03 April 2015

Review, Janine Wedel, Collision and Collusion (3)

Janine Wedel, Collision and Collusion, Palgrave Macmillan (2001).

Common acronyms: Harvard Institute for International Development (HIID); United States Agency for International Development (USAID; main distributor of US government aid); Russian Soviet Federation of Socialist Republics (RFSFR, constituent of the USSR)--after 1992, the Russian Federation (RF);

(Part 1; part 2)


One of the maddening things about this book is that Prof. Wedel seems to have no discernible philosophy.  On the one hand, she objects to the strategy, adopted by USAID, of attempting to bypass existing governments in favor of direct assistance to privatizing firms (praising European programs that did the opposite; see p.36); on the other, she objects to the US government being co-opted by specific politicians (the gist of Chapter 4).1 On the one hand, she objects to capricious control over funding by bureaucrats in Washington (who did not give field representatives enough autonomy--pp.33-34); on the other hand, region organization of US aid rather than national programs gives program managers too much power to shift funding to politically pliant governments (endnote 74, p.35). On the one hand she objects to the politicization of economic policies, so that consultants took sides in political elections.2 On the other hand, she attacks the arrogance and certitude of the (naturalized Russian-)American advisers.

Wedel mentioned3 that much of her research came from Anne Williamson, author of Contagion (unpublished).  Her testimony to Congress4 at once struck me as a version of Wedel's own account of events, but without the diffidence. While Wedel's account seems to hover between explicitly blaming USAID for Cold War 2, and backpedaling, Williamson minces no words (there are subtle differences: Wedel is a trained anthropologist, whereas Williamson discusses the Russians as if  they were a challenging breed of horse, bred centuries ago to require a firm guiding hand.). Williamson praises Larisa Pyasheva (or Piasheva), a staff adviser to Moscow Mayor Gavril Popov, as having concocted a plan for privatization that would have totally and suddenly resolved all the country's problems at once; and blames the US for total disaster by failing to seek her out and compel the Russian authorities to implement her plan.5 That, and her admiration for Wilhelm Röpke's presumed creation of postwar Germany, suggested that Russia was a totally blank slate on which a cohesive USA could write whatever it wanted--"us," with our global monopoly on agency and our unique potential to know the Truth (if only "we" really wanted to).

Anne Williamson may, or may not, be an avatar of Janine Wedel herself.  Wedel  is the well-nigh Quelle of allegations that the US government, deceived by Harvard, decisively and maliciously intervened to promote fake market liberals like Anatoly Chubais and Yegor Gaidar (instead of real ones like Grigory Yavlinksy or Larisa Pyasheva), thereby turning Russians against the ideals of democracy and free markets.  Even Matt Taibi and Mark Ames (in The Exile, 2000, p.237), distinguished journalists themselves, cite Prof. Wedel's work as evidence of this. Wedel's writing is extremely abstract, focused mainly on expenditures as conclusive evidence of agency; this agency is always decisive,and always misguided (actually, insidious).

Click for larger image

Russian Constitutional Crisis,  October 1993
And while most journalists have subtly different narratives and focuses when writing about crises, Wedel's and Williamson's are the same.  In contrast, authors at The Exile (and its successor, Exiled where a lot of archives from The Exile are routinely printed) are generally hostile to capitalism and its ideological hold over the USA; Williamson's (and Wedel's) premise is that the authorities in the USA betrayed capitalism.  No one would think to publish Anne Williamson's views in The Nation; but Janine Wedel?  Perfect fit. 

Anyone with the slightest familiarity with the authors who wrote for Exiled, or friends like Matt Bivens (1997), knows these people are not remotely admirers of USAID.  But they're also not enthusiasts for the ideology of free markets embraced by Janine Wedel. For them, the problem was not that voucherization was adopted (whether under foreign pressure or not), it was that privatization was given top billing.  If I have understood them correctly, the real problem was that actual markets, let alone free markets, simply did not exist in Russia c.1991-1996; so "privatization" would necessarily mean plunder, not competitive management. And arguably radical market reforms really weren't what Russia needed, then or now.

