Power Lines Episode 6 Transcript
[Music playing]
Maryna: My name is Maryna Khromykh. Now, I work as an executive director of DEJURE Foundation. This is an advocacy and analytical centre, which is dealing primarily with judicial and judicial reform and rule of law issues in Ukraine. We are doing our best to fight with corruption and lack of integrity in judicial system. We consider it as our own frontline.
Anastasiia: Maryna Khromykh is a Ukrainian who directs a think tank which fights against corruption in the Ukrainian judicial system.
I called her today to talk about another Ukrainian she knew, who stood for all the same ideals; Roman Ratushny. You might have heard his name; he’s been hailed across the world as one of the great Ukrainian heroes in this war.
Roman was a famous civil activist, and when the war began, like so many others, he joined the Ukrainian army.
He fought for many things, but he's best remembered for preserving public spaces in his hometown of Kyiv, against an oligarchy class that sought to destroy them.
His commitment to standing up against abuses of power by corrupt elites was unwavering. Maryna told me about when she first met him.
Maryna: I've met Roman on one of the rallies that we have organised as an initiative for justice in Katya Gandzyuk case. She was a civil activist from Kherson. She was attacked in summer of 2018. She was attacked with sulfuric acid. She spent three months in hospital fighting for her life.
And Roman, as a lot of other people, a lot of other civil activists understood that this case is very important because if we do not get justice in this case, so we cannot expect anything good for ourselves, and each civil activist can be the same.
It was a pleasure being with him and knowing that this is the next generation, and you can just, I don't know, go retire and expect that Roman will be after you and will do the job of this civil society and so on.
Anastasiia: Roman was the founder of an activist group, that came together to protect a public space in Kyiv called Protasiv Yar, a patch of woodland with a small ski slope that was loved by the locals. I used to ski there too as a kid.
In May, 2019, the developers from Daytona Group announced the construction of three 40-story buildings, right in this green zone. But dig a little deeper, and the whole enterprise seemed extremely shady with some even claiming it was illegal.
And the beneficiary of Daytona Group was a businessman, Hennadiy Korban, closely associated with one of Ukraine's most and famous oligarchs, Ihor Kolomoyskyi. Korban has since had his Ukrainian citizenship revoked.
Could you then explain for our listeners a bit, what is Protasiv Yar and what happened there? How did Roman get involved?
Maryna: Roman was fighting with one of the strongest construction mafia in Kyiv, and he was trying to save the green area in the very centre of the Kyiv. Roman was elected by this community as a leader. He had that aim to save this green area because it's a huge problem for Kyiv with these constructions.
Basically, they had a part of legal activities. Yes, and of course, here is the huge role of Evgeniya Zakrevska, who was the lawyer of Roman, and who is the lawyer in a lot of cases of Maidan. She's defending the relatives of those who died or suffered during the Revolution of Dignity. And that is why I guess, they won a lot of cases in courts.
Anastasiia: And what were those cases? What were they about?
Maryna: It was about saving these concrete parts of the land as a park, but not as a land where the construction can be built.
Anastasiia: So, designating that part of Kyiv as protected land.
Maryna: This case is very successful and it's really inspiring for a lot of people, not only in Kyiv, but in other cities of Ukraine where local civil activists are fighting with their regional construction Mafias and so on.
Anastasiia: Protecting public spaces from corrupt officials was not new to Roman. He'd done a similar thing before.
At just 15, he was one of the first people defending the Maidan Square during the Revolution of Dignity.
[Protest chants]
Along with other students, he was beaten up by Berkut, the government's riot police. Because of this injustice, something like a million people turned up to the Square the next day.
Maryna: I remember him telling me about this that night. He had no fear. He was just so oriented on the justice that inspired me earlier, and I guess, it would inspire me during the end of my life.
Anastasiia: After the revolution, Roman completed a law degree and worked as an investigative journalist. Then when Russia launched its full-scale invasion in February, 2022, Roman was one of the first to join the fight against Russia.
He was part of the volunteer force protecting Kyiv, and he also took part in the liberation of Trostyanets, a town near Kharkiv.
But his story, like the stories of so many other Ukrainians of my generation this year, is one that ends in tragedy. After being deployed to Donbas in the East, on June 9th, a few weeks before his 25th birthday, Roman was killed by Russians near the town of Izyum.
Do you remember how you heard that he was killed?
Maryna: I have a dog, and I went for a walk with her. I just closed the door. And some of our common friends wrote a message in our chat that something happened to Roman.
Actually, I stopped. I sat down on the street, and I started crying. People were walking by and trying to calm me down, but I was like, “I'm okay, I'm okay. Just leave me alone.”
