What Are Russian Oligarchs & Why They’re Different from Normal Billionaires

In recent days, you might have come across the term “Russian Oligarch” more often.

The most common and relatable definition of a “Russian Oligarch” is a group of individuals who hold onto the state assets, and thereby great wealth and power, without necessarily holding an official government position.

In other words, they are extremely wealthy businesspersons who usually have close influence and/or ties with the higher echelons of the Russian government.

In the current-day context, since Russia has basically become an authoritarian government under Putin, these businessmen are typically long-time associates of Putin’s.

To know about them, you’d need a simple history lesson.

Beginnings of Russian Oligarchs

Prior to the fall of the Soviet Union, the Communist government owned all states assets by technicality.

In Marxist theory, the Communist government has supreme authority through its total control of land and means of production. Then, the government is supposed to distribute the land and property among the people, which sets a standard of economic and social equality amongst its people.

Of course, as history has already proven, theory and reality are two vastly different things:

The Soviet Union eventually collapsed due to internal and external factors: the Soviet Union had declining levels of production all across the country due to high levels of absenteeism and alcoholism from the unmotivated Russian workers, any government investments scarcely saw any positive returns (read: Chernobyl nuclear disaster), and the process was only exacerbated by Mikhail Gorbachev’s democratization policies which fundamentally destabilised the entire regime.

Therefore, post-Soviet Union Russia was basically bankrupt.

In the transition period between communism to semi-capitalisation and privatisation, a select number of individuals with political power snapped up knock-down prices of virtually bankrupt state-owned industries.

And we’re not talking about small fishes here— these men bought or stole these state assets, by fair means or foul, in vital industries like oil, natural gas, timber, aluminium, steel, and other natural resources.

Since these are crucial industries that are necessary to the Russian economy, these men became stinking rich overnight once the gears of post-Communist Russia started moving again.

Key Differences Between Russian Oligarchs and Billionaires

With these historical facts in mind, we can dig into the differences between an Oligarch and a common Billionaire.

For western Billionaires—like say, Bill Gates of Microsoft or Jeff Bezos of Amazon—they made their first lump of fortunes through innovation, creativity and hard work.

They are lauded as heroes of capitalism because they created and provided the world with products that were never thought possible, and improved lives qualitatively.

But the first generation of Russian Oligarchs made their fortune off “stolen” Soviet Russian assets.

They simply buy cheap, failing industries after the Soviet Union collapsed.

Rather, the first President of the Federation of Russia Boris Yeltsin invited them to steal these bankrupt state assets, because he had enough on his plate with the political, economic, and social reforms to turn the defunct society into some semblance of working order again.

If these Oligarchs could turn around the companies, while suitably recompensing Yeltsin and his sycophants, he was content to continue the arrangement since they were all mutually benefitting.

Key Difference #1: Normal Billionaires profit from their own innovation and shrewd business minds while Russian Oligarchs profit from state assets, gained by fair means or foul

Frankly speaking, this first and fundamental difference leads to whole bunch of other implications:

For one, Russian Oligarchs are at the mercy of the government due to their close ties.

One of the finest examples is ex-Oligarch and oil tycoon Mikhail Khodorkovsky, who has been a prominent critic of Vladimir Putin for the longest of times.

Khodorkovsky, who built his wealth off the oil in Yakos in the 1990s, eventually found persecutors nipping at the heels of his oil business after he voiced his dissatisfaction with Putin as President.

In 2003, he was convicted of tax evasion and fraud, which landed him in jail for 4 years at first, but Putin extended his sentence by 6 more years afterwards.

Key Difference #2: Russian Oligarchs’ position and wealth is dependent on how well they can maintain their good relations with the higher echelons

If Putin tells the Russian Oligarchs to jump, they don’t say “no”, they will only ask “how high” and “how far”, because their wealth is dependent on his whims.

Igor Sechin, the CEO of the Oil Giant Rosneft, is a good example of how having close and long-standing friendship with the President can help load your pockets.

Sechin has been a close confidante of Putin since 1994, when he served as the Chief of Staff while Putin was the Mayor of St. Petersburg.

When Putin became President in 2000, Sechin was akin to a boat on a rising tide, since he was promoted to the Deputy Chief of Staff in his Cabinet, then appointed the Chairman of Rosneft in 2004.

Given that Putin is in the highest position, with judicial and legislative powers in his hands, it’s as easy for him to lift a close friend as it is to crush a rival like an ant.

For the same reason, the second rule of thumb for Russian Oligarchs is that Russian assets must stay within domestic borders.

Regardless of how the Oligarchs spend their money, like investing in sports clubs or buying shares other Western businesses, what began as a state asset must remain within the country.

And of course, some of the profits must eventually find its way into Putin’s pockets, or that of his cronies.

Sure, normal billionaires might form close relationships with politicians, fund their campaigns during caucuses, or form lobbies to achieve their agendas, but they don’t absolutely have to give their money.

For normal billionaires, funding and helping politicians is like a long-term investment that may or may not pay off. In any case, it’s still good to keep them on bankroll or speed dial. That is called lobbying.

For the Russian Oligarchs, it’s like paying a protection fee and proving your loyalty. It’s either you lubricate the pockets of your benefactor or risk having your wealth stripped.

The latter sounds like an abusive relationship, almost.

Key Difference #3: Russian Oligarchs’ Businesses Are Not Restricted by the Law

This might sound surprising, but yes, precisely because of the close ties that the Russian government has with these oligarchs, they scarcely impose taxes on their business.

