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What the Heck is a Russian Oligarch Anyway?

Russian Oligarchs

There are a number of English words ending in either -archy or -cracy that indicate one kind of government or another. This makes sense because the first comes from the Greek arkho meaning "to rule" or "to command" while the second comes from the Greek kratos meaning "power" or "strength." Chances are good that interested individuals can guess that the rest of these words indicate the people who are supposed to rule everyone else in these governments. So anarchy means "without ruler" and monarchy means "rule of one." Similarly, aristocracy means "best power," plutocracy means "wealth power," stratocracy means "army power," and so on and so forth. Oligarchy  would be "rule of the few." Unfortunately, oligarchy is one of those terms that can become more complicated than they seem on initial inspection. There are numerous kinds of governments that can be considered a form of "rule of the few." To name some examples, every single one of the -cracies mentioned earlier can be considered a form of oligarchy because they put ruling power into the hands of a small number of people.

Still, there are certain forms of oligarchies that get mentioned more than others, with the best example being those based on wealth rather than other considerations. Furthermore, it is important to note that oligarchies have very negative connotations. Aristotle pioneered the use of the term in a time when democracies weren't necessarily seen as being better than aristocracies, which is perhaps unsurprising when ancient Greek philosophers tended to come from the ancient Greek elite. Even so, he specifically used oligarchy to refer to a kind of corrupted aristocracy in which a small number of people ruled on the basis of their personal wealth rather than their personal excellence. Since then, a wide range of people with a wide range of political inclinations have continued to see oligarchies as something bad by their very nature. For proof, interested individuals should have no problem finding people on both the modern left and the modern right who believe that the rich possess an undue degree of influence over their governments, so much so that the latter are oligarchic in nature.

Of course, oligarchs would be the ones who rule oligarchies. Sometimes, their power is official in nature. Other times, not so much. Russian oligarchs refer to Russian business magnates who have gathered enormous power to themselves by gathering enormous wealth to themselves, so much so that they are believed to be capable of influencing the policies of the Russian state. They are associated with the large-scale privatization of Russian state assets in the 1990s, which was what made that process possible. However, the passage of time means that there is now more than one generation of Russian oligarchs. Regardless, the important point is that Russian oligarchs are seen as being very powerful in Russian politics, though specific Russian oligarchs may or may not remain so over time.

How Did the Russian Oligarchs Come About?

A state doesn't just fall out of nowhere. Sometimes, it is brought down by something external for the most part, as shown by the examples of both Nazi Germany and Imperial Japan in World War Two. Other times, it is brought down by something internal for the most part, as shown by the break-up of Yugoslavia in the early 1990s. Chances are good that interested individuals can guess that the Soviet Union was brought down by internal issues much more than external issues because getting into an existential war with a nuclear power is extremely dangerous for everyone.

Having said that, tracing the roots of those internal issues is much easier said than done because simple answers don't capture the complexities of history very well. Still, it is very common for people to point to the Brezhnev era, which refers to Leonid Brezhnev's rule of the Soviet Union from 1964 to 1982. It started out as a time of increasing prosperity. However, there is a widespread consensus that economic, political, and social problems started building up in this period. For example, industrial growth started slowing down in the 1970s, though it isn't 100 percent clear why this as well as other economic issues happened. Similarly, this period is associated with the establishment of the gerontocracy, which was encouraged by the policy of stability. Theoretically speaking, these problems could have been fixed. In the real world, Mikhail Gorbachev's reforms failed, thus bringing about the end of the Communist Bloc. The Soviet Union's satellite states went their own way. Simultaneously, the Soviet Union's own constituent republics went for independence. By late 1991, the Soviet Union was incapable of exercising power beyond Moscow. Even there, Gorbachev's remaining power was constrained by Boris Yeltsin, who had been elected the President of Russia in July of 1991. Suffice to say that Russia wasn't even the last republic to leave the Soviet Union.

The collapse of the Soviet Union was nowhere near as bad as it could have been. After all, no one broke out the nuclear weapons even though there were some very tense moments in that period. Still, there can be no doubt about the fact that it was a very messy time. For instance, there have been numerous conflicts that can trace their roots to the collapse of the Soviet Union in one way or another. One example would be the Second Nagorno-Karabakh War between Azerbaijan and Armenia, which is named thus because there was an earlier conflict from 1988 to 1994 that resulted in the de facto independence of the Republic of Artsakh. Similarly, the Russian invasion of Ukraine can be considered a post-Soviet conflict as well. Unfortunately, there were plenty of other issues, not least because of the mishandling of economic reforms. This is where the Russian oligarchs come in.