And unfortunately, I was the one who informed Evgeniya Zakrevska about this, because I thought that she might know more information, because of course, I didn't believe that this is true. Because it's Roman, he cannot be dead. It’s Roman Ratushny. He is one of the most alive person that I know. So, it's impossible of course. But unfortunately, we were finding more details about his death.
Anastasiia: Roman's death was also announced on the “Let's Protect Protasiv Yar” Facebook page. The initiative intends to make a park in Protasiv Yar named after Roman, with an oak tree planted in his honour.
I never knew Roman personally. I saw so many people who knew of him, who knew a lot about his work, but didn't know him personally, who were absolutely devastated.
And then there were so many of my friends as well, who were in the same situation. Some of them crying, even though still, they too didn't know Roman. So, he had this ability to touch people without ever knowing them.
Maryna: It's a great loss for the whole generation. It's awful that this Russian war is stealing the future of Ukraine, stealing the brightest people of our country, those who should be leading it and doing something useful, something great in here.
The sacrifice during this war is so huge. So, we don't have any chance to get tired, to surrender or something like that. So, we just have to remember that we are fighting not only for ourselves, but in the memory of Roman, of Katya and other people who died for Ukraine, for our independence, for us to be free.
It's very important for us to remember about them and to keep part of their soul in our hearts. And sometimes, of course, it's painful to realise that these people are gone, but at the same time, it makes us stronger and it gives us no doubts in what we are doing and what we are fighting for.
Anastasiia: [Speaking Ukrainian] Thank you again.
Maryna: [Speaking Ukrainian] Thanks.
[Music playing]
Anastasiia: What started as a campaign to protect public space, saving a small patch of green in his hometown, ended with a fight to save Roman's entire country.
But what Roman stood for and who he fought against remained the same. Corruption leaves long trails, and when you follow them, you find the different strands end up in the same place.
Because in standing up to the rich and powerful in Kyiv, Roman was standing up to the same system, the same oligarchic idea that is funding Putin’s war. Roman's memory embodies Ukraine's thriving civil society, and stands as a testament to how vital each and every fight against corrupt elites is, no matter where on the globe.
From Message Heard and the Kyiv Independent, you're listening to Power Lines: From Ukraine to the World.
Jakub: In this series, we're going to be mapping the undercurrents and global consequences of the war in Ukraine, beginning in Kyiv, and following the roads out wherever they may lead. I'm Jakub Parusinski.
Anastasiia: And I am Anastasiia Lapatina.
Jakub: This week, we're exploring the rise and potential fall of oligarchies from Russia to Ukraine and across the world.
Everyone has heard about Russian oligarchs, these big, scary bad men who control the world from the shadows.
Anastasiia: Right.
Jakub: But at the same time, when we look across the West, we see the rise of the billionaire class growing inequality, increasing influence of business on politics. And there's very much a question about whether the world itself, or at least the Western democracies, are not seeing some form of oligarchisation.
And if so, well, what does the history of Ukraine and Russia, two countries that have suffered from the oligarchs, tell us about the fate of the world?
Anastasiia: Right. I think that is an excellent question, and to even begin answering that, we probably need a definition of what an oligarch is. And it's pretty difficult to come up with that. But I thought that we could literally pull up a law, because in Ukraine, we do have a law, right?
Jakub: Absolutely. It's one of the few countries that has actually formalised what it means to be an oligarch.
So, Nasyta, you actually have looked into this law. So, what does it tell us about who is and who isn't an oligarch?
Anastasiia: So, it's a definition from a law that came in effect this spring. It is this very well-known in Ukraine and abroad, piece of legislation passed by Zelenskyy’s administration.
And it's basically his attempt to curtail the influence of oligarchs in Ukraine. This law, essentially, introduces a registry, which as far as I understand, is supposed to be a public registry where people just can go and see essentially, the list of individuals in Ukraine, who are considered oligarchs under this law. And you are considered one if you meet three out of four criteria.
So, the four criterion are one, the person has to participate in Ukraine's political life. Second is that they have to have a significant influence on the mass media. Third is this long clause, which basically says that you have to be the ultimate beneficiary of a business that is a monopoly.
So, a business that occupies a dominant position in a particular market. And the fourth is that the total value of your assets exceeds roughly $60 million if you converted from the Ukrainian number.
And what's very, very interesting is that this person doesn't have to be Ukrainian citizen, actually. So, you can be a foreigner who does business in Ukraine, participates in Ukraine's political life, and you could be qualified as a Ukrainian oligarch.
Jakub: So, basically, you need enough money to buy a London apartment that gets you into Forbes, meaning the purchase of that apartment is newsworthy.
Anastasiia: Yeah, basically. But you also have to be connected to the mass media, which I think is not something that is necessary in Russia, for example. Like many of them are just business people who have nothing to do with the media.
