Carnegie Reporter, Vol. 3, No. 1 | Philanthropy in Russia: New Money Under Pressure, page 3

The Tide Turns
A real sea change became evident with the advent of the millennium, the end of the Yeltsin era and Vladimir Putin’s election as president in March 2000 (after his appointment by Yeltsin when the latter resigned in late 1999). The changes over the next three years were both quantitative and qualitative. Between about 2000 and 2003, corporate giving is estimated to have jumped from $200 million to $1.5 billion. Until the year 2000, 98 percent of all charitable giving by Russians was corporate. By 2001, Kortunov says, you also began to see an encouraging development directly connected to a rise in private giving: the separation of philanthropic activity from the goals and tasks of the business that supports it. Leading this field, he said were the activities of Dmitry Zimin and the Dynasty Foundation; Interros and its chairman Vladimir Potanin; and Yukos and its chair, Mikhail Khodorkovsky.

“Until the end of the ‘90s, you couldn’t talk about Russian-funded strategic philanthropy,” says Olga Alexeeva, director of the Russian CAF. “In other words, there wasn’t any ‘civilized’ philanthropy where you try to treat the disease and not the symptoms. Private philanthropy,” she notes, “was hidden in corporate philanthropy and most of it was what we refer to as ‘orphanages, grandmothers and churches,’” i.e., essentially charity. However, in the last four years, Russia has also seen the emergence of its first private and family foundations engaged in genuine, systematic philanthropic activities.

CAF reports that private Russian giving has risen from about $10 million to $100 million a year; the amount of money funneled to philanthropic and charitable activities through CAF alone has grown from approximately four million pounds sterling to ten million. (Many Russian donors, private and corporate, prefer to have grant competitions administered by outside organizations, rather than keep large operating staffs; CAF, for instance, has run grant programs for Potanin’s foundation, as well as for Yukos and Khodorkovsky’s Open Russia.) Unlike much of previous private giving in Russia, these foundations are generally grantmaking, and follow a more transparent, Western-style model, using publicly announced application processes, grant competitions and expert juries to determine grantees, in addition to funding solicited projects and operating programs.

These institutions are fledgling and their numbers small: in all, there are six private and family foundations established by some of Russia’s wealthiest individuals. However, the numbers are growing, and among the 100 wealthiest individuals in Russia, many were beginning to structure or institutionalize their private giving by 2003.

The Rise and Fall of Yukos
The oil giant, Yukos, has been one of the indisputable leaders in corporate philanthropy. Like most large companies, it has focused its projects largely on the geographical areas of the company’s holdings, but it has instituted innovative, competitive grant programs for a variety of social and cultural services, many of which are featured on its web site, www.yukos.com. In 2001, Mikhail Borisovich Khodorkovsky, Yukos’ president, along with several other major Yukos shareholders, established the Open Russia Foundation, financed from their private wealth. Since then, Khodorkovsky’s spending on philanthropic programs, grants and activities has averaged $15 million a year, and according to Irina Yasina, director of Open Russia, was intended to reach as much as $30 million in 2004.

From the outset, Open Russia’s priorities were unrelated to Yukos’ corporate profile. The goal of the foundation, as articulated in its mission statement, is to “help create the conditions… in which people will prefer to work and earn a living in Russia, facilitating the country’s emergence as one of the leading world economies. We are completely certain that this is possible if the country continues moving along the road of democratic reforms, strengthening civil society and stimulating entrepreneurial spirit.”

As the very name of the foundation indicates, it was modeled on the Open Society Institute. Indeed, many of the programs financed by Open Russia are in one way or another analogous to programs initiated by OSI. The Internet Education Federation (originated by Yukos), for example, creates centers around the country to train school teachers in Internet use; Open Russia, in partnership with the Ministry of Culture and Mass Communications and professional library associations, supports the modernization of rural libraries with computer equipment, Internet access and training, as well as contemporary reference materials on economics, management and business. Like the Potanin foundation, Open Russia has initiatives targeted at young people such as the “New Civilization” program, which exposes them to the values and practices of democracy, civil society, and market economics through a learning game called “Newlandia.” In addition to these sorts of operating programs, Open Russia supports the previously established “Russian Booker Prize” for literature and the prestigious Regional Tefi awards for television (a sort of Russian “Emmy”).

