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Russia is a paradise for billionaires

UNITED STATES (OBSERVATORY NEWS) — Twenty years after Vladimir Putin reached the pinnacle of power, it became apparent that Russians’ dreams of social justice had crashed into harsh reality. Today, the “money whales” that previously controlled the Soviet economy retained their privileges in exchange for loyalty to the Kremlin, but the growing gap between rich and poor threatens to spill over into a socio-political explosion.

The suppression of freedom of the press, the “taming” of the opposition and the lack of comprehensive political reforms led to mass demonstrations in the summer, despite the tightening of punitive measures for holding protests and the adoption of bills regarding the responsibility for publishing on social networks.

In 2019, more than half of Russians faced financial difficulties, but money whales were a clear exception. It should be noted that the country’s economy has been suffering from the consequences of economic sanctions since 2014, and the real incomes of most citizens are rapidly falling, which threatens to result in a socio-political explosion due to the widening gap between rich and poor.

According to Bloomberg , which refers to its own calculations, in 2019, the 23 richest people in Russia got rich at 38.4 billion dollars. Thus, their combined fortune reached $ 250 billion, which is equivalent to 1/6 of Russia’s national income, which in 2019 amounted to $ 1.6 trillion, according to estimates of the International Monetary Fund.

According to the latest data from Rosstat, half a million Russians joined the “army of the poor.” Thus, today, about 21 million people, or 15% of the country’s population, officially live below the poverty line.

“New Russians”

According to Bloomberg, the richest Russians made their fortunes in the oil and gas sector, which has been mired in corruption since the early 90s of the last century. And, perhaps, the main reasons for which they succeeded were the closeness and absolute loyalty to the Kremlin, withdrawal from politics and refusal to criticize Putin’s government.

Co-owner of Norilsk Nickel Vladimir Potanin collected the richest harvest this year. The Russian billionaire, who ranks sixth on the Forbes list of richest Russians, increased his fortune to $ 25.6 billion thanks to an increase in shares of Norilsk Nickel, the world’s largest producer of nickel and palladium.

Potanin, as you know, is a close friend of Putin, with whom he plays hockey together. In addition, the Russian billionaire invested about $ 2.5 billion in the preparation of the Sochi Olympics.

The co-owner of Norilsk Nickel made his multi-billion dollar fortune in the 90s of the last century by organizing auctions on the principle of “loans for shares”, as a result of which a lot of businessmen got the largest industrial enterprises in Russia at bargain prices.

The Russian government, led by Boris Yeltsin, was unable to repay loans on time, so the “new Russians” gained control of the country’s largest companies. So Vladimir Potanin got the Norilsk Nickel.

It should also be noted that members of Putin’s family and his close friends disappeared from the list of the richest Russians, but new names appeared at the same time. For example, Gennady Timchenko. His fortune is estimated at 22.7 billion dollars, of which 4.1 billion he earned in 2019. Timchenko’s biography shows that he had a good relationship with Putin since working for the [now deceased] mayor of St. Petersburg, Anatoly Sobchak.

It is worth noting that Gennady Timchenko benefited from the privatization of the 1990s, becoming the owner of several large companies. He ended up on the top of Russia’s list of major “money whales” after billionaire Mikhail Khodorkovsky, owner of the Yukos oil company, paid for his political ambitions in 2004.

Timchenko, together with a Swedish entrepreneur, founded the oil trading company Gunvor, which was instructed to export Yukos oil, whose shares after the bankruptcy went to Rosneft. The Russian billionaire also owns almost 25% of the shares of the gas company Novatek, 80% of the shares of Stroytransgaz and 17% of the petrochemical company Sibur.

It should be noted one more fact. The number of dollar millionaires in Russia over the year has grown to 246 thousand people with a population of 140 million people. By the way, Russia is the world’s largest exporter of oil, natural gas, grain and minerals.

10% of the richest people in Russia, who can afford to buy luxury yachts and private jets, account for 83% of the country’s national wealth. According to another study, 5% of Russians account for more than 70% of the country’s personal wealth.

According to experts, while maintaining the existing model of the economy, when 70% of the country’s citizens live on the poverty line, Russia in the coming years will turn into an authoritarian raw-material state of the Latin American type. Wealth will accumulate in the pockets and accounts of oligarchs loyal to the Kremlin in exchange for the ever-growing number of poor people.

“Paradise for billionaires”

The Russian online newspaper published an article by Mikhail Delyagin, head of the Institute for Globalization Issues, in which he accused the government of turning the country into a “paradise for billionaires,” noting that in countries with a creative economic model, the wealthiest people are growing following an increase in social wealth and thanks to this increase.