Jakub: So, that's an interesting distinction. And I think when you look at Ukrainian and Russian oligarchs, especially how they've evolved over time, the political influence and the role that the Ukrainian oligarchs played was much greater. They were political players.
Anastasiia: Right. But in Russia, actually, there is this stereotype that all oligarchs are one way or another, Putin's friends in a way that they can influence his politics, which is one of the reasons why so many sanctions have been applied towards Russian oligarchs.
But some experts are saying that that is a gross misunderstanding of how that actually works, because there are hundreds of oligarchs who actually don't have a close connection. They can't just call Putin and be like, “Hey, this invasion thing is really not working out.”
But people think that that's how it happens. But that's not true. At least not in all cases, right?
Jakub: Essentially, it's applying a Ukrainian solution to a Russian problem. In Ukraine, you had quite a few oligarchs who ran political parties, financed them, had mass media, they had ways to influence whoever was in power. In Russia, not at all.
Anastasiia: Exactly, yeah. And it seems like Russian oligarchs are no longer really his inner circle. It's rather military generals. It's intelligence people. It's the FSB, it's those folks.
So, yeah, I think it's very important to understand that Russian oligarchs are not this keyword that if we sanction their yachts, they're going to go and like take over Putin’s seat in the Kremlin. Like that's very unlikely to happen.
[Music playing]
Jakub, I know you've been looking forward to doing this episode for a while. This topic clearly fascinates you. So, who did you interview?
Jakub: Well, I was lucky enough to sit down with the author and investigative journalist Oliver Bullough. Oliver has written and worked all over Russia, Central Asia, Eastern Europe, and has seen firsthand how the development of oligarchies has affected people living in those regions.
These days his gaze is mostly turned towards financial corruption and the mechanics of the global kleptocracy, which is to say how corrupt world powers are able to expropriate the wealth of countries for their own gains.
Obviously, oligarchies are the most potent example of this. And his recent books, Moneyland and Butler to the World are truly seminal studies of how corruption and dirty money from places like Russia, but all over the former Soviet Union, have managed to infect global financial systems in the West.
You can find Oliver's writing in The Guardian, GQ, as well as his very aptly named newsletter called Oligarchy, on Coda Story.
I wanted to first find out from Oliver about how the oligarchic system developed in Russia after the dissolution of the Soviet Union.
When we think about oligarchies in the modern sense, we invariably think about Russia, Ukraine and other former Soviet states. What was it about that time, the way the Soviet Union broke up or the newly independent states were established, that led to this phenomenon?
Oliver: Well, in 1991, all of the ex-Soviet republics faced the challenge of how they were going to transform their economies from being totally state-controlled to being capitalistic.
And no one had ever really done that before. So, how do you go about that? And the most influential model was what was being done in Russia, obviously, because Moscow had been the capital of the Soviet Union.
And their approach was to build democracy and capitalism by creating private property. So, they wanted to privatise everything as quickly as they could.
They didn't really care whether the privatisation auctions were fair or well-run. They just wanted to build a class of private property holders, who would then be the bedrock on which capitalism and democracy would be built.
So, they just created a series of auctions to get rid of everything the state owned. Inevitably the people who ended up owning state property were people with political connections or people who had already amassed wealth because of their political connections.
So, you had a very small group of men, and they were all men who ended up owning everything. And once you have that group of a very small number of people, then they will inevitably maintain their dominance over society and the economy because they own everything.
And we saw, I mean, this situation obviously wasn't the same in Ukraine at all. Privatisation happened much more slowly. There were totally different dynamics in play.
But eventually, certainly by the 2000s, you ended up with a small group, again, of men almost entirely who controlled the economy and therefore, also, controlled political parties, media channels, and therefore, had huge influence over what was happening in Kyiv.
Jakub: So, we've got the Soviet Union, almost all meaningful economic assets are to some extent owned and controlled by the state. You have the breakup and there's a lot of wealth lying around up for grabs. What happens next? What's sort of the genesis of this oligarchy?
Oliver: Well, in the most sort of well-studied example, in the most dramatic example, which remains what happened in Russia, you had, at the end of the Soviet Union, there were some private companies, which included a very small number of private banks. And essentially, those private banks, because they were the people with money, ended up as the people able to buy shares in the newly privatised entities.
Once they had shares, they could use that to raise more money. Once they had money, they could buy more shares, once they had shares. And so it went on.
And that gave them political influence. And then by the mid to late 1990s, they were bartering that political influence and the money they were able to lend to the government, for control of truly spectacular assets: ]oil companies, nickel mines and so on.
So, it began relatively small, it began with control of banks in the very, very early days of the free market in Russia.
But within seven, eight years, it had become control of oil companies, genuinely geopolitically strategic assets. And this is just a sign of the upheaval in the country that everything was for sale, everything was up for grabs, everything was overturned.
