U.S. Bilateral Assistance to Russia: 1992-2002

Report for Congress
U.S. Bilateral Assistance to Russia: 1992-2002
January 16, 2003
Curt Tarnoff
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

U.S. Bilateral Assistance to Russia: 1992-2002
For more than ten years, the U.S. program of foreign assistance to Russia has
supported three aims – security, by promoting nuclear and chemical weapons
nonproliferation activities; stability, by supporting a range of programs to create a
democratic and economically prosperous Russia that would be a cooperative member
of the international community; and humanitarian relief, reflecting traditional
American values.
Since it was launched, the Russia foreign aid program has been subject to
considerable criticism. Some argued the amount of funding was too little, too late;
others that too much money was put into projects before the country was ready for
reform. Critics protested that the money mostly went to American advisers, while
others said it went to support a non-reformist government and the oligarches.
Although the program has had its problems, aid to Russia has resulted in a
number of significant achievements. Hundreds of nuclear weapons delivery systems
have been eliminated and thousands of scientists employed in peaceful work. Food
aid has been provided to the needy. Russians have been exposed to new ideas
concerning the workings of democracy and the free market, indigenous think tanks
and civic organizations have been supported, and thousands of private business and
grassroots activities have been funded.
The assistance program has changed over the decade in response to criticisms,
new funding priorities, and changing circumstances within Russia. Security
programs now account for two thirds of U.S. aid. Democratic reform efforts and
exchanges are better funded than economic reform projects.
Re-assessments of aspects of the aid program in 2001 have led to further
changes. Projects to support stability aims are expected to emphasize entrepreneurs,
civil society, and health. Nonproliferation efforts will expand material control and
accountability programs and scientist demilitarization efforts. The Administration
is reportedly planning to propose a large cut in the FY2004 budget for Russia
stability aid.
For more detailed discussion of the aid program, see CRS Report 96-261,
Russia and U.S. Foreign Assistance: Current Issues (March 1996), CRS Report
RL30112, Russia’s Economic and Political Transition: U.S. Assistance and Issues
for Congress (May 1999), and U.S. Assistance to the Former Soviet Union 1991-

2001: A History of Administration and Congressional Action (revised January 2002).

This report will not be updated.

A Decade of Assistance.............................................1
Security Programs.............................................2
Weapons Destruction and Dismantlement.......................2
Control and Protection of Nuclear and Other WMD
(Weapons of Mass Destruction) Material...................2
Demilitarization ...........................................2
Humanitarian Programs.........................................2
Stability Programs.............................................3
Economic Reform.........................................3
Democratic Reform........................................3
Social and Environmental Reform.............................4
Criticism and Achievements.........................................4
Criticism .....................................................5
Too Little, Too Late........................................6
Too Much, Too Early.......................................6
Too American............................................7
To the Wrong Russians.....................................7
The Wrong Strategy........................................7
Achievements .................................................8
Security Program Achievements..............................8
Humanitarian Program Achievements..........................9
Stability Program Achievements..............................9
Exposure to New Ideas.................................9
Creating Vehicles for Dissemination of Ideas...............11
Putting Ideas into Practice..............................12
The Russia Program After Ten Years.................................12
Prospects for the Future............................................14
List of Figures
Objectives of U.S. Assistance to Russia: 1992-2001.......................2
U.S. Assistance for Russian Stability: 1992-2001.........................3
Objectives of U.S. Assistance to Russia: FY2001........................13
U.S. Assistance for Russian Stability: FY2001..........................14
List of Tables
U.S. Assistance to Russia from NIS Account............................6
Total U.S. Assistance to Russia......................................13

U.S. Bilateral Assistance to Russia:
For more than ten years, the United States has supported programs of bilateral
and multilateral assistance to Russia. Although policymakers always anticipated that
multilateral financial assistance through the World Bank and IMF would compose
the bulk of global efforts to assist Russia, throughout this period the United States
has maintained a program of bilateral assistance that more directly and immediately
reflects U.S. interests and priorities.
The U.S. bilateral program has had three overarching and related aims –
security, stability, and humanitarian relief. The United States has sought to achieve
security, both U.S. and Russian, by promoting nuclear and chemical weapons
nonproliferation activities. It has sought stability – Russian and world stability – by
supporting a range of programs to create a democratic and economically prosperous
Russia that would, as a result, be a cooperative member of the international
community. Its humanitarian programs, like those elsewhere in the world, often
transcend specific U.S. strategic and other interests in Russia – reflecting traditional
American values.
As might be evident from the current state of Russia’s economy, society,
politics, and military, the numerous and diverse projects that were developed to
achieve these aims have had a mixed record. Over time, as a consequence of failures,
successes, lessons learned, financial constraints, and program restrictions and
conditions, the aid program today is substantially different in size and scope than it
was early on. How it will change over the next decade is unclear. But in determining
where the program is to go in the future, it may be helpful to know where the
program has been.2

1 This report is a revised and updated version of a study that appeared in Joint Economic
Committee, S. Prt. 107-50, Russia’s Uncertain Economic Future, December 2001.
2 For further detailed discussion of the aid program, see CRS Report 96-261, Russia and
U.S. Foreign Assistance: Current Issues (March 1996), CRS Report RL30112, Russia’s
Economic and Political Transition: U.S. Assistance and Issues for Congress (May 1999).