“And if the model is based on the exploitation (if not to say – looting) of the property created by previous generations, then the assets of billionaires will ultimately grow due to the robbery of everyone else,” says Delyagin.

Many economists and sociologists criticize the Russian tax system, including Delyagin. In his opinion, Russia has become “a tax haven for billionaires, and a tax hell for everyone else.”

The Russian expert believes: “The richer the person (in Russia), the more opportunities he has to reduce the tax burden, since he can register as an individual entrepreneur and give 6% of income to the budget, while hired workers are supposed to give 13%, and there are not even any exceptions for those who earn below the subsistence level. ”
According to official statistics, tax revenues to the state treasury increased by 17% in 2018, and real incomes of citizens increased by 0.1%.

According to the Levada Center survey, 30% of respondents admit the likelihood of protests of a socio-economic nature, for example, against a decline in living standards.

The majority of Russians (72%) believe that the interests of the authorities and society in Russia do not coincide, substantiating their point of view by the fact that “the authorities live at the expense of the population, but they do not care much about how the people live.” Another 41% of the population is dissatisfied with the distribution of income in the interests of ordinary people.

Levada Center Director Lev Gudkov commented on the results of the survey. In his opinion, the prevalence of pessimistic sentiment “is directly related to stagnation in the economy and a decrease in real incomes of the population.” The current state of society is characterized by distrust of the leadership as a whole, as well as estrangement and distancing from it because of high-profile corruption scandals among officials.

In early November, the VTsIOM conducted a survey on confidence in the future among Russian citizens. According to the results, about 48% of Russians think about their future with anxiety and anxiety, while 41% expressed confidence that next year there will not be any positive changes in their standard of living. Another 23% of respondents expect the situation in the country to worsen.

Increased demand for loans

As the economic situation in the country worsens, citizens’ demand for loans has increased markedly. According to the latest statistics, 40 million Russians pay off credit debt – this is 54% of the working population. In addition, some pharmacies began to sell drugs on credit, at a cost of at least 3,000 rubles per pack.

Russian experts say that the credit load of Russians has peaked since July 2012. In their opinion, credit growth is associated with a decrease in real incomes of Russians, while banks owned by “money whales” set interest rates of 30% per year, which exacerbates the debt crisis of Russians and increases the profit of banks and financial institutions.

In an effort to encourage the Russians, VTsIOM conducted a survey on the satisfactoryness of the country’s citizens with their lives in various areas in 2000 and 2019.

According to the survey, about 80% of Russians are satisfied with their lives. Putin ridiculed the results of the poll after a wave of criticism from experts who said that it is impossible to compare conditions in a country that was on the verge of an economic collapse after the 1998 financial crisis, when real incomes of citizens fell first by 65%, and then another 15%, which practically led to the destruction of the middle class in the country, with present-day Russia, which has increased its economic power several times.

At a final meeting with members of the government, Russian President Vladimir Putin called the main goal “raising the level of citizens’s income,” but Kremlin spokesman Dmitry Peskov said there were no concrete proposals to combat poverty in Russia in response to rumors about the government’s intention to cancel income tax for Russians who receive a salary less than or equal to the cost of living. Recall, the proposal was submitted to the State Duma by Chairman of the Federation Council Valentina Matvienko.

Unfortunately, Russia has to pay for the global ambitions of the ruling authorities, which led to an increase in the number of Russian moneybags that the Kremlin saved from the impact of Western sanctions and global crises, giving them the opportunity to control various sectors of the Russian economy. It becomes clear that in the last term of President Vladimir Putin there will be no improvement in the standard of living of the population.

More and more Russians are convinced that anti-corruption campaigns are just profanity. Yes, the Kremlin authorities pushed influential “money whales” from the podium, such as Boris Berezovsky, Vladimir Gusinsky and Mikhail Khodorkovsky, but this was due to their rash political ambitions and criticism of the authorities.

Nevertheless, the fact that Putin’s rule has created a new class of oligarchs with whom he has close ties cannot be denied. Some names are famous, while others are in the shadows, secretly earning multi-billion dollar fortunes.

The Russian economy suffers from structural problems due to over-reliance on oil, gas and raw materials exports. The government is trying to control important sectors of the country’s economy through holding companies, but is facing rampant corruption and a lack of an independent judiciary. According to Russian economists, the lack of social justice and a further decline in the standard of living of the population will lead to anti-government protests, as in Chile, Lebanon and other countries.


This article is written and prepared by our foreign editors writing for OBSERVATORY NEWS from different countries around the world – material edited and published by OBSERVATORY staff in our newsroom.

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