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Aid-created orga-

bureaucracy." Acknowledging the lack of

vent the Duma, thus fomenting political

political support for many reform measures,

opposition and creating the perception that

nizations were sit-

Coles said, "There was no way that reformers

the reform was not legitimate.42

uated somewhere

could go to the Duma for large amounts of

The donors' flagship organization was the

in the twilight

money to move along reform."36  Unfortu-

Russian Privatization Center, a private,

allegedly nonprofit organization set up in

nately, without wide support, reforms were

zone between state

Moscow. The RPC was closely tied to Harvard

likely to be subverted in the process of imple-

and private, be-

and epitomized the operations of the aid-sus-

mentation.

tween the Russian

tained Harvard­St. Petersburg coterie. The

U.S. AID's showcase efforts to reform

center received money and loans from all

Russia's tax system and to set up clearing and

government and

major, and some minor, Western donors--the

settlement organizations (CSOs)--an essential

Western donors,

United States, the World Bank, the IMF, the

ingredient in a sophisticated financial

European Bank for Reconstruction and

system--failed largely because they were put

and between

Development, the European Union, the

solely into the hands of one group, which

Western govern-

United Kingdom, Germany, and Japan. The

declined to work with other market partici-

ment and Russian

center's CEO, a Russian from the St.

pants. In Moscow, for example, despite mil-

Petersburg Clan, has written that he managed

lions of U.S. AID dollars, many of the Russian

government alle-

some $4 billion, all from the West, according to

brokers were excluded from the process and

giance and orien-

Veniamin Sokolov, head of the Chamber of

declined to use the Moscow CSO.37 One mar-

Accounts, Russia's rough equivalent of the

ket participant, Viktor Agroskin of the broker-

tation.

GAO.43 For example, the RPC received more

age Rinacoplus, remarked that the Moscow

CSO was "incorporated and nothing else."38

than $41 million from U.S. AID44 and millions

of dollars more in grants from G-7 countries.45

Thus, since 1994, when consultants working

under U.S. AID contracts totaling $13.9 mil-

It also implemented loans both from the

lion39 set out to design and implement CSOs

World Bank ($59 million)46 and from the

in five Russian cities, very little evidence of

European Bank for Reconstruction and

progress has emerged. After a 1996 investiga-

Development ($43 million) to be repaid by the

tion of HIID activities in Russia, the GAO

Russian government.47

issued a report calling the CSO effort "disap-

Formally and legally, the RPC is a nonprof-

pointing."40

it organization. But the "private" RPC was

established by Russian presidential decree and

In addition to hindering particular market

received foreign aid funds because it was run

reforms, governance by decree stifled democ-

by the St. Petersburg "reformers," who played

racy and the building of transparent, non-

key roles in the Russian government. Lending

aligned institutions so critical to its develop-

credence to its appearance as a "government"

ment and that of a stable economy. Some voic-

organization, the RPC's tasks have included

es within U.S. AID concur: According to the

helping to formulate macroeconomic policy,

GAO, U.S. AID's Washington Office of

as well as negotiating loans with international

Democracy for Russia opposed using decrees

financial institutions.48 In practice, the RPC

"because it believed decrees did not support

the democratic processes envisioned by the

and other aid-created organizations were situ-

project."41

ated somewhere in the twilight zone between

state and private, between the Russian govern-

Clique-Run Organizations

ment and Western donors, and between

Western government and Russian govern-

The reformers also set up a network of aid-

ment allegiance and orientation. Whatever

funded "private" organizations controlled by

their predilection at any given moment, those

the St. Petersburg Clan and HIID. Those orga-

organizations were run by the St. Petersburg

nizations enabled reformers to bypass estab-

reformers (with support from U.S. AID

lished bodies of government, such as min-

through HIID and U.S. contractors) and were

istries and branch ministries, and to circum-

8