A Decade of Assistance
Objectives of U.S. Assistance to Russia:
Through September 2001, about $8.9 billion in grant assistance has been
obligated for programs in Russia. Roughly 35.4 % of these funds have been targeted
for security objectives, 32.0 % for humanitarian goals, and 32.6 % for stability
obj ect i v es. 3
Security Programs
Of the roughly $3.2 billion obligated for security purposes, most ($1.9 billion)
has come from the Department of Defense appropriations, authorized under the so-
called Nunn-Lugar Cooperative Threat Reduction Program (CTR) first approved by
Congress in November 1991. Related programs are also funded and implemented by
the Department of Energy and Department of State. The bulk of security programs
are intended to lessen the potential threat to the United States posed by Russian
nuclear weapons, material, and expertise vulnerable to sale, theft, or hire by terrorists
or rogue nations. There are several key components of these efforts.
Weapons Destruction and Dismantlement. The CTR program has
helped Russia meet START I treaty limits by facilitating the elimination of delivery
vehicles for nuclear weapons, including SS-18 missile silos and heavy bombers, and
supporting destruction of its chemical weapons stockpile.
Control and Protection of Nuclear and Other WMD (Weapons of
Mass Destruction) Material. The United States has provided design and
construction assistance for a storage facility for fissile material from dismantled
nuclear warheads, along with the containers for the transport of warheads and storage
of materials. It has sought to enhance the security of warheads and materials during

3 The United States also provided loan and other guarantees to support roughly $6 billion
in the face value of U.S. goods and investments to meet trade objectives. As these mostly
benefitted U.S. exporters and investors, they are not discussed here.

transport, storage, and at research facilities by such measures as providing
supercontainers, inventory control systems, sensors, and personnel reliability
methodologies. Customs officials have received training and radiation detectors have
been provided in order to thwart illegal export of fissile materials.
Demilitarization. U.S. assistance has supported the conversion of Soviet
defense industries into commercial, non-military, enterprises. Several programs aim
to employ Soviet WMD scientists in peaceful civilian research.
Humanitarian Programs
Since 1992, the United States government has provided Russia with $2.8 billion
in humanitarian assistance. Almost all of it has been food aid, delivered under the
P.L. 480 Food for Peace, Section 416(b), and the Food for Progress programs carried
out by the Department of Agriculture, and most (79%) was provided during the two
years of 1993 and 1999 in response to perceived shortfalls in production. In some
cases, food was given to private voluntary organizations for distribution to the needy.
In other cases, commodities were sold and their proceeds were used to support
development objectives – such as the cooperative credit system, child vaccination
programs, and the Russian Pension Fund. The U.S. government has also provided
transport costs for medical and other aid donated by the private sector, and has
contributed to international organizations working in Chechnya.
Stability Programs
U.S. Assistance for Russian Stability:
Programs aimed at creating a stable and peaceful Russia by facilitating its
transition from authoritarian communism to a free market democracy have received
particular attention from Congress and the public. During the past ten years, $2.9
billion, mostly funded under the NIS (New Independent States) account of the foreign
operations appropriations and authorized under the FREEDOM Support Act (P.L.

102-511) has gone to such efforts.4 Projects designed to meet these objectives have
been numerous and diverse. The breadth of purpose and sectors they cover, many of
which overlap, make it difficult to categorize them. They might be put into three
broad baskets.5
Economic Reform. More than half (51.6% – about $1.5 billion) of stability
programs appear to have as their primary objective the economic restructuring of
Russia and development of a strong private sector economy. Among the projects that
sought to meet this need were efforts to encourage reform of tax, banking, fiscal,
energy, housing, and privatization policies. U.S. funds have been made available for
equity investments in small and medium business, and loans to small and micro-
business. Technical advice has been provided to farmers and businesses, as well as
opportunities to gain experience in U.S. firms. Various efforts have been made to
promote U.S. trade and investment in Russia.
Democratic Reform. By the narrowest definition, only 8% of stability efforts
in Russia were directly geared toward the development of democratic institutions and
practices. These would include projects providing advice to staff of political parties
and election commissions, encouraging the growth of civil society through offering
advice and funding to non-governmental advocacy organizations, promoting the rule
of law through provision of judicial training programs and expertise on a civil code,
and crime and anti-corruption programs. Democracy programs, more broadly
defined, also include a wide range of U.S. exchange programs and small grants to
NGOs, many of which facilitated economic reform or other objectives, but whose
effect, through exposure to U.S. institutions or development of indigenous civil
society, has been helpful to democratic development. A quarter of stability programs
fit this broader definition ($733 million).
Social and Environmental Reform. Social and environmental reform
activities account for about 18% of stability efforts ($522 million). Programs to
improve the social welfare and environmental conditions of the Russian public were
largely intended to bolster the key U.S. objectives of economic and democratic
reform. Experts have argued that the Russian public would be more likely to support
these objectives if they experienced fewer negative consequences as a result of
reform efforts. Unenforced environmental standards by the communist regime and
the end of a cradle-to-grave social system have fostered a dramatic health and
environmental crisis in Russia. Health programs supported by U.S. assistance have
sought to reform health care delivery and financing systems, and they have targeted
specific diseases such as HIV/AIDS and tuberculosis. U.S. hospitals have provided
equipment and expertise to partner hospitals in Russia. Family planning assistance
has been provided as an alternative to the common practice of abortion. Russian
orphanages have been assisted.

