Thread: Russian Oligarchs

Can someone explain me shortly why there are so many Russian rich people.
My country, Cyprus, is full of them. The money they possess is unimaginable.
As I understood after the collapse of the Soviet Union the public wealth went to the hands of few people.
But is this the only reason? Did these oligarchs existed before the collapse of the Soviet Union?
What was the relationship of this oligarchs with the previous and current government?
The majority of them also as I noticed have low education.
Why the people in Russian do not react against them. Is it natural a person to possess 8 billions and the other to starve or receive pension of less than 50 euro?
Please you answers if its possible in Russian.

Как появились олигархи

The reason they are rich is because they bought the property of the state for a fraction of the market value, back in the 1990s. The state was the ultimate owner of everything, but needed/wanted to sell things, starting in the early 1990s. Not long after the oligarchs bought these assets so cheaply, they were able to exploit them to their true value. This made them rich.

I.e. they bought something valuable at bargain prices. Classic way to get rich. But there were other factors as well.

They bought natural resources of various kinds, like metals, minerals etc.
Or factories which were outdated by Western standards, but still fully functional. Some just bought stuff cheaply that could be resold for extremely high profits abroad. All this was possible in Eastern Europe 1989 - late 1990s.

When the Soviet Union started allowing some private ownership towards late 1980s there was no proper understanding of the true value of the assets.
Everything belonged to the state, and corrupt state officials sold assets to people who could pay. The prices were extremely low, from an international perspective.

Then, after the USSR formally dissolved and communism ceased to have any influence, it was an absolute free-for-all. Not only Russians, but people or companies from other parts of Europe, and from the USA, went to Russia and Eastern Europe and bought natural resources and factories at a fraction of the real price. Regular people went East and bought things like vintage wines (a relative of mine did that), antiques, art or a truckload full of anything that could be sold at home.

Nobody could really do honest business there at the time. My dad had done legitmate business with the USSR in the late 70s-80s. He got quite badly ripped off in 1992 and pulled out completely. Maybe if he had stayed involved and been a bit ruthless, he could have become a billionaire lol! But it was rumoured to be physically dangerous to do business in Russia at the time, that's how extreme the situation was.

People actually laughed at the fact that the Eastern Europeans did not understand the value of assets, or were not in a position to demand the true value. The reason they didn't know the monetary value of things, was because in the socialist economies the state simply decided how much of something should be produced, and what the price should be. Whereas in capitalism this is decided by "the market".

So they really had no idea what the actual value of their property was, and there was not much to compare with. Western Europeans took down the prices further, by claiming that everything in Eastern Europe was totally outdated or didn't work, therefore not worth anything. But something that is a bit outdated can still work and fulfill a need. This was disregarded though. In Eastern Europe previously, particularly in the USSR, things were priced in a very odd way and as a visitor you could both make tremendous bargains or be badly ripped off. I have no idea how they set the prices in the USSR, but it seemed almost random at times - or it was based on something that I just wasn't familiar with.

Early 1990s for these oligarchs was a crazy bonanza and the shrewdest most ruthless people snatched the output of what socialism had built up in Eastern Europe. Unfortunately for this region, it still haunts them to this day. If you go to EU Eastern Europe you'll find that they have almost no big brands of their own - Western European brands dominate the market in most fields. Their local stuff is cheap and totally unknown outside their borders. Personally I think they were brutally taken advantage of, at a weak moment. I think Russia has somewhat reversed that though, and Belarus never allowed it.

All the oligarchs needed to do was come up with fairly low sums of money (which they borrowed abroad, or got from international development funds).
Then it was like a gangster in Santa Claus' toy land.

Also, another problem was that the Soviet state was almost broke and had lost its motivation for doing anything. It regarded the socialist system of state ownership as failed.

People who had the authority to sell this stuff were broke themselves. So even if they knew they were selling the goods too cheaply, they didn't care because they wanted cash for themselves, to cope. Lots of people went for months without receiving salaries, but still working. Many of them got by through corruption, bribes and thievery instead.
So they allowed this to happen even though in hindsight, it seems crazy.