That's a matter of personal outlook, and it does need to be said that good journalists aren't wedded to particular policies, because of they were, they'd fail to acknowledge when that policy was failing. 

However, this brings me to my final point.  Wedel focuses on flaws in the process of privatizing Russia, but not on what these flaws led to (aside from the generally prevailing anomy of Russia today).  She mentions that the Supreme Soviet of the RSFSR had passed a privatization law that would prevent corruption (p.137), but Russian Pres. Yeltsin's appointees pressed for a system that ensured corruption.6  How did the first law prevent corruption, and why is Prof. Wedel so certain it would have?  Yes, she's certainly correct that privatization in both Russia and Ukraine occurred in a manifestly corrupt way, and this was a byproduct of the laws, but it's really important for readers to know specifically how it did and what plausible alternatives existed.

For example, Russia was not the first country in Europe to experience a transition to a capitalist economy; and one could argue that, in 1991, the results of "experiments" in Central Europe were far too spotty to draw any valid conclusions. But there had been a widespread consensus among economic historians in the capitalist bloc that the Third Reich had been a command economy--albeit, with notionally private ownership.  One could argue that, in 1992, post-1947 Germany provided a much more convincing case of successful transition to market capitalism than did post-1989 Czechoslovakia--the model that was actually used. More relevant still, after 1945, the business management of the Third Reich was morally discredited but retained vital technical expertise--a conundrum for the Occupation authorities and for Christian Democrats who inherited control of the country.

Did Russian authorities consider postwar Germany as a model for Russian transition to capitalism?  Why or why not? If yes, why was that model rejected so vehemently? Germany was, after all, not only well known to the Russians and Western leaders, it was the supreme economic power in Europe. What lessons could Russians and their Western liaisons have been expected to draw from Germany's impossible-to-ignore success story? Did Germans see their country as a model for Russia?  If they did, what did that model entail?

In the first part of this essay, I mentioned that I hoped to address an objection: that conditions in Russia were too murky as a result of  the bad processes Prof. Wedel is exposing, and that for this reason, analysis of how policies led to bad outcomes (and how these outcomes could have been avoided with different policies) is impossible.  As far as I can remember, Wedel never claims this, and I don't want to put words in her mouth, but it does seem like she felt privatization policies were not worth discussing as policies.  Hence, the process by which political actors got their way is given top billing instead.

This is understandable, especially in so far as it advances her case polemically.  For example, even the most cursory glance at the politics of transition makes it obvious that something was very wrong.  The method by which Yeltsin secured control over the Russian government after the 1993 constitutional crisis, for one thing, cast a pall over whatever happened--or could have happened--afterwards.  Even if enthusiastic support from the US had nothing to do with Yeltsin's conquest of power, it still was morally wrong for Washington to provide it. And so, in the end, Wedel's points are about a morally purblind Washington and its biggest thinktank, Harvard.

That's a fairly weak polemical position to have, because nobody wants to defend the 1990s (except people whose reputation was directly affected, like Prof. Andrei Shleifer; even Prof. Jeffrey Sachs and George Soros have divorced themselves from those events by denouncing them, and here's what that looks like). And saying "we" or "the USA" as if the typical American  reader had the slightest thing to do with it makes one look unhinged. This was a period of total confusion; all of the systems of accountability had broken down, in the sense that everyone was improvising, typically in a fog of ignorance. No one possessed a constitutional mandate to react to what was happening.

This book is like a postmortem of a massive earthquake, heaping scorn on the conduct of officials once the earthquake has begun. The collapse of the USSR was certainly a crisis, but at the time officials in NATO member states did not realize it was, and when they did, they were overruled by their most ruthless, purposeful colleagues--or bosses. Usually, when times are "normal," processes spawn policies: the American electoral system, with its money and corporate-controlled news outlets, for example, help determine the decisions that politicians will make.  But in a revolutionary upheaval, this is backwards: the policies taken long ago, like the Cold War strategies of the rival blocs, determined how leaders would perceive the situation, and what potential disasters they hoped to avoid.  Once the earthquake of August 1991 hit, no human planner had the ability to master to the situation. No one even knew what it was.


