Janine Wedel - Shadow Elite - How the World's New Power Brokers Undermine Democracy, Government, and the Free Market

Approving such a large sum of money as a noncompetitive amendment to a much smaller award (the Harvard Institute’s original 1992 award was $2.1 million) was highly unusual, according to U.S. officials. U.S. government procurement officers and GAO officials, including Louis H. Zanardi, who spearheaded GAO’s investigation of Harvard activities in Russia and Ukraine, offered this pronouncement. The waiver was endorsed by five U.S. government agencies, including the Department of the Treasury and the National Security Council (NSC), two of the leading bodies making U.S. aid and economic policy toward Russia (and Ukraine). From Treasury, the Harvard-connected Lawrence Summers and David Lipton supported the Harvard Institute projects. In his capacity as USAID’s deputy assistant administrator of the Bureau for Europe and the New Independent States, Carlos Pascual signed the waiver on behalf of USAID. Pascual’s support for Harvard projects continued, and he was later promoted to the NSC, where he served as director of Russian, Ukrainian, and Eurasian Affairs from 1995 to 1999. (Biography and information supplied by Pascual’s office.) Pascual later served as U.S. Ambassador to Ukraine from 2000 to 2003.

11. With regard to the $300 million reform portfolio that the Harvard Institute helped steer and coordinate, see U.S. General Accounting Office, Foreign Assistance: Harvard Institute for International Development’s Work in Russia and Ukraine , Washington, DC: GAO, SMD-97–27, 1996, p. 18. On Harvard’s oversight role and on USAID’s laxity, see p. 17 of the same report.

12. U.S. General Accounting Office, Foreign Assistance: Harvard Institute for International Development’s Work in Russia and Ukraine , Washington, DC: GAO, SMD-97–27, 1996, p. 17.

13. Lawrence Summers’s speech printed in Russia Business Watch 5, no. 2 (Spring 1997), p. 19. Summers and Chubais were on a first-name basis. For example, a letter Summers wrote to Chubais in April 1997 (obtained and published by a Russian newspaper) which he wrote as deputy Treasury secretary and addressed to “Dear Anatoly,” instructed his Russian colleague on the conduct of Russian foreign and domestic economic policy. Summers’s dictates included the Russian tax code, oil industry prospects, and how Russia should prepare itself to join the World Trade Organization and deal with U.S. trade laws.

14. The book by Shleifer, Boycko, and a coauthor here quoted is Boycko, Shleifer, and Vishny, Privatizing Russia , pp. 142, 128, respectively.

Dine’s views are from author’s interview with Thomas A. Dine, August 16, 1996. The quote from Morningstar is from author’s interview with Richard L. Morningstar, U.S. aid coordinator to the former Soviet Union, February 11, 1997.

For details of unequivocal U.S. support of Boris Yeltsin and the “Reformers,” see Frontline “Return of the Czar,” interviews with former officials at the U.S. Embassy in Moscow, including Thomas Graham, E. Wayne Merry, and Donald Jensen, PBS, http://www.pbs.org/wgbh/pages/frontline/shows/yeltsin/interviews/.

15. The Kryshtanovskaya quote is from Kryshtanovskaya, “The Real Masters of Russia.” Hay’s view of his role is from author’s interview with Jonathan Hay, June 17, 1994.

16. The SEC quote is from “U.S.-Russian Joint Commission on Economic and Technological Cooperation,” SEC News Digest , Issue 96–134, July 17, 1996. Summers’s quote is from Lawrence H. Summers, “Russia’s Stake in Global Capital Market Development,” speech at the Kennedy School of Government, Harvard University, Treasury News , Washington DC, Department of the Treasury, Office of Public Affairs, January 9, 1997, p. 30. The Forum’s four working groups were Investor Protection; Capital Markets Infrastructure; Collective Investment Vehicles; and Taxation, Accounting, and Auditing.