Some privatization had already happened before the collapse of the Soviet Union. However, that was small-scale compared to what was to come in the Russia of the early 1990s. There was serious debate between people who wanted to implement economic reforms on a gradual basis and people who wanted to implement economic reforms with all possible speed. In the end, the latter course of action called shock therapy won out, not least because of the advocacy of western advisers as well as western institutions. It is interesting to note that some of these advisers and institutions also supported the idea of providing Russia with an aid package to cushion it from the effects of shock therapy, but that proved to be a hard sell for western leadership. This was not a pleasant period to say the least. There is a study that shows that life expectancies fell a great deal in Russia as well as most of the other post-Communist countries following the implementation of said policies.

As for the privatization, that happened in two major waves in Russia. The first one started up in October of 1992. Russia issued vouchers to Russian citizens that could be used to buy shares in the state-owned enterprises that were going up for sale. At this point in time, the Russian oligarchs didn't quite exist yet. However, those who would become the first generation of said figures had already managed to make some money through either legitimate or illegitimate businesses, which enabled them to buy up a lot of vouchers from other Russian citizens. This was a time when the loosening of price controls had brought about hyperinflation, so it isn't hard to see why so many people were willing to sell opportunities that they wouldn't be able to capitalize on anyway. Meanwhile, the people who could amass those vouchers were able to buy up huge chunks of those state-owned assets, particularly since they tended to sell for very low prices. Thanks to that, they were able to become the first generation of Russian oligarchs by the time that the first wave of privatization had come to a conclusion in 1994.

The second wave of privatization managed to be worse. For context, Yeltsin's government had become very unpopular by 1995, which should be wholly unsurprising considering the hyperinflation, the decline in law and order, the Russian government's inability to pay salaries and pensions, and so on and so forth. Just a year away from reelection, the man's approval rating had fallen into the low single-digits, so there was considerable concern among certain parties that he would be replaced by a Communist challenger. As such, Yeltsin's government made a bargain with the oligarchs. Essentially, it would lease shares in the remaining state-owned enterprises in exchange for loans. It was expected that it would default on those loans, thus enabling its lenders to walk away with the control of those state-owned enterprises. There was an auction. In truth though, well, suffice to say that it wasn't exactly what anyone would consider to be a truly competitive auction. Still, Yeltsin's government managed to win reelection because of the oligarchs' backing, so it got what it was looking for at the expense of the Russian people as well as the Russian state.

Why Are the Russian Oligarchs Being Targeted By Sanctions?

By this point, interested individuals might think that western countries are sanctioning Russian oligarchs in an attempt to convince them to use their influence to get Vladimir Putin to end the invasion of Ukraine. After all, they possessed a huge amount of influence over his predecessor Yeltsin's government, so it stands to reason that they continue to possess a huge amount of influence over Putin's government. Unfortunately, it isn't that simple. It has been quite some time since the 1990s. As a result, it stands to reason that much has changed. To be exact, the aforementioned oligarchs have managed to retain their great wealth. However, they have not managed to retain their great power to the same extent. Instead, there is now a new set of oligarchs in charge, which include some old names that have managed to make nice with Putin's government but is dominated by new names with much closer connections to Putin's government in one way or another. For example, more than one of them are Putin's personal friends. Similarly, a good chunk of them came from the Russian security services, who have managed to become rich through Putin's government. There are plenty of old names who are still around but they are very much part of the outer circle rather than the inner circle.

Both kinds of oligarchs have been sanctioned. However, there is more than one reason that they probably won't be able to actually do anything about Putin's government. For example, the term oligarchy might suggest a degree of cooperation between the oligarchs. However, business magnates are business magnates, meaning that they are used to competing with one another rather than cooperating with one another. As a result, it is hard to imagine them working together on anything this dramatic. Similarly, the oligarchs are powerful in the sense that they can control a lot of money rather than a lot of capability for violence. So long as Putin's government retains the Russian security services, it can remain in power because there is no way for the oligarchs to do anything about that even if they were somehow magically united. Summed up, the sanctions are definitely having a painful effect on the most elite of Russia's elite. They are unlikely to have a decisive effect on what happens next, though to be fair, they are just a part of the sanctions that have been implemented because of the Russian invasion of Ukraine. Still, history is being made before our very eyes. It is unpleasant, but there can be no doubt about the fact that it is interesting as well. Besides their effects on the Russian oligarchs, these sanctions are bound to influence the decision-making of other groups of people as well, though it will take years and years for that influence to unfold fully.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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