4 About 89% of stability programs were funded under the NIS account.
5 A fourth, miscellaneous, catch-all group, composes 5% of stability efforts. These mostly
include funds for the Peace Corps and USAID training programs – cross-cutting activities
that benefitted all three stability objectives.

Environmental programs have provided small grants to innovative indigenous
projects and replication of “best practices”, and have supported use of the Internet
and email to strengthen communication between environmental groups spread
throughout Russia. They have supported forest management reform and
reforestation, and pilot demonstration anti-pollution and energy efficiency projects.
To avoid a Chernobyl-like scenario, the Department of Energy and the Nuclear
Regulatory Commission have provided training and equipment to improve the safety
of Soviet-designed power plants.
Criticism and Achievements
When the FREEDOM Support Act was introduced in 1992, government
officials tried to sell the program as a relatively short-term effort, lasting until
FY1998. However, even then, many realized that the transition to democracy and
free markets might take a generation or more, depending on the sincerity and rapidity
with which political leaders adopted the basic framework and laws of a new political
and economic system. At the present time, Russia’s transformation remains an
unfinished work with analysts ranging from doubtful to hopeful in their views of its6
future course. Views of the U.S. assistance program follow the same trajectory.
Both optimistic and pessimistic perspectives have helped shape the current program
and can provide lessons for its future.
In any case, the role of the aid program in Russia’s progression to what it is
today and to what some expect it to become is hard to define. Even in countries such
as South Korea or Costa Rica where the aid programs were proportionately large and
their political and economic development highly successful, the connection between
the U.S. programs there and specific consequences is obscured by the numerous
variables that come into play. The results of some programs are more easily
measured than others, such as numbers of children vaccinated, which logically means
lesser incidence of disease, or elimination of missile launchers, which directly leads
to the conclusion that U.S. security is enhanced. The immediate returns on most
programs are often straightforward such as numbers of micro loans provided or
people trained in business management. How the trainees or loan recipients
ultimately contributed to the broader objective of creating a market economy,
however, is less clear. If the program objective is concrete, the budget “sufficient”,
activities narrowly focused on the goal, and the recipient environment cooperative,
as was more often the case with security and humanitarian programs in Russia, the
results may be more transparent. Stability programs had few of these features and
only the short-term results appear “measurable”. Further, U.S. stability assistance
was never expected to be the primary determinant of a successful Russian transition.
Its impact could only be at the margins. Such considerations should be kept in mind
when judging the impact of U.S. assistance programs in Russia.

6 The former category might include Stephen F. Cohen, Failed Crusade: America and the
Tragedy of Post-Communist Russia, W.W. Norton, NY, 2000. More hopeful views are
expressed by Anders Aslund, “Think Again: Russia”, Foreign Policy, July-August 2001;
Michael McFaul, “Getting Russia Right”, Foreign Policy, Winter 1999-2000.

From the time it was launched, negative critiques of the aid program have
emerged with regularity.7 Some attacks, many hyperbolic, may have had ulterior
motives – for example, those linking the aid program to Vice President Gore as the
2000 election approached or the snipes at aid implementors made by some
unsuccessful applicants for funds. But there was also criticism from knowledgeable
individuals who seemed to be primarily interested in more effective outcomes. Most
criticism understandably appears founded on the seeming lack of success in aspects
of the Russian economy and democracy, at least up to the year 2000. In the past two
years, however, as the economy has shown signs of significant progress, criticism of
the aid program has largely diminished. Whether this is because the current stability
program is relatively small or is credited with the recent success, or whether critics
are reconsidering their earlier assessments is unclear.
The range of criticism can be summarized as follows:8
Too Little, Too Late. Efforts to assist the democratic and economic transition
in Russia have often been criticized as offering too little funding, too late. Early on,
the George H. Bush Administration was criticized for reacting too cautiously to the
dramatic changes taking place in the Soviet Union in 1991. CTR security initiatives
launched in that year came entirely from Congress. Although some small stability-
related programs were proposed by the Administration, it was not until the April
1992 announcement of the FREEDOM Support Act, following critical comments
from national figures such as former President Nixon, that a concentrated effort was
made to offer U.S. aid and organize support from international donors. To those
expecting a new Marshall Plan in response to what appeared then to be a short
window of opportunity for adoption of revolutionary and painful reforms, the U.S.

7 Among more recent negative critiques are: Food Aid to Russia: The Fallacies of U.S.
Policy, Mark Kramer, Program on New Approaches to Russian Security (PONARS) Memo
86, October 1999; An Agenda for Renewal: U.S.-Russian Relations, Carnegie Endowment
for International Peace, December 2000; Collision and Collusion: The Strange Case of
Western Aid to Eastern Europe 1989-1998, Janine R. Wedel, New York, 1998;
International Efforts to Aid Russia’s Transition Have Had Mixed Results, GAO, November

2000; Warm Words and Harsh Advice: A Critique of the West’s Role in Russian Reforms,

International Affairs, vol. 77/ 4, 2001, p. 947-955; Russia’s Road to Corruption: How the
Clinton Administration Exported Government Instead of Free Enterprise and Failed the
Russian People, Speaker’s Advisory Group on Russia, House of Representatives, September


