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U.S. FOREIGN AID TO RUSSIA.

Contends that American foreign policy & support of the Russian transformation has had mixed results. Overview of the transformation. Discusses Russia's system under Putin & concerns regarding the establishment of Democracy in Russia. Examines U.S. Programs (USAID, etc) to assist Russia; functional powers of such aid. American foreign aid & Russia and past American bilateral assistance. Argues that American assistance to Russsia has not bolstered the country's Democratic institutions.

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The Russian Transformation and the Role of American Support
Introduction and Statement of Purpose
American foreign policy in general, and America's use of foreign aid or assistance in particular, has always been understood as reflective of both domestic and international political, security, economic and military concerns (Clad & Stone, 1993). Periodic electoral shifts in the period since the end of World War II have resulted in ideologically inspired shifts in aid policy, as in the abrupt tilt toward free-market development after 1981 and the beginning of the Reagan years; the collapse of the former Soviet Union in 1989, perhaps the major event shaping American foreign policy and aid decisions in the latter half of the century, also resulted in dramatic changes in America's bilateral and multilateral assistance programs (Clad & Stone,

were broken. Pomper and Parks (1999) reported that by 1999, key lawmakers onCapitol Hill had begun to question the Clinton administration's willingnessto challenge corruption in Russia. Available atwww.stratfor.com/services/gin2 / 6 5 . fostering joint ventures with partners lacking business expertise . As early as 1994, some U.S. Summers, Talbott defend policyin first round of hearings on corruption in Russia. Clinton administration policy ties economic aidto foreign policy goals. The next section of this reportwill examine how U.S. (199 ). It is his view that defense andforeign aid cuts have not benefited the United States, but have in factincreased her vulnerability to rogue states and to a resurgent Russianadventurism. Working together in this arena, civilian andmilitary components within DOD are engaged in a continual process ofassessing, evaluating and monitoring potential threats to U.S. Under this strategic plan, the Clinton Administration hasestablished several conditions necessary for the deployment of Americantroops or military power. Putin hasestablished a network of regional tsars who have enormous autonomy inoverseeing the actions of elected regional governors. Aid has generated well-paying positions forWestern consultants while enriching a corrupt class of oligarchs andbureaucrats. Under the War Powers Act, theability of the president to order American troops into the field islimited; nevertheless, in the cases of Bosnia, Haiti, and Zaire, thepresident has possessed the power to deploy troops abroad withoutCongressional approval. To secure funds, a cadre of self-styled Russian "reformers" steppedinto that role and from 1992 when aid first appeared until mid-1997, USeconomic aid to Russia was essentially entrusted to these men (Wedel,1998). Since the end of the Cold War, Lancaster (2 ) maintains that a newforeign aid policy paradigm has emerged which has required coalitions ofdomestic political support. or allied territory, and the use of nuclear weaponsby terrorist groups with or without the sanctions of autonomous governmentsremains a cause for concern. Not only was USAID allowed to spend a substantial portion of itsbudget on administrative overhead; many dollars were spent to facilitatelinkages between American private sector firms and newly privatizedcompanies in Russia. Lamb, K. CQ Weekly, 57(28), 1664-1668. Hecht, J.L. defense posture. Only pressure from theCongress jump-started shipments of wheat, rice, and corn to Russia andBelarus in the mid-199 s. A generally shrinking foreign-aid budget was seen asreflecting public distaste in America for sending money abroad. Publicopinion also influences policy and programs, but tends to be both passiveand permissive with regard to foreign aid except when aroused by majordisasters such as humanitarian crises. Funds earmarked for capital projects also appear tohave been diminished by the tendency of Russian firms to line the pocketsof their owners and vast sums of money meant to be spent on such projectshave ultimately ended up in numbered Swiss bank accounts. Working with Harvard University's Institute forInternational Development (HIID), also known as the "Harvard Project," theChubais Clan controlled both directly and indirectly, millions of dollarsin aid. (2 ). Ricketts, R.A., and Norton, R.J. Miles Pomper (1999) speculated that in addition to a public rejectionof "excessive" foreign aid to Russia and other states, the decline inAmerican assistance to Russia was linked to growing reports of Russiancorruption, crime, and Yeltsin's inability to manage the political andeconomic reforms he had decreed. Itis often argued that the military would generally support a position ofmilitary involvement; to offset these special interests, the War Powers Actwas created to force, if needed, consultation between the Executive and theLegislative branches (Lamb, 199 ). And, what are thefunctional powers that allow for such aid? However, the centralized economy and itsattendant economy continued to limp along as it had for several decades.The ruble was virtually worthless, foreign markets were questionable, andinflation, unemployment, and corruption were looming on the horizon. Petro (1997)commented that early on in his administration, Clinton demonstrated thiscommitment by signing the Charter on US_Russian Partnership and Friendshipon June 17, 1992; the principles of the Charter, confirmed at subsequentpresidential summits in Vancouver in 1993 and Moscow in 1994, declared therelationship to be one of mature, strategic partnership based on equality,mutual advantage, and recognition of each other's mutual interests.Accompanying American participation in the Charter was (until 1997) renewedAmerican agreements to both supply Russia with substantial foreign aid incash and in-kind, and the assistance of America in obtaining other fundingfor Russia through organizations such as IMF and the World Bank (Petro,1997). andforeign investment. firms. Cohen, L.J. Tonelson, A. still faces numerous crises of both a politicaland military nature. Theproblems that have made Russia