used to politically allocate resources in the
The Faces and Interfaces of the St.
communist tradition, through patronage net-
Petersburg Clan
works like those that virtually ran the Soviet
Both visibly and behind the scenes, HIID
Union.
was active in setting up, advising, supporting,
For example, the RPC has presided over a
staffing, and lobbying for funding on behalf
network of some 10 Local Privatization
of the St. Petersburg Clan and its network.
Centers outside Moscow.49 With Western aid
HIID received two Cooperative Agreements,
concentrated in Moscow, donors endorsed
managed by U.S. AID's Moscow mission, to
aid to the provinces. However, far from serv-
serve as an impartial adviser to U.S. AID on
ing development, the LPCs instead have been
related projects in Russia.55 Those agreements
used for political purposes, according to rep-
put HIID in the position of recommending
resentatives of the three aid-paid consulting
U.S. aid policies while being a chief recipient of
firms (Price Waterhouse, Arthur Andersen,
the aid, as well as overseeing some other aid
and Carana) that set them up.50 Dennis
contractors, some of whom were its competi-
tors. The GAO found that "HIID served in an
Mitchem, a former partner at Arthur
oversight role for a substantial portion of the
Andersen, notes that LPC leaders were
Russian assistance program" and that HIID
rewarded for blind loyalty, even if that
Those agreements
had "substantial control of the U.S. assistance
involved doing little or nothing, and even
put HIID in the
program." The GAO described U.S. AID's
scolded for local reform initiatives. Mitchem
management and oversight of HIID as "lax."56
says that the LPC directors were concerned
position of rec-
mainly with pleasing the RPC;51 Carana's
One group's near-monopoly on aid in sup-
ommending U.S.
Robert Otto concurs that local directors "did
port of top-down reform through commu-
aid policies while
what [the RPC] wanted doing. . . . The LPC
nist-style patronage networks and the creation
people slid very easily into that because it was
of chameleon-like private organizations used
being a chief
normal for them to get orders from
as political machines made it easy for mem-
recipient of the
Moscow."52
bers of the St. Petersburg Clan and their sup-
aid, as well as
porters to work all sides of the table. If criti-
Sokolov and the Chamber of Accounts
cized by Russians for public policies or misuse
have attempted to investigate how some of
overseeing some
of funds, the clan could claim that donors
the $4 billion the RPC was awarded was spent.
other aid contrac-
made the decisions. If they came under fire for
According to Sokolov, a report issued by the
funding privatization, which many Russians
chamber in May 1998 showed that the
tors, some of
have dubbed pri-hvatizatsiya, or the "great
"money was not spent as designated. Donors
whom were its
grab," donors could disassociate themselves
paid hundreds of thousands of dollars for
competitors.
from the state because they were funding "pri-
nothing . . . for something you can't deter-
mine."53
vate" organizations, even if those organiza-
tions were run by government officials. That
Could the RPC and other St. Petersburg
setup not only facilitates denial, it institu-
Clan-run, U.S. AIDfunded organizations
tionalizes it. Such an aid system lacks outside
spawn self-sustaining institutions? All three
accountability and precludes significant over-
contractors who helped set up the LPCs ques-
sight by U.S. and Russian authorities not
tioned the extent to which they could have a
aligned with the chosen group.
lasting positive impact--as did the GAO,
Given that, it is not surprising that,
which concluded that "the RPC's sustainabil-
against the backdrop of Russia's Klondike
ity is in question once U.S. AID assistance
capitalism, key HIID advisers exploited their
ends in 1997."54 The practice of funding per-
intimate ties with Chubais and the Russian
sonalities over reform processes appears to
government and were allegedly able to con-
collide head-on with the aid program's broad-
duct business activities for their own enrich-
er goal of building sustainable, independent
ment. In early 1997 U.S. AID's inspector gen-
institutions.
9