Yeltsin Resigns, Oligarchs Elevate Putin to President: KGB Officer Chosen to Protect 'The Family' Transforms Russia into Kleptocracy

Boris Yeltsin resigned as President of Russia on December 31, 1999, elevating Prime Minister Vladimir Putin to Acting President six months before scheduled elections. The succession had been carefully engineered by Yeltsin’s oligarchic allies, known as ’the family,’ who began actively seeking a successor immediately after the 1996 presidential elections. They needed a competent, reliable, loyal candidate with no past ties to Yeltsin who could strengthen the state and—crucially—protect the oligarchs’ wealth and keep Yeltsin’s family from prosecution. In 1999, they agreed that an obscure former KGB officer named Putin fit the requirements. He was barely a public figure with only 2% voter support in August 1999, but had a reputation for loyalty. The oligarchs who got ostentatiously rich through loans-for-shares deals during Yeltsin’s presidency created and bankrolled Putin’s political party Unity, engineered his meteoric rise, and deployed their television stations and newspapers (controlled by Vladimir Gusinsky and Boris Berezovsky) to turn Putin into a household name. By year-end, support had surged to 51%. Putin won election on March 26, 2000 and immediately used his KGB background to erect a kleptocracy that enriched both himself and his cohorts. In summer 2000, Putin summoned 21 of Russia’s richest oligarchs to the Kremlin with a clear message: keep your wealth at his behest, but avoid politics. Unlike Yeltsin’s laissez-faire approach, Putin built a system where political loyalty was exchanged for economic privilege. He targeted oligarchs who didn’t bend to his authority—Vladimir Gusinsky and Boris Berezovsky fled Russia to avoid prosecution, while Mikhail Khodorkovsky was arrested in October 2003 and sentenced to 9 years after funding opposition parties. Putin’s kleptocracy made Russia the planet’s most unequal large country, with 110 billionaires possessing 35% of the country’s wealth (compared to 12% globally). The Putin-era kleptocracy actively used billions at cronies’ disposal to undermine and corrupt Western institutions and democracies—a transformation from Yeltsin-era chaos that had its roots in the shock therapy devastation and oligarch creation of the 1990s.