The oligarchs were very ruthless and were able to eliminate competitors and make money much faster than you can in a regulated Western society with mature capitalism, or in the old state regulated system that had been in place earlier. They were almost as ruthless and criminal as the mafia in Italy.

Putin decided to try to reign in the oligarchs. They had to either co-operate with the state, or leave the country. This was critisized a lot in the Western world (Khodorkovsky, Berezovsky etc). But it put a stop to the worst excesses of the oligarchs.

However, there are still many around. Some extremely rich Russians live in the neighbourhood where I live too. My gut feeling about them is that they are probably crooks. It doesn't matter how much they try to be chic and sophisticated.

Finally, there are oligarchs from other ex-USSR countries as well. For example Ukraine and Kazakhstan in particular, but also other places. I think they tend to speak Russian, but technically that's not their nationality.


So to sum up:

• They bought things cheaply, not at the true value of the assets.
• They were corrupt, criminal and ruthless, to a level you could not get away with in Europe.
• The situation in Russia at the time was such, that they got away with that.
• Nobody bothered to stop them because everybody had urgent problems of their own.
• The state in the 1990s in Russia was weak and corrupt.
• It is better in Russia today, but the problem is still not fully solved.

PS - if any Russian person thinks that I have got any of this wrong, please feel free to correct it. That is how it seemed to me at the time, and certainly in hindsight. But I don't have the "inside story" of course, and I didn't not personally live through it in Russia.

So tell us about these Russians in Cyprus. Do they live there, or just visit on holiday?
What do local people think about them?

Don't confuse just rich russians and oligarchs.
There are alot of Russians who made some money running fair business. And there much more of them then "oligarchs".

Originally Posted by Alex_krsk

Don't confuse just rich russians and oligarchs.
There are alot of Russians who made some money running fair business. And there much more of them then "oligarchs".

Well, probably some in the software industry and science. But it might be that Antonio and myself are seeing the not-so-nice people who have in fact taken their money and moved abroad because they have something to hide.

There are some very rich Russians living in my neighbourhood. I don't think they are oligarchs on par with Abramovich and similar, but they own properties that cost several million pounds. They have extremely expensive habits. Why do they live here at all?

My assumption is that they are somehow crooked. The family that I see the most is actually from Kazakhstan though. But they speak and look Russian.

I sometimes see other local Russians, only at the most expensive local places that I don't normally use/visit. No "regular" Russians live in this part of London. Most regular Russian speakers in London are from the Baltic states and live in other parts of the city.

But how else could these people have made that much money in under 20 years, and why do they move abroad? People don't normally get super rich that quickly. It only happens legally in Silicon Valley or Hollywood..... Not even the mafia get seriously rich that fast, and they combine business and criminality. I'd be very surprised if there is legitimate hard and honest work, or an invention behind their riches.

There are so many rich Russians moving into this part of London that they actually have Russian speaking staff in some of the real estate agencies. People who buy such expensive properties are usually Arabs with oil money, or people who inherited wealth. The odd well known mogul of a very big company. And then these "oligarchs".

My question does not aim the acquisition of historical knowledge. My question is seeking answer to one of the most popular questions in human history: How to get extremely rich quickly?
I agree that with the word rich I don't distinguish between billionaires, millionaires and simple wealthy. I meant extremely rich people (50 millions of wealth and above)
Through my job as a Financial Advisor with specialization in Russians I tried many times to answer one of the most important questions:
These oligarchs have been already rich and before the collapse of the Soviet Union?
Did rich Russians existed and before 1989?
We all say that Russians before 1989 were leaving under a communistic regime, were the existence of private property was prohibited?
Is this true? Did in reality oligarchs had already accumulate a lot of money before 1989 and when the collapse arrived they just have the resources/money to buy everyrthing that was under privatization?
In my country except from extremely rich Russians we have an extremely rich Chinese.
Chinese are still living in a communistic regime. These people come from China to Cyprus, possessing the resources to buy a house with value one million and a car 100,000 euro. If they have 1,000,000 (house) + 500,000 (deposits) + 100,000 (car) = 1,600,000 euro in insignificant and trivial Cyprus this means that in China they don't have less than 50,000,000 euro.
Where did they found this money from the time the state is communistic?

