The Harvard Boys Do Russia
H.I.I.D. had supporters high in the Administration. One was Lawrence Summers, himself a former Harvard economics professor, whom Clinton named Under Secretary of the Treasury for International Affairs in 1993. Summers, now Deputy Treasury Secretary, had longstanding ties to the principals of Harvard's project in Russia and its later project in Ukraine.
Summers hired a Harvard Ph.D., David Lipton (who had been vice president of Jeffrey D. Sachs and Associates, a consulting firm), to be Deputy Assistant Treasury Secretary for Eastern Europe and the Former Soviet Union. After Summers was promoted to Deputy Secretary, Lipton moved into Summers's old job, assuming "broad responsibility" for all aspects of international economic policy development. Lipton co-wrote numerous papers with Sachs and served with him on consulting missions in Poland and Russia. "Jeff and David always came [to Russia] together," said a Russian representative at the International Monetary Fund. "They were like an inseparable couple." Sachs, who was named director of H.I.I.D. in 1995, lobbied for and received U.S.A.I.D. grants for the institute to work in Ukraine in 1996 and 1997.
Andrei Shleifer, a Russian-born émigré and already a tenured professor of economics at Harvard in his early 30s, became director of H.I.I.D.'s Russia project. Shleifer was also a protégé of Summers, with whom he received at least one foundation grant. Summers wrote a promotional blurb for Privatizing Russia (a 1995 book co-written by Shleifer and subsidized by H.I.I.D.) declaring that "the authors did remarkable things in Russia, and now they have written a remarkable book."
Another Harvard player was a former World Bank consultant named Jonathan Hay, a Rhodes scholar who had attended Moscow's Pushkin Institute for Russian Language. In 1991, while still at Harvard Law School, he had become a senior legal adviser to the G.K.I., the Russian state's new privatization committee; the following year he was made H.I.I.D.'s general director in Moscow. The youthful Hay assumed vast powers over contractors, policies and program specifics; he not only controlled access to the Chubais circle but served as its mouthpiece.
H.I.I.D.'s first awards from U.S.A.I.D. for work in Russia came in 1992, during the Bush Administration. Over the next four years, with the endorsement of the Clinton Administration, the institute would be awarded $57.7 million--all but $17.4 million without competitive bidding. For example, in June 1994 Administration officials signed a waiver that enabled H.I.I.D. to receive $20 million for its Russian legal reform program. Approving such a large sum as a noncompetitive "amendment" to a much smaller award (the institute's original 1992 award was $2.1 million) was highly unusual, as was the citation of "foreign policy" considerations as the reason for the waiver. Nonetheless, the waiver was endorsed by five U.S. government agencies, including the Treasury Department and the National Security Council, two of the leading agencies formulating U.S. aid policy toward Russia. In addition to the millions it received directly, H.I.I.D. helped steer and coordinate some $300 million in U.S.A.I.D. grants to other contractors, such as the Big Six accounting firms and the giant Burson-Marsteller P.R. firm.
A s Yeltsin's Russian government took over Soviet assets in late 1991 and early 1992, several privatization schemes were floated. The one the Supreme Soviet passed in 1992 was structured to prevent corruption, but the program Chubais eventually carried out instead encouraged the accumulation of property in a few hands and opened the door to widespread corruption. It was so controversial that Chubais ultimately had to rely largely on Yeltsin's presidential decrees, not parliamentary approval, for implementation. Many U.S. officials embraced this dictatorial modus operandi, and Jonathan Hay and his associates drafted many of the decrees. As U.S.A.I.D.'s Walter Coles, an early supporter of Chubais's privatization program, put it, "If we needed a decree, Chubais didn't have to go through the bureaucracy."
With help from his H.I.I.D. advisers and other Westerners, Chubais and his cronies set up a network of aid-funded "private" organizations that enabled them to bypass legitimate government agencies and circumvent the new parliament of the Russian Federation, the Duma. Through this network, two of Chubais's associates, Maxim Boycko (who co-wrote Privatizing Russia with Shleifer) and Dmitry Vasiliev, oversaw almost a third of a billion dollars in aid money and millions more in loans from international financial institutions.
Much of this largesse flowed through the Moscow-based Russian Privatization Center (R.P.C.). Founded in 1992 under the direction of Chubais, who was chairman of its board even while head of the G.K.I., and Boycko, who was C.E.O. for most of its existence, the R.P.C. was legally a private, nonprofit, nongovernmental organization. In fact, it was established by another Yeltsin decree and helped carry out government policy on inflation and other macroeconomic issues and also negotiated loans with international financial institutions. H.I.I.D. was a founder of the R.P.C., and Andrei Shleifer served on the board of directors. Its other members were recruited by Chubais, according to Ira Lieberman, a senior manager in the private-sector development department of the World Bank who helped design the R.P.C. With H.I.I.D.'s help, the R.P.C. received some $45 million from U.S.A.I.D. and millions from the European Union, individual European governments, Japan and other countries, as well as loans from the World Bank ($59 million) and the European Bank for Reconstruction and Development ($43 million), which must be repaid by the Russian people. One result of this funding was the enrichment, political and financial, of Chubais and his allies.