8 In addition to these policy-related critiques, observers have raised concerns regarding the
administration of projects, asserting the inadequacy of management, ineffectiveness of
implementation, and possible malfeasance of individuals employed in projects. In some
cases, the charges have been significant. For example, the DOD Inspector General found
that $2.2 million of Defense Enterprise Fund expenses would have been unallowable if
subject to Federal cost principles, and noted that more than half its $66 million budget was
spent on management and administration rather than the investments for which it was
established. A Justice Department $120 million law suit, resolution of which is still
pending, was brought against Harvard Institute for International Development contractors
for allegedly using their positions in a USAID privatization project for personal gain.

contribution was considered paltry and half-hearted, and the bulk of offered
international assistance, loans from the IMF and World Bank, were not appealing to
a country reluctant to add to its debt.
A year later, the Clinton Administration proposed a significant increase in U.S.
stability assistance – roughly $1.5 billion. Following this one-time infusion of aid,
annual levels appropriated for Russia quickly declined, settling below $200 million.
Throughout the decade, critics continued to remark on the disparity between the
supposed importance of Russia to U.S. interests and the level of funding for efforts
to effect change there. Although Russia received a greater proportion of available
funding for the region, neighboring nations, such as Armenia and Georgia, with
significantly smaller populations consistently ranked higher than Russia as recipients
of aid on a per capita basis.
U.S. Assistance to Russia from NIS Account
($ millions)
Fiscal Year1992-93199419951996199719981999200020012002
Administra tio n –* –* 379.4 260.0 173.0 241.5 225.4 295.0 161.9 167.0
Allocation after350.01,300.0344.2137.094.8133.2161.2186.6163.6161.6
Appropriatio n
*Prior to FY1995, the Administration did not break-down its NIS account request by country.
Too Much, Too Early. Some would argue that a major reason for failed
projects and wasted resources in the early years was the impetus to spend before there
was a serious prospect of success in certain sectors. Economic reform legislation was
developed with U.S. assistance while a communist dominated parliament was
inclined to thwart each measure. Assistance was offered to develop farming before
land was privatized. And foreign investment was encouraged before rule of law
safeguards were in place to protect investors. Ironically, as some have pointed out,
by the time serious reform was underway and small business and civil society better
established, significant amounts of funding were no longer available.
Too American. However much the United States claimed to provide to
Russia, the fact is that much of the effort was self-focused, and many of the funds
never left American hands.9 Moreover, many critics complained that Americans with
specific knowledge of Russia were underutilized in the formulation and
implementation of assistance programs. Stability programs designed and run by non-
expert Americans were accused of displaying little cultural sensitivity and providing
advice that was inappropriate. Few Russian staff members were hired to compensate
for American ignorance of local matters. These criticisms were mostly aimed at the

9 A GAO report criticized the DOE Initiatives for Proliferation Prevention program for
providing only one third of its funds to Russian institutes for employment of scientists. But
most security assistance, in the form of U.S. equipment such as containers, and humanitarian
aid – U.S. commodities – were items requested by the Russian government. On the other
hand, stability aid was mostly U.S. technical advisers and equipment, key exceptions being
monetary grants to grassroots organizations, equity investments in private sector firms, and
grants provided for on-lending to small and micro-business. The Russian government had
little to do with how stability funds were spent.

large for-profit contractors that focused on government policy reform work and
dominated the aid program in the early years. Critics also argued that inadequate
funds were provided to the relatively smaller NGOs which worked with the Russian
grassroots and were more responsive to local realities and needs. As a result, U.S.
assistance created a degree of public resentment, critics would argue, instead of the
anticipated good will.
To the Wrong Russians. Both the George H. Bush and Clinton
Administrations announced that aid should follow reform. However, some have
observed that, partly due to the lack of Russia expertise or a misguided effort to
support the Yeltsin government, aid was provided to individuals or groups that were
not reformist. In particular, critics pointed to U.S. support for Anatoly Chubais’
program of privatization, which they assert exacerbated income divisions and helped
foster the so-called “oligarches”. Policymakers, according to critics, blindly provided
support to Yeltsin, despite his inconsistent support for economic reform and
democracy, rather than to democratic “institutions”.10 When a substantial amount of
food aid was provided in 1993, many suggested that proceeds were channeled
through corrupt officials who may have used them illegitimately. Others argued that
congressional directives funneling funds to specific regions insured ineffective
programs by assisting non-reformers.
The Wrong Strategy. Some critics disagreed with the mix of programs that
were funded by the United States. They argued, for example, that stability programs
emphasized economic reform efforts while leaving democracy programs
underfunded. Stronger democratic institutions, they suggested, would have led to
more economic reform. Some critics argued that too much assistance was provided
to programs in Moscow and not enough to the regions. Others contended that too
much went to the reform of Russian government policies and not enough to
grassroots activities and the private sector, or that reforms were a too-radical
“economic shock therapy” that simply alienated the Russian public. Still others
assert that the U.S. objective of free market economy was inherently wrong for
Russia, that government should play a more active role there.11
Some CTR critics argued that funding the destruction of chemical weapons was
less important than elimination of nuclear weapons; others that more funds should
have gone to insuring the security of materials used to produce weapons. Some
questioned the wisdom of defense conversion programs, arguing they subsidized the
Russian defense industry and had no effect on current production capacity. Others
suggested that funding weapons dismantlement while Russia continued to modernize
its systems simply subsidized defense modernization. Critics of food aid argued that
sale of the commodities lowered local food prices and harmed Russian farmers,
especially the new independent farmers some aid programs were trying to encourage.

