An oligarchy is government by the few. And the Oxford Dictionary defines “oligarch” as an “extremely rich and powerful person, especially a Russian who became rich in business after the end of the former Soviet Union.”
Despite the Russian overtones, however, the word oligarch has Greek roots: It is derived from oligoi (“few”) and arkhein (“to rule”). Aristotle used it to describe a privileged few exercising despotic power for corrupt purposes — a debased kind of aristocracy.
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“Oligarchy is when men of property have the government in their hands,” he wrote.
But the word has taken on a new salience since the Russian invasion of Ukraine — and the moves by Western nations to impose sanctions against Russia and the industry tycoons who orbit President Vladimir Putin.
These elites and their high-end assets — from multistory megayachts to luxury properties in New York and London — have been splashed across the Internet and targeted for sanctions by the United States, Britain and the European Union. Among them are Chelsea Football Club owner Roman Abramovich; mining mogul Alisher Usmanov; and fertilizer and coal industrialist Andrey Melnichenko. Italy said earlier this month that it had seized Melnichenko’s superyacht, which boasts a rotating king bed and $40,000 bath knobs.
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But some experts say Russia’s 21st-century oligarchs don’t hold the sway they once did. In Russia, there are two generations of oligarchs — the old and the new.
The first generation of Russian oligarchs emerged from the 1991 collapse of the Soviet Union, whose state control over the economy began to loosen under Mikhail Gorbachev’s perestroika, or restructuring reforms.
Gorbachev’s successor as president, Boris Yeltsin, then ramped up privatization, seeking to transform Russia with its trove of state assets into a free-market economy — and fast. Yeltsin and the other architects of post-Soviet Russia rapidly loosened state control over prices and property, according to Da Hoffman, author of “The Oligarchs” and a contributing editor at The Washington Post.
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The government sold swaths of state-owned enterprise — from small restaurants to oil giants — in both rigged auctions and through privatization vouchers. A scramble for the spoils ensued.
But with few rules, institutions or precedent, the freewheeling privatization effort led to what Hoffman calls a “warped protocapitalism.”
Russia’s first tycoons, some well-connected and others unafraid to take chances, made enormous fortunes. Russian voters at the time cynically referred to the rush as “prikhvatizatsiya,” or “grabification.”
These early oligarchs were not entrepreneurs who built things from the ground up. Instead, they would buy cheap assets such as refineries, mines and factories from the state, then sell them for a quick profit, Hoffman said.
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In one such example, Abramovich bought the state-owned oil company Sibneft for $250 million in a rigged auction in 1995, then sold it back to the government for $13 billion a decade later, the BBC reported.
But after Putin became president in 2000, the era of the old guard largely came to an end. Russia’s new leader did not embrace the spirit of perestroika or approve of the rise of new capitalist tycoons.
He moved to rein in the Russian financiers’ power and consolidate his own. Along the way, he ended up creating his own class of influential elite — the new oligarchs.
In contrast with the older generation, this new class has been more rooted in Russia and less interested in ingratiating themselves with the West, said Timothy Frye, a professor of post-Soviet foreign policy at Columbia University.
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They generally fall into three categories, according to Frye.
First, there are those with long-standing ties to Putin. These indiuals have built companies largely on immense state contracts that were both profitable and assigned on a noncompetitive basis. In 2018, for example, Putin opened a $4 billion bridge connecting Russia with Crimea. It was built by a billionaire businessman and construction magnate, Arkady Rotenberg, who also happens to be Putin’s childhood friend and former judo sparring partner.
Second are the business executives who “cut their teeth in Russia in the Putin era,” said Frye, and were appointed by the president to run major state companies. This group includes someone like Igor Sechin, a close ally of Putin who was named chairman of Rosneft, the Russian state oil company. France this month seized Sechin’s 281-foot yacht the Amore Vero (or “true love” in Italian). The United States, Britain and the E.U. have all targeted Sechin for sanctions in recent weeks.
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Third, there are the national security hawks — elite security and military hard-liners, some of whose relationships with Putin date back to his years as a K.G.B. agent. While not traditional oligarchs, some of them have leveraged their connections in the security services and “cashed them in,” Frye said.
Not all wealthy Russians have deep ties to the Kremlin, but “once one rises to some level of wealth in Russia, one attracts the attention of the state,” Frye said.
“It’s difficult to survive without being in good relations with powerful people in Russia,” he said.
The word oligarch, however, is not typically used to describe U.S. or European yacht-owning billionaires with political influence.
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Frye said a closer U.S. parallel to Russia’s oligarchs might be the robber barons of the Gilded Age, who maintained close relationships to the state and used unethical practices to build their wealth.
Others, however, view the definition more broadly. “I don’t know why they are not calling them oligarchs,” said Brooke Harrington, a professor of sociology at Dartmouth College. She added that there are oligarchs in many countries, including the United States.
The question came up during the 2018 criminal trial of Donald Trump’s former campaign chairman Paul Manafort, who was eventually convicted of tax and bank fraud. During the proceedings, Judge T.S. Ellis instructed lawyers on both sides to stop using the word “oligarch” to refer to Manafort’s patrons in Ukraine.
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He said that U.S. political donors “Mr. Soros” and “Mr. Koch” would also be oligarchs if the same standard was applied.
“But we wouldn’t call them oligarchs,” he said, complaining that the term was too “pejorative.”
“A lot of things happen in the United States that happen in other countries, but we don’t label them as such as quickly,” said Harrington, adding that it’s a “quirk of American exceptionalism.”
In 2017, she wrote that “the collective wealth of Trump’s team dwarfs that of any other in history.”
“There are no laws against a president and his super-wealthy Cabinet using their power to benefit their own class,” she wrote. “There is nothing that compels them to look beyond their privilege to address the needs of the citizenry.”
