Thursday, September 04, 2003

Russian oligopoly-conglomerates Amidst the unending quasi-recession in the U.S., Japan, and Europe, one country stands tall. Surprisingly enough that's Russia. The Russian economy keeps getting better, at a solid rate of 7% a year. Inflation has leveled off, employment is picking up, and businesses are booming. Granted, the country still has problems, but the seemingly inevitable slide to absolute disaster has been reversed and there's a new optimism in the country. One of the reasons for this has been Putin's support for a new kind of oligopoly capitalism, according to an article called "The New Face of Russia 's Oligopoly" from the Moscow Times, an English-language newspaper. The article points out that much of the reinvestment in the country comes from a small number of oligopolies/conglomerates that have grown from the holdings of the "oligarchs," the men who managed to corner Russian state industries after the fall of communism. Some of the oligarchs have been kicked out or disgraced, but a number still continue on. These big companies have snapped up a number of other enterprises. As the authors of the article state. They still pump oil, dig up metals and bank, but now they also insure, produce turbines, build telecommunications systems, trade grain and even raise pigs. They each contribute a significant share of the nation's GDP and belong to a group of insanely wealthy individuals. But the reason behind this shopping spree may not simply be, as some believe, greed or lust for power, but the absence of a proper banking system -- and orders from the Kremlin to invest here. "The question is what the oligarchs are doing with their money. They could take it out of the country as they used to, but Putin has told them they would be in trouble if they do," said Al Breach, economist with Goldman Sachs. Among the companies profiled are: Millhouse Holdings, which owns petrol giant Sibneft, a big piece of Aeroflot, the national airline, 50% of Russian aluminum, paper mills, and more. Interros which owns Norilsk Nickel, a major mining company which also mines platinum and palladium, banking, steel, insurance, turbines, farming, and engines. Alfa Group which owns Alfa Bank, the leading nation-wide bank, the Tyumen oil company, the leading supermarket chain in Russia, insurance, vodka, real estate, and much more. These companies are closely held and quite secretive financially. They are not at all like the specialized new oligopolies we have covered elsewhere. Nevertheless they are genuine oligopolies, not state monopolies, and they may be the only form of capitalism that can work currently in Russia. The do resemble more the conglomerates of the robber barons in the Gilded Age. 9:18:06 PM

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