10 For example, Supporting Democratic Institutions Rather than “Democrats” in Russia,
Regina Smyth, PONARS Policy Memo 139, April 2000.
11 See The Limits of U.S. Influence on Russian Economic Policy, Mark Kramer, PONARS
policy memo 173, November 2000.

There are many possible responses to the numerous and disparate criticisms
made during the past ten years: It could be said that, no matter the amount of funds
available, little could be done without a strong commitment on the part of the
Russian government to support the few Russian reformers who emerged in positions
of power. In fact, some argue that Russia’s problem was that it did not adopt
seriously radical reform. While, there were American experts on Russia who knew
more than Kremlinology, it has been pointed out that few of these had experience in
running assistance programs, and that no one had expertise on the transformation
from communism to democratic capitalism. Everyone had their own formula for how
funds could best be spent. And many of the criticisms, even those written as late as
2000, were based on aspects of the first four years of the program that had since
In taking aim at individual aspects of the aid program – the privatization effort,
corrupt food aid, insufficient support for democratization, etc. – critics often
promoted the impression that the whole aid program was in dispute. While there was
much in the critiques that rang true, there were also many things that could be said
to be right with the program, positive accomplishments, some of which have been
noted by the critics themselves.
Security Program Achievements. A January 2001 report by the Russia
Task Force co-chaired by former Senate Majority Leader Howard Baker and former
White House counsel Lloyd Cutler found that “current nonproliferation programs in
the Department of Energy, the Department of Defense, and related agencies have
achieved impressive results thus far...”.12 Among these are elimination of 396 SLBM
launchers, 438 ICBM silos, 97 strategic bombers, and 486 ICBMs. Secure storage
of fissile materials has been enhanced by delivery of 32,000 containers and by
assistance in construction of a storage center. The stockpile of nuclear weapons is
more secure due to upgrades in inventory and security systems. Interdiction
capabilities have been strengthened by providing border crossings with radiation
detection equipment and guards with training. The employment of thousands of
scientists may have helped prevent a brain drain of sensitive expertise in weapons of
mass destruction and to some extent re-directed that expertise toward peaceful,
commercial enterprises.
Humanitarian Program Achievements. Twice in the past decade, in
response to production shortfalls, the aid program provided large quantities of food
assistance to Russia. It has also provided transport costs to deliver more than $628
million in privately donated food, medical and other supplies, and contributed to
international organization work in the North Caucasus region. While some of the
food deliveries may not have been necessary, tens of thousands of displaced persons,
children, pensioners, and other needy individuals received food and vaccinations, and
pensioners received financial aid from the proceeds of food sales they may otherwise
not have received.

12 A Report Card on the Department of Energy’s Nonproliferation Programs with Russia,
January 10, 2001, Russia Task Force, Secretary of Energy Advisory Board, page 1.

Stability Program Achievements. While no one will argue that Russia has
become a full fledged western democracy and free market economy, it has changed
radically since the end of the communist era (and continues to evolve in directions
we can only surmise). Tens of thousands of private businesses now exist, political
parties and grassroots advocacy organizations proliferate, travel abroad is
unrestricted, an open exchange of information, including the internet and a much
more free press exist. Further, Russia has made a strategic shift, especially since
9/11, toward closer ties with the United States and the West. Stability programs did
not create this situation, but they nurtured it, and, to some facets of the new order, the
contribution was arguably significant. Stability programs sought to affect many
discrete aspects of Russian life, but perhaps their greatest cumulative impact in the
long-term may have been the introduction, dissemination, and practice of new ideas.
Exposure to New Ideas. A large number of assistance projects sought to
change Russia by exposing its government and citizens to new ideas.
!Policy reform. U.S. technical experts and U.S.-supported Russian
indigenous think tanks have provided advice to national and local
governments on legal and administrative reforms in a wide range of
sectors. While many reforms have yet to be implemented, these
efforts have introduced officials to procedures and law in other
countries and laid the groundwork for the large number of reforms
that have been approved in the past few years under President Putin.
A program to assist fiscal reform, for example, provided the
Ministries of Finance and Taxation, the Budget Committee of the
State Duma, the regional administrations of six oblasts, and the
municipal administrations of Novgorod and Tver with analytical
models for forecasting the effects of tax policy. The program also
trained a team of Russian specialists in these skills.13 Housing
reform project staff reportedly contributed views on 160 national
laws and decrees and directly drafted 37 legislative acts.14 Tax
reform proposals by the USAID-supported Institute for Economies
in Transition were adopted into law.
!Rule of law. A 1993 pilot program run by the ABA to introduce the
concept of jury trials into Russia bore fruit in 2001 with their
nationwide adoption for all serious crimes.
!Mortgage finance. Housing reform specialists introduced the
practice of residential mortgage lending to Russia by drafting a
legislative framework for this activity, writing the industry’s “how-

13 Work carried out for USAID by Georgia State University and the Russia Public Finance
Center it founded. Final Report Evaluation of the Impact of Technical Assistance on
Russia’s Fiscal Reform and the Identification of Possible Future Work, Carana Corporation,
March 21, 2000, p. 49. Advice on tax administration and enforcement was also provided
to the Ministry of Finance by U.S. Department of Treasury-appointed advisers.
14 Work carried out for USAID by Urban Institute. Evaluation Report: The Russian
Housing Sector Reform Project Phases I and II, Carana Corporation, November 1999, p.4.