Matt Bivens & Jonas Bernstein, The Russia You Never Met (PDF), Demokratizatsiya: the Journal of Post-Soviet Democracy 6, no.4 (Fall 1998). Matt Bivens was (at the time of its writing) a former editor of the Moscow Times; Jonas Bernstein was a business writer for the Moscow Times and analyst for the  Jamestown Foundation; Matt Bivens was business writer for the Moscow Times's sister publication, the St Peterburg Times.

Matt Bivens, "Aboard the gravy train: in Kazakhstan, the farce that is U.S. foreign aid," Harper's Magazine (1 August 1997).  This article is behind a subscription wall but is available here (accessed 2 April 2015).  I found it to be extremely interesting, because it explained explicitly how outsourced contracts with USAID, etc. were actually spent.

  1. Readers may not realize how hard, if not impossible, it is to make such a distinction; and perhaps I'm totally wrong, and it is. But Wedel specifically praises PHARE thus:
    Many of the EU's PHARE programs were administered through Program Management Units (PMUs), which were set up either inside the government ministries or in parallel with them.  Although EU representatives typically were assigned as advisers to PMUs, the PMUs were staffed and directed by recipients, who naturally had access to local contacts.
    But in the case of a transitional economy, the object of assistance is to build up a viable market based economy, not revise modalities of central planning!  In a sweeping transition, the object is to restructure the entire system of government and business management, and this is (a) an intensely political decision, albeit on a small scale, and (b) it means interaction with the government cannot occur through civil servants (who will necessarily resist the sort of drastic changes transition requires of governments); it must occur through democratically accountable figures like cabinet ministers and their deputies. 

  2. This may be a misunderstanding on my part of what Prof. Wedel is trying to say.  An alternative interpretation may be that, yes, Prof. Wedel knows that economic policy involves political judgments, but policy advice should be neutral with respect to political factions. If Ruslan Khasbulatov were to support privatization as well (and she says he did) then it was the responsibility of Washington to remain steadfastly neutral in the March 1993 Constitutional Crisis.  I would certainly approve of this as an ideal, but it's not very realistic. 

  3. In an exchange in The Nation, "The Nation: Exchange of letters between George Soros and Janine Wedel," Janine Wedel mentioned that she was relying on research by Anne Williamson.  Williamson's view of the 1990s in Russia is that the situation could have emerged perfectly if the Administration had embraced conservative orthodoxy and imposed it on the Russian authorities; and the reason it did not, is some mysterious conspiracy of Pres. Clinton to discredit capitalism and bring about a return of Communism.

  4. Anne Williamson's Testimony before the Committee on Banking and Financial Services of the U.S. House of Representatives, presented Sept. 21, 1999. The testimony is found in James A. Leach, Russian Money Laundering: Hearing before the Committee on Banking and Financial Services, US House of Representatives (21-22 Sept 1999), p.275. I suspect that Anne Williamson is a pseudonym, possibly for Janine Wedel.

  5. Larisa Pyasheva's plan, as near as I can find out, was to privatize firms in Russia by awarding ownership of them to the existing employees. Williamson admired this plan, whatever it was, and praised the author of it for being an Austrian economist like Wilhelm Röpke, the presumed architect of Germany's economic miracle. To be clear, Larisa Pyasheva was not a famous person in 1991 (when the Harvard-Chubais connection appeared), but she and her husband had written Hayek-inspired articles in the dissident publication, Noviy Mir (1987). See Bengt Svensson, Seven years that shook Soviet economic and social thinking: reflections on the Revolution in Communist economics 1985-1991, Doctoral Dissertation, University of Stockholm (2008), p.81. She published occasionally under the name L. Popkova. Notice that in a 170-page monograph about dramatic changes in economic thought in the USSR of this period, Pyasheva gets one mention, as an ideological outlier.

