The liberalization and reform movements carried out by Mihail Gorbachev after he became first secretary of the U.S.S.R. Communist Party introduced a new class to a country approaching collapse. The members of this class have registered most of the assets in Russia in their own names (usually through illegal means) thanks to the privatization carried out after the collapse of the Soviet Union. These rich businessmen, known as 'oligarchs'(1) in the political terminology of the country, penetrated the Kremlin and grew stronger during that period.
Most of the assets owned by oligarchs today were acquired through the the privatization that materialized during the initial years of Yeltsin's term in office. The privatization of that period was boon for those who had already amassed fortunes due to liberalization movements. During that period, giant energy companies taken over from the U.S.S.R. were passing into the private sector almost for free. Seventy-eight percent of the shares of Yukos, the biggest oil company in Russia today, were taken over for $350 million in 1995 by 'Menatep,' whose establishment was initiated by Hodorkovsky. Approximately two years after this transaction, the value of Yukos increased to $9 billion. After mergering with Sibneft, the value of the Yukos shares reportedly jumped to $40 billion. In the same way, Norilsk Nikel was bought by Vladimir Potanin's Interros Group for $170.1 million in 1995, and its profit in 2001 alone was $1 billion. The value of the company today stands at approximately $10 billion. Research shows that as a result of privatization activities after the collapse of the Soviet Union, the control of 85 percent of the biggest 64 enterprises in Russia is concentrated in the hands of eight big oligarch groups.
Oligarchs, who played key roles in appointing the (prime) ministers and were able to speak authoritatively about many subjects like the Chechen War and domestic and foreign security problems (2), started to search for a successor as the end of the Yeltsin-term approached. Beginning in 1998, the trials of the 'heir apparent' continued for about a year. Kirienko-Primakov and Stepashin were tested as prime ministers; nonetheless, they were not supposed to be sufficiently qualified according to the Yeltsin-oligarch team. Finally during the 'trial period,' or prime ministry of Putin, it was agreed that Putin was the heir apparent. In fact, Putin's policies toward oligarchs, who played a major role in his coming to power, were not anticipated and have been a total surprise for the oligarchs. As a result, the power game of the oligarchs was spoiled by Putin.
Being appointed by proxy, Putin signaled in his first days that he would not share political power with the oligarchs as his predeccessor, Yeltsin, had done. A statement made by Putin regarding the oligarchs prior to the elections, as 'those who have shifted the influence of capital against power' to 'abandon acting like a class' was responded to quickly by the greatest oligarch of the period, Boris Abramovich Berezovsky, who was extremely sure of his power in the Kremlin. Berezovsky expressed the thought that Putin would not be able to reduce the influence of the oligarchs and that Putin was criticizing them because of his concerns about the elections and votes.
Dubbed 'Prince Berezovsky' or 'Rasputin' (3)by the Russian media Berezovsky thought that Putin could not fight with big capital. The new president announced that he was not willing to share his power with anyone. The two greatest oligarchs, Berezovsky and Gusinsky, both of Jewish origin, had to flee abroad when, through the efforts of the Russian attorney general, most of their assets were confiscated and they came face-to-face with the possibility of being imprisoned. The fact that Putin started his struggle with the oligarchs with rich Jewish businessmen does not appear to be just a coincidence. Actually, in Putin's Russia there is no place for coincidences.
After Berezovsy and Gusinsky left the country, operations against the new and very powerful oligarch, also said to be Jewish, Mihail Hodorovsky (4) and the attempts of Jewish businessman, governor of Chukotka and the English Chelsea Sport Club owner Roman Abromavich to take his investments abroad indicate that this process will continue.
When the recent situation of the Russian economy and the power-oligarch struggle is examined, its negative reflections on the Russian capital structure are evident. According to the Russian Central Bank, the capital outflow from Russia between July-September 2003 hit a record $7.7 billion. This outflow is thought to stem from political rather than economic reasons, especially if the positive signs in the Russian economy are considered. For specialists this outflow is linked with the Yukos incident. This situation is exceedingly annoying for Russian Prime Mininster Mihail Kasyanov, who is anxious that the probable results of the incident may negatively affect foreign capital inflow. Meanwhile, investigations carried out against Yukos are closely followed by the Western media, which sees Hodorkovsky as a defender of democracy and the free market, while the Putin team is regarded as opressors of the special sector, damaging the international image of Russia.