to” handbook, and offering technical assistance to banks. By 1998,

47 banks were making mortgage loans.15

!International accounting standards. U.S. experts promoted the
use of international accounting standards to Russian business in
order to make it easier to attract investors and qualify for loans and16
to promote transparency. In 1999 alone, 3,670 were trained.
!Direct exposure to the United States. Since 1992, more than
50,000 Russians were brought to the United States for both targeted
education and training and broader familiarization with U.S. culture
and institutions. For example, the SABIT program provided
experience working in a U.S. business (238 in 2001), the Cochran
program experience in agriculture-related concerns (30 in 2001), and
the Productivity Enhancement Program management-training
internships (675 in 2001). The Open World Program (formerly
Russian Leadership Program) brought promising leaders for short
visits, including home-stays, at the grassroots level (almost 4,000
since 1999).17
!Person-to-person exposure. Several programs brought American
volunteers to Russia, emphasizing personal contact with Americans
as much as provision of “know-how” at a grassroots level. During
their two-year term of service, Peace Corps volunteers (174 in 2001)
taught English and business skills. The Farmer-to-Farmer (152 in
2001), Financial Service Volunteer Corps, International Executive
Service Corps, and others provided the technical skills of practicing
and retired farmers and businessmen to their counterparts in Russia
on a one-to-one, short-term basis.
!Advice and training for business. Emerging businesses and their
employees received both general and specialized training in
business skills as well as targeted, individualized advice. In
FY2001, business support institutions served 8,000 businesses and
trained 77,000 people. Many of the volunteer programs noted above
were aimed at providing experts to individual business clients to
help solve specific problems, such as how to improve production or
marketing. More than 1.7 million Russian school children were

15 Evaluation Report: The Russian Housing Sector, p. 28-33.
16 Results Review and Resource Request: USAID/Russia, April 2000, p.14.
17 Implemented by the Departments of Commerce, Agriculture, and State, and the Library
of Congress, respectively. The vast majority of exchange programs (serving more than
32,000 Russians since 1992) are conducted by the Department of State’s Bureau for
Education and Cultural Affairs; USAID has brought over 9,000 Russians to the United
States for project-related training.

introduced to concepts of capitalist economics through Junior
Achievement programs.18
Creating Vehicles for Dissemination of Ideas. Many aid projects sought
to increase the capabilities of organizations that traditionally act as agents of change
and disseminators of new ideas.
!Internet networking. In the first years of the assistance program,
aid was provided to ISAR, an organization which facilitated the
sharing of ideas and strengthened the solidarity of environmental
NGOs in part by establishing an email network system linking them.
Support for Internet access and training at more than 50 sites
throughout Russia has been provided to alumni of U.S.-sponsored
exchanges in order to build contacts among them and reinforce
positive experiences gained while in the United States.19
!Think tanks. To continue the policy reform work provided by U.S.
experts, USAID supported the creation and strengthening of more
than two dozen indigenous Russian think tanks whose expertise –
often former Russian associates of U.S. technical experts – could be
drawn upon by national and regional governments. For example, the
Institute for Economies in Transition, run by Yegor Gaidar,
produced tax, budget, land code, and other policy studies and
provided advice to the government. The Moscow School of Political
Studies trained young leaders in democratic principles.
!Developing civic organizations. The United States has aided the
development of institutions, such as NGOs, political parties, and
trade unions, that advocate new ideas and are essential to a healthy
civic society. U.S. assistance helped 5,000 NGOs in 1999 through

48 Russian NGO resource centers.20

!Independent media. U.S. aid has offered training and technical
assistance to television and print media. During the 1998 economic
crisis, grants were provided to help independent television stations
survive despite a drop in advertising revenue.21
!Developing business support organizations. Assistance programs
have supported 33 business service centers offering consulting and
other services to small and medium business, and fostered

18 FY2002 USAID/Russia Annual Report, p. 3.
19 ISAR is the Initiative for Social Action and Renewal in Eurasia. The Internet Access and
Training Program is carried out by Project Harmony for the Department of State.
20 Work carried out for USAID by IREX, ISAR, and others. USAID Results Review, p.28.
21 Work carried out for USAID by Internews and others.

development of business educational training through support to 59
business schools.22
Putting Ideas into Practice. Through grants, lending programs and other
means, U.S. assistance has helped individual businesses and civic organizations
apply the new entrepreneurial and democratic concepts often learned through training
and technical assistance.
!Loans and Guarantees. The United States provided funds to
Russian institutions for on-lending to micro, small, and medium
sized businesses. USAID programs disbursed 32,000 micro loans in
FY2001. U.S. assistance programs provided guarantees on loans
enabling Russian banks to make their first residential mortgage and
auto loans.
!Grants. Several programs provided competitive grants to non-
governmental organizations to enable them to conduct programs
contributing to reform at the grassroots level. Since 1993, a U.S.
funded foundation has provided more than 2,000 grants worth over
$50 million to NGOs, local governments, independent media, and
private businesses seeking demonstrable positive results in the fields
of enterprise development, public administration, and civil society.
Another program awarded funds (87 grants in 1999, most in the23
$30,000 range) to replicate successful environmental practices.
The Russia Program After Ten Years
The U.S. assistance program of today is substantially different from what it was
in its initial several years. Lessons learned as a result of failure and achievement, of
criticisms and congressional review during the first years set in motion reevaluations
of programs and redistribution of resources. In many cases, programs were revised
internally even before outside criticisms were made.

