Carnegie Reporter, Vol. 3, No. 1 | Philanthropy in Russia: New Money Under Pressure, page 2 (low-bandwidth)

The Foreign Connection
The first foreign philanthropic foundation in Russia was financier George Soros’ Cultural Initiative (CI), which opened in 1987, when the first breezes of perestroika were just beginning to be felt. CI helped support publication of many previously unpublished books and translations, and provided funds for Soviet academics, writers, and scientists—long isolated from their colleagues in the West—to travel abroad for the first time. However, most of the employees were Russian and the foundation in its initial form was subject to many of the same ills that afflicted early Russian charitable efforts; additionally, it bore the burden of being the first such foreign presence in the Soviet Union, and its activities were closely monitored by a suspicious Soviet government. Soros eventually closed CI, and opened two new foundations, The Soros Science Foundation, which offered support for individual scientists and peer-review, awarded grants in the fundamental sciences. Later, in the mid-‘90s, a Russian office of the Open Society Institute (OSI) was opened; it supported everything from civil society development, education, textbook, legal and tax reform to Russian literary “thick journals” and contemporary art. In the nearly 15 years Soros was active in Russia, his foundations funded well over $300 million in projects.

Hard on the heels of the Soviet Union’s collapse, many other foreign organizations began to arrive to assist Russia’s “transition to democracy.” Government aid in various forms and amounts was quickly forthcoming from the U.S., European countries and the European Union (though never on the “Marshall Plan” level envisaged by many intellectuals and Yeltsin’s first government). Along with governmental agencies, other Western philanthropies began to make grants for projects in Russia or open offices with grant-making programs: notable among them, in addition to OSI, were the Heinrich Böll Foundation, the MacArthur Foundation, the British Charities Aid Foundation, the Ford Foundation, the Charles Stewart Mott Foundation and the Howard Hughes Medical Foundation. The Eurasia Foundation, a U.S. government-private sector partnership was created in Washington in 1992 expressly to “promote the advancement of democratic institutions and private enterprise” in Russia and other post-Soviet countries. Over the last ten years, the Eurasia Foundation has supported projects in civil society, small business and media (among other areas) with some $225 million in USAID funding, enhanced by more than $58 million from other private and institutional sources. And in 2000, Carnegie Corporation of New York began funding Centers for Advanced Study and Education (CASEs), aimed at revitalizing higher education in the former Soviet Union through the establishment of university-based centers dedicated to the promotion of scholarship, publications, academic mobility, international networking and access to resources.

Many of these foundations funded, and still fund, an extraordinary range of projects within Russia, often with a strong emphasis on the development of the non-governmental sector and the institutions of civil society. Furthermore, smaller charity organizations with specific profiles, such as Alcoholics Anonymous or the British charity, Downside Up, which works with families of Down’s Syndrome children in order to avoid institutionalization, reached out to their Russian counterparts and launched projects in Russia. Likewise, foreign businesses such as McDonald’s, Coca-Cola and Philip Morris brought their corporate sponsorship practices with them to Russia.

Suffice it to say that the history of foreign charitable, nonprofit, and philanthropic organizations in Russia to date would fill several volumes. Though it far exceeds the reach of any one article, it is important to keep in mind. Foreign foundations—particularly private ones—provided both potential grantees and would-be Russian philanthropists with a model of philanthropic activity. It involved a transparent, egalitarian grantmaking process, in addition to financing hundreds of millions of dollars of projects over the first decade of post-Soviet Russia. The staff of these organizations, as well as the juries constituted to evaluate the grant applications, consisted largely of Russian citizens. Thus, the foreign foundations served as a training ground for future Russian-funded philanthropic activity. Grant-makers and grantees alike gained valuable experience—both philosophical and practical—in their contacts with foreign philanthropy.

Concurrently, with the influx of foreign institutions, the controversial era of privatization began. In the ‘90s, Russian business exploded beyond the limits of perestroika-period cooperatives—essentially small businesses—into banks, advertising, media outlets (broadcast and print), publishing, utilities and large industrial and natural-resource conglomerates. Many of these were created by selling off huge state-era enterprises to private individuals, particularly people who had begun their careers in the Komsomol, the Communist Youth League, or elite Soviet institutions—usually for a small percentage of their actual (or potential) worth.

