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Last Updated: Saturday, 25 October, 2003, 09:18 GMT 10:18 UK
Russia's oligarchs under pressure
Nikolai Gorshkov and Stephen Dalziel
BBC Russia analysts

Russia's "oligarchs" rose to prominence during the early 1990s, when well-connected entrepreneurs were allowed to pick apart the remains of the bankrupt Soviet economy.

President Boris Yelstin in 1998 with business tycoons, including Vladimir Gusinsky, first from left, and Mikhail Khodorkovsky, first from right.
The tycoons were at the height of their power in the late Yeltsin era
Under President Boris Yeltsin the tycoons began to take on huge political power to go with their economic might.

However their fortunes have waned under Vladimir Putin, who has been keen to show the oligarchs who is in charge.

Some have been forced into exile, and others told to keep out of politics.

The tycoons' rise dates back to 1992, when a team of young reformers led by Anatoly Chubais set about creating a market-based system.

They devised a scheme through which every Russian citizen was given a bond, representing his share of the national wealth.

The bonds had no value to millions of impoverished Russians who sold them cheap to streetwise entrepreneurs, who accumulated huge assets.

The takeover of state companies was marred by price fixing, but the government of the day saw it as a lesser evil compared to the burden on the state budget of subsidised industries.

Chelsea players
Chelsea - bought out of Roman Abramovich's "pocket money"
As a result a handful of businessmen amassed nearly half of all financial assets in Russia.

Among the first, and the wealthiest, was Boris Berezovsky who started his business empire with a dealership that secured exclusive rights to sell Lada cars.

The oligarchs also engaged in ruthless wars against each other for prime pieces of the state pie. Coalitions were formed and abandoned, allies sought and dumped.

The oligarchs were at their peak in 1996. It was essential for them that Boris Yeltsin remained president, and their campaign through the media empires they controlled was largely credited for his re-election.

By this time, all of the significant parts of Russia's media which were in private hands belonged to two of the leading oligarchs - Mr Berezovsky, and Vladimir Gusinsky.


When Mr Yeltsin stepped down on New Year's Eve 1999, the tycoons expected to hold the same influence over his successor.

They had a nasty shock in store. Vladimir Putin was determined to break the hold the Kremlin's shadowy paymasters had on Russia's politics.

Boris Berezovsky and Vladimir Gusinsky were forced to go abroad, to London and Israel respectively.

Others were made to understand that they would be allowed to pursue their business interests if they kept out of politics.

This tacit agreement seemed to be holding until it was learnt in the first half of 2003 that the head of the Yukos oil company, Mikhail Khodorkovsky, was financing political parties that would be opposing President Putin in parliamentary elections in December 2003.

Since then Yukos has been subjected to raids by the tax police, and its chief accountant, Platon Lebedev - himself an oligarch - was arrested and is still in prison awaiting trial on charges of theft of state property during the privatisation of 1994.

Mr Khodorkovsky - reputedly Russia's richest man and one of the most prominent oligarchs - is facing further investigation.

Capital flight

The big question now is whether the oligarchs will be allowed to continue their business interests unhindered.

Billionaire Roman Abramovich, who recently bought Chelsea football club for $200m, seems to be an example of one who - for now - is being left alone by the Kremlin.

But more significantly as far as Russian business is concerned has been his sale of his shares in Aeroflot, and half of his stake in the Aluminium giant RusAl.

If the Kremlin feels that this is encouraging capital flight from Russia - a trend of the 1990s which Mr Putin boasts has now been reversed - Mr Abramovich could yet feel the weight of the system.

Mr Berezovsky recently said that more of the big players were now moving out with their billions.

He says 10 big businessmen have brought large properties in London in recent months.

Economists have warned Mr Putin not to interfere with big business, saying it could be disastrous for the country's economic health.

If the oligarchs "behave themselves" politically, then it is highly possible that the new Duma which will be elected in December will draw a line under the privatisations of the 1990s, leaving the oligarchs with their financial - but not political - gains.


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