  6. UPDATE (29 June 2015): I believe I finally stumbled across the answer: in Martin McCauley, Bandits, Gangsters, and the Mafia: Russia, the Baltic States, and the CIS since 1992, Pearson Education (2001), p.273, it is pointed out that the original privatization law required that vouchers not be sold for at least threee years after issue, and to prevent this from happening, they were issued with names (and presumably identifying serial numbers). On 14 August 1992, Yeltsin issued a degree calling for the vouchers to be issued without names, and therefore fungible. This played a major role in the ability of some players to acquire the vouchers for shockingly small sums of money. Perhaps by September 1995, Russian holders of the vouchers would have been better aware of how to maximize their returns on the vouchers they had.

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02 April 2015

Review, Janine Wedel, Collision and Collusion (2)

Janine Wedel, Collision and Collusion, Palgrave Macmillan (2001).

Common acronyms: Harvard Institute for International Development (HIID) United States Government (USG); Government of the Russian Federation (RFG) Russian Privatization Center (RPC); State Property Committee (GIK, in Russian)

(Part 1)


Anatoly Chubais
Here may be a good time to remind readers that I am not a specialist in Russia or its process of privatization. However, I was motivated to do some investigation into the chapter on Harvard's Institute for International Development (HIID), since this is such a momentous historical event. It implicates many of the top intellectuals of contemporary economics, including Anders Aslund, Andrei Shleifer, and Jeffrey Sachs; and the Harvard (Kennedy) School of Government. It stimulated a wave of mistrust of foreigners, and in particular, of the USA. At the same time, many of the winners in this scandal went on to become decisive actors in the political life of Russia.

So what really happened?

In Leningrad (later renamed St Petersburg), a reformist mayor named Anatoly Sobchak formed a group of supporters, deputies, and advisers that Janine Wedel calls the "Chubais Clan" after its key national-level principal, Anatoly Chubais.1 A startlingly large number of major oligarchs and national officials in Russia would come from St. Peterburg and be linked to this clan; other authors have linked Vladimir Putin to the Chubais Clan, although he (naturally) denied any contacts with Anatoly Chubais personally.

The Chubais Clan, according to Wedel, was uniquely capable of influencing the Russian government, to the point that the Russian state was practically a projection of the Clan's intent (p.101; also, Wedel, "Clans, Cliques, and Captured States"--2001). For the record, it is true that Vice-President Al Gore had a close working relationship to PM Chernomyrdin and Deputy-PM Anatoly Chubais, and this has been used a reproach against the Clinton Administration generally; once again, US leadership allowed itself to become the best friends of a wildly unpopular head of state.

From the beginning, Russian authorities sought rapid privatization of the economy. Wedel mentions legislation passed by the State Duma in June 1991, and again (after the failed coup) in 1992. Wedel mentions the 1992 legislation was "structured to prevent corruption" (p.137) but makes no mention of how. Chubais's program encouraged the accumulation of vouchers, but Wedel fails to explain how this was so, and how it permitted huge fortunes to be made.2 In fact, this is a constant frustration of the book: while Wedel is eternally horrified by the management structure that administered privatization, she never explains the specific outcomes.

Chubais and his American interlocutors were both members of the Russian Privatisation Center (RPC), and serving on/consultants to the Russian State Property Committee (GKI)3; Maxim Boycko, a close confidant of Chubais, acted as his consigliere in both organizations. Wedel (correctly, in my view) recognizes this as a severe conflict of interest.4 A major preoccupation of Western aid to CEE generally was accountability; aid programs were often designed to bypass the government since it was expected to use aid to preserve its (economically) unsustainable state-owned enterprises, etc. In Russia, the system broke down entirely, and American aid officials colluded openly with Russian officials to manage both the disposal of state assets and the delivery of Western aid to institutions. The assistance being delivered was overwhelmingly technical assistance in the creation of financial institutions and markets; but the same set of mutual promoters (from Harvard and St Petersburg) were creating, implementing, and reviewing all the proposals; and one of these entities--the RPC--was private.


