When people think of Putin, they think of Power. (Quick images of Putin with sound effect)
Vladimir Putin Has been ruling Russia since 1999. There hasn't been such a powerful leader
in Russia since Stalin. He invaded neighbouring countries, interfered in US elections, And
even changed the constitution to stay in power until 2036.
But that hasn't always been the case. Back in the 1990s, Russia was ruled by Oligarchs,
a group of people who amassed massive fortunate during the collapse of the soviet union. They
controlled the media, had most of the politicians on their payroll, and even brought Putin to
power. But when Putin refused to return the favor, the Oligarchs waged a war against him!
Why Soviet Union Collapsed
The Soviet Union sent the first man to space, developed the first-ever satellite, and was
the second-largest economy. But by the 1980s, the union began to weaken, especially after
the war in Afghanistan. The war drained the soviet budget and sent it into a recession.
The Soviet leadership tried to modernize the economy, but it was too late already. People
began to protest, asking for independence.
When the Berlin wall fell, countries began breaking out of the soviet union one by one.
The soviet economy was huge but deeply ineffective. Despite its massive size, ownership was illegal,
everything belonged to the state, and the state belonged to the people. At least that’s
how the communist party wanted you to think. The country was filled with factories that
produced everything from steel to tanks to aluminum, but it was deeply centralized.
At the end of the year, whatever profit the factories made, they had to send it to Moscow,
and Moscow would redistribute the funds back to the factories according to their needs.
So if the factory spent 800K dollars instead of a million they had received, the Kremlin
would cut their budget next year to 800k since it will assume that’s how much they need.
That’s why factory managers would always overspend in order to receive more funds next
year. That led to the creation of hundreds if not thousands of ineffective factories
all across the country, which pushed the country into a lot of debt and a recession, which
eventually led to the collapse of the union.
How Russia went from Socialism to Capitalism overnight - Vouchers
Russia had to move from Communism into socialism overnight. The Russian government knew that
they had to privatize all the factories across the country since they were a huge burden
on the government’s budget. But at the same time, it wanted the average Russians to benefit
from this transition. One-third of the companies will be owned by the people, the second third
will be owned by the government, and the last third will be sold to investors.
So it distributed the so-called vouchers that the average Russians could exchange for shares
in these companies. It sounded great in theory, but it could easily be abused in practice.
For most Russians, the concept of ownership was something unheard of. They didn’t really
know how it could benefit them, so they sold the vouchers to factory managers for a fraction
of a price, especially when most Russians back then hadn’t received their wages for
months and needed cash to put food on the table.
Instead of the average people benefitting out of this transition, a few individuals
took advantage out of this system and became Russia’s new elite.
But the concept of oligarchs became popular a bit later when Russia’s first president
run for re-election in 1996. Boris Yeltsin’s popularity was falling quickly
since the country was in chaos, and many blamed the president for mismanaging the crisis.
Everyone knew that he would lose the election, especially when the parliament was mainly
controlled by the communist, who were confident that they would take over the presidency in
the next election. So Boris Yeltsin turned to the country’s
richest bankers for help. But the oligarchs weren’t ready to risk their fortune for
nothing. They wanted something in return, a bigger pie of the economy.
But to sell the rest of the companies that were owned by the government, the parliament
had to approve it, and it was pretty impossible since it was mostly controlled by the communist.
So they became creative and came up with a brilliant strategy, and robbed the entire
Russian government. You see, Russia’s financial system was still immature back then, so government
funds were deposited in commercial banks and mostly managed by them.
Since the country was in chaos and Yeltsin desperately wanted to be re-elected, Russia’s
top bankers offered him a deal. The oligarchs will lend him 500 million dollars with an
annual interest rate of 150 percent and will take the government’s shares in the biggest
companies as collateral. If the government would not be able to pay back its loans, the
banks would be able to keep these shares. Eventually, Boris Yeltsin won the election
in 1996, but the government, as expected, wasn’t able to pay back the debt. That's
how a few individuals literally became the owners of Russia’s largest companies.
Vladimir Potanin, who was the mastermind behind this scheme, received the controlling stake
in Norilsk Nickel, one of the world's largest nickel and palladium mining and smelting companies.
It’s cost him 170 million dollars, but today the company is worth almost 50 billion dollars.
And Potanin’s net worth is 27 billion dollars, making him the second wealthiest man in Russia.
