Making Sense of Bidzina Ivanishvili
MT799 Authenticated | Independent Contributors Column
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Publisher’s Note:
Given the ongoing protests in Georgia over the “Russian Foreign Agent Law” passed by the Georgian Parliament, we invited the two foremost global experts and authors on oligarchs to write about Bidzina Ivanishvili, the powerful Georgian oligarch.
About the Authors:
David Lingelbach is a professor of entrepreneurship at The University of Baltimore. He lived and worked in Russia from 1994 to 1999, where he served as head of Bank of America’s businesses in the former Soviet Union and worked with Vladimir Putin.
Valentina Rodríguez Guerra is an author, oligarch researcher, and graduate student at La Facultad de Ciencias Económicas, Universidad Nacional de Colombia.
Their book, The Oligarchs’ Grip: Fusing Wealth and Power, was published by De Gruyter and was shortlisted for a Business Book Award and a Goody Business Book Award. To study this important phenomenon, they have established The Center for the Study of Oligarchs.
Making Sense of Bidzina Ivanishvili
Oligarch | Master of the Universe
The most insightful comment about Bidzina Ivanishvili came from the Georgian oligarch himself 2011. Years later, Thomas de Waal, one of Georgia’s most insightful foreign observers, tried to capture him thusly:
“...Ivanishvili is formed by Russian business and political culture and is comfortable doing business with the Russians – but seems to want to do so from a position of safety. He shows no sign that he wants to be owned by them.”
Gia Khushashvili, once his adviser and now a political scientist and critic, mused, perhaps feeling his own wounds:
“Ivanishvili likes to crush or push people slowly. He is very good at strategic patience. If he dislikes someone, he can smile at them for a year or more.”
And what did Ivanishvili say? In an interview with The Observer, on the eve of establishing his Georgian Dream party, he named Vaclav Havel as his hero and then, in the same breath, said:
“I’ve never been an oligarch. The definition of an oligarch is someone who has cooperated with the [Russian] government and I never did.”
His remarks are brilliant in their way, perhaps subconsciously so. No one would confuse Ivanishvili with Havel, and everyone knows that he is an oligarch and has been one since the mid-1990s. Ivanishvili’s juxtaposition of the two untruths—holding out the hope that he is a “good” oligarch like, say, Al Gore—read the Georgian room perfectly at that moment in the country’s history when incorporation into the Western world seemed to be only a matter of time. The stealthiness of Ivanishvili’s remarks reveals a master oligarch.
We define oligarchs as economic and political actors who gain wealth or power and then transform one into the other.
Oligarchs acquire wealth in three ways:
Self-made.
Inheritance.
Political and family connections.
Their power is of three types:
Decision-making (typically by holding political office).
Agenda-setting (often through funding or working behind the scenes), or
Ideological, shaping the way we think and act.
Historian Matthew Simonton describes oligarchs as the wealthy few who govern us.
In 2024, Ivanishvili unveiled his long-established dominance as Georgia’s master oligarch. But that unveiling has raised a series of questions. How effective of an oligarch is he? Where does he fit in the oligarchs’ world, which now covers the globe? When he emerges from the shadows, will his second act enable him to enhance further his wealth and power, which are an oligarch’s two essential control mechanisms?
To answer these questions, we turn to the more than 30 years of research on oligarchs we’ve conducted, summarized in our recent book The Oligarchs’ Grip: Fusing Wealth and Power.
So far, most observers have taken a Georgia-centric approach to assessing Ivanishvili. We want to use a wider lens, comparing him with other oligarchs over time and space. Let’s start in Russia, where Ivanishvili made his first fortune.
Comparison with OG Russian Oligarchs
Like many oligarchs born outside of Russia who made their fortunes there, Ivanishvili’s entry point was higher education. In 1982, he moved from Georgia to Moscow to pursue a PhD in Economics at the Moscow State University of Railway Engineering (MIIT, now known as the Russian University of Transport). The university was considered amongst the best technical universities in the Soviet Union and was known for accepting Jewish students, suggesting a more open intellectual environment. In his World Economic Forum biography, Ivanishvili states that he earned a PhD in 1987, but the university and subject aren’t specified. We are unable to confirm that he holds this degree. Several prominent oligarchs have been associated with MIIT, including Len Blavatnik, Viktor Vekselberg, and Vitaly Malkin, who became Ivanishvili’s first and main business partner.
Ivanishvili and Malkin followed a common route to wealth at that time, importing computers and telephones. They used the profits from that business to create Rossiyskiy Kredit Bank in 1991. Typically, approximately $100,000 in capital was required at that time to establish a Russian bank. Contrary to other reports, we can say that Rossiyskiy Kredit (and, by extension, Ivanishvili and Malkin) were not leading actors in Russia’s privatization process or a central part of Boris Yeltsin’s 1996 reelection. When David served as head of Bank of America in Russia during the 1990s, Rossiyskiy Kredit—and Ivanishvili and Malkin—were very much not target customers of most international financial institutions. Chrystia Freeland got it right in her The Sale of the Century (2000) when she referred to Ivanishvili and Malkin as candidate oligarchs—very much second-tier.
