Upon the collapse of the Soviet Union, the Russian agricultural market, alike majority of other sectors of the economy, fell into a trap of a forced institutional transformation. The dynamics of inherited kolkhozes and sovkhozes failed to satisfy the projected expectations. Thereby, alongside major economic reforms, a formerly state-controlled land was redistributed to the population, ultimately resulting in an overall decline of agricultural production. In 1998, battling with a severe inflation, Russia devaluated its currency, stimulating an increase of domestic output which consequently launched a momentous incentive for export. This, in turn, prompted for an emergence of new agricultural operators which nowadays, in the mainstream literature, are commonly referred to as “agro-holdings”.     

The government suddenly needed to shift gears from communism to a democratic rule, yet instead, it was gradually replaced by a “managerial democracy”, where the mental models remained unchanged. Ex-post Soviet corruption went intact with an everyday business which encouraged uncertainty and ultimately promoted for fewer transactions, due to risk-averse culture. This entire bouquet attracted the affluent individuals (later oligarchs) to invest in agricultural sector. Due to a combination of social, institutional and economical factors, the oligarchs appeared as the strongest of all and, thus, triggered further development of vertical and horizontal integration of agricultural enterprises in Russia.      

A stereotypical perception of oligarchs has been, as a rule, negative, however, current literature assures otherwise. This paper analyzes economic achievements of oligarchs in Russian agricultural entrepreneurship, as well as, the contributing factors and the reasons for the development of agro-holdings. The discussion derives from prominent literature that concerns the business development in countries of transition economies. The theoretical framework is inspired predominantly by a philosophy of New Institutional Economics. The empirical evidence derives from the Russian Statistical Yearbook, whence we compare large vs. small farms production levels and efficiency rates in various regions.       

Consequently, we suppose that the emergence of agro-holdings and their governance by oligarchs in Russia were inevitable and one of the major contributing factors playing a significant role was the uncertainty.

Keywords: oligarchs, institutions, transaction costs, property rights, corruption, Russia.