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Yeltsin and the Oligarchs


The 1996 presidential elections were the turning point in the transformation of some of Russia’s most prominent business leaders into a premier league of oligarchs. On the eve of the elections Boris Berezovsky, Vladimir Gusinsky, and several other top business leaders had agreed to throw their wealth and media resources behind Yeltsin in his uphill battle against a strong Communist challenger, Gennady Zyuganov. 

B. Berezovsky and V. Gusinsky

As a result, their commercial structures became actively involved in financing Yeltsin’s presidential campaign to the tune of $300 million. It goes without saying that their investment in promoting the incumbent was recouped manifold through tax concessions and other tokens of government favor.

After Yeltsin’s reelection, several of the tycoons were rewarded with high government posts (e.g., Vladimir Potanin became vice premier). All of them were handed assets at knock-down prices: for example, Boris Berezovsky was given control over the first public TV station, ORT, and over the country’s biggest airline, Aeroflot; and Alexander Smolensky gained control over Agroprombank, which had one of the best local branch networks.

Having assisted Yeltsin’s reelection, the oligarchs seriously believed that the state owed them a debt of gratitude, forgetting that a substantial part of their wealth had been gained by plundering state assets in the first place. Because most money-making business was now placed under their control, the oligarchs’ financial-industrial empires swelled rapidly, enabling them to enter the ranks of the world’s richest individuals, as published in Forbes magazine.

As a result of these developments, the “oligarchic vanguard” of Russian business began to define, to a large extent, Russia’s foreign and domestic policies. It exerted a powerful influence on the central government’s economic strategies, which often neglected national interests for the sake of corporate interests. In an enfeebled state the powerful financial-industrial groups were able to use the resources and capabilities of the state itself to accrue profits.

In contrast to countries with developed democratic systems, Russia’s small and medium-size businesses were obstructed from playing any significant political role. The lower segments of the business community had no input in decision making at the federal level, and only limited influence at the regional or city level.

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