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The decline of Russia's oligarchs

2009-08-31 03:14:05

By James Rodgers

Analysis, BBC News

If you look up the word "oligarch" in the dictionary, you will find it means a

member of a small group holding power in a state.

Today, though, it usually refers to the super-rich Russians who made their

fortunes in the sometimes barbaric business world of their country in the

1990s.

In some cases, they sought to convert their new financial clout into political

influence.

They grew even richer as oil prices and the Moscow stock markets soared in the

boom years which followed.

Then, 12 months ago, as the global financial crisis reached Russia, the

oligarchs got a shock.

"They have taken the biggest hit because they had the most to lose," says Chris

Weafer, chief strategist at Uralsib, a banking and investment company based in

Moscow.

"The stock market in the second half of last year fell almost 75%, and we've

seen that reflected in the Forbes list of billionaires et cetera," Mr Weafer

says.

"Just looking at the wealth of these individuals, they've taken a huge hit -

hundreds of billions of dollars have been wiped from the value they had in the

middle of 2008."

There is no formal oligarchs' club or association - and the way individuals

have fared has varied depending on where their money was invested.

But any list of wealthy Russian businessmen would be likely to include Roman

Abramovich - most famous outside Russia as owner of Chelsea football club -

aluminium magnate Oleg Deripaska and Boris Berezovsky, who has become an

implacable opponent of the current Russian leadership. He now lives in Britain.

Public humiliation

As the crisis hit home, some of Russia's richest ran into difficulties.

Today it's very, very clear who's calling the shots, and it's not the

oligarchs

Chris Weafer Chief strategist, Uralsib

In June, Mr Deripaska found himself in a piece of political theatre on Russia's

biggest stage: the national television news.

Russian Prime Minister Vladimir Putin arrived in the northern Russian town of

Pikalyevo to deliver a public reprimand to Mr Deripaska and others with a stake

in the town's main factory. Workers had not been getting their wages.

Viewers saw Mr Putin call Mr Deripaska forward. He ordered him to sign an

agreement to solve the problem.

It looked like a teacher telling off a pupil - especially when Mr Putin asked

for his pen back.

"It's a very Russian approach. Nobody in Russia was surprised," says Zoya

Trunova, an editor at the BBC's Russian Service.

"Everyone thought, 'Well, that's a fair thing to do. What else would the prime

minister be doing?' And then Deripaska looked very intimidated by that, but

then he would do what he was told, but obviously the state feels that oligarchs

are almost their own team of people so they can tell them what to do."

This shift in power did not just come with the economic crisis. Vladimir Putin

seems to have decided, as soon as he first rose to political prominence ten

years ago, to rein in the oligarchs.

"He's made it very clear that he expects the oligarchs to look after the

workers, to help the government in terms of the stimulus package," says Chris

Weafer. "And today I think it's very, very clear who's calling the shots, and

it's not the oligarchs."

Staging a comeback

The oligarchs' global fame - or notoriety - has been built on tales of

extravagance.

Stewart Lansley - a co-author of the book, Londongrad, about their lives in the

British capital - says their reduced spending actually fuelled the downturn in

the luxury goods market in Britain. Now, he says, they're returning.

"What's happened in the last couple of months is that the Russians have been

creeping back. There's evidence already that they've started looking for

bargains in a number of areas, they've been reappearing in jewellery shops,

they've been reappearing buying Rolls Royces and top end cars."

The oligarchs have usually excelled at reading the Russian political situation.

Jonathan Eyal, from the Royal United Services Institute in London, agrees that

the government currently has a political advantage - but, he argues, that does

not mean that the oligarchs are finished.

"The oligarchs have many opportunities of influencing Russian political life,

partly because Russian political life is itself now quite brittle," Mr Eyal

says.

"We have a double-headed leadership - on the one hand, Prime Minister Vladimir

Putin, on the other hand President Medvedev - and in that kind of a structure

the oligarchs will always find a weak point, or will always be able to divide

and rule."

The dictionary definition of oligarch doesn't refer to wealth. Russia's

oligarchs have definitely lost part of theirs, and, as a result, they may also

lose some of the "power they hold in the state".

Given their proven ability to survive and prosper in the toughest of times,

they are not about to disappear.