Not counting the exiled Boris Berezovsky and Vladimir Gusinsky, Putin's relations with the oligarchs are actually not openly hostile. Even though these people sometimes criticize the Russian political system, they avoid making comments targeting Putin, or they get their analysts to do it through the media. The reason is their anxiety about Putin harming the financial interests of at least some of them in unanticipated situations. In this connection, the criticisms levelled by Mihail Hodorkovsky, the chairman of Yukos Oil Company and the richest man of the times, about the system were instantly responded to by the Kremlin and Platon Lebedev, one of the shareholders of Yukos who has been imprisoned on the grounds that he was involved in corruption. The interesting point is that it was not economic grounds but the murder of many people that were claimed to have constituted the crime during the trial. Russian Attorney General Alexei Pichughin is responsible for seven murders The multidimensial pressures put on the richest man in Russia, Mihail Hodorkovsky and on his company Yukos can be perceived as political intimidation rather than a simple judicial investigation and as a part of the struggle for power among the groups which want to be active in the Kremlin. Hodorkovsky, born in 1963, stated in an interview with the german magazine Der Spiegel that he was not willing to deal with business management past age 45 and that then he might go into politics. In an astonishing coincidence when Putin's office term ends in 2008, Hodorkovsky will be 45 years old. Hodorkovsky is thinking differently than President Putin in terms of political approach in many areas. For example Iraq, Hodorkovsky is opposing the behaviour of Russia, using the UN as a threat and spoiling relations with the United States.
The other oligarchs, and especially Hodorkovsky, are starting new debates about the form of the government. They are not delighted with the existing presidential system and proclaim that a semi-presidential system as in France or a parliamantary system would benefit the Russian people. It is difficult to determine whether they want it for their compatriots or for themselves, but what is definite is that the supervision of the oligarchs over the political power would be easier than today; in the parliamentary system through the parliamentarians they would get elected with the help of their wealth. In this respect, a decleration of Berezovsky to a newspaper is worth noting: 'Every oligarch wishes to be the president'. The oligarchs, some of whom will be obliged to go abroad and engage in foreign partnerships, do not have much chance against Putin in the short term. However, in longer terms their chance seem to increase.
The statements made at the end of September that Yukos (After the merger with Sibneft it is called YukosSibneft officially) would be turned into an international company and that the negotiations for the sale of aproximately half of its shares, which are valued at 25 billion dollars totally, to ExxonMobil, amounts to smuggling capital. If that sale occurs, Hodorkovsky will have a strong partner abroad for his company. On the other hand he will be able to manage the financing of the struggle for power in Russia with the hot money he will get. Also Putin has not missed the news about the export of shares from Yukos to ExxonMobil. Putin has declared that in such a big corporation the state is interested and that the managers of the company should consult with the government about such a strategic subject which is related to the general policies of the state.
This oligarch-government war that began with the official work of Putin can be evaluated as the unwillingness of in-Russian-'Siloviki'(5) so-called 'security forces', who became a dominant element in the Kremlin, along with Putin, to share their power with the oligarchs and their efforts to mitigate the influence of these businessmen in domestic politics. This early confrontation of Putin, who will not be able to participate in the presidential elections in 2008, and of his team, the Silovikis, with oligarchs can be characterized as the struggle to design the Post-Putin period. With the facilities gained in the last 10 years, oligarchs, with their financial and political powers, have gotten beyond the bureaucracy's control. Actually, the extent of their influence is so great that they can threaten the power of Putin. This threat on Putin's power has become an 'oligarch nightmare' in Russia. Even, it is claimed in articles that oligarchs are preparing a 'coup' and the Kremlin is preparing serious reports about it.
The support of politically activated oligarchs, support given to many parties representing different point of views, before the Dec.7 Duma elections and their efforts to put their men in higher lines in party lists show that these anxieties are not irrelevant. The basis of taking sides seems to have shifted in Russian domestic politics from the grounds of ideas toward a basis of interests. Their support of liberal Yabloka (Apple), Sayuz Pravih Sil-SPS (Union of Right Forces) and to centralist or left-centralist Narodnaya Partiya (Party of People), and the struggle they have engaged in with the Kremlin over the party of power Yedinnaya Partiya (Union Party) is only a part of their endeavor to keep Russian domestic politics under the control. It is a good indicator where oligarch-politics relations in Russia have reached that the oligarchs are supporting, beside the parties which are close to them in terms of ideas, the Communist Party of the Russian Federation-KPRF as well, which is the most powerful rival of Putin and the most organized and strong party in the country. With the elections on Dec. 14 'the men' of oligarchs and especially those of Hodorkovsky will be elected to the parliament from the lists of parties that passed the 5 percent country threshold, mainly from Yabloko, SPS and KPRF.
