Visualising the Evolution of the Oligarchy

Author: Giorgios Hadjipavlis

Image 1: Mikhail Khodorkovsky: From Russia's richest to a prisoner (see Gidadhubli 2003) - Getty Images

N.B.: This section draws on from the content presented in other posts of this blog. We highly recommend the readers to especially consider reading "From Yeltsin to Putin: How the Super Rich were Affected" prior to engaging with our visualisation.

Following the previous articles, this post focuses on providing an overview on the evolution of the oligarchy and its current state through evidence-grounded visualisation. The popularisation of the concept has elevated a number incorrect assumptions into becoming part of how we think about the concept. By combining literature and select case-studies, and with the aid of the visualisation, we will critically analyse the development of the oligarchy across time, in order to obtain a deeper understanding of the function of the oligarchy in relation to governance. We will demonstrate how the transition from the Yeltsin to the Putin era has altered the relationship between the Russian government and the oligarchs. The changes in the mode of governance and the broadened scope of the Russian state under Putin has not only transformed the oligarchs' interaction with formal governance but also their role as actors of informal governance. Consequently, their functions and positioning within Russian society differ at present in comparison to the apex of the Russian oligarchy in the mid- and late-1990s.

Exploring the oligarchy: the key questions

The colloquial term ‘oligarch’ has been used, since the haphazard privatisation of the Russian economy in the early 1990s until the present time, to describe a number of profoundly wealthy economic elite who possess the power to skew domestic arrangements in their favour.

Three main questions arise from critically examining the colloquial understanding. Firstly, the popularised definition often ignores the element of political control encompassed in the literary definition of the term. An oligarchy – as presented in the introductory section of this blog – refers explicitly to a state run by a small group of people. This clearly invokes politics and a particular system of governance governance. Hence, the notion of an omnipotent oligarchy comes into direct contradiction with Putin's Russia where authoritarian centralisation has become a key characteristic (see The Economist 2017:11). Yet the term is still in use by major international media to simply refer to super-rich Russians. The question that naturally arises is: “what is the actual role of the oligarchs in the running of the country”? This consideration gives rise to a second query. One’s positioning in relation to governance can be discerned by their competence in making things happen in the political domain. To provide further clarity to the concept, it is useful to ask: "what kind of governance-related tools do they have available to employ in order to meet their objectives, and to which extent are their political powers restricted?” Thirdly, the term oligarchy has been used in regard to Russia in the same fashion since its introduction. Russian studies enthusiasts will be quick to point out a critical juncture in contemporary Russian political history. The rise of Vladimir Putin to power has seen a remarkable consolidation of power to his hands and those of his allies. Naturally, the consolidation of powers to the Kremlin must have restricted the playing field in which the oligarchs as political actors can operate. As such, we have to ask: “how have the competences of the oligarchy been affected by this change?”

The first section of this post will introduce the visualisation and explain the rationale behind the choice of the axes and the format. The second section will introduce the selected cases, justify their selection, and highlight the events that support the movements on the matrix. The third part will offer an overview of what we observe in the visualisation, having considered the cases. A conclusion will follow, briefly addressing whether we can speak of an oligarchy given the developments.

1. Unveiling the Visualisation

We begin with the introduction of the visualisation so as to enable the reader to critically consider the content which shaped our visualisation as we present it.

The Format

We had first designed a simpler 2x2 matrix, but felt that the generated matrix did not capture the important nuances of the transition. For example, in considering Berezovsky in 1996 and Deripaska presently, the degree of their connectivity to the Kremlin does not appear to be substantially different. Similarly, both Berezovsky at the time and Deripaska at present have a friendly predisposition towards the regime. Hence, in a 2x2 matrix their positioning would be congruent. Yet, this would fail to capture the dimension of hierarchy; the subordination of the economic elite under Putin, which was non-existent during Yeltsin's rule.

It is understood that some sections of the matrix remain empty. This should not be seen as missingness, but rather as a reflection of the situation. For example, the mid-point is empty because the Yeltsin regime was not strong enough to subordinate oligarchs, while the Putin regime is very precise about the terms of its loyalty pact; the loyalty-for-benefits arrangement demands an active contribution to the regime's perpetuation.

The Axes

The y-axis pinpoints the nature of the oligarchs’ relationship to the Kremlin, while the x-axis reports their stance towards the political leadership; as friendly, indifferent or uncooperative and actively unfriendly. We argue that these axes best portrait the transition of the oligarchy in a manner which can enable us to draw useful inferences on evolution of the role of the oligarchy. For example, by looking at the y-axis it can be deduced that while Berezovsky had the power to influence policy and appointments as an insider, Deripaska will have to follow the Kremlin’s orders in retaining his status and perpetuating his wealth. This helps us clarify the transition of the function of the oligarchy across the two regimes. Examples on how the Kremlin rewards the oligarchs can be found in the last section. The x-axis is, firstly, useful in capturing the stance of the oligarchy in important junctures. Secondly, it enables us to further explore how the two regimes dealt with dissent and insubordination more deeply; i.e. the inability of Yeltsin to reprimand the oligarchs who instead became informal actors of governance, and the range of punitive measures taken by the Putin apparatus to enforce their supremacy. Jointly, they enable us to comprehend the full extent of the evolution of the oligarchy.

