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The Rise of "Oligarchs"

V. Gusinsky

A. Smolensky

M. Khodorkovsky

V. Potanin


By the mid-1990s Russia formally had a market economy. However, in practice, huge financial resources were still distributed through the state budget. Subsidies and “selective” financial support from the state budget still existed. Railways, massive energy systems, and entire branches of industry were completely or partially state-owned. The state dominated the financial sector. It retained influence in foreign trade, dictating quotas for exported raw materials, granting export licenses, and regulating access to the gas and oil pipe networks. The incomplete nature of Russia’s capitalist reforms meant that the state continued to play a major role in running the economy. 

Under these conditions, it was extremely important for the business class to establish close relations with state officials at all levels. Russian entrepreneurs realized that, in a country where officials had such exten­sive powers, it made sense to have good political connections. A handful of the most successful of them thrived on the confluence of power and big business, accumulating enormous political and economic influence and concentrating in their hands control over entire branches of the economy. These magnates soon began to refer to themselves as “oligarchs.”

The new oligarchs’ rise to prominence began in 1994. By that time a score of leading bankers and entrepreneurs had emerged who had made their fortunes in the period of rampant inflation of 1992—94. The new magnates included Vladimir Gusinsky (the Most group), Alexander Smolensky (the Stolichny bank), Mikhail Khodorkovsky (Menatep-Bank), Vladimir Potanin (ONEXIM-Bank), Boris Berezovsky (the Logovaz group), Mikhail Fridman (Alfa-Bank), and Vladimir Vinogradov (Inkombank).

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