an iffy investment locus have not in factbeen ameliorated by the emergence of Putin as the chief executive. Rather than helpdissipate many of the legacies of communism, U.S. Critical in Putin's strategy for meeting these conditions is hisongoing prosecution of the wealthy Russian oligarchs who have dominated theprivate sector and who are believed to have enriched themselves at theexpense of economic development. foreign aid resources flowsoriginate either from the public sector ("Official Flows") or the privatesector. These examples include the fact that almost one-half of the $4 billion in bilateral aid given to Russia before 1996 was for"USDA food assistance" and "humanitarian assistance." Not only did theseshipments of agricultural surpluses represent Congressional welfarepayments to U.S. Hyland (1999) suggests that Yeltsinmay well have been willing to overlook corruption and embezzlement becausethe very individuals committing these actions were those who were mostsupportive of his own political ambitions. Good intentions: The mismanagement of foreignaid. Martin's Press. This included a package devised by Senators SamNunn (D-Georgia) and Richard Lugar (R-Indiana) to appropriate money toassist with the dismantling of Russia's strategic arsenal (Hyland, 1999).Additionally, the United States led the Group of Seven (G-7) to approve apackage of $24 billion in aid, much of which was never dispersed. Christopher maintained as well that helping Russiabuild a market economy should be one of if not the highest foreign policypriorities addressed by the Clinton administration. The Economist,332(7873), 26-28. Lamb (199 ) notes that the WarPowers Act was passed by Congress to ensure that consultation takes placebefore American military forces are ordered into active duty. Nincic (1988) notesthat policy-making in a democracy must have three principal attributes: 1)it must be based upon the policy preferences of the public; 2) the powersof a democracy's managers must be constrained; and 3) policy must notviolate rights and liberties. Taylor (1999), Coordinator of U.S. Even U.S. USAID, according to Clad and Stone (1993), has been troubled fordecades by the extreme politicization of its mission.With Congressional approval, USAID serves as the primary locus for thedistribution of foreign assistance funds and non-monetary aid; more oftenthan not, USAID policies are shaped by the Executive Branch withCongressional oversight (and budgetary approval) functioning as a necessityunder the U.S. For example, USAID is said to have spent about US$97 percapita in Armenia, as compared to US$11.6 in Russia as of December, 1994(Petro, 1997). This group was dominated by a St. (2 ). Russian Social Science Review, 4 (3), 12-34. It is the purpose of thepresent study to examine the use of and shifts in American foreignassistance policy and programs as those shifts and uses have impacted uponthe former Soviet Union, or Russia herself. U.S. foreign aid to Russia represents a mixed blessing.Without such assistance, it is highly doubtful that Russia would haveachieved any progress at all towards democratization, privatization, andother critical reforms. Foreign Affairs,72(3), 166-183. Weekly Compilation of PresidentialDocuments, 34(13), 546-551. Some USAID officials were more thanwilling to use Chubais as a means of promoting market reform, but many ofthese efforts failed. ormultilateral aid had been diverted or laundered, although investigatorswere looking into whether or not criminal acts had occurred. An American intelligence service, STRATFOR (Russianreforms: All Shock..., 2 ), reported in mid-2 that Putin had movedaggressively to reduce the influence of a class of wealthy oligarchs whohad acquired power and influence during the Yeltsin years. O'Hanlon, M. In 1998, President Clinton signed Executive Order 13118 - the ForeignAffairs Reform and Restructuring Act. McCormick, J.M. favoring selected groups over others (Wedel, 2 ). funding businesses composed of partners of previous acquaintance . Pomper, M.A. Nincic, M. Department of Agriculture exhibited its concernover these problems by delaying shipments of humanitarian aid until theRussians provided a detail plan as to how they would prevent pilfering andsales of agricultural products on the black market. will now act as aglobal policeman. Though Clinton implemented significant changes in the policy goals ofOPIC and also restructured aspects of USAID, there is little evidence thatthe funding provided to Russia through these organizations has succeeded inbring about the kind of change and reform needed (Madeo, 1993; Wedel,2 ). Additionally, Yeltsin's political reforms wereseen as part of a system of corruption, a system which Putin has inheritedand which must be brought under control in relatively short order.American foreign policy, in which foreign aid has been tied to politicalissues, has proven false and the fundamental assumptions upon which it wasbased have unraveled. It gave to USAID broad and sweeping powerswith respect to general oversight of all aspects of American foreignassistance to countries such as Russia (Clinton, 1999). Washington, D.C.; U.S. With the advent of the Putin regime in Russia, there are some signsthat Russia is taking steps to reduce corruption and crime in governmentand in the private sector. As of this date, it is difficult to predict the ultimate effectof American foreign aid to Russia. administrationofficials such as Strobe Talbott were defensive on these questions. (1994).Time, 143(2), 11. Petersburg clan named after itsleader, Anatoly Chubais. Rather, theU.S. (1999). (1997) National Security.Washington, D.C.: Naval War college. SenatorsPatrick Leahy (D-Vermont) and Mitch McConnell (R-Kentucky) spoke out aboutpoor management of the program and called for an overhaul before anyfurther moneys were expended (Aid to former Soviet Union..., 1994).Complaints about the Clinton administration were also forthcoming, withboth Leahy and McConnell stating that the Clinton administration briefingson Russian aid were contradictory, incomplete, and inaccurate. As Clinton was taking office, Yeltsin was experiencing difficultiesin Russia. (1999). How successful has this policy been? The focus of these efforts - initiated under Bush andcontinued under Clinton - was to facilitate the privatization of the largestate-owned enterprises as a measure of the progress of "transition (Wedel,2 ). It is critical that Putin continue toprosecute the oligarchs and to weed out corrupt government officials whohave taken control of many