2. Presenting the Cases

The cases are a critical component of the visualisation. A guiding understanding has been gained by consulting scholarly literature, but the examination of real case-studies directly informs the image of the matrix. So, why were these cases selected, and which events inform the movements visible?

The Rationale of the Selection:

In selecting the cases we aimed to give a broad picture of the movements the economic elite undertook since the creation of the oligarchy. The cases are all of actors important enough to have attracted the attention of the extensive Russian government. Despite numerous super wealthy Russians being dubbed ‘oligarchs’, we are specifically exploring those who engaged with (or were engaged by) the political leadership. This is given we are primarily interested in the context of their interaction with Russian governance which has been becoming increasingly state-centred. We attempted to exclude actors with duplicate movements, unless their background gives us a story which differentiates them from their pair. In selecting Deripaska, known for his vivid relationship with Putin, we excluded similar actors such as Arkadiy Rotenberg and Yevgeny Prigozhin whose positioning has been similar.

Berezovsky & Khodorkovsky (from the icons of oligarchy to pariahs). These two oligarchs were clustered together since they were integral in the early stages of the oligarchy’s development. Despite Berezovsky being more of a Kremlin insider (known to have lobbied the government for other oligarchs) and Khodorkovsky being more of a financial success case, they jointly spearheaded the rise in prominence of the economic elite. Similarly, they both opposed the decision of the state to oppress their influence which saw their wealth considerably diminished along with a necessitated exodus to London.

Gusinsky & Durov (the nonconformists): this pair demonstrates the tolerance span of the two regimes towards non-conforming elements. Gusinsky shows how it was plausible under Yeltsin to be independent and supportive, or towards the later stages, unsupportive of the centre and still part of Russian society. Under Putin, Gusinsky's insubordination, as he refuses to surrender the independence of his media empire, leads to the state turning against him. Durov’s case demonstrates how the Kremlin punished not merely non-conformism, but also the refusal to support the apparatus when demanded; his mistake was to fail providing information of Kremlin antagonizers who used his platforms. The scope of the state extends to the owners of the new media, despite the fact that it is not the company itself but the users who set the tone of the content. Hence, the pair demonstrates how the Putin regime agglomerates a breadth of non-conformists.

Savvidi & Deripaska (different tracks to loyalty): These two elite showcase the variety of tracks that can be pursued to become a loyalist in order to receive rewards from the Kremlin. Savvidi opted for the political track, joining Edinaya Rossiya to serve as deputy in the State Duma in the 4th and 5th convocations. Having been already the managing director of Donskoy Tabak, he presumably selected this track to maximise his potential gains. Deripaska came from the industrialist track, which is common amongst Russia’s oligarchs. Unlike Abramovich, his wealth burgeoned under Putin in the 2000s. Despite not being politicised, he became a solid Kremlin loyalist to enable himself to become Russia’s richest man. The important takeaway is that both men saw their wealth skyrocket as a result of becoming devoted Kremlin loyalists; they arrived at the same result despite following varying tracks. The Kremlin's pact is thus intended to encompass everyone who's powerful enough to potential contest the state.

Luzhkov (all that is needed of you is to be loyal): The late 1990s saw Luzhkov being projected as a viable replacement for Yeltsin. Media articles granted him the title of the future Tzar (although this was only realised by Vladimir Vladimirovich), while he directly challenged Yeltsin and “The Family”, and their choice of Putin (in White et al. 2005). Acknowledging defeat to Putin and his tactics which saw his and Primakov’s party Otechestvo-Vsya Rossiya lose to the pro-Putin party Edinstvo in 1999, he repented. He pronounced his loyalty and merged his party to form the notorious Edinaya Rossiya. In line with Putin’s pact of non-contestation he confined himself to Moscow mayoral politics following the events. Most importantly, this case demonstrates the overarching scope of Putin’s pact, set to include even former antagonists.

Abramovich (the grip tightens even on the favourites). With the support of Berezovsky, Abramovich managed to become a Yeltsin insider, even allegedly maintaining an apartment inside the Kremlin complex. He promulgated his loyalty for Putin when the transition occurred. Yet, his relationship with the new President was not as symmetrical. In recognition of Putin’s seniority, he has been said to address him in vi instead of ti (plural of politeness). It becomes tempting for one to wonder if the progressively restricted political toolkit available in the Putin era contributed to him resigning from politics and the governorship Chukotka. This case is useful in demonstrating the universal push for the state's primacy.

