Anti-State Oligarchs-The Russian Handling:Part 1


Dr. M. Ali Hamza

There was a time when Pakistan’s economy was trending and had no comparison in growth. Beside agricultural advances, the industrialization started taking off. But then nationalization happened: the culture of state owned enterprises. The unmatchable economic growth of Pakistan came to stand still, corruption badly infected the institutions, and the era of unproductivity began.

Since then Pakistan is trying to get rid of it, and had tried de-nationalizing institutions, but it was never easy to reverse things, rather the antithesis produced the oligarchs: rich business leader with a great deal of political influence. And now most prominent oligarchs in Pakistan have become Machiavellian and threat to the state. The good fortune is that in Asia and to be more specific in our own region we have an example to learn from. A country that went through severer economic and political circumstances, formed and then de-formed the anti-state oligarchs, and currently they are back to the path of progress. Yes the Russia.

The economy of Soviet Union evolved exponentially till 1950s, mainly based on the agricultural sector. The industrial revolution, mass production and market competition in the west changed the entire game and business structure of USSR was a misfit to this latest revolution. Therefore by 1970s the Soviet Union entered the Era of Stagnation: the term coined by Mikhail Gorbachev in order to describe his viewpoint related to dilapidating economic, political, and social policies of the USSRinitiated by Leonid Brezhnev (1964–1982) and sustainedunder Yuri Andropov and Konstantin Chernenkofrom 1982 to 1985. The complex demands of the modern economy in the world, and the cumbersome procedures for bureaucratic administration that hampered free communication at the enterprise level in USSR overwhelmed and forcedthe central planners in Moscow to rethink. Moreover the corruption, information manipulation, and data fiddling became common practice among bureaucracy to report satisfied targets. But the reality was on the contrary. Finally in 1986, with Perestroika policyMikhail Gorbachev attempted to address economic problems by moving towards a market-oriented socialist economy. Though it failed, instead, to many it caused the breakup of USSR in 1991.

Russia in her struggle to coup up with this shift from state owned business to open market had to go through certain challenges.The first challenge was to find capable human resource that could run the business in a competitive market and had some familiarity of new trends of business. In fact for a very long time the business environment was state-owned and only government officials were aware of the business processes, but even those government officials had no clue how to run a private business. Operating a private enterprise is way different ballgame than overseeing state-owned financial affairs.Thus, the private business acumen was a rare commodity. Being a global players, and influencer, Russian political scenario could not afford to invite investors and businessmen from West to take over the Russian economy.  The government decided to find people among Russians who do have some exposure to private financial ventures.

The intelligence produced a few names from black market, who were involved in businesses like, financial speculation, smuggling of goods i.e. computers, jeans, for hefty profits during USSR regime, therefore many of them had been to imprisonment in Soviet times. One thing was common among all, and that was greed for money, so the intelligence knew that these guys cannot befullytrusted, but assured their loyalty to the state. Moreover the intelligence guaranteed that if ever they go against the state, they will be handled abruptly and adequately. Accordingly, as per plan the so-called voucher-privatization program of 1992-1994 was launched. Under this program business of oil, natural gas, nickel, coal, copper, chromium, automobile, mass media etc. were sold out to the selected individuals. Voucher-privatization program enabledthe handful of young men to become future Russian billionaires,in a very short span of time.Who were these people,why did some of them become anti-state and how Russia neutralized these traitors? Acase study of few of these individualscan make us learn and we could clearly understand the manipulative and Machiavellian nature of some of our own anti-state oligarchs those are trying to control Pakistan.

One of the prominent namesamong these selected individuals isBoris AbramovichBerezovsky. In 1989, Berezovsky took advantage by Perestroika policy. He established a company named LogoVAZ that used to developed software for AvtoVAZ, sold Soviet-made cars and serviced foreign cars. He profited from hyperinflation by taking cars on consignment and paying the producer at a later date when the money lost much of its value.One of Berezovsky’s early endeavors was All-Russia Automobile Alliance (AVVA), a venture fund he formed in 1993 and by 2000 AVVA held about one-third of AvtoVAZ; a Russian automobile manufacturer established in times of USSR in collaboration with Fiat. He profited from gaining control over various Russian assets. In 1997, Forbes estimated his wealth at US$3 billion. Berezovsky’s involvement in the Russian media began in 1994, when he was given access to control over ORT Televisionto replace the failing Soviet Channel 1.The quick money in billions, and control of the mass media created a sense of being king maker in Berezovsky. He used his wealth and opinion making tools to get into inner circle of Russian political system, got access to Russia’s security council and Duma; the lower house of the Federal Assembly of Russia. Though he funded Unity, a Russian political party that formed Vladimir Putin’s parliamentary base, however, following the Russian presidential election in 2000 he went in opposition with president Putin. One of the reasons is Berezovsky’s disagreement on constitutional reform proposed by Putin. Berezovsky used his media power not only against the proposed legislative reforms, those he called ‘a restoration of an authoritarian regime’ but started building an anti-Putin narrative.In an article in The Washington Post in 2000, Berezovsky argued that in the absence of a strong civil society it is necessary for capitalists to interfere directly in the political process.At this point of time Putin took a strong decision and announced that no criticism will be tolerated on the government by media that is in control of oligarchs and such blackmailing will not be allowed. Furthermore President Putin mentioned that the state has a cudgelwhich has been brandished and the day state get really angry, she won’t hesitate to use it. So the State used the cudgel.In 2001 a systematic takeover by the government of privately owned television networks began, in the course of which Berezovsky lost most of his media holdings. Berezovskysold his stake in ORT to Roman Abramovich; a pro-state oligarch. Later in 2003Berezovskywent to Uk, applied political asylum and was granted refugee status by the British Home Office.Ultimately till 2006 he sold his remaining Russian assets. In 2013 Berezovskydied and buried in England. Before his death he sent a letter to the Russian president, asking for permission to return to Russia and asking ‘forgiveness for his mistakes’, the permission was never granted. Berezovsky forgot that his empire was built on some promises. He disregarded the foundations of his surprising fortune. Some Oligarchs in Pakistan have also forgotten their promises, but who is in Pakistan ready to stand like Putin? Another case study will be presented in part 2.