of the agencies directly benefited by U.S. McCormick (1995, p. Petersburg Mafia to infiltratethe power structure. and Stone, R.D. Its inherentassumption is that consultation - in which the president is required toconsult with Congress - will prevent drastic mistakes on the part of theExecutive Branch; no more Vietnams, in other words. (1993). Taylor, W.B. 171 - 178; and C.J. U.S. and alliedsecurity and developing responses to such perceived threats. Eds. These are the kinds of problems that havecharacterized America's foreign aid efforts virtually since the beginningof the Russian transformation. Foreign aid is now an expression of"soft power" exercised not only by USAID, but also through such agencies asthe Peace Corps, the InterAmerican Foundation, the African DevelopmentFoundation, and the contributions of the United States to six multilateraldevelopment banks, dozens of United Nations (UN) groups, and otherinternational aid organizations. Hyland (1999) claims that even Boris Yeltsin recognized at the timethat Russia had a grace period on only several years to experiment with anew political, social, and economic order. Wayne, "ThePresident and National Security," pgs 63 -85. (1999). Astandby loan from the IMF was also offered, with heavy conditions attached,and those bilateral assistance programs offered to Russia by the UnitedStates were mainly in credits for exports (Hyland, 1999). Government Printing Office. Lancaster, C. Because thesecretaries of State and Defense and their upper-level staff members arepolitical appointees, the War Powers Act regards their advice to thepresident on matters of policy and defense as having significant politicalunderpinnings. aid to Russia as well as the Ukraine andCentral and Eastern Europe is described by Wedel (2 ) as illustrating thedifficulties of conceptualizing and implementing effective aid in supportof market reform - aid that is by definition political. Some analysts believe that theaid policy implemented by Bush and continued for the most part by Clinton,evolved from the American response to the collapse of communism, behindwhich was the world view contained in Ronald Reagan's conservatism(Retrieving the irretrievable..., 2 ). The coalition typically includes key executivebranch agencies, members of Congress, and various private groups. Assessing Clinton's foreign policy atmidterm." Current History, 94(595), 37 - 374. He was told that if he wished to obtain foreign investment, muchless the needed official aid flows, Putin must achieve three reformssimultaneously. Law and Policy in International Business, 25(3),1215-1221. Reinventing what for whom? Anonymous. The Economist (Tellme the old..., 1994) reported that by 1994, aid to Russia was clearly lessof a priority for the United States; in 193, Russia and the other newrepublics received $2.5 billion overall, and in 1994 the U.S. resource flows to developing countriesand multilateral organizations, 1993-1997. Hyland (1999) has commented that the links that had tiedtogether the central economy of the U.S.S.R. Washington, D.C.:Congressional Quarterly, Inc. North Scuitate, MA: Duxbury. senators were beginning to express fearsand doubts concerning the management of U.S. USAID theorized, and the two American presidential administrationsagreed, that the transformation of large enterprises would reduce thepossibility of a return to Communism; the steel, glass, airline, and othermajor industries were seen as leading the way to free market reforms(Wedel, 2 ). However, this movemay only change the beneficiaries of foreign aid from the oligarchs andtheir clans to the new political appointees and their supporters. foreign aid has been deployed with respect to Russiasince the transformation of the former Soviet Union.America's Foreign Aid to Russia The dissolution of the Soviet Union was greeted in Washington and inthe European capitals with a strange mixture of both euphoria andskepticism. The Group of Eight has labeled Russia little more thana money laundering center and has threatened retaliatory measures ifPutin's government does not take charge of the economy (G-8 tellsRussia..., 2 ). Throughout 1999, stories about ongoing governmentcorruption filled the newspapers in Russia and the United States (Pomper &Parks, 1999). References Aid to former Soviet Union called mismanaged. directinvestment abroad, securities transactions, and export credits of privatebanks participating in the guarantee programs of the U.S. Putin also is eliminatingturnover taxes that encourage dishonest bookkeeping and barter trade,cracking down on the oligarchs who have amassed enormous fortunesapparently drawn from the coffers of foreign aid suppliers and institutedother reforms with the potential to eliminate much of the corruption thathas been observed in Russia. As earlyas 1994, concerns regarding the inappropriate use of official aid flows andinvestment capital were being voiced. How does American foreign aidto Russia since 1989 reflect or deviate from past examples of Americanbilateral assistance? TreasurySecretary Lawrence Summers testified that while Russia had serious problemswith government corruption, there was little evidence indicating that IMFloans to Russia had been either laundered or misused. Redesigning foreign aid. The idea that supporting newsmall and mid-sized businesses would speed up conversion to a marketeconomy was critical to American and Western aid plans. Ed. Edwards and S.J. The aid agenda has been driven by Westerngovernments and much of the funding has been used for political purposes. (1999). Hecht (1996) offered other examples of how official aid flows toRussia have been mismanaged and ineffective and part and parcel of theproblems of corruption and crime that have troubled Russia's transformationto a free market economy. In an effort to obtain debt forgiveness, Putin went to the Group ofEight Summit in July 2 . What are the specific efforts or programs initiated bythe United States to provide assistance to Russia? using American standards to define output measures . (1994). military presence in Europe primarily designed to provideprotection to its NATO allies from a perceived Soviet threat. Other examples include the $2 billion ineconomic aid (in addition to $3 billion in military aid) given each year toIsrael and Egypt in keeping with an agreement made at the time of the CampDavid accord. (1999). and Parks, D.J. aid offered by Wedel (2 ) is thatthe aid appears to have become an end in itself and has in many cases beenused for self-enrichment. (2 ). At the same time, however, there is no doubt that aidhas fostered corruption and crime and created a situation in which a classof oligarchs and government servants has achieved excessive influence. (1999). (1995). Simon (199 ) argues that the expanded role of DOD in shapingAmerica's foreign policy is a logical consequence of the political, social,economic and ideological dislocations created by the collapse of the SovietUnion and also an artifact of the long years of the Cold War. Independent Review,4(3), 393-423.