In a recent interview that went viral, Russian President Vladimir Putin repudiated NBC journalist Megyn Kelly, when she pressed him on the so-called “Russiagate” scandal.
“When they (the Americans) claim that some Russians interfered in the U.S. elections, we tell them: ‘but you are constantly interfering in our political life’,” an exasperated Putin said. “Do you know what they told us last time? They said, ‘Yes, we do interfere, but we are entitled to do so, because we are spreading democracy, and you are not, and so you cannot do it.’”
“Do you think this is a civilized and modern approach to international affairs?” Putin asked Kelly.
Kelly proceeded to press further: “But Russia did not interfere in America’s election?”
Putin denies such involvement, not only calling such accusations hypocritical, but impossible. Russia he says, has neither the means nor the desire to interfere in U.S. affairs. He points out that Russia Today, often accused of directing the “interference,” is far less powerful and influential internationally than U.S. media, and that international cyberspace infrastructure is nearly entirely controlled by the United States.
The United States, he says, interferes in Russian affairs “all the time.”
Is Putin right?
Harvard University, Post-Soviet Russia’s First ‘President’
As a former KBG agent who has called the collapse of the Soviet Union “the greatest geopolitical catastrophe of the century,” Putin would remember well how it was the United States that helped orchestrate the auctioning off of the once powerful Soviet Union’s assets, leading to a period of political and economic chaos.
The 1990s was, by all measures, a hard decade for Russia. All of the country’s key industries were auctioned off and privatized, transforming a primarily state-led economy into a neoliberal feast in only a few years. This process came to be known as “shock therapy,” and was none other than the perfected final form of the “Chicago boys” orchestrated privatization of Chile’s economy under military dictator, Augusto Pinochet in the 1970s.
Russia’s economy, and consequently the standard of living, took a sharp nosedive. Gross Domestic Product crashed, inflation soared, and inequality widened. Even in the declining years of the Soviet Union, the country had previously had among the narrowest wealth distribution brackets in the world.
But by the mid 1990s, the fledgling Russian Federation had one of the highest number of billionaires, according to the World Wealth and Income Database.
To this day, a majority of Russians view the collapse of the Soviet Union as more harmful than beneficial, according to national and international polls.
The “shock therapy” of the former Soviet bloc, and formation of the Russian federation was carried out under the administration of President Boris Yeltsin. Directing privatization however, was deputy prime minister for economic and financial policy, Anatoly Chubais, who The New York Times once referred to as “the most despised man in Russia.”
Cozy with the U.S. Clinton administration, Chubais was instrumental in giving control of Russia’s economic policy to the Harvard Institute for International Development (HIID), which had originally arisen out of the Harvard Center for International Affairs, founded by Henry Kissinger and known for its close relationship with the CIA and FBI. In the 1990s, the HIID consisted of an ideologically driven group of economists eager to apply their neoliberal credentials to what was once the world’s then largest socialist economy.
The sale of Russia was first devised in a villa outside Moscow in the final years of the Soviet Union, when Harvard economist and HIID director Jeffrey Sachs met with Chubais and a small pro-Yeltsin clique. The team devised their plan to eliminate nearly all price controls and subsidies, and privatize all key industries in a very short time-span.
Later, at Chubais’ urging following the dissolution of the Union, the U.S. Agency for International Development, or USAID, was tasked with the “reform” of the fledgling Federation’s economy, and delegated that authority to the HIID.
And so it came to be that a few Harvard professors, at the behest of USAID, became the architects of post-Soviet Russia.
The “Harvard Boys,” as they came to be known as (perhaps a play off of the “Chicago Boys” that privatized Chile), included “shock therapy” theorist Jeffrey Sachs, former World Bank Chief Economist Lawrence Summers, and Harvard economists Andrei Shleifer and Jonathan Hay.
Hay and Shleifer would later be fired and sued for using USAID money for personal gain. In spite of the scandal, Shleifer teaches economics at Harvard to this day.
Shock therapy proved to be a “shock” indeed. Commodity prices went up by 2,500 percent within a single year due to hyperinflation. Although the inflation stabled out (temporarily), the damage was done, and numerous people had been pushed into poverty, while an oligarch class was rising to wealth and power.
Chubais implemented a voucher program to alleviate the worst of privatization, originally conceived of in an academic paper by Shleifer. The program entailed providing a “voucher” of roughly 10,000 ruble shares in formerly public companies to each citizen. However, the fact that the most profitable industries, including oil, gas, and metal, were excluded from the program, paired with extremely high inflation, quickly led to the vouchers becoming worthless.
Financial scams involving the vouchers quickly further complicated the program, leading many to sell off their “shares” for practically nothing, getting perhaps a bottle of Vodka or some groceries in exchange.
Chubais and the HIID were able to operate by using foreign money to establish private, non-governmental organizations that could bypass parliament, most notably the Russian Privatization Center, which carried out government policy and directed privatization processes. It had the power and authority of a government agency, but was not accountable to parliament or officials, being run directly by Chubais and the Harvard Boys. Hundreds of millions of dollars flowed into Russia from USAID, the World Bank, and the European Union, to prop up the NGOs carrying out privatization.
Western aid money provided the funds to construct an oligarchy. Quoted in a 1998 report by The Nation, the USAID coordinator for the former Soviet Union, Richard Morningstar, admits this: “If we hadn’t been there to provide funding to Chubais, could we have won the battle to carry out privatization? Probably not.”
By the end of Yeltsin’s first term, Yeltsin’s popularity had plummeted to the single digits, and Chubais and his clan were implicated in a massive corruption scandal for awarding bribes and privileges and using funds for personal profit. Yeltsin in response, fired several officials, but still kept Chubais on, claiming his departure would “destabilize the situation.”
