Russian oligarchs, or the ‘revolutionary installation of an entrepreneurial class’1
by Arne C. Seifert*
(picture ma)
On 24 February 2022, something happened that the world deemed unthinkable: War broke out in Europe with Russia’s “special military operation” against Ukraine. Harald Kujat, a former NATO general, commented on this on 21 August of the same year: “The measures taken by the West to stop the Russian attack on Ukraine – financial support, sanctions and the supply of weapons – must be seen as an overall strategy”. And: “It has been foreseeable for some time that Russia will be more successful than expected in surviving the effects of the sanctions imposed by the West”.2
The latter is certainly true with regard to Western sanctions against Russian oligarchs.
Berlin also justified the latter observation as a serious blow “against the close associates of the Putin regime, which will affect those who have profited from corruption in the country for decades”.3
An oligarchy, it is said, is a “rule of the few”. Its supporters are “those who rule with a few others, in particular big businessmen who have also gained political power over a country or region through corruption. With the intertwining of politics and business, political decision-making processes become non-transparent and often go hand in hand with autocratic rule and a shadow economy”.4
The social category “oligarch”: Where did it come from in post-Soviet Russia? Suddenly and abruptly? Until the dismantling of the USSR in the early 1990s, this fresh-faced “oligarch” was a Soviet citizen, a functionary in a socialist state, a member of the CPSU or of Komsomol, a man of finance, industry, transport, collective agriculture, raw materials, etc. Consequently, he was by no means a capitalist, nor did he fall from the sky. The doors to becoming an oligarch were opened to him by the “shock therapy” of what was commonly called at the time the Washington Consensus.
‘Washington consensus’
This “consensus”, which was never actually a consensus, was decided in January 1993, an American scholar tells us, between “15th Street and 19th Street in Washington among the United States Treasury, the IMF and the World Bank, as well as some influential think tanks, a prominent majority of academics along with assorted editorialists and, most importantly, business interests.”5 According to Canadian author Naomi Klein, in her seminal work The Shock Doctrine (Metropolitan, 2007), many of the powerful masterminds in Washington saw Russia’s economic collapse as a geopolitical victory – the decisive one that secured the United States’ supremacy. “With the end of the Soviet empire”, she wrote, “the market now had a global monopoly”. Klein went on to reveal that advocates of the Washington Consensus talked “frankly and freely” about actively causing a serious crisis in the transition countries to be able to push through a “shock therapy”, as this exercise was called. “Only countries that are really suffering, that are shocked, submit to shock therapy”, the argument ran.
West German support
The “shock therapy” of the Washington Consensus also found supporters in the Federal Republic of Germany. The position that the West had to steer the transformation processes in the post-Soviet space from the outside was expressed, for example, in the postulate that “the only condition under which a market economy and democracy can be implanted and flourish simultaneously is if both are imposed on a society from the outside and guaranteed for long periods of time through international dependency relationships”.6
East Germany became both theoretically and practically the object of this neo-liberal strategy of simultaneous transformation of all political, economic, and social systems in a “frontal attack: the ‘revolutionary installation of an entrepreneurial class’”, as Claus Offe, the German sociologist and political scientist wrote in 1996. This would be accomplished through determined and comprehensive privatisation of state and cooperative property, the introduction of market-economy instruments, the withdrawal of the state from the social sphere, the replacement of elites where possible, and the reorganisation of the political system on the basis of the model of Western democracy.
The “frontal attack”, with its primacy of property privatisation, hit East Germany hard and had negative long-term economic effects there. [Not so for the Western oligarchs. Historically well established in the German West, they knew how to prevent and stop the emergence of competing “Eastern oligarchs” from the outset by means of “transformational” control of property through a “Treuhand” (Trust agency)].
The IMF, the World Bank,
and the Russian oligarchs
The IMF and World Bank fuelled the “revolutionary installation of an entrepreneurial class” in their own way by “driving up the number of companies that were transferred to the private sector, by whatever means” during Russia’s “transition period” from around 1992–93.7
Joseph Stiglitz, Nobel Prize winner for economics, a member of President Clinton’s Council of Economic Experts, chief economist and senior vice-president of the World Bank, was ruthlessly critical of this strategy. “Almost everything else was secondary”, he wrote.8 The haste ordered by the West allowed “an elite led by international bureaucrats … to impose rapid changes on a dissenting population”.
The first phase of shock therapy provided for the rapid privatisation of almost 225,000 state-owned companies.