Restatement of the question:
You want me just to believe that a person who was just clever and ruthless was able to find 1,000,000 euro to buy a state business?
Where he found the money?
Or ... he was just a superior army officer and this state business was just a present to him by the government?

Nothing makes sense.
I know hard working, clever people who will never earn more than 1,000,000 million during their whole life.
If these oligarchs just stole this money without using any skill, cleverness, innovation, social contribution the government should confiscate everything.
Russians should wake up!

No, of course there were no Russians that were rich in a meaningful way prior to glasnost.

Some people had access to large funds through their work, but it was not their money. They couldn't inherit any serious wealth, and if they lived in luxurious conditions, it was because of their job, not because they had private wealth.

Those people who were rich before the revolution left the country. If they didn't, they eventually lost everything and became regular citizens.

Perhaps some superstar singers and the odd criminal were rich in Soviet times, but not regular people, even people with really important jobs.

Like I explained those super rich people took advantage of the conditions in the 1990s, at the very end of the USSR, or just after. (it held on to 1992).

Probably it's not possible anymmore to become super-rich in Russia as fast as the first generation of oligarchs did. It was a unique situation.

The modern day financial market in Russia is apparently well regulated and functions similarly to any other stock exchange in the world.

The rumours back in the 1980s was that Russians had "lots, and lots of money", and technically that was probably true in many cases. But the rumour continued: They have all that money but they can't really find much to spend it on.

The problem was, the money couldn't easily be exchanged to any hard currency, and they couldn't buy stuff they wanted with the money, because of shortages, bureacracy and laws. So if somebody had a large amount of Soviet roubles it only had limited value anyway. Most people couldn't get large amounts of hard currency and had no opportunity to leave the country and set up accounts somewhere else. The system (deliberately) made it almost impossible to become rich.

Plus, the Soviet roubles lost their value almost completely over the course of a few years, and then again in 1998. So anything they kept in that currency was ultimately useless.

The situation was really very odd from a modern / Western viewpoint.
If you are born in '86 you are to young to remember it, but it was well known back in those days, what difficulties the Soviets and others in Eastern Europe experienced on that front. One short visit to anywhere in Eastern Europe made the situation pretty clear. The stuff you might want might not necessarily be available. From today's perspective it's difficult to get it across. It wasn't poverty or misery, just a total absence of private wealth or luxury consumption.

If you just took a superficial view, it was clean, people looked healthy and there were no beggars, unemployed looters or open criminality. But there also were no ads, no cool shops, no chic restaurants and not a lot of really desirable things to buy.

To conclude: None of the people that you are advising in a professional capacity today are likely to have had anything remotely passing for private wealth prior to the 90s.

One exception perhaps somebody who happened to live in a very attractive property as a perk for his job, continued living there and was able to snap it up very cheaply and now finds that he sits on a luxury property in central Moscow, worth millions. But that must be an unusual situation. That's talking about the top 1% of the population.

As for China, I think 95% of what goes on there has nothing to do with Communism. It's just the name of the party ruling the country.
They re-defined Chinese Communism to essentially mean capitalism with a one party meritocratic state.
However the state there is trying to make it difficult for people to move money out of the country. They don't mind people being rich, but they want the money to be in China, not in offshore locations.

Originally Posted by Hanna

No, of course there were no Russians that were rich in a meaningful way prior to glasnost.
Those people who were rich before the revolution left the country. If they didn't, they eventually lost everything and became regular citizens.

Perhaps some superstar singers and the odd criminal were rich in Soviet times, but not regular people, even people with really important jobs.

Like I explained those super rich people took advantage of the conditions in the 1990s, at the very end of the USSR, or just after. (it held on to 1992).

Probably it's not possible to become super-rich in Russia as fast as the first generation of oligarchs did, anymore.

The modern day financial market in Russia is apparently well regulated and functions similarly to any other stock exchange in the world.

As I notice this extremely rich Russians continue to become richer.
How can this happens from the time the economy of Russia is now in a severe crisis (the GDP growth is less than 2%)?
I think that Russia has one of the worst economic systems and more socially unfair from all the industrial countries.