How the United States Won the 1996 Russian Elections
The U.S. government, the Harvard privatization gang, and their Russian allies faced a dilemma going into the 1996 election. After one term of Boris Yeltsin, the Russian people despised him. Four years of neoliberalism, and Russians vastly preferred none other than the Communist Party’s candidate, Gennady Zyuganov.
Intent on portraying the collapse of the Soviet Union as the triumph of “democracy,” Washington decided to turn a blind eye to corruption and unpopularity in order to ensure that their agenda succeeded in Russia.
The U.S. Secretary of the Treasury reportedly said quite candidly: “We hoped Yeltsin would get elected. We didn’t care at all about the election corruption. We wanted to pour money into his campaign.”
The task before them was enormous: to get Russia’s most unpopular president re-elected. They managed to succeed.
“A team of American political strategists … said this week that they served as Russian President Boris N. Yeltsin’s secret campaign weapon in his comeback win over a Communist challenger,” the LA Times wrote in 1996.
The July, 1996 edition of Time Magazine cover featured a smug looking Boris Yeltsin holding a U.S. flag, with the lead story titled “YANKS TO THE RESCUE: The Secret Story of How American Advisers Helped Yeltsin Win.”
According to the Time article, an early campaign memo by the team of U.S. advisors said: “Voters don’t approve of the job Yeltsin is doing, don’t think things will ever get any better and prefer the Communists’ approach. There exists only one very simple strategy for winning: first, becoming the only alternative to the Communists; and second, making the people see that the Communists must be stopped at all costs.”
Yeltsin’s daughter, Tatiana Dyachenko, who was working closely with the Americans, was initially skeptical that anti-communism would work in Russia, reportedly saying “with communism coming back all over Eastern Europe and with Stalin’s reputation rising here, a campaign based on anticommunism is wrong for us.”
However, a few more weeks of a failed positive campaign managed to convince Dyachenko that an American-style, negative, anti-communist campaign was the only hope for Yeltsin.
Yeltsin and Dyachenko teamed up with the Americans to form an efficient anti-communist propaganda machine, to make Yeltsin, as despised as he was, seem like the only option.
The Time article reports: “The Americans used their focus-group coordinator, Alexei Levinson, to determine what exactly Russians most feared about the Communists. Long lines, scarce food and renationalization of property were frequently cited, but mostly people worried about civil war. ‘That allowed us to move beyond simple Red bashing,’ says Shumate. ‘That’s why Yeltsin and his surrogates and our advertising all highlighted the possibility of unrest if Yeltsin lost … ‘Stick with Yeltsin and at least you’ll have calm’–that was the line we wanted to convey,” says Dresner. “So the drumbeat about unrest kept pounding right till the end of the run-off round, when the final TV spots were all about the Soviets’ repressive rule.'”
Russian television, according to Time, became an “arm of the Yeltsin campaign,” and began to broadcast an anti-communist and pro-Yeltsin message day in and day out. The idea that a communist victory would promote mass chaos, riots, and possibly a civil war was a favorite topic of the Yeltsin campaign during this time, broadcast on the now U.S.-influenced media. TV had become, according to Time, “almost exclusively a nonstop diet of past Soviet horrors”
The extent of the U.S.’ role in the campaign was massive. The Americans advised on advertising, on speeches, they assembled staged crowds of supporters and mandated that government employees attend rallies. They had Yeltsin send out mail to former Soviet Red Army veterans, thanking them for their service.
While the communists were constantly calling on Yeltsin to hold a public debate, on the American’s advice, Yeltsin refused to do so. According to an American adviser speaking to Time, Yeltsin “would have lost,” and such a debate could have been disasterous for their efforts.
While the Americans were operating undercover for the duration of the campaign, the U.S. interference was not a secret for long. The advisers quickly bragged about it to Time magazine, and the story was plastered all over front pages with pride. The United States and its media saw nothing wrong with such interference in foreign democratic processes
Time magazine concluded: “Democracy triumphed–and along with it came the tools of modern campaigns, including the trickery and slickery Americans know so well. If those tools are not always admirable, the result they helped achieve in Russia surely is.”
Fall and Rise
Yeltsin’s second term ended in flames. In August of 1998, the value of the Ruble crashed, leading to a default on domestic debt and a moratorium on foreign debt repayment. Inflation soared, reaching 84 percent.
Russian agriculture tanked, as the government could no longer pay its subsidies to the sector.
The crash was preceded by a year of scrambled attempts to stabilize the economy, with the International Monetary Fund and the World Bank all engineering reforms and pouring money into the economy.
Political support for the Yeltsin presidency crashed, with a massive coal miner strike further stopping the economy due to billions in unpaid wages.
Prior to the crash, the Harvard project was largely canceled by USAID after investigations revealed that Schleifer, Hay, and Schleifer’s wife, hedge fund manager Nancy Zimmerman, had used their positions to personally profit in the securities market. The U.S. government sued Harvard University in September, 2000, which was settled in 2005 for US$26.5 million.
The brief regime of Harvard-USAID rule was coming to a close.
An official during the Yeltsin years, who in the midst of the crash was appointed the Director of the Federal Security Service, and only a year later was appointed Prime Minister. After only four months into his term as Prime Minister, Yeltsin suddenly resigned, leaving Putin as acting president.
After winning Presidential elections the following year, Putin inherited a broken Russia, and immediately set on a course different from his predecessor. He set on a path of renationalization of key resources, beginning by taking a large portion of the oil industry under state control. This allowed for economic reconstruction, and laid the foundation for the powerful Russian federation that Putin still leads today.
The West had a vision for post-Soviet Russia: that it would be constructed in its own image, that it would be an economic playground for Western economists, and that it would be a state dependent on Western aid money. This dream of the U.S. and its allies has been shattered, in spite of their best efforts.