Demonstrating the events resulting in the movement of the oligarchs:

Boris Berezovsky

Initially an integral insider and member of “The Family” and the semibankirschina. He largely influenced political decisions and appointments. He enjoyed considerable informal influence under Yeltsin, which he utilised to receive formal appointments, such as that of the Deputy Secretary for National Security. He was tactful and manipulative; an adept personality in managing informal relations. His wealth peaked at $3 billion, before being stripped of key assets after challenging Putin and being forced to relocate to London, following the introduction of the new order. Two sets of account have attempted to explain his death; his death was either caused by the Russian security services, or he hanged himself to shame following his judicial defeat to Abramovich whom he had once assisted on his path towards success. From the spokesman of the oligarchs (in Hoffman 2011:12), and then of the dissenters, he saw his fortune shrink having lost the contest with Putin and his allies.

Mikhail Khodorkovsky

Once Russia’s richest man and the principal shareholder of Yukos which controlled numerous oilfields. He was one of the seven of the semibankirschina. His informal influence enabled him to grow considerably. His opposition to Putin combined with his growth, led to the state intervening to stop him in 2003. Yukos was seized and eventually absorbed by state-owned Rosneft. The details of the case were publicised in Yukos v. Russia. Khodorkovsky was jailed for a decade - from 2003 to 2013 - before relocating to London. One of the law clerks reported the verdict was drafted not by the judge of the case, but by higher authorities (Vasiliyeva in Hoffman 2011).

Vladimir Gusinsky

Gusinsky supported the semibankirschina and other important informal actors by granting access to his media empire which included the prestigious NTV. Yet, the once powerful media mogul had refused to support “The Family’s” choice of Putin. His determination to fight for a free press in Russia was overpowered by the state. He was convicted of money laundering, and saw his Russia-based assets, including NTV, usurped by Gazprom Media.

Roman Abramovich

A figure close to both Presidents. His relationship to President Putin is described to that of a father and son (with Roman clearly being the son). His subordination ensured he retained his wealth and political status, albeit not possessing the same freedoms as he did under Yeltsin.

Oleg Deripaska

“Putin’s favourite industrialist”. He allegedly worked with Trump-ally and former lobbyist Paul Manafort to advance Putin’s interests by influencing the American position on a range of issues, such as the Ukrainian peace deal. He forms a constellation of oligarchs who serve Putin’s state and are rewarded in exchange. Nonetheless, as the video below demonstrates, he is still vulnerable to Putin’s open wrath, which clearly demonstrates who runs the show in Russia. Deripaska gained his prominence during the Putin era, having not featured in any important insider groups or top level informal activities during the Yeltsin era.

Video 1: Oleg Deripaska is reprimanded for firing employees during the crisis and is ordered to make changes by the President

Ivan Savvidi

The most successful tobacco industrialist in Russia. His switch from an independent local lawmaker in Rostov to Putin ally in the State Duma saw his success go through the ceiling. Ever since, in line with the Putin-oligarch pact, he has allegedly been the covert extension of the Kremlin’s arm in operations abroad which provide Savvidi with profits and the Kremlin with foreign influence. The OCCRP alleged he was behind the attempt of the Kremlin to block the Macedonia deal by financing protesters, which would have disrupted North Macedonia’s prospects of joining the competing NATO since the deal encompasses the lift of Greece’s veto. He was also allegedly behind Russia’s effort to tighten the grip on now-Western-leaning Bulgaria, by purchasing Bulgartabac, in a deal financed by state-controlled VTB. From an independent industrialist, Savvidi’s allegiance has not only enabled him to consolidate his wealth in Russia, but to expand his business abroad with the financing and support of the Kremlin.

Pavel Durov

Durov was a digital pioneer in Russia having founded VKontakte and Telegram, but he remained uninvolved in politics. After he refused to present the VK data of Ukranian protesters and Putin antagonist, Alexei Navalny, to the authorities, he saw himself fired as CEO of his own company. He left Russia to pursue his business interests in an environment more compatible with free-market principles.

Yury Luzhkov

The late strongman of the 1990s and Moscow Mayor of the 2000s, has occasionally been classified as an oligarch despite being more a political than economic elite (see Hoffman 2011). He was integral in helping Yeltsin both during the 1996 election, and offering his critical support during the 1993 Constitutional Crisis. Realising Yeltsin's imminent retirement, he joined Primakov in forming Otechestvo-Vsya Rossiya with the objective of contesting both the 1999 legislative and 2000 presidential elections. Following his defeat to Putin in 1999, he shifted allegiances once more to join the pact and become a critical founding figure of pro-Putin Edinaya Rossiya. He was thus allowed to retain his mayoral position until 2010, which allegedly allowed him to gather considerable financial power.