----------------------- 1 STRATFOR.Available at www.stratfor.com/cis/commentary/ 75232 .htm. at the threshold of the 21stcentury. There are many voices in the United States which have been raised insupport of increased foreign aid to the Putin government. It is Wedel's(2 ) thesis that many U.S. Defense Policy. Gorbachev'sreforms, which had been supported with a high level of enthusiasm in theBush Administration had failed. Chubais and his "clan" were also highly regarded by the IMF and WorldBank and other international financial institutions and investors. The Christian Century, 113(32), 1 63-1 66. has shifted. (1996. and other Western donors to Russia wanted to seenew faces in positions of influence and to entrust aid to individualsuntainted by association with the former Communist regime. In the past ten years, American troops have beenordered into the field in such diverse locations as Panama, other CentralAmerican countries, Eastern Europe (Bosnia, for example), and the MiddleEast. has done in the cases of Grenada,Haiti, Panama, Bosnia, and Somalia (Nincic, 1988). Boychko, Shleifer, and Vishny (1995) have pointed out that Chubaisand Yeltsin worked together to ensure that every major regulation ofprivatization was introduced by presidential decree rather thanparliamentary action in the Duma. Simon, J. Per capita aid to Russia was low in comparison to aid providedto other Eastern European countries and also in comparison to other CIS andBaltic states. However, with the election of former KGB official VladimirPutin as Russia's chief executive, and Putin's increasingly "hard line"posture vis-a-vis Russian's own external policies (and toward the UnitedStates), there are growing concerns that democracy may not prevail inRussia over the long term (Putin's plan to increase..., 2 ). Statement before the House Committee onInternational Relations, June 9. Similar comments have been advanced by Lancaster (2 ) who believesthat the purposes of aid over much of the past half-century were promotingU.S. providing Western consultants to Russian businesses . The idea of an emergent Russian democracy appeared to besomething of an historical oxymoron, given that autocrats and dictatorshave ruled Russia and the Soviet Union for centuries (Hyland, 1999). Foreign Assistance:Harvard Institute for international Development's Work in Russia andUkraine. Instead of funding, he came away with a strongwarning about money laundering and about his government's failure toresolve problems of corruption and crime in Russia (G-8 tells Russia...,2 ). New mission for foreign aid.Foreign Affairs, 72(1), 196-2 6. Farrell, "Bureaucracy is Not a Four-Letter Word,"pgs. STRATFOR, an intelligence think-tank, considers the free market inRussia to be an economic calamity of unparalleled proportions (Retrievingthe irretrievable..., 2 ). Hyland (1999) argues that the Bush administration was primarilyconcerned with what would happen to the russian nuclear weapons stockpilesand control over missile command centers in the new states of Belarus,Ukraine, and Kazakhstan. policy hadhelped to allow corruption to flourish in Russia because high officials inthe country felt that they could do whatever they wanted withoutrepercussions from the United States (Pomper & Parks, 1999). As Jeffrey Simon (199 ) has pointed out,the collapse of the Soviet Union, coupled with the outbreak of civil war inmany former Eastern Bloc nations, has created a "geostrategictransformation" in which the role of the U.S. 371) statesthat the three pillars of current American foreign and military policy are:1) making America economically secure and prosperous and thus able toresume its leadership role; 2) maintenance of a strong and flexible defenseto meet security challenges; and 3) aggressive promotion (employingmilitary force where necessary) to promote democracy. William B.Taylor (1999), Coordinator of Assistance to the NIS is one such voice.Taylor (1999) argues that aid must continue and even increase in order tomeet humanitarian needs in Russia and to prevent nuclear proliferation.Sergei Rogov (1999) agrees, but cautions that the Russian government maywell lack the ability to push through the reforms that are needed and totake control over a bureaucracy that is as corrupt as it is vast andunwieldy. Whether or not Putin will have thetime needed (or the support required) to follow through on these efforts isunknown at this time. Thecentral reality that post-Soviet and post-Gorbachev Russia faced was itseconomic crisis. Lancaster (2 ) saysthat the major way that Western donors assisted these nations in theirtransition to a market economy was through technical assistance in the formof consultants sent to the region - the so-called "Marriott Brigade."Under the USAID Indefinite Quantity Contracts, says Wedel (2 ),consultants from American business and industry were deployed to assistnewly privatized Russian and other Eastern European organizations as wellas government ministries in developing the market expertise needed forsuccess. Heche (1996) criticized USAID financial arrangements with Russia longbefore the Clinton administration began reducing its financial support forthat country. aid to Russia. McCormick (1999) further notes that bilateral loans from the U.S.government - a major source of assistance to "friendly" nations and aforeign policy tool used regularly throughout and after the Cold War - maybe classified as ODA, while official resource flows that are not capturedin this category of foreign aid consist primarily of credits extended bythe Export-Import Bank and the Commodity Credit Corporation as well asthrough the Overseas Private Insurance Corporation and other U.S.Government agencies. aid abroad. In cases where actual force is to be employed, thePresident and Congress take the lead role. The inherentcorruption of the Russian economy had created a situation in which rampantinflation had occurred, weakening the already tenuous economic hold of theRussian population. In Bosnia, for example, Cohen (1996) has pointed out