Forbes reports on the shocking wealth accumulated by Russia’s new oligarchy, unsettlingly reminiscent of the concentration of privilege that occurred in, and destroyed, the former Russian monarchy and the Bolshevik regime.
Russia had the second-highest number of billionaires in the world this year, but when it comes to wealth in government, the former Soviet Union is clearly No. 1. Twelve billionaires now hold seats in the country’s parliament, with a total net worth of $41 billion, sitting alongside the less wealthy lawmakers, worth merely in the hundreds of millions. Russian billionaires don’t limit themselves to legislative seats; there’s at least one billionaire governor, and the mayor of Moscow is married to another.
At the top of the heap: Suleiman Kerimov, 42. Young and brash, this stock market mogul (worth a staggering $17.5 billion) served eight years in the parliament’s lower house after Vladimir Putin announced he wanted no more billionaires in the Duma. There were also fears his wealth would attract the attention of the tax authorities–thus possible scandal.
Then there’s Gleb Fetisov, 41. Worth an estimated $3.9 billion, he was appointed to parliament in 2005. He built his wealth trading commodities in the Alfa Group business empire and is now affiliated with Alfa’s telecom holding company, Altimo. As a lawmaker, he’s fought for less government regulation of large enterprises and was considered one of Alfa Group’s key contacts for lobbying the federal government until a recent deterioration in his relationship with Alfa.
Others include: Sergei Pugachev, 45, a former banker worth $2 billion; Farkhad Akhmedov, 52, the feisty and outspoken founder of Northgas, worth $1.4 billion; and Dmitry Ananyev, 41, who made his $2.3 billion selling ERP software. And the list goes on.
Of course, wealth and political power are as old as the institution of government. But the scale of wealth in Russia’s government is unparalleled anywhere else on Earth. These men, mostly entrepreneurs, often swear their motives are altruistic, but the overriding factor is likely the personal benefit they enjoy from being closer to the center of power. Most are affiliated with Vladimir Putin’s United Russia party–compared by some political pundits with the old Communist Party: Membership has many privileges.
Russia’s legislature is like the U.K.’s, with a lower and upper house. The lower house (the Duma), has 450 seats. Seats are distributed proportionally among parties that get more than 7% of the vote. The upper house (the Federation Council) has 168 senators who are appointed by the governors and local legislatures of each of the 84 regions.
In the upper house, especially, this system allows governors to appoint their friends and allies to represent their regions. The system is cozy, but it can work out for local constituents: Senators in the upper house are expected to corral federal tax revenues for their district. They’re also supposed to lobby for businesses to move there.
But it’s really a win-win for the senator and the region. “If a big guy represents a small region, even a small part of his fortune is good for the region,” says Nikolay Petrov, a scholar at the Carnegie Center in Moscow. “These guys get a certain position and respect, which makes it easier to deal with the authorities on a certain level. This helps their own business.”
Some legislators from the lower house have been moved to the upper house for being seen as too wealthy–possibly creating controversy. Vladimir Putin recently made comments suggesting that billionaires shouldn’t be in the Duma, which is why Gazprom and Aeroflot investor Alexander Lebedev ($3 billion) didn’t return this year.
Senators can also move around to different regions. Corporate raider Sergei Gordeyev–merely wealthy, not a billionaire– reportedly didn’t hit it off with the governor of the tiny Ust-Ordyn Buryat Autonomous District (which was also merged with a nearby region); he’s now a senator for Perm.
Complicating matters further, Russian law prohibits legislators (or any government official) from running a business. So how come so many billionaire lawmakers make our list? Many get around the law by “assigning” or “giving” shares of their companies to friends and family members. At least on paper.
It may all sound rather wacky, but give the Russians this: In the czars’ days, with government service reserved for the aristocracy, the newly rich had no chance of attaining government positions. Today, government is open to all–though a net worth of a few hundred million dollars sure doesn’t hurt.