People related to oligarchs will also have seats in the Duma. That is the danger that agitates the government. Some international publications say that the investigations against Yukos were started in order to restrain the political desires of Hodorkovsky. There is a serious coalition of pressure over oligarchs and on re-construction of Russian political life. It is attracting attentions that this coalition is becoming firmer when Yukos, Sibneft, Alfa Grup and Bazoviy Element are under consideration. Nevertheless, it would not be a proper analysis to claim that all of the oligarchs are against the existing government. The ones who support the existing power can be found, like the Chairman of Lukoil Vahit Alekperov, Moscow Mayor Yuri Luzhkov and Vladimir Potanin. It will be appropriate to examine the oligarchs from two different point of views depending on the posession of the capital. Besides the oligarchs in the private sector, the oligarchs and/or oligarch institutions in the state sector are also active. For instance, Gazprom, one of the richest organizations in Russia is a state-oligarch in every meaning. In the struggle of oligarch and state, these oligarch institutions and/or people are used by the state as an efficient weapon.
The oligarchs in Russia and their political desires are sometimes related to the oligarchs in other states. Russians frequently compare their oligarchs with the Prime Minister of Italy, Berlusconi, while they occasionally make references to Turkey. In this respect the Russian media, following closely the trial of Uzan, claim that there were parallels between the Uzan Group and the Russian oligarchs. The Russian media said: 'It seems that Uzan is a prototype of the Russian oligarch. Not just any oligarch, but a type of oligarch who is not royal or suspected not to be royal.'
Thoughts of Russian People About the Oligarchs The results of opinion polls about 'oligarchs', by Fond Obsestvennoye Mneniya are given below. The question posed to people for the opinion polls, on Jul. 24 2003 was 'Who is the greatest oligarch in your opinion?'. The results of ranks among the oligarchs were interesting as it can be seen in the table below. Berezovsky is still the leader in the list.
In another opinion poll made on Jul. 17th people were asked what the word 'oligarch' reminds them of. 24 percent of the people gave the answer of just 'a rich person', whereas 25 of the queried people described the oligarch as 'a person who became rich illegaly'. 8 percent of the respondents said that the oligarchs were 'the real owners of power in the country', while 1 percent answered the question 'politicians'. What do oligarchs provide to the country, was asked. 59 percent of the people have a negative opinion about oligarchs. Though the policies of Putin regarding oligarchs are critisized in the domestic and international media, these policies are supported by the people. Therefore, Russian people have a different view than the internal and foreign media in that oligarchs harm Russia more than they are of help to it. President Putin's struggle with oligarchs, 17 billionaires is taking support from the people of Russia, 40 million of whom are living below the poverty limits.
Conclusion
It is an accepted fact that Putin is guaranteed the second term presidency in the 2004 presidential elections. All the sections in Russia who have the ability to struggle for power are preparing themselves for the Duma elections on Dec. 7 and for 2008, in practice the post-Putin period which will acquire a shape under the influence of the Duma. However, although Putin has declared that he will leave power at the end of this process, the staff of the Kremlin 'Silovikis' and 'Peterburgs team' will remain assertive enough after this process. Staff members Alexandr Valoshin, Igor Sechin and Viktor Ivanov have played crucial roles in the struggle of Putin with the oligarchs.
The facts that Hodorkovsky, at the peak of the oligarchy pyramid, was stopped during a fuel supply stop in his private plane on Oct. 25 by camouflaged special forces, That he was arrested after he was ordered off the plane, and that he was taken to Moscow immediately and has been interrogated can be counted as the signs of a new era in relations between power and the business oligarchy in Russia. Even though a declaration of public prosecutors said that Hodorkovsky is going to be judged on six seperate crimes including tax evasion, this operation was believed to be politically motivated. Another factor why the staff of Kremlin is pestering Yukos is the uneasiness about the economical support of Hodorkovsky for the Communist Party. The Hodorkovsky operation may open new problems in the international area. Similarly, the effects of the operation may result in unexpected situations within the country. However, it should not be forgotten that these operations are supported by the people generally in Russia in the eve of elections.
