Introduction
The phenomenon of the Russian oligarchy after the Cold War and its impact on the structure of power in Iran represents one of the most revealing cases for understanding how post-transition societies reproduce new forms of concentrated power and inequality. Following the dissolution of the Soviet Union in 1991, Russia entered a turbulent era of economic liberalization and political reformation. These transformations not only reshaped ownership and governance structures but also created a new class of extraordinarily wealthy and politically influential individuals — the oligarchs.
Beyond Russia’s borders, the mechanisms and logic of oligarchic power found resonance in other countries facing similar institutional weaknesses, rent-based economies, and hybrid political orders. Iran, while different in its historical and ideological foundations, witnessed a parallel process in which the concentration of political and economic power led to the emergence of a distinct form of domestic oligarchy. This paper analyzes the historical evolution of the Russian oligarchy after the Cold War, examines how its underlying logic has echoed within Iran’s power structure, and finally discusses why Western governments often prefer cooperation with oligarchs rather than risking a revolutionary overhaul of established regimes.
Post–Cold War Russia: Historical and Economic Context
To grasp the birth of the Russian oligarchy after the Cold War, one must revisit the early 1990s — a period marked by institutional collapse and economic chaos. The fall of the Soviet Union dismantled not only a geopolitical empire but also an entire command economy. Under President Boris Yeltsin, Russia embarked on a rapid transition toward a market system through policies widely known as shock therapy. These included price liberalization, trade deregulation, and large-scale privatization of state-owned enterprises.
However, these reforms were implemented hastily and without adequate legal frameworks or regulatory institutions. Consequently, they paved the way for a massive transfer of national wealth into the hands of a few. One of the key instruments in this process was the Loans-for-Shares program, which allowed the government to borrow money from private banks in exchange for temporary control over shares in major state companies. When the government failed to repay these loans, ownership effectively passed to those same financiers — the future oligarchs.
Thus emerged a small, interconnected group of businessmen, former party managers, and politically connected insiders who came to dominate Russia’s natural resources, energy sector, and financial markets. Economic liberalization, instead of producing a competitive market, generated a system of crony capitalism where political access, not entrepreneurial innovation, determined success.
Incomplete Privatization and Institutional Weakness
From an institutional perspective, Russia’s privatization was incomplete and structurally flawed. The absence of transparent auctions, weak rule of law, and corruption within administrative systems created a fertile ground for rent-seeking and monopolistic control. The newly rich used their resources to influence the media, shape public opinion, and penetrate political institutions.
Thus, the Russian oligarchy after the Cold War evolved as a hybrid formation: economic in origin but deeply political in outcome. These oligarchs were not merely wealthy businessmen—they became political actors whose fortunes were intertwined with the fate of the state.
Putin and the Redefinition of the Oligarchy
When Vladimir Putin rose to power in 2000, he promised to restore state authority and limit oligarchic excesses. Some of the most powerful figures of the Yeltsin era were prosecuted, exiled, or forced to sell their assets, as exemplified by the Yukos case. Yet, the oligarchic system did not disappear—it merely changed form.
Under Putin, a new compact was forged: economic privilege in exchange for political loyalty. Those who aligned themselves with the Kremlin retained their wealth and status; those who challenged it were eliminated. This arrangement redefined the oligarchy as an extension of state power rather than a rival to it. The outcome was a system of state-dependent oligarchy, ensuring short-term stability but entrenching long-term structural inequalities.
Echoes of the Oligarchic Logic in Iran
The Russian oligarchy after the Cold War and its impact on the structure of power in Iran can be analyzed both in terms of institutional parallels and adaptive imitation. Iran did not experience a post-communist transition, but it faced its own post-war reconstruction phase after the Iran–Iraq War (1980–1988). The need to rebuild the country, combined with a rent-based oil economy and limited private sector, created fertile conditions for the rise of semi-state economic networks.
In this context, certain organizations gained privileged access to contracts, licenses, and state resources. The combination of political authority, economic rent, and weak oversight produced a structure where wealth accumulation was closely tied to political proximity—much like Russia’s early 1990s model. However, the Iranian version of oligarchy developed unique characteristics shaped by its revolutionary and security-oriented foundations.
The Role of the Military in Shaping Iran’s Oligarchy
A crucial element that distinguishes Iran’s experience—and one that must be included in any study of the Russian oligarchy after the Cold War and its impact on the structure of power in Iran—is the central role of the military establishment. While Russia’s oligarchs emerged primarily from private bankers and industrial managers, Iran’s oligarchic class partially originated from within its military and security institutions.
Following the Iran–Iraq War, military organizations entered the economic sphere under the justification of contributing to national reconstruction. Initially focused on infrastructure projects, their activities gradually expanded into energy, telecommunications, petrochemicals, banking, and manufacturing. Over time, these entities evolved into major economic conglomerates.
