Call it crony capitalism, or brush it aside as a commonplace occurrence in the Russian business world. The so-called Russian oligarchs, who are in the spotlight usually for the wrong reasons, rose to prominence during the Yeltsin era, becoming owners of some of the country’s biggest raw material companies. But what has crowded the headlines recently is the rise of a crop of “neo-oligarchs”, or the nouveau riche, who now find themselves seated alongside some of the “original” oligarchs on the list of Russia’s richest men brought out by the respected national magazine Finans. While the likes of Vladimir Lisin and Mikhail Prokhorov bagged the top slots as expected, some relatively unknown names such as businessman Arkady Rotenburg and his brother, as well as Yuri Kovalchuk sprang up as a surprise. Like them or loathe them; but the oligarchs, the old and the new brigade alike, seem to know too well how to navigate the twists and turns of the Russian bureaucracy.
Unknown as they may be to the everyday people on the streets of Moscow, the neo-oligarchs seem to be pretty well-known to those at the helm of affairs in Russia. And the connections may have triggered their mercurial rise on to Russia’s rich list. Rotenburg, for instance, has been ranked the 63rd richest person in Russia with his personal wealth estimated to be about $1.75 billion. Rotenburg’s energy service firm Stroygazmontazh has grabbed a part of the $12-billion contract to build the Nord Stream gas pipeline. He is also the second largest shareholder in construction company Mostotrest, which has won lucrative deals for the 2014 Winter Olympics to be held at the Black Sea resort of Sochi. The proverbial rags-to-riches story of Rotenburg and his brother Boris, who both share the same position on the list, did raise a few eyebrows in the Russian corporate circles considering the fact that the brothers were ranked 395th in the list of 500 richest Russians published by the Finans magazine in 2009.
Kovalchuk, who owns the National Media Group, and is reported to have close links with the Russian establishment, has been ranked Russia’s 115th richest person. Oil trader Gennady Timchenko, the second largest shareholder in independent gas producer Novatek, may probably be the only familiar face on the list. Timchenko, who keeps a low profile, and has denied reports that he is well-connected, is ranked higher in order of personal wealth at the 17th position.
On the other hand, those who have dared to rub the Russian establishment the wrong way have often fallen from grace and riches. Real estate czarina Irina Baturina, wife of former Moscow mayor Yuri Luzhkov who was sacked by President Dmitry Medvedev, has been relegated to the 94th position, down from the 47th slot she held earlier in the pantheon of the country’s rich. Moreover, the police have conducted raids on the property company owned by Baturina for alleged mismanagement of city funds.
Two steps forward and one big step backward. This could sum up Russia’s progress toward improving its notorious corporate governance standards and the business climate. The country has been making giant strides such as the $32-billion privatization of state-owned assets. And the proposed launch of a $10-billion fund in cooperation with international private equity firms will likely draw investors to the country. However, the growing prominence of those who are well-connected seems to show that the recipe for success in Russia is a combination of both business acumen and blessings from the Kremlin.
While the “neo-oligarchs” may not be a match for the oligarchs of the 1990s, even the perception that only businessmen with political patronage can thrive in Russia sends out a wrong message to investors who are eager to have a slice of the fast-growing emerging economy.
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