that U.S.involvement took place because the Clinton Administration felt that theBush Administration had largely failed to articulate a consistent and clearforeign policy. agricultural interests - they also appear to have beendiverted from the Russian people and used to line the pockets of a smallnumber of Russian oligarchs and criminals. It is Hecht's (1996) belief that the vast majority ofofficial and private sector aid flows to Russia was not spent on criticalhumanitarian needs or promising opportunities for economic development.Rather, foreign aid has been used as payoffs to achieve American foreignpolicy objectives. Including, . Of particular significance was the ongoing conflict betweenYeltsin and the Duma, which was heavily influenced by ex-communists and byold-style conservatives who were suspicious of reform (Hyland, 1999).Under Bush, Yeltsin and his government had become virtually the sole focusof American aid and support; the conventional wisdom that influencedWestern and American policy was that democracy in Russia was largelydependent upon Yeltsin's success in controlling the various forces that hademerged in the wake of the collapse of the Soviet Union. Westport, CT: Praeger. (1999). Thoughthis group was superficially committed to reform and democracy, by 1997Wedel (2 ) notes that this and other influential Russian "clans" wererapidly becoming (or already recognized as) little more than corruptcriminal organizations which had penetrated the highest levels ofgovernmental and other sectors (Wedel, 2 ). When mechanisms for the deployment of bilateral foreign aid to Russiaand other countries are considered, the role of the military and DOD isalso of significance; however, as noted above, other actors also play arole in this decision-making and policy formulation process. Bosnia and Herzegovina: Fragile peace in adivided state. When all of these issues are considered, it becomes clear that theultimate effect of U.S. Hyland (1999) believes that Clinton had been influenced by StrobeTalbott (Ambassador-at-Large and later Secretary of State) and WarrenChristopher (Secretary of State under President Jimmy Carter and PresidentClinton). Constitution. Assistance to the NewIndependent States (NIS) and Russia, commented that among the strategiesand legal or enabling vehicles used to get various types of aid to Russia(e.g., humanitarian aid, economic assistance to emerging private sectorbusinesses and markets, military aid, aid to non-governmental organizationsor NGOs, etc.) are: - government-to-government aid programs of a mostly humanitarian focus, authorized by Congress and administered by USAID and OPIC; - assistance through DOD and U.S. (1988). Both of these men strongly argued that the United States shouldtake an important role in helping the Soviet Union achieve a transformationto market capitalism. In late 1999, Swissauthorities were also investigating whether or not a construction companyhad paid tens of thousands of dollars in credit card bills for Yeltsin andtwo of his daughters. A strategy ofenlargement, in which U.S. A more damning criticism of U.S. (1996). Critics of IMF lending policies also speculated thatbecause organized crime was believed to have infiltrated the highest levelsof Russian government, some of the laundered money could well have beenU.S. Wedel (2 ) states that under the leadership of Chubais, and withthe knowledge if not overt support of Boris Yeltsin, the accumulation ofvast property and other resources in the hands of a small group took place. McCormick (1995) believes that American militaryinvolvement in Bosnia and other theaters reflects a global commitment todemocratization and human rights. Retrieving the irretrievable: The Clinton foreign policy legacy.(2 ). The grandiose "StarWars" SDI nuclear weapon and detection system proposed by the ReaganAdministration, for example, has become substantially obsolete as a resultof the Soviet collapse. The entire record of U.S. Governance by decree, funded in large measure by USAIDassistance, had the ultimate effect of stifling democracy and inhibitingthe building of transparent, nonaligned institutions critical to thedevelopment of democracy and a stable economy (Wedel, 2 ). The UnitedStates had made aid in support of market reform in Russia and other Centraland Eastern European countries its chief priority, obligating more dollarsto economic restructuring, including privatization and development of theprivate sector, than to any other single effort. Part of America's policy involves the maintenance of an Americanmilitary presence abroad - in such disparate theaters as Europe (via NATO),Southeast Asia (in the Philippines), Central America (Guantanamo andPanama), the Middle East (now in Saudi Arabia), and the Far East (via ourtreaties with Japan). Simon (199 ), however, states that the threatposed by existing nuclear stockpiles, the dissemination of Soviet nuclearweapons into the hands of the new republics, the possibility of a "rogue"nuclear attack on U.S. That being the case, continued foreign aid in themillions or billions to Russia does not seem to be in the best interests ofthe United States. Periodic electoral shifts in the periodsince the end of World War II have resulted in ideologically inspiredshifts in aid policy, as in the abrupt tilt toward free-market developmentafter 1981 and the beginning of the Reagan years; the collapse of theformer Soviet Union in 1989, perhaps the major event shaping Americanforeign policy and aid decisions in the latter half of the century, alsoresulted in dramatic changes in America's bilateral and multilateralassistance programs (Clad & Stone, 1993). Working within the framework of NATO and the United Nations, andforging temporary and permanent alliances with other countries, the U.S.continues to exercise enormous authority in the post-Cold War world. Private flows, in contrast, consist of U.S. Current History, 95 (599), 1 3 - 112. Foreign policy, say Edwards and Wayne (In Rickettsand Norton, 1997), is often shaped outside of the formal organizationalstructures of DOD, State, and Congress. Conflict resolution,nuclear nonproliferation, andthe promotion of sustainable development also come into play inestablishing the circumstances under which the U.S. Michael O'Hanlon (1999)believes that the policy has failed. The funds were made available through a variety of institutionsand organizations that were working to achieve privatization, economicrestructuring and related activities. Senate askedfor only $839 million, of which only $3 to $4 