Andrei Shleifer, Harvard economist
Jeffrey Sachs, Harvard economist
Privatization stalled soon after 1993, at least in part because its mascot, Acting PM Yegor Gaidar, was sacked and replaced with Viktor Chernomyrdin. The voucher scheme had resulted in the sudden rise of speculators such as Mikhail Khodorkovsky and Vladimir Potanin (1st Deputy PM of Russia), but the actual process of restructuring firms for sale to private citizens had stalled. Worse, the Russian government was facing a liquidity crisis. Vladimir Potanin, an "oligarch," proposed a loans-for-shares auction of stakes in 12 companies, including Yukos, Sibneft, and Norilsk Nickel.5 Wedel's description of the L-f-S scheme is pretty much in line with a dozen other exposés (p.161); Treisman (2010, p.2) lists a few of the milder ones.6  But the fact was that other forms of privatization were blocked by the Duma--even after an armed standoff there.

First: the deal was like a repurchase agreement (or a pawnshop), in which the winning buyer got to take possession of the shares (pledges) if the government failed to repay its debt. Like a pawnshop, the buyers at the auction were lending an amount well below the market value of the pledged shares. As it happened, the Russian state did default on its debts, but the great majority of Russian creditors--ordinary citizens--had nothing as collateral. This default was probably an inside job, in the sense that the RFG probably could have recovered its shares at par by the deadline, but chose not to under the watchful eyes of the oligarchs.

Second, it is immutably true that the single biggest beneficiary of the L-f-S scheme was also its architect, Vladimir Potanin. Potanin ultimately acquired Sidanko for less than $500 million, which is what BP Amoco paid him for a 10% stake in 1997. He also won control of Norilsk Nickel, one of the most valuable mining companies in Russia--which is saying something.7 He and Mikhail Prokhorov, partners in Norilsk, probably are the two most biggest beneficiaries of loans for shares, although Boris Berezovsky and Mikhail Khodorkovsky won enough political influence at the time to bring about their political demise.8 Anatoly Chubais was known to have approved the decision, which was to be one of the least popular in the history of the Russian Federation.

One of the defenses advanced by Treisman (2010, pp.11-12) of the L-f-S scheme is that the most corrupt auctions were those in which the "red managers" acquired control over their own firms.  An especially egregious case is Surgutnaftgaz, which raided its own workers' pension fund to pay for its leveraged buy-out.  The idea here is that the real corruption was perpetrated by the very people L-f-S was intended to divest of control: the Soviet-era management teams at Lukhoil and Surgutnaftgaz. This is actually the weakest part of his defense, because of course it makes no difference if the oligarch happened to have gotten his swag through a position as a state director or as the head of one of post-voucher Russia's many "banks."  

Treisman's defense of having the auctions just then (pp.13-15) is that the public had soured on privatization, and Chubais had to steal a march on the Communists--who seemed poised for victory in the 1996 State Duma elections.  But he doesn't attempt to explain how the auctions wound up being so sleazy.  He never mentions the scandal that embroiled Jonathan Hay and Andrei Shleifer, or the HMC.9

Doubtless the political conditions for privatization were worsening, or thought to be worsening; and it's also true that the market value of the assets was "doomed" to be low, because of a host of different risks faced by investors.  Treisman focuses on the political risks (of Communists winning back the Duma or the presidency, and liquidating the owners); but the uncertainty of future earnings was also a serious problem.  The fixed capital of these concerns was in a parlous state, and productivity was terribly low. The price of oil was still in a protracted funk (FRED2; the same was true for other commodities like nickel and platinum), and wastage of assets was a serious problem.  Also, there continued to be a lot of conditions on the ground that Treisman doesn't mention, conditions which obviously had nothing to do with the administrative modalities of privatization, or any Western country at all.10

Two more points: one is that Prof. Wedel mentions the L-f-S as a "typical" event in which "lucrative state monopolies" were transformed into "lucrative private monopolies" (p.161).  I don't think it was typical: Wedel and Williamson (whose research Wedel relied on a great deal) rely so heavily on it, but it's a very poor example of American advisers "wrecking" the Russian economy.  It was under conditions of national emergency, and these conditions had nothing to do with Harvard advisers.  The L-f-S firms were extractive industries, like Lukoil and Novilipetsk Metals, not monopolies. One could argue that, as extractive industries, they represented unique flows of economic rents, but they were certainly not lucrative in 1995-1996.