This militarization of the economy produced several structural consequences:
- Blurring the line between coercive and economic power:
The same institutions that command armed force began controlling vast financial assets and industrial projects. This fusion of power made economic competition deeply politicized and often insulated from public scrutiny. - Exclusive access to contracts and licenses:
Military-linked corporations obtained preferential treatment in major tenders and public–private partnerships, sidelining independent private actors. - Expansion of political influence:
As these entities accumulated economic power, their leverage over political decision-making increased. Economic interests became inseparable from security considerations, reducing flexibility for policy reform or transparency.
In this sense, Iran’s oligarchy can best be described as a military-political oligarchy, in which the holders of coercive authority also dominate economic life. This internal fusion of political, military, and financial power differs sharply from Russia’s post-privatization pattern. Whereas the Russian oligarchy initially competed with the Kremlin before being subordinated, Iran’s oligarchic networks largely arose within the centers of power themselves.
Comparative Analysis: Russian and Iranian Oligarchies
Despite their distinct origins, both systems display comparable outcomes. In both Russia and Iran:
- Wealth is concentrated in the hands of a narrow elite;
- Institutional oversight remains weak;
- Independent media and civil society face restrictions; and
- Oligarchic actors exert decisive influence over political agendas.
However, their sources of legitimacy diverge. Russia’s oligarchy grew from economic liberalization gone wrong; Iran’s stems from the intersection of political ideology, military power, and rentier economics. In Russia, the state eventually tamed the oligarchs; in Iran, the state itself embodies them.
From Economic Dominance to Political Control
Oligarchs are not mere businessmen—they are political agents who shape governance. In Russia, their control over strategic sectors such as energy and media allowed them to steer public discourse. In Iran, military-economic institutions exert influence through both financial and ideological mechanisms, affecting domestic policy and foreign relations. In both contexts, oligarchic consolidation undermines institutional checks and limits pluralism.
Why Western Governments Prefer Cooperation with Oligarchs
The preference of Western states to cooperate with oligarchs rather than promote revolutionary transformations can be explained through a realist lens:
- Stability over transformation:
Oligarchs seek to preserve the existing order, making them predictable partners. Western governments often prioritize stability over the uncertainties of political upheaval. - Access to strategic resources:
Russian oligarchs controlled vital energy supplies; Iranian networks control oil, gas, and key trade routes. Cooperation ensures continuity of these resources. - Mediating function:
Oligarchs act as intermediaries between authoritarian regimes and global markets. Even under sanctions, they maintain informal trade channels that benefit all parties. - Fear of revolutionary chaos:
Western policymakers often view revolutions as destabilizing events that could produce conflict, migration, or terrorism. Hence, engagement with elite actors is deemed a safer strategy.
In short, the West’s engagement with oligarchs reflects a pragmatic calculus—favoring short-term security and economic access over long-term institutional reform.
Regional and Global Implications
The dynamics of the Russian oligarchy after the Cold War and its impact on the structure of power in Iran have broader implications for other rentier and hybrid regimes. The oligarchic model, once entrenched, tends to spread across borders through investment networks, patronage, and imitation. It reinforces authoritarian stability at the expense of transparency and civic participation. Moreover, the willingness of international actors to accept such systems for economic gain further legitimizes them, making reform increasingly difficult.
Toward Reform: Lessons and Prospects
Although entrenched oligarchies are resilient, comparative experience suggests that gradual institutional reform can mitigate their dominance. Key strategies include:
- Transparency and disclosure:
Publicizing ownership structures and government contracts through open data platforms weakens monopolistic control. - Independent oversight:
Strengthening judicial and anti-corruption agencies can counterbalance concentrated power. - Support for media and civil society:
Independent journalism and civic organizations are essential to hold elites accountable. - Incremental institutional reforms:
Instead of abrupt “shock therapy,” steady institution-building and rule-based governance produce more sustainable outcomes. - Rethinking Western engagement:
Rather than prioritizing short-term resource access, international actors should incentivize transparency and institutional accountability.
Conclusion
The study of the Russian oligarchy after the Cold War and its impact on the structure of power in Iran reveals that oligarchy is not merely an economic category but a comprehensive system linking political authority, wealth concentration, and institutional weakness. In Russia, it was born out of rapid privatization and evolved into a state-aligned hierarchy. In Iran, a variant form emerged from within the political–military establishment, fusing coercive and economic power into a single framework.
Western cooperation with oligarchs—while rational in the short term—reinforces these structures and obstructs democratic development. Overcoming oligarchic dominance requires a dual approach: domestic empowerment of transparent institutions and international reorientation toward long-term governance reforms.
Ultimately, both Russia and Iran demonstrate that when power and wealth converge without accountability, oligarchy becomes self-perpetuating. Breaking this cycle demands not revolution, but the steady construction of institutions capable of restraining power, enforcing transparency, and expanding the space for civic participation.
