Russia is clambering up the global victory stand, knocking other countries out of the way in an effort to reach her place at the top. It is a climb that the country responsible for the death of millions and the misery of billions will refuse to lose. In the last 18 years, the designs for a ‘liberal democracy’ have not been a success for Russia; it has been a weary aspiration, full of ideals that Russia’s powerful persons frequently misplace in order to better themselves and their future.
The truth is that Russia has not as yet changed from the cruel autocracy it has always been; it does not look set to do so either. The only apparent difference is the rise of a new elite: the oligarchs.
The question that many ask of this nouveau riche is where did their power and wealth come from? How did they become the phoenix that rose out of the ashes of the broken Soviet state in the 1990s? The most honest explanation is the result of the small reforms pushed through in the 1980s by Gorbachev. These reforms succeeded an embarrassing attempt by the Politburo to reinvigorate Lenin-Marxist economics by clamping down on ‘unearned incomes’. What this quite meant was beyond the understanding of the Soviet security services.
One result of this order was the prevention of privately sold vegetables. The militia searched vehicles coming into major cities – searching for, as the newspaper Nezavisimaia Gazeta put it, “Criminal Tomatoes.” Gorbachev was extremely embarrassed by this, and realising the need for reform, changed the law in order to allow small privately owned businesses to exist – these were called the cooperatives.
So finally, as the tyrannical fire of the Communist state was starting to dwindle, the freedom of capitalism was permitted in small doses. This is where the oligarchs enter the stage – one of whom is the prominent billionaire Mikhail Khodorkovsky.
Although his first few businesses, such as a café at the Mendeleev Chemical Institute, were a failure, his fortunes soon changed completely (as did those of hundreds of other Russians) when they exploited a small loophole in Soviet law.
Khodorkovsky took a bunch of temporary workers, called them his labour collective, and claimed subsidies from the Gosplan (the state institution for economic planning). He then took these subsidies, told the banks he had to pay his workers in real money, and was allowed to redeem the subsidies for actual cash, which he immediately turned into dollars, freeing this wealth from the dragging burden of the failing rubles.
Hundreds of entrepreneurs exploited this loophole, and the Soviet state, in an effort to save their economy unwittingly gave more and more subsidies to the cooperatives – the result of which simply multiplied the fortunes of these Russians. By the collapse of the Soviet Union, hundreds were fast becoming, or had already become vulgarians with a rosy future – persons who succeeded as the state failed. This success had its integrity challenged however – it was marked with shady loans and sales of banks for fractions of their worth.
Not all oligarchs came to prominence with this relative honesty. Many of the wealthy are petro-oligarchs, men who have made their fortune by buying up the State’s largely untapped reserves of oil. In the 1990s, Yeltsin gave oil, metal and banks to the sycophants of his administration. The other prospering Russians seemed to have simply had the fortune to be in the right place at the right time. Poorer Russians will give each other knowing looks and say, “KGB, or Politburo…” These are often unproved rumours, but who was better placed to cash in on the rise of the most prosperous industries in the world than those who had controlled it not a few years previously?
One example is Vagit Alekperov. He was the Deputy Minister of Fuel and Energy under the USSR, and miraculously managed to acquire numerous oil assets in the 1990s. He now enjoys a personal wealth of $1.3 billion. And what of Vladimir Gusinsky? He built a huge media empire, starting this effort in the 1980s, while enjoying a close relationship with Filipp Bobkov, a KGB general who personally supervised Soviet repression of political dissidents, Christians and Jews.
When Putin arrived on the scene in 2000, he told the nouveau riche that he would not carve up the Russian economy but he warned them to keep out of politics. Wealth may not always buy power, but it certainly gives certain ambitions – and some oligarchs could not resist trying their hand. Vladimir Gusinsky and Boris Berezovsky were the first casualties of the oligarchs’ foray into politics, resulting in their exile just a short time later. The brutal retaliation of the Russian state has targeted journalists, political dissidents and the wealthy – men and women who have been threatened, attacked and murdered at home and abroad.
