News of Russian Oligarchs dominate the headlines, but what exactly is an oligarch and why are they being sanctioned?
Looking at this definition, we must first ask what is an oligarchy? Described by ancient Greeks as one of the four types of government, it simply means ruled by the few. An oligarchy is a system of government where the power is divided between a small number of people.
Secondly, why especially in Russia?
In a Russian context, the word has come to describe a particular billionaire business elite that currently dominate the vast amount of the country’s political power.
The first of the Russian oligarchs made their fortune as Russia, following the fall of the Soviet Union in 1991, began a series of rapid reforms designed to leave behind their communist past and embrace the free market. What followed was the large-scale privatisation of state-owned businesses- everything from restaurants to oil giants were up for sale. The entire process had little oversight and was full of corruption as those with the right connections were quick to snap up everything they could. The quintessential example was the “loans for shares” scheme, introduced by Putin’s predecessor Boris Yeltsin, that transferred the shares of 12 key natural resource companies in exchange for loans to the government, which Yeltsin then used to fund his 1996 election campaign. Essentially, the most valuable parts of the Soviet economy were being sold for a fraction of their worth.
The Russian state would eventually have to buy back their industries, much to the benefit of many oligarchs. A well-known example of this is Roman Abramovich, who bought the state-owned oil company for $250 million in 1995, then sold it back to the government for $13 billion a decade later.
Throughout the 1990s, Oligarchs completely dominated Russian politics, buying off kremlin officials, filling many government positions, and at times dictating policy to Yeltsin himself.
This would change in the 2000s. With Putin now as president, the new leader made a deal with oligarchs- that he would stay out of their business if they stayed out of politics. Putin applied strategic pressure to regain some of state control over the economy and with the arrest of oligarchs such as Mikhail Khodorkovsky, he made it clear that he would challenge oligarchs- albeit the ones that threaten the kremlin’s authority.
But this was not the end for Russian oligarchs, despite his initial election promises to do so, Putin would not end Russian oligarchy- in fact many who earned their fortune in the 90s still cling to their wealth, while others find new ways to elevate themselves. Far from removing them from society, Putin’s presidency has seen the rise of a new class of oligarchs.
According to Stanislav Markus, Today, Russia has three different types of oligarchs.
First, there are those who are personally connected to Putin- Most of them the benefices of lucrative state contracts- for example, a $4 billion bridge connecting Russia with Crimea was commissioned. The contract was given to billionaire businessman and construction magnate, Arkady Rotenberg, who happens to be Putin childhood friend.
Second there are Russia’s security services, the police, and the military- known as “siloviki”- who used their connections to amass great wealth. Among them is Igor Sechin, chairman of oil giant Rosneft, widely seen as the second-most powerful person in Russia.
And lastly, there are Finally, the largest number of Russian oligarchs are outsiders without personal connections to Putin, the military, or the FSB. Most of them a part of the first class of oligarchs that made their money in 1990s who have remained unchallenged by Putin.
Regardless of their type, all oligarchs have helped Putin stay in power through their direct support but often through their lack of opposition to any of the kremlin’s actions. The goal of western sanctions is to change this and it has seen some success. For example, once Russia’s richest man, Oleg Deripaska is among several oligarchs to call for an end to the war in Ukraine.
However, in an article for The Conversation, Stanislav Markus argues that this is not an effective means of putting pressure on Putin: “it is the guns, not the money, that speak loudest in the Kremlin today”. As long as Putin retains his control over the siloviki…the other oligarchs, in my view, will remain hostages to his regime.”