Originally Posted by Antonio1986

Restatement of the question:
You want me just to believe that a person who was just clever and ruthless was able to find 1,000,000 euro to buy a state business?
Where he found the money?
Or ... he was just a superior army officer and this state business was just a present to him by the government?

They didn't need any 1 mil Euro. And as you know, the Euro didn't exist back then. They would have used Dollars or D Mark. But nowhere near that. If you really want to know about this, some of the oligarchs have actually written memoirs. I assume they explain some of this. Boris Berezovsky for example, wrote a memoir, I think. I haven't read it, but I've seen interviews with him.

They bought entire factories and mines for much less than that!

They borrowed the money abroad, and had made some of it during glasnost when some limited capitalism was allowed, co-ops and the like. Against that, they could borrow more.

In all honesty, a very large proportion, if not the majority of the oligarchs are Jewish. So they may have taken advantage of the opportunity to emigrate to Israel in the 1980s, made a bit of hard currency there, and taken a loan, then returned to the USSR. I think a few people did that, and their Israeli citizenship meant they could circumvent some of the local laws even though they were for all extent and purposes Russians.

Also, super rich people from the US, like George Soros etc, made funds available for those wanting to invest in Eastern Europe. Western banks knew what was going on in Eastern Europe and they knew that anyone who bought anything there was paying well below the market price. I don't know how the banks in the USSR worked, and whether they would have lent people money for investments in the late 1980s.

It probably varied from person to person, but they bought HUGE enterprises for RIDICULOUSLY low sums of money, and money was made available to Russians who figured out capitalism before everybody else.

A lot of rich people or corporations across the world were all to keen to see the USSR sold off and thus lose the opportunity to ever make a comeback as a socialist country.

If these oligarchs just stole this money without using any skill, cleverness, innovation, social contribution the government should confiscate everything.
Russians should wake up

They know it... Check the political forum.
And the oligarchs were clever and bold. Not very ethical probably, and they did not invent anything. But it was probably hard work to figure out how to make a Soviet factory or mine profitable internationally while hanging on to skilled labour and preventing looting. Not to say I admire them, I don't. They were like clever parasites who took advantage of a very unusual situation.

But unfortunately it took regular people in Russia too long to figure out what was happening to their country. By the time normal people really understood capitalism and had a competent president, it was too late.

Some of us said for a year or two "They are crazy! They are selling out everything they worked for, for 70 years. For a stupid BigMac and a pair of Levis" But then, all the dirt on the USSR came out, it was black painted. People thought it was a cruel country and modern Russia a dump. For a few years people thought Russia was a country of gangsters, alcoholics, crooks and prostitutes. Everyone turned their back on Russia. That was Russia's darkest moment, in the 1990s. Then things improved, with Putin and oil/gas money after that.

Russia has had the most insane modern history of any country in the world really. That's one of the reasons I find it so intriguing. They have experienced everything there.

There are some very rich Russians living in my neighbourhood. I don't think they are oligarchs on par with Abramovich and similar, but they own properties that cost several million pounds. They have extremely expensive habits. Why do they live here at all?

Now that's xenophobia. Some Brits in the area could think the same of Swedes as well, how's that?

Thank God I was raised with the concept that counting other people's money is a mauvais ton, but apparently there are people who don't think so. But tell you what, some poor people in central Africa or countries like N.Korea who live for less than $1 a day would think you guys are oligarchs. Seriously, for many people out there $100K a year is the oligarchic level. So, just because someone's richer than you doesn't mean you should hate them.

In fact, I admire all those making much more money than I do, and I try my best to get up to their level, and I never dream of them getting down to mine, and I would advise you guys to do the same.

By the way, in Russian they have a nice saying about those having a black eye on someone more successful than they are --> "пусть лучше у соседа корова сдохнет, чем самому свою иметь", which literally says "I'd better have the neighbor's cow dead, than mine live and good". Don't be like that!

