User:Stuffisthings/business oligarch draft

'This is a work in progress!! No citations or links yet, still very POV.' 68.107.199.60 (talk) 18:43, 14 April 2008 (UTC)

New Oligarchs Page
In Russia and the former Soviet Union, the term "oligarch" refers to a small group of businessmen who amassed large fortunes and extensive political influence, starting during Gorbachev's program of economic restructuring and reaching their height of power in the late 1990s under Boris Yeltsin.

The term "oligarch" was originally understood to apply to seven men who became immensely wealthy during privatization of the Russian economy: Boris Berezovsky, Mikhail Friedman, Vladimir Gusinsky, Mikhail Khodorkovsky, Vladimir Potanin, Alexander Smolensky, and Vladimir Vinogradov.

The financial crisis of 1998 changed Russia's economic landscape, and many of the original oligarchs lost their fortunes. Under the presidency of Vladimir Putin, the original oligarchs were also stripped of most the power and political and media influence they had accumulated over the past decade. Many were forced (or chose) to flee the country, often to avoid prosecution or confiscation of their assets and wealth as happened to Mikhail Khodorkovsky in 2003. Since then a new class of billionaires more closely linked to the government has arisen, though they are still referred to as oligarchs. After the 2008 economic crisis and the fall in oil prices many of these businessmen have also lost their fortunes, and there is now open speculation in the Western media that Putin and Medvedev could crack down on them in order to avoid popular unrest.

Today the term "oligarch" does not refer to any particular widely-agreed-upon group of individuals, and is often used to refer to any powerful billionaire in Russia or the former Soviet Union. The new term "minigarch" has also been used in English to describe wealthy Russians who are not considered to be in the top tier of economic, political, and/or media influence. The oligarchs of the Putin/Medvedev era are generally seen to be less independent politically and have closer ties to the government than their 1990s predecessors.

Perestroika Era
The businessmen who would later become known as oligarchs got their start in the 1980s, during Gorbachev's program of economic restructuring, or perestroika. As the economy changed, opportunities arose for savvy businessmen to take advantage of the huge imbalances inherent in central planning to make large profits, often by importing rare goods such as jeans and personal computers or by exploiting subsidies and price differentials within the Soviet economy. Unlike typical entrepreneurs, they were not primarily engaged in new business ventures that resulted in investment or jobs, making their money mainly through price manipulation and arbitrage. This contributed to the popular perception of oligarchs as "parasites" on the real economy.

Because market liberalization under Gorbachev was partial and highly contested, many of these activities were either outright illegal or could be interpreted that way. Furthermore, many of the people best placed to take advantage of these opportunities were those already operating in the black- or "gray" markets of the Soviet Union. Thus, from the beginning, the oligarchs were associated in the popular imagination with criminality and shady dealings.

Yeltsin and 'Shock Therapy'
With their easy access to cash and ties to emerging economic liberalization movement, the oligarchs were well-placed to take advantage of the rapid privatization of Soviet industry that occurred under President Boris Yeltsin. In the early and mid-1990s, the oligarchs also became heavily involved in banking, partly in order to finance the acquisition of newly-privatized state assets. Private banks, most of them financially unsound and many run like pyramid schemes, proliferated during this period, contributing to the crisis of 1998. Some oligarchs also engaged in stock market deception -- one of the most notorious examples being Boris Berezovsky's Automobile-All Russia Alliance, a pyramid scheme in which investors were sold shares in a non-existent automobile factory.

Under the Yeltsin government's policy of "shock therapy," promoted by many Western economists and advisers and spearheaded by Yeltsin's economic adviser Anatoly Chubais and Prime Minister Yegor Gaidar, Russia rapidly privatized hundreds of billions of dollars of assets such as factories, mines, oil wells, and businesses. Thanks to their ties to politicians and government officials, and the fact that many of the many of the privatizations were handled by their own banks under the loans-for-shares scheme (first proposed by oligarch Vladimir Potanin) the oligarchs were able to manipulate the privatization process to acquire valuable assets at a fraction of their real price. There are numerous corruption allegations from this period, frequently revolving around auctions of state assets where favored businessmen received special consideration and legitimate rivals were disqualified on technicalities or simply not informed of the auction. Notable examples of this type of corruption include the privatization of Yukos and Sibneft. The loans-for-shares scheme has also been called inherently corrupt because many of the "loans" being traded for government assets were actually made with state money -- effectively meaning that the assets were being given away to those with good political connections.

After taking over a factory or business, oligarchs often engaged in asset-stripping, creating massive resentment among average Russians. Because of the instability of the Russian economy and quasi-legality of many of their activities, the oligarchs frequently preferred to move their profits into safer markets abroad through off-shore banks. Economists estimate that some $bn was flowing out of the Russian economy per month during the 1990s. While the oligarchs became rich, average Russians saw their standard of living and prospects for economic security collapse: during the 1990s, Russia's GDP contracted by over 45%, the largest drop in a country's GDP during peacetime, while massive inflation (reaching X% in 19--) destroyed the savings of millions and impoverished pensioners and others who relied on fixed incomes. Economists estimate that in the 19-, % of Russia's GDP was lost to corruption.

