Privatization

   Under Boris Yeltsin, the newly independent Russian Federation initiated a mass privatization scheme meant to transfer the assets of the now-defunct Soviet state to the people in whose name the property nominally was held. However, incipient privatization efforts in the late Soviet period, targeting smaller industrial concerns, had already determined that, in practice, assets would be transferred to political and economic elites rather than the masses. Under Yeltsin, state-owned enterprises proved to be the major target of this undertaking, excepting strategic assets in the defense industry. In the early stages of this plan, Anatoly Chubais spearheaded privatization through the State Committee for State Property Management of the Russian Federation. Adapting the voucher privatization plan that had been employed in Czechoslovakia, Chubais distributed vouchers to employees of small and medium-sized state firms and some large enterprises from 1992 to 1994. These vouchers were quickly bought up by industry insiders and others with access to large amounts of capital (including members of the security services and the mafia).

   This concentration of ownership laid the groundwork for the emergence of the oligarchs in the mid-1990s, and, after a brief flurry of enthusiasm, turned much of the populace against the government and further privatization efforts. Despite public opposition, Yeltsin, in desperate need of funding, expanded privatization to larger firms and strategic sectors of the economy in 1995. Through the loans for shares program, the state auctioned off what would become ownership stakes in some of Russia’s largest enterprises, transferring control of the country’s telecommunications, mining, oil, natural gas, and other key industries to a handful of well-connected tycoons. The lack of transparency and low prices paid for the assets, as well as the program’s intensification of the country’s wealth gap, soured most of the citizenry on the entire idea of privatization. The process also gave rise to the slang prikhvatizatsiia, a portmanteau of the Russian word for “grab” and the English word “privatize,” producing the concept of “grab-it-ization” to criticize the emerging kleptocracy and corruption of the state.

   Ignored during the Yeltsin era, the Land Code of 2001 opened the door to privatization of the large swaths of land that remained under state control. Despite Vladimir Putin’s push for land reform, few businesses or individuals took advantage of the new opportunity to buy land, in part due to long-standing traditions of publicly held lands, but also as a result of high levels of taxation and insecurity about the legal status of such purchases. In the wake of the 2008–2009 global financial crisis, the Kremlin has bought up controlling stakes in a number of strategic assets, suggesting a concerted effort at “reverse privatization,” that is, renationalization. Such actions follow the widely criticized seizure of Yukos from Mikhail Khodorkovsky.