Hanna, your opinion is very accurate, I can only make one or two small remarks.
First. You say, private property was not allowed in the USSR before the so-called "glasnost'" period. It's not completely true. The thing is, the communistic ideology distinguished two different kinds of properties that Western people call "private". The one that was forbidden was called in Russian "частная собственность на средства производства" which means "private property on the means of production" and it was recognized as to be the source of exploitation of a human being by another human being. The other, called in Russian "личная собственность граждан", was allowed and it included such things as cars, small plots of land with a little cottage called "dachas", flats in the houses built by cooperatives and so on. But all the factories, plants and other enterprises where many people worked were all in the state property.
The second remark is, we never lived under "communistic regime". Even Stalin never called the Soviet regime "communistic". We were building communism but we have never lived in a communistic society. Stalin called the Soviet society "socialism", Brezhnev decided that in the time of the late 70s we built a "developed socialism". Gorbachev tried to build so-called "socialism with a human face" whatever that means, but nobody of the Soviet leaders was crazy enough to describe the Soviet reality contemporary to them as "communism" with maybe an exception of a short period of the civil war in 1918-1921 when it was "war communism", but you of course understand, that that kind of communism was not the aim of the communist party. The real communism was declared as a remote future aim almost unattainable like The Kingdom of heaven in Christianity.

Originally Posted by SergeMak

Hanna, your opinion is very accurate, I can only make one or two small remarks.
First. You say, private property was not allowed in the USSR before the so-called "glasnost'" period. It's not completely true. The thing is, the communistic ideology distinguished two different kinds of properties that Western people call "private". The one that was forbidden was called in Russian "частная собственность на средства производства" which means "private property on the means of production" and it was recognized as to be the source of exploitation of a human being by another human being. The other, called in Russian "личная собственность граждан", was allowed and it included such things as cars, small plots of land with a little cottage called "dachas", flats in the houses built by cooperatives and so on. But all the factories, plants and other enterprises where many people worked were all in the state property.
The second remark is, we never lived under "communistic regime". Even Stalin never called the Soviet regime "communistic". We were building communism but we have never lived in a communistic society. Stalin called the Soviet society "socialism", Brezhnev decided that in the time of the late 70s we built a "developed socialism". Gorbachev tried to build so-called "socialism with a human face" whatever that means, but nobody of the Soviet leaders was crazy enough to describe the Soviet reality contemporary to them as "communism" with maybe an exception of a short period of the civil war in 1918-1921 when it was "war communism", but you of course understand, that that kind of communism was not the aim of the communist party. The real communism was declared as a remote future aim almost unattainable like The Kingdom of heaven in Christianity.

Thanks for the explanation. I knew some of what you said - it's just hard to keep the terminology perfect Private property was too broad a term.

I guess it's "means of production" that wasn't allowed, but limited private property for personal use was ok. That's what I should have said!

One thing occurred to me; what about inheritance in Soviet times? For example, if somebody lived in a nice flat or had a dacha or owned a nice car: could their children or other relatives inherit?

And what about in the 1990s when they started giving back land to the original owners in some parts of Eastern Europe? Did that happen at all in Russia?

Originally Posted by Lampada

Как появились олигархи

Страна узнала о новоявленных березовских, гусинских, всяких мавродиях, абрамовичах, Прохоровых и им подобных

The bold are unknown words. I don't know what they mean
For the word мавродиях I just want to say pozdravlyaiu ...
МММ — Википедия

Originally Posted by Hanna

They didn't need any 1 mil Euro. And as you know, the Euro didn't exist back then. They would have used Dollars or D Mark. But nowhere near that. If you really want to know about this, some of the oligarchs have actually written memoirs. I assume they explain some of this. Boris Berezovsky for example, wrote a memoir, I think. I haven't read it, but I've seen interviews with him.

They bought entire factories and mines for much less than that!

The most valuable property was sneaked away from the state via Залоговые аукционы.

the government should confiscate everything.
Russians should wake up!

Funny like a bank employee from Europe suggests to confiscate while european leaders call Putin a dictator for trying to do just the same. Look like Khodorkovsky bieng a biggest crook in modern russian history magically turned from bloody oligarch into a political prisoner and freedom fighter.

That's not that easy, my friend.

How can this happens from the time the economy of Russia is now in a severe crisis (the GDP growth is less than 2%)?
I think that Russia has one of the worst economic systems and more socially unfair from all the industrial countries.

I wish this "crisis" and unfairness would last as long as possible.