million was destined forRussia herself, on the proviso that Russia was remove herself from activityin the Baltics. William B. Hecht (1996) maintains that Russia is not the soleexample of such mismanagement. Clad, J.C. Boris Yeltsin was also blamed for having allowed thissituation to occur and Yeltsin's increasingly erratic behavior. HIID also helped to steerUSAID's total $3 million reform portfolio, which also was targeted toaddress matters related to privatization, legal reform, bankingrestructuring, capital market formation and the development of a RussianSecurities and Exchange Commission (US GAO, 1996). What has been the effect of American foreign aid to Russia since thecollapse in 1989? Wedel (2 ). However, Russia's current economic situation isdifficult and Putin may not have the time needed to achieve meaningfulreforms. The U.S. military presence is now employed in assisting in various peacekeepingoperations (Simon, 199 ). Hedges (1993)also believes that many U.S. Regardless, however, howAmerican foreign aid and assistance programs have been oriented, they haveserved as ideological and political vehicles destined to reinforce Americanprinciples and to acquire "friends" for the United States, leading toreduction of risks to domestic security. (1994). The charges of corruption levied against the Yeltsin governmentreached into the Russian leader's own family. Today,lacking a central "enemy," such as that formerly provided by the SovietUnion and its perceived threat in Europe and the trouble spots of the Farand Middle East, the U.S. Yeltsin's daughter, Tatyana,and her husband Leonid Dyachenko, were found to have accounts at the Bankof New York that were worth millions of dollars. (2 ). The Bush administration pushed through Congress a relatively smallprogram of assistance. ThePutin regime has the opportunity to correct many of the abuses whichflourished under Yeltsin. Brookings Review,17(1), 22-31. assistance for market reforms: Foreignaid failure in Russia and the former Soviet Bloc. aid sent to Russia directly or through international lendingorganizations. Similarly, both the Departments of State and Defensecomprise vast bureaucracies with many internal special interest groups. A recent publication by the Editors of CongressionalQuarterly, titled U.S. Russia and the U.S. Simon (199 ) further states that the extraordinary changes in Europerequire radical changes in the U.S. Congress, and were unwilling to vote in favor of theappropriations called for by the Clinton budget; at the same time, Russia'sinsistence on being an integral part of the peacekeeping forces inYugoslavia was greeted with suspicion by American lawmakers, who saw themove as an attempt on Russia's part to assert a hegemonic influence in theregion (Pomper, 1999). Senate Foreign Relations CommitteeChairman Jesse Helms (R-North Carolina) stated that the White House mayhave tolerated the diversion of billions of dollars provided by the UnitedStates into the pockets of corrupt Russian officials and businessmen.Support for this view was provided by Yuri Shachekochikhin, a Moscownewspaper editor and a member of the Duma. Wedel (2 ) reports that between1992 and 1997, HIID received $4 .4 million from USAID in noncompetitivegrants for Russia, and was due to receive an additional $17.4 million whenUSAID suspended its funding in May of 1997. (2 ). Putin's plan to increase central power wins support. Ranking Democrat Joseph Biden (D-Delaware) told the Foreign RelationsCommittee of the U.S. Other aid to Russia and other countries ischanneled through the various branches of the military service, withmilitary-to-military programs identified as continuing to flourish as ameans of providing Russia with military assistance in the hopes that suchassistance will stabilize Russia's military situation (Taylor, 1999). security and supporting development in poor countries - prioritiesthat are no longer quite as pressing in the post-Cold War world of Americandominance and new emerging markets. Hyland, W.G. Stephen J. United States General Accounting Office. Secondly, Putin mst cooperatewith the West on an array of issues related to crime and corruption so thatthe West will become more willing to invest in Russia. Rockman, B.A. Though aCommission on Economic Reform was created in 1995, Chubais was revealed ashaving enlisted the assistance of the St. First, he must work to ensure that the entire legal andbanking system restructuring continues on track, which will be measuredwith a reduction in inflationary pressures. United States Foreign Policy. G-8 tells Russia: Manage without investment. Russian president Vladimir Putin was introduced as a reformerwho would eliminate many of the problems that the Yeltsin regime hadallowed to fester. The Act, which became effective onOctober 1, 1999, promoted the USAID as an independent agency within theExecutive branch of government. Yeltsin was unable to use law to introduce a market system andPutin may well not be able to do it simply by decree. Most ofAmerica's bilateral assistance programs have been administered under theaegis of a flagship agency, the United States Agency for InternationalDevelopment (USAID) (Clad & Stone, 1993). government. The doors were opened to widespread corruption, with funds earmarked fordevelopment or reform initiatives finding their way into the hands of asmall and increasingly powerful group of corrupt bureaucrats and privatesector power brokers. EnterpriseFunds employed a combination of aid approaches. (1993). In terms of development, official aid flows appear to haveadded little to what private, voluntary exchange could have provided on itsown. At the same time,Pomper and Parks (1999) claimed that there was speculation that the Bank ofNew York had been used by Russian criminals to launder billions of dollarsof ill-gotten gains. CQ Weekly, 57(37),2246-2248. U.S. Legacy of containment: Reshaping US foreignpolicy toward Russia. Putin targeted Anatoly Chubais, former privatization ministerand Yeltsin chief of staff who is currently the head of Unified EnergySystems (Russian reforms: All..., 2 ). STRATFOR Global Intelligence Update. Bush did succeed in gaining agreement on a newtreaty - START II - reducing strategic armaments, but began to devise aneconomic assistance program for Russia only when former president RichardNixon prodded President Bush to do so. President andCongress in the making of foreign policy. Harvard International Review, 19(4), 38-43. Executive Order 13118 - implementation of the Foreign Affairs Reformand Restructuring Act of 1998. Aid may have staved off a return to communism orto totalitarianism. Senate that the problem of corruption should be seenin terms of broadly positive changes in Russia and U.S.