And although the situation was different in Ukraine, it still had similarities, obviously major sort of geo-strategic asset in Ukraine where the pipelines carrying gas from Russia and Turkmenistan to Western Europe. So, control over those pipelines became a key source of political patronage and corruption in Ukraine.
So, different countries were different, but the basic model was the same, that the people who had a little bit of money at the very beginning were able to use that small amount of money to obtain truly colossal amounts of property and influence within less than a decade, in a way that's probably unrivalled in modern history, that that much property was redistributed so quickly.
[Music playing]
Anastasiia: Jakub, how old were you in the ‘90s, after the Soviet Union collapsed?
Jakub: I was born in 1984 or so, let's say seven-years-old.
Anastasiia: You were tiny?
Jakub: Yeah.
Anastasiia: Okay. So, you probably don't remember much.
Jakub: No, not that much. And certainly, I had very little involvement in the shady appropriation of government enterprises.
Anastasiia: I'm just curious, like when all of these shady dealings were happening, that must have been shocking to people, after decades of a communist system, they have to wrap their heads around that. Like I was, when I was preparing for this episode. I'm just thinking, how did people react to this?
Jakub: I think you have to realise that at the time, people were mostly concerned with their own survival. A lot of the time what happened is you'd have a sort of a government factory, the shares, meaning the ownership in that factory is distributed to the workers. And what they have is a bunch of worthless pieces of paper.
Now, their families are hungry, they've probably lost their jobs. They're living in a pretty miserable place. And anyone who could show up with, let's say just a couple of brief cases of dollars was able to convince most of the people and buy up those shares.
Now, obviously, a lot of the times that didn't happen. People would just come in and threaten and menace and whatever, take over the property in other ways. But actually, a lot of this state property was purchased, let's say, more or less legally for people who just didn't have any other options.
Anastasiia: I think Oliver mentions that this post-Soviet gamble that was happening, from communism to somewhat capitalism, that that's an unheard-of situation. Like do we now know what should have been done differently to transition?
Jakub: Yeah. There's actually been quite a lot of research into the process of privatisation in different East European countries and–
Anastasiia: Because Russia wasn't the only place that did it.
Jakub: Absolutely not. Similar things were happening in Poland, Hungary, Uzbekistan, and a lot of the economists who arrived on the ground with ideas, they were making it up as they went.
There's a reason why Poland, as well as some of the other Central European countries didn't really have oligarchs, or at least, not to the same extent. It's based on the size of the companies that were there under communist times.
There were no huge enterprises. There were no huge land holdings. Most of the businesses that you could privatise were relatively small and there were a lot of people competing for them.
So, while the privatisation process in Poland was hardly perfect, nobody was able to amass enough of these different assets to actually really stand out and become an oligarch.
But that wasn’t the case in Ukraine. Ukraine had massive enterprises, left over from the Soviet period, that were ripe for the takeover.
What’s interesting though is the subtle way in which Ukraine diverged from Russia, and the way that oligarchy was taking shape there.
Jakub: And that's exactly what I asked Oliver.
[Music playing]
What is sort of the next scene or the next kind of stage of the development of oligarchy.
Oliver: In Russia, what happened was that the oligarchs battled each other. They sometimes cooperated, sometimes fought each other until Putin came along.
Putin came to power with a different power base. His power base is based in the security services, which was in turn, very strongly connected to organised crime.
And he essentially (by first destroying the two oligarchs with big media empires, in the very early years of his presidency, and then destroying the richest oligarch, Mikhail Khodorkovsky, a couple of years after that) — he essentially, intimidated the other oligarchs to such an extent, that they were willing to kind of recognise him as the don, as the first among equals.
So, Russia gained this very centralised, almost a pyramidical style of corruption with Putin at the top, then a small number of very wealthy, powerful men directly beneath him. Many of them people who he had known with and worked since his time in St. Petersburg city administration, and a few of the original oligarchs mixed in with that.
In Ukraine, it was different because corruption never became centralised in that way. Viktor Yanukovych tried to do it after 2010, but it didn't work.
So, you ended up with a far more kind of pluralistic system, whereby oligarchs would battle for political control, they would have control of the media, control of different parts of the country, control of political parties. And this was often presented as a kind of pro-Western versus pro-Russian split, which it was to a certain extent.
But also, it was more… that was a kind of frame placed on it by Russians and westerners, when within Ukraine everyone was corrupt. Whether they were pro-Western or pro-Russian, they were all corrupt just in different ways.
So, in a way, although the Ukrainian situation and the Russian situation began in similar ways back in the 1990s, they’re diverged quite widely, in that Ukraine had a much more pluralistic system with multiple oligarchs battling for influence. Which I think is probably why Ukraine was able to develop this incredible civil society, with extremely robust and imaginative NGOs working against corruption.
