In my recent blog entry marking the start of a run of pieces on Russia’s oligarchs, I said I’d track the development of Russia’s oligarchs. These individuals emerged as the former Soviet Union’s economy collapsed, building their wealth by trading natural resources and dealing in foreign exchange.
This activity developed under Yeltsin with the privatisation of Russian state enterprises, as many of these businesses passed into the hands of these entrepreneurs. As a result, rather than Russians taking common ownership of these assets, relatively small numbers of individuals came to control vast natural resources through their company interests. Political connections have played an important role in deciding which oligarchs have prospered.
The current political period has involved more state control of the oligarchs, with Prime Minister Putin and President Medvedev both taking on some of Russia’s tycoons. Among those who have been purged from the elite ranks of the oligarchs is Mikhail Khodorkovsky, currently serving a 14-year prison sentence for theft and money laundering. Khodorkovsky had once been one of Russia’s richest people.
Alleging corruption and opposing the political leadership may be one way in which the oligarchs can jeopardise their wealth and influence. But the financial crisis and subsequent commodities bust, as demand plummeted across the world, also led to a decline in the oligarchs’ power. In 2008, Moscow overtook New York as the world’s billionaire capital, with 74 tycoons compared to 71. The following year, Forbes reported, Moscow had ‘only’ 27, while New York had 55.
By 2011, numbers of Russian billionaires had risen and many of them could boast rebuilt affluence, thanks in large part to the recovery in world demand for raw materials and energy, but also due to the rapid rise in commodity prices. As Moscow returned to rank as the world’s billionaire hotspot, its richest oligarch, Vladimir Lisin, a steel company owner, is characterised as epitomising the elusive Russian tycoon, in contrast to the more flamboyant type prone to flaunting their wealth, owning sporting clubs and suchlike.
Notable names among the list of the richest Russians include shareholder in English football club, Arsenal FC (Alisher Usmanov) and Roman Abramovich, owner of Chelsea FC. The list also includes the owner of a US NBA team, Mikhail Prokhorov (New Jersey Nets). Oleg Deripaska is another example of an oligarch who made a fortune, nearly lost it, before coming back from the brink, according to Forbes. Deripaska controls Rusal, the world’s largest aluminium company.
In the next entry on Russia’s oligarchs, I’ll take a closer look at some of the firms they control and later, some of the many disputes and battles between them and their commercial interests.