More interesting than Rossiyskiy Kredit were Ivanishvili’s investments in the metals sector. Two iron ore producers—Stoylensky and Mikhailovsky—and a steel plant—Orlovsky. Acquired during the mid-1990s and sold off 2003-05 for a combined $2.2B. Some data suggest that the proceeds were reinvested in Gazprom, UES, Lukoil, Vimpelcom, MTS, and Surgutneftegaz shares. We will note that two firms—Gazprom and Surgutneftegaz—are Vladimir Putin’s core investment holdings.
Further asset sales in Russia followed. In 2006, Bank Impex was sold to Raiffeisen Bank for $563M. Then, beginning in 2011, Ivanishvili appears to have sold off many of his remaining original Russian investments for a total of $1.5B, including Rossiyskiy Kredit ($352M), the Doctor Stoletov pharmacy chain ($60M), and the Stoilenskaya Niva grain processor.
Today, our best estimate of Ivanishvili’s net worth is $6B, representing the average estimates by Bloomberg and Forbes. According to the former, most of that net worth is in cash and other liquid investments, and the remainder is in his extensive art collection and real estate.
How does Ivanishvili’s track record as an oligarch compare? We begin by looking at these results in relation to those of other OG Russian oligarchs. Ivanishvili has both below-average wealth and power when compared with his cohorts:
Comparison with Global Oligarchs
Moving beyond the 1990s cohort of Russian oligarchs, how does Ivanishvili compare with other oligarchs worldwide? Here, we draw on research published in The Oligarchs’ Grip and some estimates for other oligarchs that we follow at The Center for the Study of Oligarchs.
Let’s start by comparing Ivanishvili to a few other oligarchs and one tycoon (an actor with wealth but no or limited power) in the Caucasus. As the following table shows, his wealth is above average in comparison to others in the region, and his power is average:
The Lingelbach-Rodríguez Oligarch Index (LROI) is a simple quantitative measure of an oligarch’s effectiveness, enabling us to easily compare them. It comprises four equally weighted metrics–wealth, power, capacity (defined as the fit with the Lingelbach-Rodríguez Model), and impact–normalized on a 0-10 scale. The oligarchs we studied closely in our book had an average LROI of 5.1, making Ivanishvili an above-average oligarch in this regard.
Next, let’s consider Ivanishvili against oligarchs worldwide, who make interesting comparisons. These oligarchs originate from post-Soviet institutional environments beyond the Caucasus or relatively small economies that can be compared to Georgia. In this comparison, Ivanishvili is below average in terms of both wealth and power:
In summary, Ivanishvili is, at best, an average oligarch compared to others of his type.
Prospects
What is Ivanishvili’s fate? The above oligarchs provide some clues to which he has just been compared. Of the 12 OG Russian oligarchs noted earlier, five have been defeated: two are dead, and three are exiled with little or no power and greatly diminished wealth. But seven continue to be active, even prosperous if not terribly powerful. Better than even prospects for Ivanishvili based on those results.
The odds are roughly the same for Ivanishvili if we look at the Caucasus-origin oligarchs. Three were defeated–two dead, the other currently in jail. Three others are holding their own and doing fairly well. So, based on these data points, it's 50/50 for Ivanishvili. While the numbers are smaller for comparable oligarchs beyond the Caucasus, the results are consistent with the other comparisons.
Measured by the Lingelbach-Rodríguez Oligarch Index (LROI), Ivanishvili is above average compared to the oligarchs we have studied most closely. He seems most comparable in his competence and current approach to two other oligarchs we know well from our research: Charles Koch and Rafic Hariri. Like Koch, Ivanishvili’s power has remained principally agenda-setting in nature. Like Hariri, he has had a special focus on philanthropy, perhaps motivated by “doing good” but also with clear reputational (and therefore) political benefits.
Will he take Georgia squarely into Russia’s orbit? Will Georgia take a further turn toward authoritarianism? We leave these questions to others (See Georgian Nightmare by Thomas de Waal). However, a December 2023 encounter we had with Ivanishvili soldier Irakli Chikovani, then Georgia’s deputy speaker of the parliament and now deputy prime minister and defense minister, made us skeptical that Georgia would continue its turn to the West.
But we can say this: Bidzina Ivanishvili is a master oligarch, even if an average one. He knows that this is his time, saying recently,
“Making the right move at the right time is the ultimate art of politics.”
Neighboring states are mainly run by oligarchs. He will likely survive and prosper in the Georgia he is creating for himself and, incidentally, the Georgian people.
2024 is the year of the Oligarchs, and, like several others, Ivanishvili is riding that trend.
Vol 2, No 27 - BWR (MT799) 12.06.2024
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