Because there remains space between the oligarchs in a way that there wasn't in Russia. That essentially, Russia, by controlling everything from the centre, it allowed Putin to essentially, crush anyone who opposed him, whether that was the Chechens or the oligarchs or the media, or independent political parties or independent NGOs or whoever, or Alexei Navalny.
Jakub: Yeah, absolutely. I think this is something really fascinating to dive into. My sort of observation is that in many ways, Ukraine diverged from almost all of the other post-Soviet states that went into the oligarchic model, by just how competitive it remained.
There really was a sense of the different regions of Ukraine might have had their big bosses, but even in many of those regions, there was even in-fighting. Part of the time, I think especially in the 2000s, the oligarchs used that civil society against each other.
There was a lot of feeling that you'd pay somebody off, one of the activists, to go off against your enemies. But that space in and of itself was enough to sort of build something different from the other countries.
Oliver: Yeah. And also, I think a lot of credit goes to the response of Ukrainian society to that. There are obviously differences in the society in Ukrainian's culture and history, which contribute to that.
But I think an awful lot of that is simply the fact that Russia had huge quantities of oil and gas, and Ukraine didn't, which meant that the Kremlin was able to dominate the economy in the way that the president or the government in Ukraine never was.
So, when Yanukovych tried to build his sort of pyramidical system of corruption after 2010, all he succeeded in doing was not only pissing off ordinary Ukrainians, but also alienating large numbers of the oligarchs. Which meant that when the big protests came, he simply didn't have the kind of people behind him that Putin would've had in Russia, because he couldn't buy people off.
[Music playing]
Anastasiia: Jakub, so it's important to kind of highlight the difference between the oligarchy in Ukraine and in Russia. Like I feel like our political climate when it comes to oligarchs, is just not as heated and as dangerous. It still is pretty bad, of course. And the civil society is constantly fighting against it, and against the corruption, but we don't have as many people falling out of windows, right?
Jakub: I would challenge that a little bit. If you look at where actually the former office of the Kyiv Post was located, on Pushkinska Street, next to Premier Palace, well, back in the day there were a couple of parties where people flew out of windows, actually from that very hotel, not from the Kyiv Post, from the hotel that was next door.
Anastasiia: Excellent correction.
Jakub: Looking more broadly, I wouldn't say that being an oligarch in Ukraine was particularly safe or being tied up with them either. But I think the big difference was that Ukraine was always more of a free for all.
Whereas in Russia very quickly, especially after the rise of Putin, the danger, the threat was concentrated on a central power level.
Anastasiia: So, what you are saying is even our oligarchy is more democratic.
Jakub: In talking, Oliver mentions a Russian oligarch, Mikhail Khodorkovsky.
Anastasiia: Khodorkovsky is a fascinating figure. So, Khodorkovsky used to be the wealthiest man in Russia. He was one of those oligarchs with the typical story where after the Soviet Union fell apart, a bunch of companies were auctioned, and he acquired a bunch of oil fields and united them under a company called Yukos.
So, Yukos controlled oil fields and oil infrastructure. And it was so big that in the 2000, this company controlled roughly 17% of total oil production in Russia. And his fortune at one point was around $15 billion.
Jakub: But then he also made a cardinal sin in Russian politics, which is to get involved, right?
Anastasiia: That is exactly what happened. So, he probably thought, “Well, now, that I have all of this money, let’s try doing an actual good thing for the society.” So, he opened an NGO called Open Russia, which… very basic civil rights NGO, advocated for democracy and human rights and openness and transparency.
And almost immediately, he gets in Kremlin's radar for that. And two years later, he's arrested and charged with fraud and like every financial crime in the book, like tax evasion and a dozen other things.
And he ends up spending 10 years in prison. But then he’s suddenly pardoned by Putin in 2013 because certain politicians lobbied for his release. After that, he lost all of his wealth, his organisation was banned.
And after his release, he never returned to Russia, he fled to the UK. He now lives in London, writes books about Russia and authoritarianism, has a YouTube channel about politics.
So, like a very typical opposition figure in exile kind of situation, writes op-eds for The New York Times and things like that.
As you said, this is very emblematic of the Russian cardinal sin, that once you have a lot of money and once you become an oligarch, don't you dare actually try to influence the political life in the country. And this goes back to the broad misconception that we mentioned in the beginning.
These people, the only reason why they have so much money is that they do not influence the Kremlin and try not to.
Jakub: But of course, this question of injustice, this isn't just a Ukrainian or a Russian issue these days, it's a feeling that is felt by people more and more all over the world.
[Music playing]
Anastasiia: Definitely.