The second point is that foreign entities did object: the IMF criticized the loans-for-shares program (IMF, p.127), but lacked the necessary agency over the tottering Russian government. In an interview for Frontline, Prof. Wedel argued that
What happened was that US policy [...] chose this group of power brokers and basically gave them a blank check in the form of hundreds of millions of dollars of US and Western aid, and we helped to create them. Because the main comparative advantage that the Chubais clan, the so-called young reformers, had in the Russian context was their access to hundreds of millions of dollars of Western aid and key Western pundits.
That aid was mostly in the form of ideologically neutral technical assistance, like the setting up of the Russian SEC; and by her own insistence (e.g., p.155 endnote 159 [chapter 4]), the Russian authorities usually denied the claims of major Western pundits to be advisers: they were radioactive!  No one can take the idea seriously that Western pundits of any sort were a political asset by January 1993, which means that only the Western aid "made" Chubais powerful.11
And many of the players who were involved in the so-called economic reforms were also involved in politics. So, in promoting this group of young reformers, so-called, we also were promoting their particular political activities.


So, here, again, we have political aid under the guise of economic aid. Which is familiar to Russians who were raised under communism, because in many respects the essence of communism was that you had economic decisions made in the political realm.
This is a terrible mistake, that exposes a massive error all through the book: that there is a single, easy-to-recognize, correct economic decision that is totally free of any political baggage.  In reality, this is hardly ever the case.
[...S]ome of the ignorance was understandable. However, what was, I think, not understandable and not excusable was the sheer arrogance and the hubris with which many of these advisers entered the scene and said we have the answers. [...] And they came with their cliches and tried to sell people on both sides of the Atlantic on these cliches and on the idea that they had the answers.
 Here, I think Wedel is putting any adviser in an impossible situation.  She complains that the advisers were arrogant, but her own advice is to be far more arrogant: to divorce economics from politics.  This is a double bind: one the one hand, the advisers were excessively arrogant (they ought to have been more humble?), but on the other hand, they ought to imposed far stricter performance controls on their contacts in Russia (they ought to have been more pushy and controlling?).

(Part 3: SUMMARY)


Andrew Scott Barnes, Owning Russia: The Struggle Over Factories, Farms, and Power,  Cornell University Press, 2006
Ira W. Lieberman & Daniel J. Kopf, (editors) Privatization in Transition Economies: The Ongoing Story, Elsevier (2008); Ira Lieberman was at the World Bank during this time.

E. Semenkova and V. Aleksanian, "The Development of the GKO-OFZ Market: Lessons and Prospects," Problems of Economic Transition vol. 43, no.1 (May 2000), pp.74-81 ; translated from the Russian by M.E. Sharpe, Inc. Original article publsieh by the Institute of Economics, Russian Academy of Sciences. This article is not directly related to anything in this essay, but is a valuable explanation of the short history and financial economics of the state short-term bond (GKO, in Russian) market.

Károly Attila Soós, Politics and Policies in Post-Communist Transition: Primary and Secondary Privatisation in Central Europe and the Former Soviet Union, Central European University Press, (2011)

Daniel Treisman, "Loans for Shares Revisited" (PDF), NBER Working Paper No.15819 (March 2010).  A defense of the L-f-S scheme. Readers may want to know that Prof. Treisman (of political science, UCLA) is a co-author with Andrei Shleifer of at least one article, "A Normal Country: Russia After Communism" (PDF), Journal of Economic Perspectives, 19, 1: 151-74 (2005). I have serious issues with this 2nd paper (neoclassical economists are amazingly effective at evading evidence of the human costs of their policies; pp.156-157 are pretty hard to take).  To make matters worse, analysis of the causes of "output collapse" in the former Communist states of the Warsaw Pact is really purblind.