Putin plays a clever game however, and regularly meets with business leaders, in order to inform them that they will be tolerated but that they must not think or act against the state. The Russian newspaper Kommersant reported a meeting in 2007: “The topics under discussion were chosen to show business its place (as was last year’s meeting, devoted to ‘the social responsibility of business before society’).”
The oligarchs are shining trophies of success for Russia, and the state is eager to show them off. Yet that same state is desperate for Russia to not become an overt plutocracy. The occasional fervent repression of rich individuals and removal of their political voice could be the wish of the state for itself to be seen as proletarian.
Putin is careful to never display his wealth, but some suspect it to be vast. Anders Åslund wrote in his book, ‘Russia’s Capitalist Revolution’: “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.”
In response to these allegations, at a press conference in February of this year, Putin replied: “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.” This is a very Russian answer.
This state of affairs is reminiscent of feudal Europe. When William I conquered Britain, he rewarded flatterers of his court. Men such as the Earl of Northumbria, who had not fought him, were given large amounts of land. And although the Russian emancipation of the serfs was back in 1861, the Russian people are still very much subservient to the state and the oligarchs, that is, the Tsar and the landowners.
The financial turmoil that has engulfed the World economy has revealed the remnants of the Soviet state that still subsists in Russia. The oligarchs lost a huge amount in the recent stock market crashes, in which shares have fallen by 75% since August. Vladimir Lisin, the steel magnate owner, has lost $11.2 billion since July; Vagit Alekperov, the President and one of the biggest shareholders in Lukoil, has lost $5.13 billion; and Uralkali Dmitry Rybolovlev has stacked up losses of $7.3 billion. Meanwhile, ordinary Russians know very little of their country’s and their oligarchs’ failures.
A recent poll found that 57% of Russians believed their country to be flourishing, up from 53% a few months previously. And the state-controlled media have been banned from using words such as, “crisis” and “decline”.
Just as Soviet propaganda films purported, Russians are still told how terrible life in the West is. Supposedly desperate Britons are throwing themselves in the Thames; we can no longer afford to bury the dead; and the Queen is pawning her jewellery. Russia tells its people that the Motherland will be the rescuer of Europe. The state affirmed this by giving a large loan to bankrupted Iceland recently, while Western countries refused to help. The media asks Russians to thank the genius and leadership of Vladimir Putin for their country’s stability and strong position during the financial turbulence.
The truth is that oligarchs are simply pawns of the state, at the mercy of the current tolerance of the Kremlin. Putin is preparing to reinstate himself as President – so completing the transition to an authoritarian method of rule – but as the economy worsens, his forbearance from destroying the providence of Russia’s financial elite is looking to lessen fast.
As in Soviet times, it is true in Russia that if one pulls oneself up, out of the misery of the bottom of the pile, then one will risk the painful drop from the top right back to the bottom; albeit from the nocuous control of the state, the lethal prison, forced labour, Siberian exile, or the gun. Ten years ago, life had never looked better for the oligarchs – through both serendipity and dishonesty they looked set to live a comfortable life. Now they find themselves in a collapsed attempt at democracy, in an atmosphere that is breeding wanton ideals of despotism. A recent Russian reality television show has Stalin set to win ‘The Greatest Russian Ever’ award. Stalin – a man responsible for the death of tens of millions of people.
The sensible oligarchs, such as Roman Abramovich have moved to Europe, partly because of the larger number of crimes accused by the Russian state and business partners against them.
Abramovich in particular, emerged triumphant from the so-called ‘Aluminum Wars’; he left behind him over 100 gang fighters dead, a fellow oligarch exiled to Siberia and “numerous officials and executives” found murdered.
Russia never became a state with a free economy. Most of the oligarchs made their fortunes in a dying state through cruel and backhanded measures. Just as they rose so spectacularly, they will fall so too – especially as oil prices continue to plummet.
They are bizarre figures – successors to the KGB heads and party officials – all of whom enjoy a limited autonomy in their respective areas of control; but they are still, and will always be ultimately at the mercy of the callous Russian state.