On February 24, Vladimir Putin, President of the Russian Federation, met with representatives of Russian business circles. Precisely the same day that Moscow began its military aggression against Ukraine.
The meeting was planned in advance, and, how could it be otherwise, Putin alluded to the inevitable economic consequences of the war that had just started.
In this meeting the hierarchical framework appeared as clear as in the horrific session of the Russian National Security Council where, days before, Putin had humiliated the head of the foreign intelligence service (SVR for its acronym in Russian).
This time the ceremony did not provide such memorable anecdotes, but it showed who the oligarchs are, key players in understanding both the economic structure of today’s Russia and its more immediate history. In this regard, two things should be noted:
1. That the relationship between Russian political power and economic power did not always have the hierarchy that was shown in the ceremony.
2. That at that meeting not all those who usually fall within that disturbing denomination were present.
Therefore, two questions arise: who were and who are the so-called oligarchs?
Oligarch, the concept
First of all, it is worth clarifying what is meant by oligarch and why we are not just talking about businessmen. The word oligarchy refers us to the political regimes of ancient Greece, where only a fraction of the citizens had political rights. In the context of our liberal democratic political order, speaking of oligarchy inevitably refers to the idea of the illegitimate capture of the political order by an unelected elite. And in fact, that is what the Russian oligarchs did in the context of the brutal economic collapse of the USSR and the convulsive birth of the Russian Federation.
The term oligarch has a double dimension. On the one hand, we can talk about the capture of certain economic sectors by a series of businessmen, thanks to their political connections. On the other hand, it can also be an abuse of their economic power to exert political influence. The truth is that, together, both dimensions lead to a perverse symbiosis: the plundering of resources leads to political influence. And in turn, such influence encourages even greater looting.
Mikhail Khodorkovsky, former owner of the Yukos oil company, behind bars during his trial for fraud and tax evasion on March 28, 2005. Shutterstock / kojoku
The oligarchs of the fall of the Soviet
The political springboard for many of the future oligarchs, such as the now dissident Mikhail Khodorkovsky, was the very structures of the already moribund USSR. For the impoverished Russian citizenry, this carried with it a painful irony: those who enjoyed positions of power or privilege during the communist regime were the ones who were going to thrive in the new capitalism! Boris Berezovski, gray eminence of the immensely corrupt administration of Boris Yeltsin (president of the Russian Federation in the 1990s), exemplifies the power that many of them came to acquire.
The most scandalous episode of this perverse symbiosis came with the 1996 presidential elections. Faced with a thriving candidate from the Communist Party, Guenady Ziuganov, buoyed by the weariness of a large part of the electorate, Yeltsin had to secure re-election. Thus, a lucrative scheme was devised: a series of tycoons offered loans to the State. Such loans were guaranteed with state assets, mortgaged in case the state could not repay the money. Obviously, the money could not be returned. Thus, huge economic sectors ended up in the hands of rich oligarchs at bargain prices. The oligarchs who were to benefit fulfilled their part of the bargain. The media they controlled gave Yeltsin adequate media coverage, and he was re-elected.
This was, in broad strokes, the genesis of the brutal capitalism of the new Russia. But then, a certain Vladimir Putin came to the presidency in the year 2000. And he brought two major changes.
The forces of order and the power of money
First, Putin, forged in the troubled local politics of 1990s St. Petersburg and recommended by Berezovski as a malleable successor, showed more personality than expected. He was promoted to the presidency as a defender against the terrorist threat and, once in power, he marked the territory. The oligarchs received the following message: “Keep what you have stolen and enjoy it. Of course, stop stealing and pay your taxes. But above all, for your own good, stay out of politics» (free paraphrasing by the author).
Berezovski and Vladimir Gusinsky did not fully understand the message. They lost their means of communication and ended up in exile. Other tycoons, like Mikhail Khodorkovsky, understood it even worse. Khodorkovsky spent 10 years in jail while Putin’s loyalists divvied up his emporium.
And this is where the second change comes in: the birth of a new class of oligarchs, whom Daniel Treisman has defined as silovarcas.
In Russia, all those with a past in the army, secret services or police are identified as silovikis. To express it in a somewhat more pedestrian way, we could define them as “law enforcement officers”. This bureaucratic political profile began to gain relevance at the hands of Vladimir Putin. These are close collaborators of the regime who come from Putin’s inner circle and, for the most part, come from the sectors of public order. An example is Igor Sechin, who, through the Rosneft company, absorbed the Yukos oil company, which at the time belonged to Khodorkovsky.
At the beginning of the 21st century, therefore, a new generation of Russian oligarchs was being born who have amassed enormous fortunes and represent one of the great pillars of the elite on which Putin relies. And that, in parallel, they coexist with the oligarchs of the 90s, such as Oleg Deripaska, born from the fall of the USSR and who have been able to understand the new consensus that Putin proposed when he came to power.
Oligarchy and economic sanctions
At this point, the question arises as to what role the Russian oligarchy will play if the economic collapse occurs due to Western sanctions in response to the war against Ukraine. Because Putin was offering them economic power in exchange for their political primacy. What will happen if, in addition to yielding politically, the oligarchs go bankrupt? Well, let’s not lose sight of it, the sanctions seek a generalized impact on the Russian economy. They affect, above all, Russian citizens. But also, although they have more margin, practically all Russian businessmen.
It remains to be seen what capacity for political resistance Vladimir Putin’s regime has. For now, there are two factors that must be taken into account for the immediate future.
The reaction of the public
After annexing Crimea in 2014, the Russians were proud but now they don’t seem to be as enthusiastic. The protests over the war have not been massive and, if there was potential for them to increase, the government’s gag has managed, for the time being at least, to intimidate other citizens.
Putin carved out his aura of power by bringing order to the kleptocratic chaos of the 1990s. However, thanks to Alexei Navalni’s leaks, many citizens may harbor suspicions about the lifestyle of Putin’s inner circle, if not of himself. It remains to be seen whether the drop in quality of life will be combined with simmering resentment among Russian citizens.
The reaction of the oligarchy itself
In the first days after the beginning of the invasion, some voices of oligarchs were heard against the attack on Ukraine. But you have to think coldly about the consequences of prolonged sanctions.
Many would like to believe that, sooner or later, an outraged population will take to the streets and crack open an equally dissatisfied elite. However, a critical economic situation may lead many oligarchs to rely even more on the patronage of the Kremlin, thus strengthening their political control. Although Putin has broken his part of the contract by subordinating economic success to tragic geopolitical adventurism.
The oligarchs who got rich in the 1990s aspired to control Russian politics but were forced to subordinate to Putin. Those who did, along with the newcomers, proved to be here to stay. However, we do not know if this war will lead to greater political irrelevance or if they will be a key prop in a change of course. The next few months, or even years, will answer a couple of questions we left out at the start: who will the new oligarchs be, and where will they get their new fortunes from?
This article has been published in
The Conversation
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