IMF Staff, Russian Federation: Recent Economic Developments (PDF), IMF Country Staff Report No. 99/100 (Sept 1999)


  1. By far the vast majority of Google hits for "Chubais Clan" are from Janine Wedel; the same goes for "Harvard Institute for International Development." In one counterexample, Martin Mccauley, in Bandits, Gangsters and the Mafia: Russia, the Baltic States and the CIS Since 1991, Routledge (2014. p.28), criticizes Wedel's hypothesis that HIID advisors were decisive in Russian economic policy after 1992; McCauley strips away the qualifications and narrative culs-de-sac to paraphrase Wedel's thesis as, "[the American monetarist gurus] waltzed through the Kremlin as modern-day Pied Pipers of Hamelin." This was impossible even if the Russian leadership had been psychologically disarmed by the likes of Andrei Schleifer: the Russian state was weak and could not raise enough revenue to balance the budget.

    Martin McCauley's book is the other, independent author who uses "Chubais Clan." He acknowledges the existence of many powerful clans in Russia and has much more specific bases for associating people into clans.

  2. For a good explanation of how the voucher system was intended to work, please see Alfred Kokh, The Selling of the Soviet Empire: Politics & Economics of Russia's Privatization--revelations of the Principal Insider, SP Books (1998), p.26 & following. Kokh was disgraced and forced to resign because he arranged for George Soros to participate in an auction for Svyazinvest (1997) in exchange for a loan made to Pres. Yeltsin's government (to pay government salaries; Wedel, p.163). For a much more specialized and detached analysis, see Soós (2011).

  3. Chubais was the first head of the GKI, in November 1991 (Wedel, p.139); Wedel strongly implies (p.142) that Chubais remained head of GKI when he became deputy prime minister in September 1994, but in fact Chubais was replaced at GKI by Valentin Polevanov. See Ira Leiberman, "The Rise and Fall of Russian Privatization," in Lieberman & Kopf (2008), p.292 (Lieberman was at the World Bank during the relevant time period); or see Mikhail Berger, "Polevanov: Privatization's Newest Foe," The Moscow Times (6 Jan 1995). Looking up the MT story proved fruitful:
    First, all of Chubais' efforts to have one of his deputies appointed -- either Peter Mostovy or Dmitri Vasilyev -- fell through. He was also unable to get President Boris Yeltsin to confirm Sergei Belyayev, who is now heading the state agency in charge of bankruptcy, and with whom Chubais worked closely in St. Petersburg. Yeltsin felt he needed to appoint someone from the provinces in order to "bring in some new blood."
    The article strongly suggests that Chubais was, in fact, losing standing as a result of his "promotion," building up a bigger portfolio.

  4. Oddly, the GAO report made little of this: see "Harvard Institute for International Development’s Work in Russia and Ukraine" (PDF), General Accounting Office GAO/NSIAD-97-27 (Nov 1996), p.26-27.

  5. For actual specifics on the Loans-for-Shares scheme, see Treisman (2010), esp. Table 1, p.10. Also: while I'm loathe to defend the L-f-S, one point bears repeating: while the privatization was extremely dysfunctional, it's hard to imagine a more surprising victim than BP Amoco, especially when it got involved in Sidanko (Vladimir Potanin had "lent" the RFG US$ 130M for a 51% stake in Sidanko; later, BP Amoco paid US$ 484M for a 10% stake in Sidanko)  But BP would ultimately be obligated to write it all off. See Neela Banerjee, "From Russia, With Bankruptcy; A High Cost for BP Amoco's Investment in an Oil Concern," New York Times (13 Aug 1999).  The assets "stripped" from the Russian state required massive restructuring to possess their current high value, and even BP Amoco was unable to capture any.

  6. The most vehement and febrile of these has to be Anne Williamson's Testimony before the Committee on Banking and Financial Services of the U.S. House of Representatives, presented Sept. 21, 1999. The testimony is found in James A. Leach, Russian Money Laundering: Hearing before the Committee on Banking and Financial Services, US House of Representatives (21-22 Sept 1999), p.275.  I strongly suspect that Anne Williamson is a pseudonym, possibly for Janine Wedel.