3. Deciphering the Transformation

An Overview of the Movements

As evident in literature, the most influential oligarchs of the 1990s, decisively supported the Yeltsin regime from 1996 onward. They used the 1996 election to gain influence on governance to varying degrees. Some became part of "The Family" or the semibankirschina, which had been alleged to had been as influential as forming the President's opinion. Others, such as Gusinsky, exerted their influence as independent allies of these named or unnamed groups by trading resources (access to the NTV in Gusinsky's case). They assembled to promote the notion of corporate governance, which was the oligarchy of the economic elite. Their positioning on the y-axis was a herald of their fate when Putin emerged as leader. Those closest to Yeltsin, presumably with more to lose, perished. Khodorkovsky was jailed and Berezovsky eventually died as a, direct or indirect, result of his challenge. Gusinsky was more fortunate having had the opportunity to cash-in in a shares for freedom transaction (officially Protocol no. 6) before leaving to pursue business interests abroad. Putin has been relentless in quashing anyone who would not follow his commands. Durov, an entrepreneur who rose to prominence in the Putin era, faced the wrath of the state in a similar fashion. The state has been decisive in keeping the oligarchs control and ensuring new actors abide by the terms they have set.

The oligarchs who yielded received the benefits in exchange for accepting the primacy of the state. They joined the pact by following varying paths depending on their backgrounds and their starting point in 1999. Abramovich simply went down the y-axis, while Savvidi and Deripaska enthusiastically gave away their right to for political independence in the political arena in exchange for the state-provided benefits. Luzhkov repented to join the pact and remained Moscow Mayor until 2010, before being deposed by Medvedev, who was independent enough (but not much, as evident in the Khodorkovsky case) to exercise a slightly more liberal anti-corruption approach. Luzhkov's dismissal can also be considered in view of his criticism of Medvedev which was in breach of the terms of the pact. Simply put, the more distant from the political arena one found himself, the more safe his status became.

The general trends are as follows. The Yeltsin era sees oligarchs assemble on the left-side of the matrix in a bid to gain influence in the state. They appear to be content with Yeltsin regime which they can considerably shape, and which is much better than the disastrous potential of reverting to socialism which would be deleterious to capitalists. The transformation period of the Yeltsin succession and the uncertainty presented sees a number of oligarchs defect from being 'friendly'. Putin's iron pact calls on the oligarchs to become loyalists and recognise the state's primacy so that they can maintain their status, or face "the cudgel". In spatial terms, this concentrates most oligarchs in the "Subordinate-Friendly" box. Those who oppose the state face dire consequences in a variety of ways. The consequence on the oligarchs' informal positioning is simple. From being prominent actors of informal governance through their membership in or support of a variety of groups, such as "The Family" and semibankirschina under Yeltsin, they lose their capability to directly influence politics if they wish to avoid repercussions. Most follow this direction, while those who do not are successfully silenced. The state becomes supreme and the oligarchs are restricted to informal activities which perpetuate their status as economic elite and their wealth, without contesting the Kremlin in any way. Even if their activities include lobbying policymakers (such as via the use of smotryashchie and United Russia) they ensure this does not contest or raise the alarms in the Kremlin. The transformation from a multitudinous informal network of influence on governance to a pro-Kremlin group of loyal oligarchs is shared both by our visualisation and literature.

Can we still speak of the Oligarchy?

Suggesting that the economic elite no longer have any influence on the process of governance would be an error. Resourceful elite in capitalist systems are expected to affect such processes, even inadvertently. Yet, this blog post has demonstrated that the oligarchs no longer command a direct political influence capable of controlling the state. The Kremlin has granted them extraordinary access to state resources in order to maintain their status and perpetuate their wealth, but it has explicitly barred them from any activities in the political arena that would be considered to be contesting the supremacy of the regime. In line with the definition of the term, they, thus, cannot be longer considered to be oligarchs. Other sections of this blog have come to the same conclusion. Yet, a number of academic publications (such as Guriev & Rachinsky 2005, which also discusses the continued importance of the elite in the economy), and media articles still employ the term. Despite being erroneous in its strict sense, since they no longer share the control of the state amongst them, the colloquial usage of the term has become ingrained into a variety of analyses of Russia's economic elite. As such, despite the decline in its usage, we can expect further publications utilising the term along these lines.

Moreover, despite the Putin era quashing a range of informal tools available to the oligarchs of the 1990s which were directly used to influence political decisions, such as appointments and policy-making, the oligarchs still maintain some functions. Albeit none of them used in a manner which can politically challenge the Kremlin, they can still gain rewards and influence the institutions. Employing tools, such as the smotryashchie, can skew policymakers in their benefit, which adds to the informal activities conducted in coordination with the government.

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