Throughout the 1990s, a number of oligarchs became prominent in the media and politics, buying TV and radio stations and newspapers and helping to finance Boris Yeltsin's election. As the oligarchs grew in power, they came under increasing criticism both inside and outside Russia. (See Control of the Media and Influence on Politics)

During this time, mafia activity and associated violent crime also flourished. Violent score-settling was not uncommon and each oligarch maintained his own private army of bodyguards. Vladimir Gusinky's Most Bank, for example, is reported to have employed over 1,000 people in its security division, many of them former KGB officers. Car-bombings, gun battles, and confrontations between rival armed groups (including elements of the police and state security forces) were everyday occurrences. Boris Berezovsky survived several assassination attempts, including a car bombing in which the driver of his Mercedes was decapitated and he was badly burned. In *, there were * unsolved murders in Moscow alone. ...

The Financial Crisis
Many of the oligarchs lost substantial amounts of money, and with it much of their power, during the Russian economic crisis of 1998. Those involved in the banking sector were especially hard-hit. Many observers, especially in the West, blamed the oligarchs and their style of doing business for causing the crisis, and there is some evidence that their banking practices did weaken the Russian financial system. From 1998 onward, the original group of seven oligarchs never again exerted the same degree of control over the Russian economy, media, and political system, and many new oligarchs began to rise to prominence.

Backlash and Putin Era
During the 1990s, ordinary Russians became greatly disillusioned with the oligarchs, blaming them for many of the country's economic problems and resenting the way they seemed to profit at the expense their country's economy and long-term wellbeing. This widespread disillusionment contributed to the popularity of President Vladimir Putin, who promised to reign in the oligarchs and curtail lawlessness and mafia activity.

In addition to cracking down on economic malfeasance, the Russian government under Putin aimed to curtail the oligarch's influence on politics and the media. A number of privately-owned television stations and newspapers owned by oligarchs such as .... were shut down or taken over by the government, and many of the oligarchs were targeted for criminal prosecution over tax evasion and other economic irregularities. Most notable is the case of YUKOS and its chairman, Mikhail Khodorkovsky, who was imprisoned due to alleged tax violations. In order to pay the tax bill, which independent observers said was unusually high (totalling **), the Russian government auctioned off YUKOS's most valuable assets, which are now owned by...

Putin and his allies claimed that they were "cleaning up" the corrupt, mafia-ridden business world of the 1990s. However, these efforts did not result in a diversification of the Russian economy or in greater foreign investment, as many Western and Russian observers had predicted. Instead, the Russian economy is now dominated by large state monopolies such as Gazprom and companies controlled by government officials or individuals close to Putin and his allies. Foreign companies like Shell and (American guy) have left the country after losing battles with regulators, which frequently left their assets in the hands of the Russian government or the new oligarchs. Western commentators and political leaders, especially in the United States, accused Putin of using the crackdown on corrupt oligarchs as a pretext to return to Soviet-style statism and to silence independent criticism in the media. And while Putin is widely credited in Russia with reducing the violent crime and mafia activity associated with the 1990s, journalists and politicians (like Galina Starovoytova, Anna Politkovskaya, Sergei Yushenkov, Yuri Shchekochikhin, Alexander Lebed and Alexander Litvinenko) have continued to be assassinated or die under mysterious circumstances.

While oligarchs in 2009 are less politically powerful than those of the 1990s, many critics inside and outside Russia still say that the continued domination of the Russian economy by a few well-connected individuals is ultimately harmful for the economy, and indicative of deep and growing economic inequality in the country. Currently, despite its relatively low per-capita GDP, Russia is home to the third highest number of billionaires in the world, after the United States and Germany.

Oligarchs Abroad
After the 1998 economic collapse, the Russian government began to investigate Russia's most prominent businessmen for illegal activities. Several were forced to flee the country to avoid prosecution, most notably Boris Berezovsky, who currently lives in London and is fighting extradition for fraud, and Vladimir Gusinsky, who is believe to be in exile in Greece, Spain, or Israel. Mikhail Khodorkovsky is currently serving a 9-year prison sentence in Russia for ___.

Many other oligarchs choose to live abroad for other reasons, often in London, earning it the nickname "Moscow on the Thames." Perhaps London's most famous Russian resident is Roman Ambrahmovich, who bought the popular football club Chelease F.C. in 20__ and spent record amounts on player's salaries.

Social Backgrounds
The social background of Russian oligarchs, especially their Jewishness, connections to the Communist Party (or lack thereof), and criminal records have been widely discussed in Russia. While some of the original seven oligarchs had high-level Communist Party connections (notably Vladimir Potanin, whose father served on the Central Committee of the Communist Party, and Mikhail Khodorkovsky, who served briefly as economic adviser to Gorbachev), most were either low-level technocrats or complete outsiders who engaged in private business because traditional paths to power were closed to them. A number of the original oligarchs got their start in what was considered petty crime, such as driving a gypsy cab (Vladimir Gusinsky, who later founded Russia's first independent TV network) or selling black-market theater tickets (Mikhail Fridman, who founded the Alfa Group and is now the worlds' 45th richest person), and Vladimir Smolensky was arrested for his illegal printing operation in 1981.

Much has been made of the number of prominent Jewish oligarchs, with explanations ranging from positive stereotypes about Jewish business acumen to antisemitic conspiracy theories. Ironically, official and unofficial antisemitism in the Soviet Union probably contributed to the success of some of the Jewish oligarchs. Mikhail Khodorkovsky, for example, has publicly stated that he entered private business because official antisemitism was preventing him from achieving his dream of becoming a factory director.