies that controlled massive amounts of money into the hands of his closest friends. A handful of people Putin knows personally from his time in the KGB, or from working with them during his early post-Soviet political career. The new breed of oligarchs became known as the ‘silovarchs’. The term is a portmanteau of oligarch and ‘siloviki’, a Russian word for the country’s military and security elite. The so-called silovarchs are business elites who have leveraged their networks in the FSB (Russian Federal Security Service) or the military to amass extreme personal wealth,’ wrote Stanislav Markus, a professor of international business at the University of South Carolina. ‘Since 2003, Putin’s friends and the silovarchs have steadily risen to control crony sectors of the economy and to hold important positions in the executive branch.’ Forbes Among the most famous silovarchs and Putin friends-turned-oligarchs are Gennady Timchenko, Arkady and Boris Rotenberg, Alexei Miller, Igor Sechin, Yury Kovalchuk. Unlike the first generation of oligarchs who made their fortunes through shady scheming, this new breed of oligarchs was and is even more dependent on Putin, as their wealth and political clout is entirely the result of their close relationship to Russia’s president. Yuri Kovalchuk, Gennady Timchenko and Arkady Rotenberg. Some of Putin’s closest ‘silovarchs’. The Apolitical Ones All the while amid oligarch feuds of the 1990s and Putin’s consolidation of power and assets of the early 2000s there was a relatively small apolitical chunk of Russian economy that was subject to laws and free market rules. It proved to be fertile ground to those who sought to do fair business. Those who were catering to the needs of the nascent free market economy found they could make a good buck without the need to corrupt politicians or participate in illicit schemes. As a result, a new class of rich Russians was born who made their fortunes legitimately. Working across a variety of sectors they made sure to stay out of politics and relied solely on their own skills and efforts. In late 90s, Russia had eight billionaires worth a collective $12.4 billion. Ten years later, there were 101 billionaires worth $432.7 billion, according to Forbes data. Some of them made their first fortunes in the 90s and grew them significantly along with the rise in the country’s prosperity. Moscow’s sprawling business center The majority of those who didn’t rely on Putin or privatisation schemes for their wealth were either apolitical or did not support Putin altogether. Unlike the ‘silovarchs’ and most of the first-wave oligarchs this group of businessmen was interested in forging strong economic ties with the Western world and integrating Russia into the global economy. To them the start of Putin’s war was as much of a shock as to the rest of the world. Some of them came forward with heavy criticism of the regime and its invasion of Ukraine. One of the most prominent examples is a Russian entrepreneur Oleg Tinkov who built Russia’s largest online bank. Soon after he came forward with a curse-filled post on Instagram branding Putin’s war ‘insane’, he was forced to sell his stake in the bank to one of the original-oligarchs-turned-Putin-ally Vladimir Potanin for pennies on a dollar. Several other Russian billionaires who made their fortunes with hard work followed suit denouncing the war and denying any involvement in the political life of the country let alone connections to Vladimir Putin. These included billionaire Andrei Melnichenko, who gave a series of interviews with insights into the inner workings of Russian business and its relations with Putin’s regime, Alexei Mordashov, who denied any involvement in politics and emphasised his role in building strong economic ties with the West, and a number of owners of big Russian tech companies. New class is brewing? As the Forbes noted, since the war began, it’s become apparent that Russia’s billionaires – whether oligarchs, silovarchs or genuine businessmen – have no sway whatsoever with Putin. Now it’s obvious that the notion of omnipotent Russian oligarchs is really somewhat of a myth dating back to the ‘wild 90s’. And if anything, Putin’s grip on economy and billionaires of any kind is only getting tighter. Vladimir Putin’s meeting with Russia’s business leaders on the day of Russia’s invasion. A prominent Russia pundit Anders Aslund recently wrote that Putin’s war is leading to major redistributions of property through nationalization, confiscation and criminalization inside Russia. Putin is using the opportunity to enrich himself and his closest circle of confidants even further by stripping assets from those who dare to criticize his war. As an example Aslund cites the Financial Times report, according to which a Russian court has ordered the seizure of a luxury hotel complex owned by Oleg Deripaska in defiance of all statutory procedures after the billionaire criticised Russia’s invasion of Ukraine. So what? Towards the end of the WWII a whole group of US officials at the Secretary of State was working to establish close ties with German industrialists and major businessmen – even with the most amoral of them (think of Alfried Krupp). Their idea was to find allies who would later help rebuild Germany and would be loyal to the US government. Now, after the start of the Ukraine war together with the allies we have attempted a stranglehold on Russian billionaires of all kinds thinking they could somehow influence Putin (clearly, they can’t). We used our sanctions tool as a cudgel rather than a scalpel, punishing honest businessmen not directly implicated in Russia’s wrongdoings along with Putin’s cronies who were likely privy to his imperial plans. And that’s where I think we went wrong. While punishing those whose wealth relies on the survival of the regime is a must, sanctioning honest businessmen and executives is a mistake that risks alienating them in future, once the war is over (and it will end sooner or later). Furthermore, by keeping certain financial channels open we can make Russia’s economy bleed faster and more efficiently. Therefore, it is important that we learn to distinguish between the good and the bad and find ways to identify the origins of wealth of rich Russians. Moreover, this policy should not be limited to Russia only. Identifying potential business allies amongst rich Chinese, Indians, Arabs on one hand and sanctioning the ones who depend on undemocratic regimes could significantly bolster our national security. [END] --- [1] Url: https://www.dailykos.com/stories/2023/2/15/2153109/-Fifty-Shades-of-Oligarch Published and (C) by Daily Kos Content appears here under this condition or license: Site content may be used for any purpose without permission unless otherwise specified. via Magical.Fish Gopher News Feeds: gopher://magical.fish/1/feeds/news/dailykos/