Oligarchs, in the Russian context, are the ultrawealthy business elites with disproportionate political power. They emerged in two distinct waves.
The first group
emerged out of the privatization of the 1990s, particularly the all-cash sales of the largest state-owned enterprises after 1995. This process was marred by significant corruption, culminating in the infamous “
loans for shares” scheme, which transferred stakes in 12 large natural resource companies from the government to select tycoons in exchange for loans intended to shore up the federal budget.
The government intentionally defaulted on its loans, allowing its creditors – the oligarchs-to-be – to auction off the stakes in giant companies such as Yukos, Lukoil and Norilsk Nickel, typically to themselves. In essence, then-President Boris Yeltsin’s administration appeared to enrich a small group of tycoons by selling off the
most valuable parts of the Soviet economy at a hefty discount.
After
Putin came to power in 2000, he facilitated the second wave of oligarchs
via state contracts. Private suppliers in many sectors such as infrastructure, defense and health care would overcharge the government at prices many times the market rate, offering kickbacks to the state officials involved. Thus, Putin enriched a new legion of oligarchs who owed their enormous fortunes to him.