When a U.S. Treasury spokesman was asked who named Shleifer and Hebert to the Forum, the answer was that they were appointed by the Chubais group—specifically, according to other sources, by Vasiliev (interview with U.S. Treasury spokesman by Bill Mesler of The Nation , summer 1997).

In 1997, Congress asked the GAO to look into Shleifer’s role on the Commission. The U.S. Department of Justice, with concurrence from the House International Relations Committee, subsequently requested that the GAO suspend its probe, pending the outcome of Justice’s investigation.

17. As a U.S. investigator explained it to me: “Norris would call Jonathan [Hay] who would set up meetings for him [Norris] with Russian officials.” Author’s interview with Phil Rodokanakis, former senior agent in USAID’s Office of the Inspector General, January 25, 2001.

18. With regard to the laws passed by the Russian Supreme Soviet laying the groundwork for privatization: One law established the basic structure and principles of privatization; the other specified personal privatization accounts as the method of privatization. See Lynn D. Nelson and Irina Y. Kuzes, Radical Reform in Yeltsin’s Russia: Political, Economic, and Social Dimensions (Armonk, NY: M. E. Sharpe, 1995), pp. 48–51. The laws were passed two months before the August 1991 coup attempt. In the confused political environment that followed it, several schemes to realize privatization were floated before the Supreme Soviet (for details, see Lynn D. Nelson and Irina Y. Kuzes, Property to the People: The Struggle for Radical Economic Reform in Russia [Armonk, NY: M. E. Sharpe, 1994], pp. 26–56). At the time “nomenclatura privatization” was well under way, with bureaucrats and managers of state-owned enterprises appropriating property and resources for their own economic benefit.

For an authoritative account of the privatization reforms, see Nelson and Kuzes, Radical Reform in Yeltsin’s Russia , pp. 48–51. The authors detail how Chubais essentially fooled the Supreme Soviet by pushing through a new voucher idea via Yeltsin’s decree (of August 14, 1992) while no one was looking. As Vladimir Mazaev, chairman of the Commission on Economic Reform of the Supreme Soviet, told the authors in 1993, “The parliament was deceived. We approved one privatization program, and Chubais with his foreign advisers created voucher privatization using Yeltsin’s emergency powers [to issue decrees]” (p. 50). In September after having analyzed the new approach, the Commission concluded that legally it contradicted the law “On Registered Privatization” accounts that they had passed a year earlier and “promised to offer fertile ground for criminal activity” (p. 51).

The Sachs project documents here cited are: Project documents submitted by Jeffrey D. Sachs and Associates Inc. to the Finnish government (one of many sources of Sachs’s funding), World Institute for Development Economic Research Project on the Transformation of Centrally Planned Economies: Report on Activities, First Half of 1992, pp. 4 and 7. (I obtained these documents from the Finnish government and have put them on my Web site at: http://janinewedel.info/harvardinvestigative.html#3 and http://janinewedel.info/WIDER_Project.pdf.

19. For Shleifer-Boycko quote, see Privatizing Russia , a book coauthored by Boycko, Shleifer, and Robert Vishny (Shleifer’s colleague and business partner and a professor of economics at the University of Chicago who worked with the Chubais-Harvard team). The authors state that the book “looks at the Russian privatization from our perspective as members of the team that put it together” [emphasis added] (p. vii). Information about USAID’s $58 million privatization effort was supplied by Walter Coles (interview of June 5, 1996), with figure verified at Cole’s request by Deirdre Clifford, July 24, 1996.

20. For Yeltsin’s quote see, for instance, Komsomol’skaya Pravda , August 22, 1992, p. 2, cited in Hilary Appel, “Voucher Privatisation in Russia: Structural Consequences and Mass Response in the Second Period of Reform,” Europe-Asia Studies 49, no. 8, December 1997, http://findarticles.com/p/articles/mi_m3955/is_n8_v49/ai_20545806/pg_1.