One thing that’s certain is most Americans know very little, if anything, about Russia after the fall of the U.S.S.R. The following is a short overview that highlights how the United States treated Russia after the dissolution of the Soviet Union. For example, the U.S. government and Harvard University fostered an unscrupulous oligarch class and a powerful Russian mafia by creating and implementing a privatization program fraught with rampant corruption.
The Voucher and Privatization Program
The collapse of the U.S.S.R. marked the demise of communism followed by the ushering in of neo-liberal policies including the sale of state-owned assets. Leading the charge underneath President Boris Yeltsin was Anatoly Chubais, a man who is deeply resented in his country for the economic failures that took place during the 1990s.
In 1991, Chubais was appointed to Yeltsin’s cabinet where he managed the State Committee for State Property Management of the Russian Federation (GKI)—Russia’s key state agency handling the country’s new privatization program. As Janine R. Wedel described in her book, “Collision and Collusion: The Strange Case of Western Aid to Eastern Europe,”
As the first head of the new GKI beginning in November 1991, Chubais, together with his team of St. Petersburg and Western advisors, drew up plans to privatize no fewer than 15,000 state enterprises. The team designed and coordinated the signature mass-voucher privatization program, launched in November 1992, in which citizens were given shares, or ‘vouchers,’ in state-owned enterprises. USAID spent $58 million to underwrite this privatization program, including its design, implementation, and promotion. Through the Harvard Institute, USAID supported about ten advisors to the GKI, whose contracts added up to $7.75 million.
As Wedel described above, the voucher program gave Russian citizens a stake in state-owned (soon to be privately-owned) assets. However, many didn’t know or understand what to do with the vouchers. The poor sold them for food while others simply gave them away. Some who used the vouchers to invest in formerly state-owned companies watched those same companies go belly up leaving them nothing in return.
Those with the education, money and insight to recognize a massive, economic opportunity quickly snatched up large bundles of these vouchers through rigged auctions and “loans-for-shares” programs. At these auctions, energy and oil companies were given away for peanuts. This unbridled corruption spawned a new class of wealth and political power: Russian oligarchy.
Members of Chubais’ Western team of advisors who took part in this scheme hailed from institutions like Harvard and they received an abhorrent amount of money from USAID, the World Bank, the European Bank For Reconstruction and Development, and other European governments to “reform” the Russian economy.
The Harvard Boys
Harvard professor Jeffrey Sachs and other U.S. economists began visiting Russia in 1991. Shortly thereafter, Sachs, along with Harvard professors Andrei Shleifer and then-U.S. Secretary of the Treasury for International Affairs Lawrence Summers, David Lipton, and others offered their services and money to Chubais.
USAID was more than happy to hand out huge monetary awards to these “Harvard Boys” who moved the money through the Harvard Institute for International Development (HIID) before dumping it into the exceedingly corrupt privatization program they themselves helped create.
In her book, Wedel pointed out that “using the prestige of Harvard’s name and connections in the [Clinton] Administration, H.I.I.D. officials acquired virtual carte blanche over the U.S. economic aid program to Russia, with minimal oversight by the government agencies involved.” Chubais himself had the “support of the top political quarters in the West, above all the USA, the World Bank and the IMF, and consequently, control over the money flow from the West to Russia.” As one Congressional report stated, “the U.S. government jumped at the “once in a century opportunity to advance our [U.S.] national interests.”
This is how the Clinton administration, Harvard, USAID, Chubois, and a handful of others controlled Yeltsin’s economic reforms. Welcome to the Clinton-Yelstin BFF years. Whether it was blind trust, sheer idiocy, vodka binges or all of the above that allowed Yeltsin to bring the Clinton administration into the fold like he did, whatever promises they made to him, it led to massive theft, corruption and his own downfall.
Under the privatization plan carried out by the U.S. and Anatoly Chubois, the country’s economic, political, and social problems exploded. Both the oligarch class and the Russian mafia flourished while ordinary citizens suffered extreme economic hardship.
The Harvard boys pocketed money wherever they could, government officials became filthy rich, and a handful of Russians like Boris Berezovsky, Mikhail Khodorkosvsky, Roman Abramovich, and Oleg Deripaska became the new oligarch class. They snatched up companies for a fraction of their worth and their personal net worth skyrocketed.
Boris Berezovksy was estimated to be worth $3 billion in 1997, Khodorkovsky (Yukos Oil) at one point was worth $15 billion, and Abramovich and Deripaska teamed up to make billions in the aluminum industry. Even former American Bill Browder of Hermitage Capital who disavowed his citizenship to avoid paying U.S. taxes took part in the financial rape of Russia. One article stated, “Within two years the company [Hermitage Capital] had ‘amassed $1 billion in assets’ and it was well on its way to becoming the largest foreign investor in Russia.”
As for the mafia, many of them were ex-KGB officers working hand in hand with the burgeoning oligarch class as they “gobbled up the oil, gas, mineral and telecommunications industries.” As professor James Kurth stated in this congressional report about the rise of the Russian mafia, “It was the devil’s due for Russia’s failure to develop a market economy in place of Communism–a failure abetted by the Clinton administration’s economic strategy for Russia and its embrace of corrupt Russian officials.”
(Edited and republished February 2024)
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