  7. RE: Potonin & L-f-S, see Alessandra Stanley, "Russian Banking Scandal Poses Threat to Future of Privatization," New York Times (28 Jan 1996);  RE: Sidanko; Neela Banerjee, "From Russia, With Bankruptcy; A High Cost for BP Amoco's Investment in an Oil Concern," New York Times (13 Aug 1999); RE: Norilsk Nickel, see Heidi Brown, "Deripaska Spending Many Nickels On Norilsk Stake," Forbes (25 April 2008).

  8. RE: Berezovsky (Sibneft) and Khodorkovsky (Yukos), see Andrew Kramer, "The Last Days of the Oligarchs?," New York Times (7 March 2009).  Both initially sided with up-and-coming St Petersburger Vladimir Putin; both eventually clashed with him after stints as political consiglieres.

  9. "A Federal judge ruled that, by quietly investing on their own accounts while advising the Russian government, Harvard professor Shleifer and his Moscow-based assistant Jonathan Hay had conspired to defraud the US Agency for International Development (USAID), which had been paying their salary." (See "Judge Finds Against Shleifer, Hay and Harvard," Economic Principals (4 July 2004). As for Harvard Management Company (HMC; manages the University's endowment), Economic Principles noted that  ("Who Is Minding the Store?" 16 Jan 2005)
    Harvard Management was [an] aggressive investor in Russia in the mid-1990s, during the period that Shleifer was advising the Russian government and illicitly investing on his own behalf. For example, Euromoney magazine at the time described Harvard as “bolder than most," because it bought stakes in companies themselves, instead of relying on intermediaries such as hedge fund managers. When government attorneys deposed Meyer in the course of their suit against Harvard, they learned that as much as 1.8 percent of Harvard’s endowment had been invested in Russia in the years before the US government fired Shleifer—some $200 million of a portfolio then worth around $11 billion—not the 10 percent that gossip had it at the time.
    Also, in an exchange in The Nation, "The Nation: Exchange of letters between George Soros and Janine Wedel," Janine Wedel mentioned that she was relying on research by Anne Williamson.  Williamson's view of the 1990s in Russia is quite similar to that of the John Birch Society with respect to the 1949 Chinese Revolution, viz., that the situation could have emerged perfectly for US interests if the Administration had embraced Austrian economics and imposed it on the Russian authorities; and the reason it did not, is some mysterious conspiracy of Pres. Clinton to discredit capitalism and bring about a return of Communism.  This is not sarcasm; it's actually a fairly common point of view.

  10. For example, actual armed fighting over aluminum assets in Siberia. See "Oleg Deripaska and the Russian aluminium wars," EuropeanCEO (24 Jan 2012); or Andrew Kramer, "Out of Siberia, a Russian Way to Wealth ," New York Times (20 Aug 2006).  About a hundred people were killed in the Aluminum Wars and many more badly beaten by gangsters struggling for control of the physical plant.  This was actually a common problem in Russian then.

  11. Actually, according to a GAO audit, this was $40 million from USAID (to HIID); Janine Wedel does not mention any influence Chubais, et al. had over the other ($325 - 40) = $285 million in USAID funding for the Russian privatization program, unless we are to understand that Chubais had veto power over non-HIID grants to Russia. And note PM Chernomyrdin, at whose pleasure Chubais officially served as director of GKI, did not acknowledge any foreign advisers (and probably shared in the general Russian dread of American "advice"). See "Foreign assistance: international efforts to aid Russia's transition have had mixed results: report to the Chairman and to the Ranking Minority Member," GAO report to Committee on Banking and Financial Services, House of Representatives, DIANE Publishing (Nov 2000), p.175.  This source via Wikipedia entry for "Harvard Institute for International Development," which mistakenly imputes to HIID the entire $325 million disbursement (FY1992-1996).

    In the Frontline interview quoted, Wedel claims that the US introduced voucher privatization, although this seems like an odd claim to me: see footnote 3 (above). Ira Lieberman (p.159) says that Chubais chose the then-familiar Czech system of voucher privatization. No one else claims the US government was pushing voucherization on a resistant Russian public.  If this were the case, why would Kokh (a Russian GKI staff member) claim to be part of the group who designed its implementation for Russia?

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