22 Service centers work implemented for USAID by Citizens Democracy Corps, ACDI-
VOCA, and others; Morozov schools by the Russian Academy for Management and
23 Work implemented for USAID by the Eurasia Foundation and the Institute for
Sustainable Communities, respectively.

Objectives of U.S. Assistance to Russia:
By FY2001, the most recent year for which data is available, the program’s
broad profile had shifted dramatically. First, program priorities appeared to have
changed. Whereas a ten year profile showed a near balance between spending on
security, stability and humanitarian concerns, by FY2001, there was an
overwhelming emphasis on the security objective. Security funding increased in
absolute terms as well over the period and even began to be drawn from the chief
pool of resources available for stability funding, the NIS account of the foreign
operations appropriations. Humanitarian aid, which reflected responses to specific
food crises in 1993 and 1998, dwindled by 2001. Meanwhile, actual stability funding
was cut, in part due to the perception that the program was slow in meeting its
economic and political reform objectives and in part reflecting broad cuts in foreign
aid following the accession of a budget-trimming Congress (that have been reversed
since 1999). Moreover, Congress made specific cuts for Russia programs in response
to concerns regarding Russian government behavior abroad and at home.
Total U.S. Assistance to Russia
(obligations in $ millions)
Fiscal Year1992199319941995199619971998199920002001Total
St a bilit y 71.6 312.8 984.6 352.4 224.7 169.6 231.9 169.9 164.3 221.2 2902.9
Huma n. 164.3 1063.2 39.4 48.7 23.8 15.8 6 .9 1164.1 243.9 77.9 2847.9
Security 3.2 97.00 209.2 202.9 187.8 408.9 353.7 491.9 628.7 569.3 3152.5
To t a l 239.2 1472.9 1233.1 604.0 436.3 594.3 592.5 1825.9 1036.9 868.3 8903.3
Source: Department of State
Bearing the brunt of budget cuts and criticisms, the composition of the stability
program changed far more sharply during the decade than did the security programs.24
Perhaps the most striking feature has been a shift in emphasis from economic reform
to democratic reform. For the whole period, economic reform received 51.6% of
stability funds; but in FY2001, it received only 30.8%. Democratic reform efforts,
on the other hand, were supported with 25.3% of overall funds, but in FY2001
received 38.7%. To be sure, the emphasis seems to be on exchanges rather than

24 Within the security program, percentages devoted to weapons dismantlement, material
control, and demilitarization changed little during the period.

institution-building, but even the narrowly defined democracy programs represent
11.3% of stability efforts in FY2001 versus 7.9% during the whole period. The
greater priority now given broad democracy activities reflects the lack of progress in
economic reform until recently, past criticism that not enough attention was being
paid to democracy-building and person-to-person contacts, and cuts in assistance to
the central government of Russia which was the recipient of much economic reform
aid.25 The proportionate increase in social aid from 18% during the whole period to
nearly 26% in 2001 is a reflection of the increased response to the health crisis in
Russia, particularly the rise of infectious diseases.
U.S. Assistance for Russian Stability:By 2001, the make-up of the stability
FY2001program had changed in a number of other
important ways. Extrapolating from the
experience of USAID, which accounted for
roughly half of stability program activity,
very little assistance was still being directed
toward helping the central government of
Russia. Although the central government
was the key target of the large number of
policy reform efforts undertaken in the 1993-
1995 period – in FY1996, the first year for
which data is available, accounting for 17%
of USAID’s program – by 2001, central
government-related projects accounted for
only 5%. USAID support for private sector
activities rose correspondingly, from 68% of
the FY1996 program to more than 82% in FY1999.
There is also some evidence, based on USAID activities, that, compared with
its early years, the assistance program now has more activities in the regions than in
Moscow and Petersburg (80% in the regions in FY2000), more funds directed toward
NGOs (75% in FY2000), and more Russian nationals involved as both implementors
and staff. Considerable effort has gone in recent years to creating indigenous think
tanks and nongovernmental organizations that can carry out policy reform technical
assistance, social-environmental programs, and business support efforts.
Many of these changes were featured in the Clinton Administration’s
Partnership for Freedom initiative, which was introduced in 1997 largely in response
to the criticisms noted above and in an effort to recover congressional support. A
Regional Initiative was introduced at the same time, concentrating aid on three (later
five) regional sites in a bid to attract foreign investment and improve program
effectiveness. The two initiatives promised to alter the prevailing aid strategy toward
Russia, and, in this, appear to have succeeded.

25 The cuts were the result of congressionally-imposed conditions that subjected half or
more of aid to the central government in FY1998 and later years to the requirement of a
presidential determination that Russia had terminated sales or transfer of nuclear reactor
technology to Iran.

