The number of billionaires residing in the country also rose this year, and Russia now ranks second in the world for numbers of the super-rich. The new oligarchs have made their money in a variety of entrepreneurial activities, from commodities to the stock market, and hold an unprecedented amount of the national income. The 500 richest Russians control over half of the country’s GDP.

Many of the high net-worth politicians have close ties to outgoing President Vladimir Putin, and most are members of the pro-Kremlin United Russia party. Forbes admits that wealth and political power frequently come together, but adds that Russia has taken the concept to new extremes. “[T]he scale of wealth in Russia’s government is unparalleled anywhere else on Earth,” the magazine writes. And the personal benefits of political power in the country are great, giving business leaders both lobbying power and a cutting advantage over the competition. As another added perk, legislators have immunity from prosecution while in office.

The situation is all the more absurd, since Russian law prohibits any government official from running a business. But with hundred-million dollar sums potentially at stake, finding a solution that makes everything legitimate on paper doesn’t prove too difficult.

For every perceived Putin victory, analysts point out serious failures and new problems that have emerged, including rising levels of inflation and widespread corruption. Furthermore, critics question the significance of Putin’s economic plan, and suggest that factors beyond the president’s control, like sky-high oil prices and reforms under Boris Yeltsin, contributed more to the economy.

As the Economist magazine explained in a recent article, GDP growth began before Putin even took office, reaching 6% in 1999 and 10% in 2000. Since then, it has leveled around 7% –an impressive result when compared to Western industrialized nations, but just average when compared with other former communist countries in Eastern-Europe. And unfortunately, much of Russia’s expansion is associated with little more than sky-rocketing energy and natural resource prices.

The Institute of Economic Analysis shows that the share of oil and gas in Russia’s GDP rose from 12.7% in 1999 to 31.6% in 2007. Natural resources constitute 80% of the country’s exports. Russia is now heavily dependent on world commodity prices, and has failed to use cash flows to diversify and improve other domestic industries. Foreign Direct Investment in sectors other than energy actually fell (from 1.6 to 0.65%) since Putin took office. Russian infrastructure, such as roads, remains disastrous and outdated, and unnecessarily raises the costs of doing business. State take-overs of privatized companies also dealt a blow to efficiency. Since Mikhail Khodorkovsky’s Yukos was dismantled early in Putin’s reign, growth in oil output fell drastically from a rate of 9% to 1% by 2007.

According to RIA Novosti, a further issue has been a widening gap between Russia’s rich and poor, which has skewed wage and income statistics. In 2007, the incomes of the top 10% were 17 times higher than the incomes of the bottom 10%, up from 14 times in 2000. Aside from a small class of the very wealthy, most Russians have felt their incomes rise quite gradually. Moscow, by some estimates the world’s most expensive city, overtook New York this year to house the most billionaires in any world city. Yet the per capita monthly wage in 2007 was just 30,000 rubles (€820 or $1,250). According to Rosstat, Russia’s statistics agency, incomes in the rest of the country are one tenth of that. More than 21 million Russians, or 15% of the population, remain below the poverty line.

The government has also been unable to conquer steady inflation, which reached double digits in 2007 and has eaten into growth. Prices on all consumer goods and services shot up in recent months, as much as 4 percent in some Siberian regions in January and February of this year alone. Some staple food items have grown by 20 and 25%. The Kremlin’s response has been largely ineffective, and the most notable methods used to deal with inflation have been fixed prices on certain goods.

Unprecedented levels of corruption and subservient courts have also emerged under Putin. Russia now ranks among the world’s worst countries for corruption, according to rankings from the World Bank, Transparency International, Freedom House and the World Economic Forum. The Kremlin’s uncanny destruction of one of Russia’s most open companies, Yukos, has removed any impression that businesses are protected by the rule of law.

The Economist quotes Vitaly Naishul, who tracks Russian institutions:
“The problem is not that the Russian legal system is weak. The problem is that it does not exist. The Russian justice system has as much to do with justice as the Soviet system of trade with trade.”

When Dmitri Medvedev formally takes over in May, with Putin as his prime-minister, he will stand at the helm of a formidable economic power. But a slight change in world energy or commodities markets could quickly reverse Russia’s fortunes, as continuing corruption pushes investors away.

Until serious reforms sweep the country, then, a crisis will always be just around the corner.

A new report from the Russian weekly Finans Magazine counts 101 billionaires (measured in US dollars) who have residence in Russia. A 2002 count by Forbes Magazine, early in Putin’s presidency, put that number at 7. Russia is now second only to the United States for the total number of billionaires.

The increase comes in light of Putin’s frequent public scape-goating of the “oligarchs,” a group that rose to rapid wealth under Boris Yeltsin in the 1990s. While some of the original oligarchs have been exiled or imprisoned, today’s 500 richest Russians are worth some $715 billion, or over half of Russia’s GDP. The latest list of billionaires contains twelve members of parliament, mostly of the pro-Putin United Russia party, and just one woman.

According to Finans, Oleg Deripaska, valued at some $40 billion, is first on the list, having nearly doubled his worth in the past year. Deripaska, 40, who has vast holdings across the metal, automobile and construction industries, is followed by Roman Abramovich, a former partner. Abramovich, 41, is well known for his lavish tastes and ownership of the Chelsea football club, and now holds a fortune of some $23 billion.

Putin himself does not appear on the Finans list, although a recent report from Stanislav Belkovsky, a political analyst, speculated that he has amassed a net worth of some $40bln while in office. Putin, in turn, called the allegation “detritus excavated from someone’s nostril and smeared across bits of paper” (source).

View the complete list of billionaires. (Russian)