11/8/2022 0 Comments Countries with plutocracy![]() ![]() ![]() The story of how the Russian government relinquished control of its largest enterprises (almost all of them oil companies) through a rigged "loans-for-shares" program has been described elsewhere.1 In short, government shares in large enterprises were placed under trust management with oligarch-affiliated banks and financial institutions in exchange for loans to the state. In 1995, a businessman named Vladimir Potanin concocted a brilliantly self-serving scheme: the financially strapped Russian government would mortgage the state's most valuable industrial assets to a few politically connected insiders for far less than fair value. Because they remain among the strongest political and economic actors in Russia - a major nuclear power whose future is crucial to America - the plutocrats merit close scrutiny. Oil revenues sustained the tycoons' economic and political power, and the oil oligarchs are once again awash with cash, thanks to the ruble devaluation of 1998 (which lowered costs) and the steep climb in oil prices in 1999 (which boosted revenues). But those who suggest it undermined their influence are dead wrong. The August 1998 financial crisis practically wiped out the plutocrats' financial assets. Whoever controls this massive industry controls much of the world's oil supply - and today it is the oligarchs. Oil companies account for nearly 60 percent of the market capitalization of the Russian stock market, and oil receipts amount to about 22 percent of the government's budget revenues. Prior to its collapse, the Soviet Union was the world's largest oil producer. Oil is of overwhelming importance to Russia and the oligarchs. The oligarchs dominate Russian public life through massive fraud and misappropriation, particularly in the oil sector. interests, because America's long-term security is best assured by the success of Russia's transformation. COUNTRIES WITH PLUTOCRACY FREEAs a consequence, they now threaten Russia's transition to democracy and free markets. On the contrary, these oligarchs - Boris Berezovsky, Mikhail Khodorkovsky, Roman Abramovich, Mikhail Fridman, and others - largely co-opted Yeltsin's governments, silencing most opposition to their conduct. This is something his predecessor could not, or would not, achieve. To do so, however, he must first rein in a dangerous posse of plutocrats riding roughshod over the country. For a limited time at least, he can use this support to press ahead with difficult reforms. He has also built bridges with rival political leaders. Unlike Yeltsin, Putin can count on the support of the public and of the Duma, Russia's lower house of parliament. But if Putin decides to match words with deeds, he will enjoy an encouraging alignment of the political stars. Today, just a few months later, it is still too early to determine the extent of the former KGB agent's commitment to democracy and free markets. When Russian President Boris Yeltsin resigned on December 31 of last year, he thrust Vladimir Putin, a relative unknown, into the limelight. ![]()
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