-Russian relations.Biden further claimed that there was little hard evidence that U.S. aid efforts have failed to support true marketreform and that Russia is now headed toward meltdown despite billions ofdollars of "help" from Western governments. (199 ) The People, Maybe. TheNew York Times, July 2 , A5. No longer isthe U.S. Superpower without a sword. Foreign Affairs,79(5), 74-89. With the decline in the health of Boris Yeltsin and his correspondinginability to govern ineffectively, Russia found herself in late 1999 with anew temporary chief executive who later became Yeltsin's officialsuccessor. Itwill be argued herein that American foreign assistance to Russia has notsucceeded in bolstering the country's emergent democratic institutions tothe degree anticipated, largely as a consequence of internal Russiancorruption and ineptitude and of America's failure to properly assess theRussian situation.The General Framework for American Foreign Assistance Any nation, including the United States, requires the ability to dealwith its international environment in a flexible and effective manner. economic aid has in somecases reinforced the legacies of suspicion, central planning, and politicalcontrol over economic decisions. These are the key questions that will be explored inthis report, which will offer a brief overview of the key transformationstaking place in the former Soviet Union over the past 11-plus years. Why was America's initial enthusiasm for the Russian democratictransformation seen to wane as the 199 s progressed? European Security and the Revolutions of 1989.Washington, D.C.: National Defense University Press. Washington,D.C.: Congressional Quarterly Press. In Moscow alone, despitean infusion of millions of USAID dollars, many of the Russian brokers wereexcluded from the process and refused to use the clearing and settlementorganizations. As Rockman (2 )reported, the ability of a president to use the budgetary and allocationprocess and to control the flow of foreign aid is directly related to thepresident's ability to convince both the general public or electorate andthe Congress that his policies should be followed. Inthe early 199 s, the U.S. For the better part of thesecond half of the 2 th century, USAID was focused on using financial andother forms of aid as a means of providing support to the Cold War foreignpolicy of the Executive and Legislative branches of American government.Containment - or halting the spread of communism while ensuring America'ssecurity interests and those of her friends - was the watchword describingthis policy orientation (Clad & Stone, 1993). In this broad context, American foreign anddomestic policy are created by a variety of actors and agencies, includingthe electorate at the polls, Congress, the Executive Branch and thepresident and his Cabinet, and the military. (1998). These effortsinvariably shape foreign aid initiatives as well, which will be furtherdiscussed below. Rockman (2 ) contendsthat it is this element which tends to politicize the foreign aidallocation and disbursement process. One of the most comprehensive descriptions of the failure of U.S.foreign aid to Russia has been provided by J.R. Defense Policy (1993), offered an excellent overviewof this deployment of conventional military forces and materials.America's presence in Europe in particular, via its NATO responsibilities,was long regarded as a necessity to prohibit the further spread ofcommunism across the continent. (1993). It was apparent by 1992 when Bush was replaced by Bill Clinton in theWhite House that American aid to Russia was not accomplishing its primarypurpose of supporting meaningful market reforms (Wedel, 2 ). Collision and Collusion: The Strange Case ofWestern Aid to Eastern Europe 1989-1998. Survey of Current Business,79(2), 12-13. McCormick, J.M. Anti-Soviet Containmentpolicies accordingly compelled American support for authoritarian regimes,such as those in the Shah's Iran and throughout Central and South America. Clinton's World - Remaking American ForeignPolicy. U.S. Third, he mustreinforce his own political base and secure interim funding. (1997). It has been argued that the massive amount of American and Westernforeign aid channeled into Russia during the Yeltsin years ultimately hadthe impact of creating an oligarchy of unearned wealth (Retrieving theirretrievable..., 2 ). While each of these reasons were of significance in leading to adramatic reduction in aid to Russia, it was the realization that Russia hadbecome a haven for organized crime and corruption that was most compelling(Pomper, 1999). Presidential Studies Quarterly,3 (1), 133-162. See especially:W.R. Under Putin, in relatively short order, Russia began in 2 , to takethe first steps toward legal reforms. contractors quickly became over reliant onUSAID funding, which added to their own profit margins and did nottranslate directly into infrastructure improvements in Russia itself. Given that Russia and the United States also haveserious disagreements with respect to matters of defense and nuclearproliferation, foreign financial assistance should be carefully considered(Taylor, 1999). The report hasdemonstrated that under both the Bush and Clinton administrations andduring the tendency of Boris Yeltsin, American aid to Russia has failed toachieve anticipated and necessary results. Edwards and Wayne (In Ricketts and Norton, 1997) have noted that theprimary mission of the U.S. Specifically, Putin is consolidating power inthe hands of the central government and employing the authority of stateprosecutors and tax police to undermine the influence of the oligarchs whohave used their political connections to build powerful economic empires(Putin's plan to increase..., 2 ). Official funds appear to have been used for private gain not only bythose in Russia, but also by some advisers of the Enterprise Funds and HIID(Wedel, 2 ).Summary and Conclusions The purpose of this report was first, to provide an overview of thelegal enabling mechanisms by means of which U.S. Official Flows are divided into two categories: OverseasDevelopment Assistance (ODA) and "other official flows." Bilateral ODAgrants are classified into the following categories: - Program aid ("cash" or "in-kind" transfers for budgets or balance of payments deficit support, financing of capital goods and commodities, and