Prospects for the Future
The aid program has continued to evolve in response to developments in Russia,
changes in U.S. foreign policy, and budget pressures. Calling for a “more pragmatic”
approach to Russia, the new Bush Administration, soon after taking office, launched
a review of the whole aid program.
Following an intensive study of the”stability” aid program, an inter-agency NSC
Policy Coordinating Committee Assistance Working Group produced its
recommendations in late summer 2001. The Group’s main conclusion supports
concentration of the program’s future focus on three areas – support for
entrepreneurs, strengthening of civil society and the media, and improving the health
of the Russian people. The strategy does not entirely reject, but does downplay,
further assistance to the central government. The Group also called for efforts to
apply the lessons learned implementing the five regional initiatives more widely
throughout the country. And it supported a balance between programs that have
long-range structural objectives and programs that can produce real results affecting
ordinary Russians in the short-term. The Assistance Working Group further
recommended an improvement in both coordination between implementing agencies26
and integration of disparate programs to support a shared goal.
The recommendations do not call for dramatic shifts from previous practice,
which, in any event, a limited and, perhaps declining, budget might not support.
Nevertheless, some small programmatic changes are already apparent in 2002. Funds
have been cut for an EPA environmental remediation program and a Commerce
business development effort that do not fit the new strategy focus, an educational
exchange viewed as redundant, and Treasury advisors to the central government
where the impact is not strong. In accordance with the new strategy, modest
increases are expected for media assistance programs, health, and civil society NGO27
advocacy support programs.
A similar review of the nonproliferation assistance program completed in
December 2001 also recommended changes. Overall, it found “that most U.S.
programs to assist Russia in threat reduction and nonproliferation work well, are
focused on priority tasks, and are well managed.”28 It did, however, conclude that
several programs be expanded and others altered. The Administration’s FY2003
budget adopted these recommendations. Scheduled to be expanded were the two
programs to secure nuclear material – the Department of Energy’s Material
Protection, Control, and Accounting (MPC&A) program and the Warhead and Fissile
Material Transparency program – and two scientist demilitarization programs – the
International Science and Technology Center and the Redirection of Biotechnical
Scientists programs. Administration support has also been given to accelerating
construction of a chemical weapons destruction facility. In the interest of efficiency

26 Report of the Europe/Eurasia PCC Assistance Working Group: Review of U.S. Assistance
to Russia, State Department, 2001.
27 As a result of the review, USAID revised its Russia strategy. USAID/Russia Strategy
Amendment (1999-2005), February 2002.
28 Fact Sheet: Nonproliferation, Threat Reduction Assistance to Russia. The White House.
December 27, 2001.

and effectiveness, some programs with similar purposes are being consolidated – the
Nuclear Cities Initiative with the Initiatives for Proliferation Prevention and the
Second Line of Defense program with the MPC&A program – and the Plutonium
Disposition project is being subjected to further review.
Since 1992, the mix of aid programs has changed over time, evolving in
different directions in response to assessments and re-assessments of what is possible
and most effective under the always changing circumstances within Russia itself.
While the program’s effectiveness is liable to continued scrutiny by policymakers and
analysts, it appears that, after ten years, the broad objectives of the aid program to
Russia remain much as they were at the beginning – stability, security, and, when
circumstances warrant, humanitarian relief. A democratic, economically prosperous
Russia which can maintain firm control over its WMD resources continues to be a
major foreign policy goal of the United States.
One strain of concern, constant throughout the decade, remains. Whatever the
mix of programs, is enough being done – is sufficient funding being provided in
absolute terms – to meet stability and security objectives? The January 2001 Baker-
Cutler report, for example, called for spending $30 billion in nonproliferation
assistance over the next 8 to 10 years, a five-fold increase in current levels.29 A July
2001 report from three former Senators, while rejecting “endless advice or limitless
doses of foreign aid”, supported “a large investment” in programs that would expose
Russian lawmakers, journalists, and educators to U.S. business, bring students to
U.S. business schools, provide credit to small and micro business, and address global
issues such as HIV/AIDS.30 Many commentators have continued to call for increases
in funding of democracy support.31
Recent events put the question of sufficient resources into sharper focus. As the
government of Russia adopts U.S. aid-supported economic reforms but is slow to
implement them, as the Putin government’s support for democratic institutions of
independent media and civil society remains uncertain (highlighted by the recent
Russian termination of OSCE monitoring in Chechnya and Russian withdrawal from
participation in the Peace Corps program), and as the war on terrorism increases the
threat of diversion of Russian weapons of mass destruction, many argue substantial
needs that could be addressed by U.S. assistance.32 Despite these trends, the Bush
Administration is reportedly planning an FY2004 budget request that will
substantially reduce the stability program for Russia (by as much as a third) and
begin a process leading to “graduation” from the aid program.
The United States continues to hold a very strong interest in Russia and the
outcome of events there. Whatever the accomplishments of the past ten years, U.S.

29 A Report Card ... , page. 3.
30 Toward the Common Good: Building a New U.S.-Russian Relationship, EastWest
Institute Bipartisan Task Force, Chairmen: David L. Boren, John C. Danforth, and Alan K.
Simpson, July 2001, p. 28-29.
31 Most recently, “Backsliding in Russia,” Washington Post, January 11, 2003, A20.
32 At the same time, some argue that the need to maintain Russian support for other U.S.
policies in Iraq and elsewhere has led the United States to overlook human rights and
democracy concerns held previously.

assistance may continue to play a role in those events. The nature and extent of that
role, however, is likely to be a continuing challenge to policymakers.