Originally Posted by Hanna

Thanks for the explanation. I knew some of what you said - it's just hard to keep the terminology perfect Private property was too broad a term.

One thing occurred to me; what about inheritance in Soviet times? For example, if somebody lived in a nice flat or had a dacha or owned a nice car: could their children or other relatives inherit?

And what about in the 1990s when they started giving back land to the original owners in some parts of Eastern Europe? Did that happen at all in Russia?

First. Yes, there was inheritance in the USSR. In the early years of the Soviet power there was a limit on the cost of property that could be inherited. This limit was canceled in 1926. The rules of inheritance changed few times during the Soviet period, mainly towards widening of the rights of testators and their heirs, simplification of the procedure of inheritance. The last edition for the inheritance law was made in the 60s and this law was in act till 2002. You can read about the history of inheritance in the Soviet Union here 6.
Second. No, there was no such thing as giving back the properties of the pre-Soviet owners. There was a lot of talk about it but the state didn't do anything as far as I know.

Правду хочешь?
We are awaken, but confused. Putin in fact is on good terms with oligarchs, and any person who does not concede with social injustice publicly, is immediately discredited ("сам он ворюга!")

It is funny how Yeltsin first passed oil, metals, power plants etc to future oligarchs, and then the state bought some property back. But the state by itself does not produce money! So it is excellent procedure to give hundred billions to oligarchs infinitely. Though, highest rank managers of state-owned companies, BTW, have now revenues not less than Ходорковские, Гусинские and others had.
People, who are "honestly rich" are just talented businessmen. One man who managed to sell for example German autos in Moscow, in few months is selling them over whole Russia. Of course, he must be prepared to eliminate possible rivals.
Another man, who was first to deliver furs from Greece to Omsk, had an intention to be the main seller in the next 100 years. Most probably, his business will be taken over by larger company of Moscow in few months.
Water to my flat is supplied by Moscow company (one man collect money from millions), I buy electricity from S.-Petersburg company (another man from other side of the globe), and most good plots of land in Siberian city are somehow "eternally rented" by businessmen from Moscow (our city authorities usually don't want do anything, but even if they wanted, they simply cannot).
This is what I call globalization!
Such artful project was devised by another nice-looking man
http://ru.wikipedia.org/wiki/%D0%A7%...%D0%90._%D0%91.
who explained, that property should be in hands of those who knows how to utilize it. You will be very wealthy people soon, - he predicted, - only let's give our industry, transport, and everything else to effective proprietors.
The outcome was somehow predictable: effective proprietors started to sell things to each other and to foreign businesses and build villas all over the Mediterranean.

Interesting facts:
Old soviet directors of giant refineries tended to swim not in Aegean sea, but in cold dirt waters of Irtysh, where normal person would not be able even to approach the river.
Лицкевич, Иван Дмитриевич — Википедия

Meanwhile in USSR times:
You could not bequeath your flat in USSR, because you had not bought it , but "получал" instead (from State). Relatives (children usually) usually could continue to live in the same flat, if they were living there before death of "main inhabitant" (были прописаны).
And conversely, people were buying cars, so could pass them to relatives (I think so, don't remember exactly).

Березовский, Борис Абрамович — Википедия
Владимир Александрович Гусинский биография медиа-магната

Meanwhile in USSR times:
You could not bequeath your flat in USSR, because you had not bought it , but "получал" instead (from State). Relatives (children usually) usually could continue to live in the same flat, if they were living there before death of "main inhabitant" (были прописаны).
And conversely, people were buying cars, so could pass them to relatives (I think so, don't remember exactly).

On the other hand you didn't pay a kopeck for the flat received from the state, so it was not ethically right to have such pretensions. Those flats that were built in cooperatives could be inherited as well as private houses with the plots of land. Even land share in collective farms (земельные паи в колхозах) could be inherited. I know it for sure, because my grandparents were колхозники and my father inherited their land share and house with a plot of land.

Originally Posted by Antonio1986

...Please you answers if its possible in Russian.

Наверное, никто не заметил эту просьбу.

Originally Posted by Lampada

Наверное, никто не заметил эту просьбу.

Да заметили. Просто первый отвечающий на неё плюнул и пошло - поехало