Mikhail Khodorkovsky received a 45 percent majority stake in Yukos, Russia’s largest
oil and gas company back then, for an estimated 159 million dollars, which by 2003 was worth
dozens of billions of dollars. Making Khodorkovsky Russia’s richest man with an estimated net
worth of 17 billion dollars. But the most notable example is Berezovsky.
First, he took control over Avtovaz, Russia's largest automobile manufacturer, then sneaked
into Aeroflot, Russia’s largest airline, and somehow managed to control it. And finally,
in 1996, through this scheme, he received Sibneft together with Abramovich, the second-largest
oil company which today is known as Gazprom. In a matter of a year, 7 people accumulated
so much fortune that they started buying politicians, tv stations and tried to take full control
of the government.
The rise of Putin vs. Oligarchs When Yeltsin wanted to resign, Berezovsky
convinced him to make this young KGB officer named Putin as his successor. Putin acted
like a perfect puppet. He guaranteed Yeltsin and his family the security he wanted and
the oligarchs the favors they asked for. But something went wrong. Putin kept his promise
to Yeltsin, but he began to consolidate power when he sat on the throne. Now that he is
the one who is wearing the crown, the rules of the game have changed. It was the time
to show the oligarchs who is the Tsar!
But oligarchs weren't ready to simply give up power. They controlled the media. They
had billions of dollars and multiple politicians on their payroll. They wanted to let Putin
know that it's them who put him on the throne, and they can take it away if he is not going
to return the favor.
Gusinsky was one of the oligarchs who controlled NTV, the biggest tv channel in Russia back
then, the newspaper Segodnya, the radio station Echo of Moscow, and a number of magazines.
He was the man who controlled public opinion in Russia. Everyone knew that he was not someone
to mess with. His media empire aggressively began attacking
Putin and mocking him. His popularity began to decline as the media kept spreading bad
news about him. Putin knew that if he wanted to rule Russia with an iron grip, he must
first control the press. He launched an investigation against Gusinsky
with the goal of putting NTV under the government’s control and effectively silencing the opposition.
Gusinsky was charged with misappropriation of funds and large-scale fraud and was arrested.
Shortly after his arrest, representatives of the Kremlin proposed to Gusinsky to sell
"Media Most," his media Empire worth a few billion dollars at least, to Gazprom-Media
at a price that Gazprom-Media sets, which was just 300 million US Dollars, in return
for his freedom. Under immense pressure, Gusinsky has signed
the deal and immediately left Russia after being released.
But Putin didn’t stop there. He wanted to make Gusinsky an example for other oligarchs.
Shortly after he left Russia, he launched a new investigation against Gusinsky and asked
Interpol's head office in France to issue an international arrest warrant for Gusinsky's
detention and extradition. Fortunately for him, Interpol's head office declined the Russian
request, but the Russian government kept pressuring until the Spanish government arrested him
and placed him under house arrest in Gusinsky's home in southern Spain.
Other oligarchs took note and decided not to mess with the new King and changed sides.
Abramovich, Potanin, Deripaska, Fridman all surrendered to Putin in exchange for keeping
their fortunes and freedoms.
But not Berezovsky, the main person who was behind Putin’s presidency. He controlled
the second-largest tv channel in the country (first channel). He was expecting huge favors
from Putin since he was the main person who made him the president, but in return, the
government launched an investigation into his business deals with Aeroflot. Then the
government literally took over his media empire. He was forced to exile in the united kingdom
and lost all of his businesses in Russia. His last hope was to win a court case against
Abramovich, his former partner but now Putin’s puppet, for 5.5 billion dollars. However,
he lost, so his life ended tragically in 2013. Now that Putin took control of the media,
no one could challenge his authority, except Russia’s richest man back then, Mikhail
Khodorkovsky. With a net worth of 17 billion dollars, Khodorkovsky
was confident that he could buy anything and make himself the man who would run the country
behind closed curtness. In February 2003, at a televised meeting at
the Kremlin, Khodorkovsky publicly argued with Putin accusing government officials of
corruption, accepting millions of rubles in bribes. The two-man had completely different
visions for the country's future but only one will prevail.
In early July 2003, Khodorkovsky’s most important partner was arrested. The arrest
was followed by an investigation into tax evasion by his oil and gas company Yukos.
On the morning of 25th of October 2003, Khodorkovsky was arrested at Novosibirsk airport. He was
taken to Moscow and charged with fraud, tax evasion, and other economic crimes. His company
was entirely eliminated, and he was imprisoned for the next 10 years.
Not a single oligarch ever challenged Putin again. His power grew so much that it became
impossible to imagine Russia without Putin.