Jakub: And one of the questions that I had for Oliver was whether we were not seeing the spread globally and specifically to the West of this oligarchic system.
Anastasiia: Oh, that's interesting. Let's get into it.
Jakub: We have this sort of eastern bloc kind of phenomenon, but the story of a few select number of businesspeople amassing undue influence over the development of society, it feels something that it might have been very Russian and Ukrainian in the 90s.
It feels kind of universal these days. Are we also in the age of the American oligarch? Because they meet all of the definition?
Oliver: Yeah, it's certainly true that the world has oligarchs, very influential tycoons. But the key difference I think between Russia and the U.S. in this regard, is that you can't imagine the Russian Supreme Court ruling against one of Putin's friends. It just wouldn't happen. It's impossible to imagine.
Whereas it's perfectly possible to imagine Jeff Bezos losing a case in the Supreme Court, or a case in the Supreme Court happening in a way that Jeff Bezos wouldn't like, or Elon Musk wouldn't like. The existence of the rule of law is what will maintain democracy. It's not elections that matter, it's the rule of law that matters.
This is something that the Russian friends when I lived in Russia would always say, that it wasn't really the elections that mattered, it was the law that mattered.
It's also true to say that this model of a small number of rich men dominating everything is something that most Western countries had, what? A hundred years ago.
The key difference between what was created in the former Soviet Union compared to say, the Gilded Age in the United States or whatever point of aristocratic Western Europe you want to point a finger at, is that the way that the former Soviet oligarchs owned their property was totally different.
They didn't own their property, only in their own country, the majority of their property, they exported to keep it elsewhere.
So, it is a feature of the former Soviet Union that more than half, certainly, in some places probably much more than half of the wealth owned by oligarchs was sent offshore and invested in property in London or New York or Paris, or in companies and shares or luxury goods, super yachts, football clubs and so on, overseas.
So, instead of investing back in their own societies with essentially, to a degree of long-term benefit to everyone, there's very little of that been seen in the former Soviet Union.
And that is a really important distinction, between the oligarchs of the former Soviet Union and the oligarchs of, say, the Gilded Age in the U.S. a hundred years previously.
Jakub: In a way, what makes this kind of unique is that essentially, what we have is a stationary bandit kind of political model in these countries post the breakup of the Soviet Union, and people who are leading it in a very extractive manner. It's basically, that is sort of the distinction in your view.
Oliver: Well, I would say it's different. Obviously, the idea of the stationary bandit, I would say is more what we saw in the, say the Gilded Age in the United States. That idea of an extractive bully who squats in the middle of a society and takes from everyone. But at least, they’re stationary, at least their wealth remains in that society.
What we saw in the former Soviet Union, this sort of offshore bandit, has all of the downsides of a stationary bandit, the bully, the extraction, the theft and the dominance, without the benefit of that wealth remaining in the society because they sent it elsewhere.
So, it was a new model of dominating a society, which is extremely harmful and very difficult to do anything about. Because even if there's a revolution, as we saw in Ukraine in 2004/5, and again in 2014, if the wealth is offshore, it's very hard, if not impossible to reclaim it.
When we've seen court cases to try and return wealth stolen from former Soviet countries and to return that wealth, whether that's in Kazakhstan or in Ukraine or indeed, in Russia, it's been unbelievably difficult to make that happen.
Jakub: And what's the difficulty here? It's a bit of a provocative question because part of the answer is obvious. But why has it been so hard to get this wealth back?
Surely, you'd think a lot of the Western countries that are sort of housing the bank accounts and the assets that have been purchased for this wealth, would be ready to cooperate.
Oliver: Western countries are ready to cooperate, but Western countries aren't just one thing. Western countries have governments and courts.
Jakub: Yes.
Oliver: And parliament and so on. So, you need to convince the courts that the case you are bringing is fair and well-evidenced. And extracting evidence from a corrupt country is very hard. Persuading a court that a case is not politically motivated when often it is politically motivated, is very hard.
And then you come up against all of the tricks that oligarchs are able to use to hide and protect their wealth. Because once wealth is hidden behind shell companies in multiple tax havens, it's very hard to find and it's very hard to confiscate because you need to win cases in the courts of all of those places, and all of those places, their economies are based on making it hard to get wealth out of them.
Jakub: Well, as you say, if I'm an oligarch who has been making money, whether it's in Kazakhstan, Russia, Ukraine, doesn't really matter — in each of these places, I have my people who have been earning money, I have friendly judges, politicians, et cetera. And I guess this is where the political aspect comes in and there's a whole series of places that also kind of depend on me.
So, it's basically you need to sort of break down the chain on each of the different steps. Is that basically sort of what the challenge is here, right?