Two of the foundation’s five priorities are directly linked to civil society issues: “assisting in the dissemination of objective and truthful information about the activities of Russian government and social institutions” and “continual monitoring and public expertise of Russian legislation.” To this end, the foundation has worked with established organizations like the Glasnost Defense Foundation to create a mass media law specialty in Russian law schools; it has given grants to continue Internews Russia’s regional television journalist training programs; it co-funds and helped to expand the seminars, conferences and training programs of the ten-year-old Moscow School of Political Research; and supports a program that analyzes all new legislative initiatives from the point of view of civil society and democratic values. It has also been one of the most transparently run foundations, publishing information on grant awards, competition funds, administrative costs and the like.

Open Russia has been virtually the only Russian-funded organization to give money to human rights organizations, many of which not only have activist monitoring functions, but conduct important research and educational programs as well. For example: Memorial, founded in 1989 to support former political prisoners and their rehabilitation, has developed an extraordinary program for secondary school students (ages 14-18) called “People in History: 20th Century Russia.” Young people from cities, towns and villages around the country conduct interviews with local sources and do original research in local archives, producing papers—often related to their individual family history—on various aspects of Russia’s forgotten or unknown 20th century history. Several hundred papers are usually entered; the forty best are chosen by a jury of eminent writers and historians, are published, and their authors awarded prizes at a ceremony in Moscow. Likewise, the teachers who stand behind these students receive special honors from the jury.

Now in its fifth year, “People in History” was originally funded largely by the Ford Foundation, the Heinrich Böll Foundation and other foreign sources. For the last three years, the program has been co-sponsored by Open Russia as well. It has produced several volumes of serious work that not only bear witness to the history the Soviet regime sought to erase, but to the emergence of a new generation of dedicated young Russians who seek the truth of their nation’s past, no matter how painful, in order that the tragedies they have chronicled not be repeated.

But Open Russia has gone further than simply supporting pre-existing programs. In February 2004, together with the human rights organizations Memorial and the Moscow Helsinki Group, Alexander Yakovlev’s Democracy Foundation, and the Russian Regions Foundation, Open Russia established the Public Verdict Foundation, which aids victims of government or law enforcement agency abuse and publicizes such abuse. On July 1, 2004, Open Russia, Public Verdict and the Regional Press Institute inaugurated a “human rights hot line” program, which will allow citizens in all seven federal districts of Russia to receive brief legal consultations by cell phone around the clock. Violations will be published online and in the press in order to educate the public about its rights and remedies under Russian law.

However, in 2003, the Russian prosecutor’s office began investigating Yukos on tax evasion charges; simultaneous investigations of Khodorkovsky himself also began, in connection with the 1994 acquisition of another company. In October of last year, Khodorkovsky was arrested in a dramatic pre-dawn seizure of his private plane, and has been in pre-trial detention in a Moscow prison since then. (In Russia, the prosecutor may make arrests during an investigation, before any formal charges are brought.) His trial was underway as this article went to press. Other major Yukos shareholders are also under investigation; one, Platon Lebedev, has been in prison for over a year.

Khodorkovsky’s arrest sent shock waves through the Russian business and foreign investor community and the world of Russian private and corporate philanthropy. The business community has been assured on many occasions, by both Putin and members of his administration, that the results of privatization would not be revisited, a position hard to reconcile with government actions taken against Khodorkovsky and Yukos. In early July, Khodorkovsky proposed that Yukos’ majority stockholders turn over their 44 percent controlling interest in the company to the government in order to stave off bankruptcy—tax arrears cannot be paid because the government has frozen Yukos’ accounts—but the presidential administration has so far been unresponsive to such proposals. As of this writing, Yukos, with its stock price plummeting and its assets threatened, is in danger of going bankrupt and Khodorkovsky’s future is uncertain.

Next page: The lack of tax deduction is a serious obstacle for small and mid-size companies wishing to become involved in corporate philanthropy.

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