Stiglitz summarised: “Shock therapy [as a] stabilisation, liberalisation and privatisation programme was of course not a growth programme […] It created the conditions for decline”.9 Stiglitz answered his question “Who ruined Russia?” with a clear assignment of responsibility: “The economic policy guidelines of the Washington Consensus led to a wrongly implemented privatisation, which did not lead to efficiency and growth spurts, but to shattered companies and a decline in production”.10
Referring to the political dimension of the IMF and World Bank, Stiglitz summarised: “The IMF’s haste was based on no less political motives”. The “powerful class of oligarchs” that the government created was intended to “secure [Boris] Yeltsin’s re-election”. “The ‘loans for shares’ programme [of the IMF] represented the final phase of the enrichment of the oligarchs ... who ultimately also dominated political life. High-ranking American and IMF officials ... focused on keeping their friends Boris Yeltsin and the so-called ‘reformers’ in power”.11
These senior officials found support in Yeltsin’s favour in German Foreign Minister Hans-Dietrich Genscher. At the conference of the Conference on Security and Co-Operation in Europe (CSCE) in Moscow in September 1991, Genscher succeeded in pushing through postulates in favour of Yeltsin remaining the head of the USSR, which also achieved normative status in Western international politics regarding Russia. Namely, “The demand for respect for human rights is not subject to the ban on interference in internal affairs”. And: “I also joined [then President Yeltsin] in my initiative to enshrine non-recognition of unconstitutional changes of power within the CSCE framework”.12
The circle closes
From this brief review it should be clear that Russia’s oligarchs sprang from the “revolutionary installation of an entrepreneurial class” under the direction of the Washington Consensus. However, it seems rather schizophrenic that those who subscribed to the consensus, as neoliberal midwives of Russian oligarchy, should include it now as an enemy in their sweeping anti-Russian attack: They are actually putting down the first “pioneers” and advocates who fulfilled the West’s greatest geostrategic dream in world history: to open the doors to capitalism on one-sixth of the earth – Russia. •
1 Offe, Claus. Der Tunnel am Ende des Lichts. Erkundungen der politischen Transformation im Neuen Osten, New York, 1994, p. 60
2 https://paz.de/artikel/kriegsfuehrung-ohne-ziel-a7329.html
3 Forbes 2024, «Die Oligarchenliste», https://www.forbes.at/artikel/DIE-OLIGARCHENLISTE.html
4 https://de.wikipedia.org/wiki/Oligarch
5 Marangos, John. «Was Shock Therapy Consistent with the Washington Consensus?», Department of Economics, Colorado State University, Comparative Economic Studies, 2007, 49, (32–58), https://www.researchgate.net/publication/5219030_Was_Shock_Therapy_Consistent_with_the_Washington
6 Offe, Claus. Der Tunnel am Ende des Lichts. Erkundungen der politischen Transformation im Neuen Osten, New York, 1994, p. 65
7 Stiglitz, Joseph. Die Schatten der Globalisierung, Goldmann, 2004
8 ibid, p 209
9 ibid, p 193
10ibid, p 106
11ibid, p 222; «loans for share» Programm: Ab 1995 begann die Regierung von Boris Jelzin mit der Privatisierung staatlicher Unternehmensanteile durch ein Aktiendarlehensprogramm bei der Umstrukturierung frisch verkaufter Unternehmen (um kommunistische Sympathisanten zu überwiegen, wie eine Quelle spekuliert). https://en.wikipedia.org/wiki/Loans_for_shares_scheme
12 Genscher, Hans-Dietrich. Erinnerungen, Siedler Verlag, Berlin, 1995, p. 319
* Dr Dr h.c. Arne Clemens Seifert, former ambassador, senior research fellow, WeltTrends Institute for International Politics, Potsdam. Studied at the Institute of International Relations, Moscow, specialising in Turkey, Iran, Afghanistan, graduated 1963. Doctorate at the Institute for International Labour Movement, Berlin, 1977. Dr h.c. at the Orient Institute of the Russian Academy of Sciences 2017. Functions in the Foreign Ministry of the GDR 1964–1990: Arab States Division, worked in Egypt, Jordan; Sector Head Iraq, Iran, Afghanistan; Research Assistant to the Deputy Minister for Asia, Africa; Ambassador to the State of Kuwait 1982–1987; Head of Department 1987–1990. After 1990: OSCE Mission to Tajikistan; Central Asia Advisor at the Centre for OSCE Research (CORE), Institute for Peace Research and Security Policy at the University of Hamburg, specialising in OSCE and Central Asia research – civil conflict prevention, transformation, political Islam, secular–Islamic relations, political processes. Numerous publications on geopolitical topics.