Oliver: Exactly. You have countries which are almost mediaeval in their governance mechanisms, the way that they have informal mechanisms, political courts, everything dominated by a very small group of men in the centre.
And yet, those sort of mediaeval mechanisms are then plugged into the globalised financial system, which is based on the rule of law, on efficiency, on extremely large financial institutions whizzing money around the world very quickly.
And it's very difficult once wealth moves from one side of the system to the other and back again, it's very difficult to follow it, it's very difficult to have any idea who owns what. And that's a real challenge.
The answer, I think, doesn't really lie in expecting Kazakhstan or Russia to clean up, because let's face it, that's not in the interest of their ruling class. The answer lies in much more thorough checks in Western countries to prevent the wealth getting into them in the first place.
I think that confiscating that wealth is probably impossible. Once it's entered the Western financial system, it's so well protected and so well hidden that it's essentially impossible to find and confiscate. The answer has to be to prevent it coming in in the first place.
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Jakub: Nastya, how do you feel about the fact that now, in the U.S., we have Jeff Bezos who owns the Washington Post. We have Zuckerberg who, okay, he made his money and owns Facebook. And now, we have Musk who also has stepped in and is a billionaire with a social media platform. Is this an American oligarch?
Anastasiia: Don't even get me started on Musk right now. I'm not as threatened of course, by the American oligarchs because there are a lot of issues but those are very different issues. Those are the issues of monopoly and antitrust legislation and what a particular administration wants to do with those tools and how it wants to pursue these mega, huge companies.
But it's a totally different game altogether because as Oliver mentioned, it's the rule of law that matters. And being an ultra-rich person in a country that has rule of law, as opposed to the one that doesn't, are totally different circumstances.
Jakub: You're right that the U.S. is a much more robust state. And if we say that in the U.S. you have the state that is able to essentially cut an oligarch down to size, like if they become too influential in the economic and the political system.
In Russia, oligarchy has been broken by a very different mechanism, but it's essentially, Putin telling them to sit quiet and shut up. Virtually, everybody has bowed down to him and those who didn't, have seen their assets taken away from him.
In Ukraine, Zelenskyy through the legislation, through various measures, has also cut the oligarchs down to size. Do you think we're witnessing the end of the global oligarchy?
Anastasiia: I wouldn't go as far as to say that this is some sort of global end of the oligarchy. Well, first of all, because governments change and well, maybe in Ukraine. It's important note in Ukraine they do, maybe not in Russia, in Ukraine they do.
And we don't know who the next president will be, and we don't know what their approach to this issue will be. And I'm not saying that we're going to have some sort of return of a pro-oligarchy authoritarian, but I'm just saying that we don't know.
So, that's important to keep in mind. But there's also another interesting discussion happening, which it's difficult to estimate the scale and the similarity of this phenomenon to the traditional Russian oligarchy.
But I've read an article in foreign policy, I think, that talked about the emergence of this new wave of oligarchs in Russia, because when Russia launched its full-scale war against Ukraine, many foreign companies began leaving Russia because of the sanctions, and they have to sell off their assets.
And it's this kind of very similar situation to the ‘90s when suddenly, you have all of this kind of change of hands in different companies. So, like places like Sephora for example, all of these huge international corporations who've had stores and large warehouses and large buildings in Russia, they had to sell them off.
And there is a group of younger-ish Russian rich men who bought those assets off and are now making businesses out of that. And of course, it's not the same situation because Russia no longer has the same access to the foreign market. It's just a totally different economic game to play in.
But it is interesting that people who bought off some of these assets were unheard of previously. And I'm saying that to say that this is really not the end of history. Like we don't know how resistant the Russian economy is to these sanctions and we don't know how the ultra-rich in Russia are going to continue reacting to what's happening, because I think so far, something like four Russian oligarchs came out vaguely against the war.
And I think something like only one or two actually criticised Putin, like actually said, like this regime sucks. Everyone else just called for peace and against violence and things like that, so–
Jakub: It's interesting what you're saying about how the political chaos in Russia is essentially building a new class of these future oligarchs. And it really makes you think whether it's in the U.S., in Ukraine, in Russia, in Europe, in China, or throughout the emerging world — it would certainly seem quite optimist to say that the rule or the times when rich, mostly men as Oliver points it out is over. The more things change, the more they stay the same.
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Up until the war, there was a lot of, I would say, belief that the oligarchs could influence Putin, the West sanctioned them, turned out almost no effect. At what point did that stop being true or was it maybe some other circumstance that made it not true? Did the oligarchs never have influence since the 2010s?
Oliver: It an interesting question. We don't know yet that it was wrong. We don't know yet that the oligarchs won't have influence over Putin. There are obviously, a lot of people around Putin who have become much poorer, as a result of his decision to attack Ukraine again in February, 2022.