Actually, the process started in order to intimidate oligarchs is a sort of score settling. However there is an important detail which definitely should not be missed. In 2008, Putin's term of presidency will be completed and he will not be a candidate for a third time, according to russian law. Nontheless, it is not for sure that he would not be a candidate for the third time on any ground, if his rating is still high in that period. In this direction, the union of Belarus with Russia will make a new state and a new legal order will come into existence, which would pave the way for the third candidacy of Putin by overcoming the legal obstacles. For Kremlin analysts to leave this option out does not seem likely. Otherwise, to express this attitude toward oligarchs willing to go into politics, where the only legal grounds would be a very optimistic approach. The struggle between the Kremlin and Yukos began nearly six months before and after Hodorowsky was arrested on the Oct. 25, the beginning of the end came for Yukos. Opposing the conventional wisdom, Putin has shown that he is set on finishing Hodorowsky totally. With this purpose Putin, who wasn't satisfied with the arrest of Hodorowsky, thinks they can end in this problem by seizing Yukos's shares (61 percent) on Oct. 30. The arrest of Hodorowsky and the seizure of Yukos's shares had a great affect on Russian internal policy. Beginning yesterday, State Presidency Office Manager Aleksandir Volosin resigned and his resignation was accepted and Dimitri Medvedev took his place. The resignation of Volosin, who was strongly in control of the Kremlin and is known as,'the man who created Putin', can be accepted as a success of the Siloviki in the struggle going on in the Kremlin. The Yukos event not only had a great affect on the Russian policy system but also on the Russian economy. After the arrest of Mihail Hodorovsky and the seizure of Yukos's shares there has been a great fall in the Russian Stock Exchange especially in the stocks of Yukos. On the first day the stock of Yukos lost nearly 20 percent of its value. In other words, Yukos's market price has fallen to $5.6 billion and this fall continues. Until 1999, the Russian Stock Exchange had been experiencing large daily drops. The sales were ended because of the high range falls and the ruble has lost great value against the American dollar. The arrest of Hodorovsky, the CEO of the 4th largest company in the world which is one of the companies that wants to buy Tüpras, affected Turkey too and the stock of Tüpras lost 6.5 percent of its value. As it is thought that the process going on in Russian politic and economic system is turning into the nationalization of the Russian bourgeoisies and this will not end with Yukos, the turn of the other Oligarchs will come.
(*) Head Of Department, ASAM Russian-Ukrainian Studies, e-mail: sogan@avsam.org
1) The word 'oligarch' was used in Russia on June 2nd, 1995 for the first time in the article 'Portret Oligarha v Molodosti' of Olek Baygo in the newspaper called Vek. The word became widely used after 1997. This word has been frequently used within an interview with the General Director of SGB-Argo Bank Aleksandr Smolensky which appeared in the newspaper Segodnya on Sept. 20th, 1997. In the conference named 'BuduŸee Rossii: Demokratiya ili Oligarhiya' arranged by Boris Nemtsov in March 1998, the word passed to the scientific literature.
2)Boris Berezovski was appointed to quite high bureaucratic duties like general secretary of CIS and had earlier organised the meetings with Chechnya.
3) Grigory Efimovi‡ Rasputin, born on June 29th, 1871 in Siberia, curing people in various ways though he was not educated in medicine or in any other subject. The incurable disease of the only succesor, the only son of Russian Tsar Nikolai II made the Tsar family and Rasputin come together. Rasputin built close relations with the Tsar family and some 'special' ones with the wife of the Tsar Alexandra Federovna. Rasputin was very influential in the administration. He was killed by the Tsar's family on Dec. 30th, 1916. Rasputin, believed to have mystical powers played a crucial role in the last period of the history of the Romanovs.
4) Mihail Hodorkovski: Althogh most of the oligarchs were against the Soviet Union and central planning, Hodorkovski was a prototype of an ideal young communist bureaucrat. Hodorkovski born in 1963 and raised in the Young Communist Union, Komsomol was one of the initiators of the establishment of Interindustries Scientific and Technologic Development Center (Menatep) in 1987. This institution was set up to finanace the scientific researches of 13 graduates of Mendelev University in the fields of chemistry, automation and computers. During the privatization Menatep played an active role; it has constituted a market for the vouchers issued by the state and gained the control of many newly-privatized enterprises. Holdings controlled by Menatep can be categorized in chemistry, construction, textiles, consumption goods, mining and oil. Yukos bought Sibneft on Apr. 22, 2003 and became the largest oil company in the country and the fourth largest in the world.
5)In Russian 'Siloviki' a so called security force consists of the intelligence departments (FSB) whose weight have increased with Putin, generals and other internal secrity elements' high level directors. This group is in coalition with the Kremlin.