The Yeltsin era created a class of so-called “oligarchs,” whose small numbers were far outweighed by the political influence they wielded and wealth they controlled. According to figures collected by the Russian office of Britain’s Charities Aid Foundation, in 2003, Russia had 36 billionaires (whose capital represented 24 percent of the country’s GDP), 33 of whom lived in Moscow. Furthermore, of the 100 richest people in Russia, only 34 built their own business; the others accumulated their wealth as a result of their access to the legacy of the Soviet Union—mostly oil and metal production. Details of the Byzantine political and economic deals—some would call them mafia wars—of Russia’s privatization period have been emerging in recent years in books and articles on the Yeltsin era.

The oligarchs have been blamed wholesale for many of the country’s current ills, though the story is far more complex than many of the black-and-white, good guy/bad guy depictions of them would allow. What is indisputable, however, is that with the rise of the “oligarchs,” and wealthy individuals in less visible, but highly profitable Russian businesses (for instance, the telecom industry), the scale and focus of Russian charitable activity changed. Russian philanthropy, of a sort closer to the American use of the word, began to emerge.

The Charities Aid Foundation estimates that from about early 1992 (when prices were decontrolled and privatization began) to the end of 1993, corporate giving rose tenfold, from about $1 million U.S., to $10 million. Private donations, however, were still minimal—in the thousands of dollars. The first, tentative Russian steps into charitable activity tended to be along the lines of the “patron of the arts” or “sponsor” model. Businesses often sought to use “charity,” variously conceived, as a form of advertising—getting their name into the press, “buying” the goodwill of important people, sponsoring visible literary and artistic prizes, or special events for everyone’s favorites—orphanages and emergency medical aid to children. These acts were usually isolated, one-time affairs, and entirely lacking in any systematic philosophical approach.

Then, between 1993 and 1995, individual giving soared from a few thousands of dollars to approximately $1 million. Over the same period, corporate giving again rose tenfold, to approximately $100 million. By 1998, over 75 percent of Russian companies engaged in some form of charitable giving. Giving on the part of both companies and individuals suffered a major setback after the financial crisis of autumn 1998; by 2000, however, it had not only recovered ground, but registered another tenfold increase. In that year, CAF estimates that corporate giving reached about $200 million dollars, while contributions by individuals rose to approximately $10 million nationwide. Furthermore, these gains were made despite the fact that the Russian tax code offers no tax deductions for donations to non-governmental organizations, and grants received by organizations and individuals are taxed as income.

Civil society was growing as well, though beleaguered by government regulation and constant re-registration requirements that often amounted to political harassment. In 1993 there were approximately 35,000 registered nongovernmental organizations (NGOs); by 2003, the numbers had risen to over 350,000. While many of these organizations exist only on paper, there are tens of thousands of genuine NGOs active in all areas of civil society and concerned with issues ranging from public health, child welfare, juvenile delinquency, AIDS education, science and humanities education, culture and the arts, to media training and monitoring, human rights, military reform, prison reform, environmental issues, monitoring of government activities, refugee rights, and social assistance of various kinds.

Corporate philanthropy, on the other hand, has tended to be dominated by the “company town” model, notes Andrei Kortunov, Eurasia’s vice-president for Russia and director of the Corporation’s CASE program, where “business takes on part of the work of the state.” This is a comfortable and familiar model for many in Russia, and certainly for the state. After all, under Soviet rule, state enterprises usually provided not only employment, but cradle to grave care: housing, medical care, child care, elementary and secondary schooling, recreational and vacation facilities for employees, etc. And in the post-Soviet era the state has often been unable to pay even subsistence wages on time, much less attend to other social needs. Companies have stepped in to at least partly fill the vacuum, in different ways and under varying degrees of political pressure from Moscow. The leaders in this area, says Kortunov, have been large enterprises and conglomerates like Interros, Yukos, Severstal, Lukoil and SUAL (Siberian-Ural Aluminum).

Next page: In the last four years, Russia has seen the emergence of its first private and family foundations engaged in genuine, systematic philanthropic activities.

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