And let's face it, I'm sure many of them, if not most of them, are very unhappy about that. So, we don't yet know that it was a bad calculation to sanction the oligarchs.
However, it is noticeable that they have not (with a few exceptions) been speaking out against what happened. They are quite obviously, scared of offending the Kremlin and being seen as being on the wrong side in this particular battle.
So, it's clear that Putin had done a far better job of centralising control over the oligarchs than perhaps many people thought. But that's not to say that sanctioning the oligarchs was a bad thing to do. If the oligarchs had independent voices in the Kremlin, sanctioning them was a good idea because that would've put pressure on Putin to do something.
If the oligarchs don't have independent voices in the Kremlin, sanctioning them is a good idea because essentially, you are thereby sanctioning the Kremlin. So, I think it was still a good idea and still the right thing to do however this ends up turning out.
Jakub: Yeah. So, let's move away from Russia for a second. We see sort of the trajectory that oligarchy is taking in Russia.
What about Ukraine? Has basically central government in Ukraine become strong enough to resist the oligarchy, and do we see a demise of the oligarchy whose assets in Eastern Ukraine have been obliterated, who no longer have a power base, an economic base? Is it the end for oligarchy in Ukraine?
Oliver: It's certainly true that if you look at the big sources of wealth for oligarchs in the past, the gas transit from Russia to Europe, that's obviously going to end as a source of influence. All of the industrial base in the Donbas, that's all going to end. It's been destroyed.
So, yes, the situation will be extremely different. Will the central government be able to stand up to the oligarchs in future? Is a question that probably to a large extent, depends on the Western creditors of Ukraine.
Ukraine is only able to fight, not just because it's been given weapons by the West, but because it's been given money by the West. Ukraine in any ordinary sense, would not just have been defeated on the battlefield by now, but would've been defeated economically by now, it would've collapsed.
It is being maintained by continuous Western credits and after the war, it's going to have to pay those back, or would not only need new ones, but will have to pay them back. And that means that Western countries will be able to demand significant reforms and significant anti-corruption measures as the price of continuing support.
So, yes, if I were a Ukrainian oligarch, I would not just be worried that I've had all my steel mills or whatever destroyed in Eastern Ukraine, but also, that I'm going to be entering a very unfriendly political climate in the next few years.
It is noticeable that a couple of the oligarchs, Victor Pinchuk, in particular, but also Dmytro Firtash to a certain extent, have been trying to position themselves as very pro-Western, with all these kind of peace plans and so on.
And I think that that's probably a response to their recognition of what the new reality is going to be. Ukraine, is going to be (when it wins the war) it's going to be broke, it won't have any money, and it would need money. And so, the people lending it, that money, will have colossal influence over what policies its government follows.
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Jakub: Very good. Wow, and we actually managed to make it through the whole interview without using the phrase London grad. Is that a failure or a success?
Oliver: It's a success. Or we didn't say Moscow on Thames either. Another one that makes me want to pull my hair out.
Jakub: No, that's a good one. Yeah, well done to us. Oliver, thanks so much.
Oliver: Thanks very much. It's my pleasure.
Jakub: Look, while oligarchy seems to be different in every single country, whether it's Russia, Ukraine, the U.S., China, it's clearly symptomatic of a global problem of inequality.
And what is to some extent surprising, but also, maybe gives a little bit of hope is that this is actually an issue that most of the world can rally around. Whether it's oligarchs as the enablers of autocrats, of vicious authoritarians. Well, that's something that most people can get behind.
But also, from let's say, the left wing and the people who are fighting for inequality, the oligarchs, all of these systems that are essentially propped up by extremely powerful, extremely wealthy men, this is also something that they've been fighting their whole lives against. This is a rare case where most of the world can be united against the common foe.
Anastasiia: Yeah, I think that's an important point. So, when we talk about sanctions not being enough, that's not to say that they shouldn't be there. I definitely think that we should be fighting like hell against Russian dirty money in the West. And that's what these sanctions are doing.
Because again, these assets, like one of the problems with these assets being in places like London and in the U.S. and everywhere else in Europe, it's not that it's Russian, it's that it's probably made as a result of criminal dealings.
So, I definitely think that these sanctions are a very good step, if not in stopping the war or overthrowing Putin, but in general, in fighting against Russian kleptocracy. I think that is an excellent tool for that. That's a bit of a more positive note to end on.
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In two weeks in Power Lines, we're going to be speaking about how the war in Ukraine is being fought online, as we explore what modern cyber warfare actually looks like.
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Anastasiia: Power Lines is a partnership between the Kyiv Independent and Message Heard. It was produced by Bea Duncan, Harry Stott, and Talia Augustidis. The executive producer is Sandra Ferrari. The theme music is by Tom Biddle and Alfie Godfrey.