A network of high-profile, internationally-funded NGOs (specifically the Russian Privatization Center and its offshoots) were instrumental in the privatization fraud that precipitated the 1992-96 economic crash. The GDP loss to Russia (40%) was the economic equivalent of California, Texas, Florida, New Jersey and New York seceding from the Union in a five-year period. International donors (including United States Agency for International Development USAID), used this network to contribute to First Deputy Prime Minister Anatoly Chubais’ political activities in the 1990s.

In addition, the vast majority of domestic Russian NGOs are used for criminal purposes, like money-laundering.

What does the law actually say?

The bill “Amending Some Legislative Acts of the Russian Federation” requires public associations to register with the Russian government. NGOs must report their activities and allow yearly financial audits. The standards for registration and reporting are higher for foreign NGOs- and they are not permitted in “closed” territories, like Chechnya.

The bill protects the right of foreign citizens to join NGOs, and forbids discrimination based on membership. The law also bars the state from meddling in public groups; as long as the groups don’t help terrorists, rouse ethnic hatred or offend public decency.

What is written in the Russian NGO law is in some ways less strict than the American laws about NGO registration (Russia doesn’t bar exclusively religious, or scientific research-based groups). But to understand how the law will be implemented, it is necessary to understand what motivated it.

The Great Grab

After the collapse of the Soviet Union in 1989, Westerners and Russians saw the chance to form a “civil society” in Russia- but they needed to act quickly, while domestic government institutions were malleable. Hundreds of millions of dollars in aid for this was managed by the Harvard Institute for International Development (HIID). HIID worked closely with Anatoly Chubais, who along with a few cronies, effectively controlled how most of this money was spent in Russia.

Through their flagship NGO, the “Russia Privatization Center,” Chubais/Harvard team members set up a network of local NGOs throughout Russia that would bankroll local politicians who supported Chubais. Aid money was also siphoned off for private business interests. This type of pseudo- “NGO” was used by many rich Russians to launder money or evade taxes. Yuri Mamchur, a Seattle-based Russia analyst, estimates that less than 1% of the nearly 500,000 Russian NGOs do not serve a criminal purpose.

Chubais used his aid-fueled political clout to promote the “shock therapy” privatization program that was made famous by Harvard professor Jeffery Sachs. The shock therapy plan was never popular; it was pushed through by presidential decrees- which only Chubais had the power to approve, barring direct interference from Yeltsin. The Russian Parliament and legal institutions were completely sidelined. Politicized aid spending reinforced a system of clannish patronism, to the point where functioning government institutions were circumvented and undermined.

After seven years, Russia is on its way to economic recovery, and is beginning to deal with the corruption problems that were exacerbated by foreign aid. But the fiasco raised serious concerns in Russia about what, exactly, foreign governments and private institutions were trying to accomplish with “foreign aid.” Russian government officials saw foreign intervention as a deliberate attempt to weaken their power and Russian national integrity.

High level officials in China were always skeptical of the “shock therapy” method of reforming the Russian economy- they thought the sudden devolution of economic power from the central government was foolish. The events of the 1990s confirmed their suspicions. Beijing thinks that low-level NGO staff members have a genuine desire to help the Chinese people, but distrusts some of the higher-ups’ motives.

China’s fears have only been heightened by recent American involvement in ