by Prof. Gordon L. Bowen, Ph.D.
Putin and the Oligarchs: Economic Freedom in Russia
“Shock Therapy” privatization began in January 1992 under Boris Yeltsin. All price controls on consumer goods were lifted, and prices rapidly rose. Accompanying this was rapid transfer of state-owned assets into private hands. This process soon led to re-consolidation of ownership of key industries, as former officials and new entrepreneurs bought up stock certificates that had been given to workers in the formerly state-owned factories.
Within a few years, this “nomenklatura capitalism” came to be dominated by a handful of “oligarchs.” Oligarchs controlled much of the privatized mass media as well as basic industries such as oil and natural gas. Many oligarchs gave decisive financial support to Yeltsin and his successor (Putin) during election campaigns, as the Yeltsin administration and its reform policies were opposed in presidential elections most powerfully by the Gennady Zyuganov, candidate of Communist Party of the Russian Federation in the 1996 and 2000 ballotings. (Zyuganov continued to lead the declining Communists until 2004)
The political influence of the oligarchs began to wane once Yeltsin's successor, Vladimir Putin (acting President after January 1, 2000), was elected president in his own right on March 26, 2000, and began to chart his own, independent course in policy.
Most oligarchs opposed Putin’s plans to increase taxes and to regain state control over the oil export sector. Nearly all opposed his plans to restrict the transfer of money to banks outside Russia. Putin cracked down on much of the independent press, and some oligarchs fled abroad.
Yukos Oil, the largest private corporation in Russia, was a key target of the Putin Government.
Its founder, Mikhail Khodorkovsky, often financed campaigns by political opponents of Putin, and media he owned often criticized the Putin Government. Khodorkovsky (born 1963) is of Jewish heritage.
· Khodorkovsky had by the late 1990s become Russia’s richest man. He was arrested in October 2003, and was charged with tax evasion.
· Khodorkovsky’s trial began July 15, 2004.
· Khodorkovsky was convicted May 31, 2005; he was sentenced to nine years in prison.
· He was incarcerated at Camp 13, in Krasnokamensk, in the sourthern Siberia administrative district of Chita Oblast, near the Mongolian and Chinese borders.
Yukos was investigated and ultimately sold by the state for non-payment of taxes owed to the government.
· In July 2004, a court froze its bank accounts.
· In November 2004, the government announced that Yukos’ assets would be auctioned to pay its tax bill.
· On December 19, 2004, Yukos was auctioned for $9.4 billion, far less than its $28 billion tax bill.
· Dec. 22, 2004: The top bidder for Yukos, Baikal Finance Group, was bought out by Rosneft. Rosneft then announced it would merge with Gazprom, the natural gas monopoly.
The events timeline above comes entirely from Current History "Month in Review" and other reputable academic sources. However, Khodorkovsky is a highly controversial figure, and a rich debate about the meaning of his arrest, trial and incarceration divides informed observers. Some of that debate can be found in:
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