Tainted Transactions

National Interest, The, Spring, 2000 by Janine R. Wedel

In Russia, however, the Chubais transactors' primary source of clout was neither ideology nor even reform strategy, but precisely their standing with and their ability to get resources from the West. As the Russian sociologist Olga Kryshtanovskaya explained it,

Chubais has what no other elite group has, which is 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. In this way, a small group of young educated reformers led by Anatoly Chubais transformed itself into the most powerful elite clan of Russia in the past five years. [11]

U.S. support proved decisive in this transformation. The administration's "dream team" seal of approval bolstered the Clan's standing as Russia's chief brokers with the West and the international financial institutions, and as the legitimate representative of Russia. It also enabled the Harvard-Chubais transactors to exact hundreds of millions of dollars in Western loans and American aid.

The Modus Operandi

IT IS TIME now to look in greater detail at the way in which this extraordinarily effective operation worked--effective, that is, in acquiring standing and funds. There were five basic operating principles.

* Democracy by Decree

The transactors' preferred way of proceeding in the Russian context was by means of top-down presidential decree. U.S. officials explicitly encouraged this practice as an efficient means of achieving market reform. As USAID's Walter Coles, a key American official in the privatization aid program, put it, "If we needed a decree, Chubais didn't have to go through the bureaucracy." [12] Rule by decree also allowed the transactors to bypass the democratically elected Supreme Soviet and the Duma. The Harvard Institute's Russia director, Jonathan Hay, and his associates went so far as to draft some of the Kremlin decrees themselves. Needless to say, this did nothing to advance Russia's evolution toward a democratic system, nor was it consistent with the declared American aim of encouraging that evolution.

* Flex Organizations

A similar anti-democratic ethos pervaded the network of Harvard-Chubais transactor-run organizations. The transactors established and oversaw a network of aid-funded, aid-created "private" organizations whose ostensible purpose was to conduct economic reform, but which were often used to promote the transactors' parochial agendas. These organizations supplanted or circumvented state institutions. They routinely performed functions that, in modern states, are typically the province of governmental bureaucracies. They served to allow the bypassing of the Duma and other relevant actors, whose input was in the long term crucial to the successful implementation of economic reforms in Russia. Further, the aid-created organizations served as a critical resource for the transactors, a vehicle by which to exploit financial and political opportunities for their own ends. I call these bodies "flex organizations" in recognition of their impressively adaptable, chameleon-like, multipurpose character.