wide-ranging develop- men plans in the same sector; - technical cooperation (transfers that increase the stock of human intellectual capital and its use); - food aid (including freight donations); - emergency and disaster relief; - debt forgiveness (principal and interest for qualified official credits).Bilateral ODA grants are dominated by disbursements from USAID, but manyother agencies participate in the delivery of U.S. private volunteer organizations (PVOs), The Multi-Agency Expanded Threat Reduction(ETR) Initiative, and the Departments of Commerce, Defense and Energy as well as traditional State Department agency operations. Yeltsin was an unknown quantity, but the Bush administration cameto the conclusion that the best hope for America was to provide support forthe Yeltsin regime. To accomplish this, theuse of military force or the establishment of a military presence abroad isoften indicated. (1996). The free market requires a legal system thatdefends property rights and this condition has not and does not exist inRussia. Inpractice, this often necessitates assuming the position of globalpeacekeeper or "policeman," as the U.S. Rogov, S. Chubais was closely tied toBoris Yeltsin and was commissioned by Yeltsin as the virtual "economic czarof Russia; his portfolio ranged from privatization to the restructuring ofbanks and legal reforms and the development of capital markets. foreign aid has beenchanneled to Russia and to assess the impact of that aid on Russia'stransformation to a democratic and market economy. Petro, N.N. Clinton was alsoapparently encouraged to take this view by former President Richard Nixon,though the architect of containment, George Kennan, told Clinton that itwas unlikely would ever achieve democracy in the sense of institutionssimilar to those in America (Hyland, 1999). McCormick (1999) has noted that U.S. Department of Defense and its internal agencies(including the military services) and of foreign policy in general is toensure the security of the United States and, in the process, to protectits foreign allies and international interests. The Russian Transformation and the Role of American SupportIntroduction and Statement of Purpose American foreign policy in general, and America's use of foreign aidor assistance in particular, has always been understood as reflective ofboth domestic and international political, security, economic and militaryconcerns (Clad & Stone, 1993). Putin moved to get the governmentout of business and business out of the government and to strengthen therule of law. Pomper, M.A. Nixon argued that Yeltsin was thebest bet for a democratic transition in Russia and that economic as well aspolitical reform of Russia was the key to the reform of other formerlySoviet states. troops have taken a more and more prominent roleon the global stage, is a direct consequence of these three policypositions. This was the case under theMarshall Plan, and remains the case today (Nincic, 1988). Pomper (1999) also commented that many American lawmakers, includingSenator Richard Lugar had come to the conclusion that expectationsregarding the speed with which Russia could transform itself into a marketeconomy as well as the costs and challenges of a program to facilitate thistransformation had been overestimated. (1999). Wedel, J.R. This official testified inSeptember 1997 before the House Banking Committee that U.S. Defense and foreign policy. New York: St. Russia has undergone notmerely "a" transformation since 1989; the country has experienced severalconflicting transformations as it has attempted to restructure itspolitical, economic and social institutions (Pomper, 1999). Scholars have argued that the United States and most other nationsemploy foreign policy and assistance as strategic elements designed toachieve national security goals (Nincic, 1988). Madeo, D. Putinapparently also recognized that foreign investment in Russia from theprivate sector as well as official aid flows from the West had declinedbecause of a refusal to invest in a corrupt economy. Concerns about corruption and crimewere also of significance in shaping American foreign policy. These are: 1) there must be a threat tointernational security, defined as the need for immediate relief efforts, ademocratic challenge, or severe violations of human rights; 2) clearobjectives for the UN mission; 3) agreement by all involved that theinterventions should take place (McCormick, 1995). The U.S.Congress restricted aid to Russian businesses and government in partbecause Russian scientists had been giving Iran advice on her nuclear andmissile programs. This is a view shared by Tonelson (1993), who contends thatthe lack of interest expressed by the American public in foreign affairshas led both the Bush and the Clinton administrations to ignore therealities of the new global economic and political order. Russia'sdemocracy appears to be reasonably well-established, and few Russians seeminterested in returning to the totalitarian regime that existed underCommunism. Petro (1997) further argues that despite the "popular mythology,"however, American support (or financial assistance) was never verygenerous. The initial response of theBush administration was guarded because President Bush had enthusiasticallyembraced Gorbachev and his investment is said by Hyland (1999) to have paidoff well during the Gulf War and negotiations for the reunification ofGermany. For example, the United States General AccountingOffice (USGAO, 1996) reported that USAID's showcase efforts to reformRussia's tax system and to set up clearing and settlement organizationsfailed because they were put exclusively into the hands of one group whichdeclined to work with other market participants. Wedel, J.R. Tell me the old, old story: Foreign aid. Hedges (1993) argued in the early 199 s that much of theeconomic assistance for Russia distributed by USAID was being spent onadministrative and other costs that did not directly benefit the Russianpeople. Will a cold shoulder replace post-Cold Waroptimism? Additionally, Republicans had takencontrol of the U.S. Accordingly, American foreignpolicy has emphasized the necessity of fostering the growth of the freemarket in Russia as a preliminary to political liberalization anddemocratization. Idealism reintegrated into Americanforeign policy served as the philosophical justification for sendingAmerican troops into Bosnia, and engaging in continued economic and armssale sanctions against Bosnia and Iraq.

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