In a way, it would be rude to bite the hand the feeds you.

Plus, considering the stakes that Putin covertly has in these companies and conglomerates of his close associates, it would be counter-intuitive to reduce your own wealth, even if it feeds back to the government budget.

Meanwhile, normal billionaires can only wish to a genie or higher power they had such a “Pass Go” card.

For instance, the United States is attempting to come with corporate laws to ensure that middlemen technology businesses like Amazon pay their dues in taxes because the current tax system doesn’t really include their kind of technological transaction, where it merely “facilitates” the transactions and profits off the process, as opposed to a straight-forward buy-and-sell transaction that is taxable.

Likewise, the European Union has already launched an antitrust investigation against Amazon for distorting online competition, and finding ways to tax the online transactions.

In other words, while Putin only has to ensure that he has the support of a close-knit group of oligarchs to keep his autocracy stable, it’s also managing a college fraternity where he needs to deal with relationship problems and the rivalry to ensure he can continue being President and have his goals met.

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Who are the Current Russian Oligarchs?

Compared to the first-generation of Russian Oligarchs, the second-generation with Putin at the top is a smaller group by comparison.

Regardless, those that have been sanctioned have all proven to have close ties with Putin, and that they are major stakeholders in crucial industries in Russia. These are a few more popular ones (yes, the the owner of Chelsea FC isn’t in this list).

Alisher Usmanov

Usmanov’s greatest involvement with Russia are his stakes in the iron ore and steel giant Metalloinvest.

Besides that, he is a shareholder in the electronics maker Xiaomi, and owns a range of real estates in the United Kingdom (UK), Germany, Switzerland, Monaco and Sardinia. He has a 30% stake in the English soccer team Arsenal Football Club as well.

Gennady Timchenko

Timchenko is a Russian billionaire who has been sanctioned by the United States (US), European Union (EU), UK, and Canada.

He possesses stakes in a few companies like gas producer Novatek and petrochemicals company Sibur.

To get a brief glimpse into his wealth, he has extensive real estate holdings across Europe, including two hotels in France and a lakeside mansion in Geneva, Switzerland.

Arkady, Boris, and Igor Rotenburg

Arkady is a long-time friend of President Putin and used to be his judo sparring partner.

He owns shares in the construction company called Monstroset.

His brother, Boris Rotenburg, owns SMP Bank.

The Rotenburg family had also been given billions of dollars in contracts with oil and gas giant Gazprom for the Sochi Winter Olympics.

They were sanctioned after they participated in the construction of the Kerch Bridge, the bridge that links Crimea to the Russian mainland.

Yuri Kovalchuk

Kovalchuk is better known by the Western politicians that sanctioned him as “Putin’s Banker”.

When Putin was serving as the Deputy Mayor of St. Petersburg, the two became acquaintances.

Kovalchuk has stakes in the insurance firm SONGZ and Rossiya Bank.

Viktor Vekselberg

Vekselberg made his first million by selling copper from worn-out cables, and later invested in the oil company TNK-BP only to cash out in 2013 for $7 billion.

His core asset is the 50% stakes he owns in a Swiss company called Sulzer, but more importantly, are his stakes in the aluminium producer Rusal, which moved its headquarters to the Russian tax haven of Oktyabrsky island in September 2020.

Mikhail Gutseriev

Gutseriev is the founder and largest shareholder of Safmar group, which invests in oil, coal, real estate and retail.

Alongside his son and nephew, Said Gutseriev and Mikhail Shishankhanov, they were sanctioned by the EU for their close ties with the Belarus dictator Alexander Lukashenko.  

Besides the aforementioned 10 Russian billionaires that were sanctioned, there are a total of 16 Russian billionaires that have been sanctioned thus far, according to Forbes.

 The EU has taken it a step further and sanctioned all 336 members of Russia’s parliament.

The Effectiveness of the Sanctions?

The reason why these Russian Oligarchs are being sanctioned is because they “line the pockets of the Russian government”, thus enabling them to have a sizable budget and even initiate a war with Ukraine.

Their financial, economic, and material support that they directly or indirectly give to the Russian government cannot be disassociated to the war bank that Russia touts. 

By sanctioning and freezing their assets, it imposes financial pains on the Russian elite.

How effective it is against Putin’s gathering of vast wealth is hard to keep track or know, but it has been theorised and confirmed by many analysts and economists that the Russian President hides his own fortune by divvying them amongst his cronies for safekeeping or investments. 

Perhaps one of the motivations behind imposing these sanctions on select individuals is in hopes that it will weaken the relationship between the autocrat and the oligarchs.

Most of all, the media attention brought to these billionaires also frames Russia in a terrible light: in contrast to the images of shocking violence and destruction coming from Ukraine, these oligarchs are flaunting their wealth across the Western countries through grand real estates and yachts.

If that isn’t one way to promote disgust and hatred towards the Russian autocracy, and show a broad image of how only a select few benefit from Putin’s reign, I’m not sure what else will.

Read Also:

• 10 Facts About the Russia-Ukraine War That Are Known So Far
• Russian Oligarch Roman Abramovich Selling Chelsea FC After Threats of Sanctions by Biden
• French President After Call With Putin: The Worst is to Come & Putin Intends to Seize the Whole of Ukraine
• Gangster Ukrainian Farmer Tows Away Russian Tanks With a Tractor

Featured Image: Shutterstock / Alexandros Michailidis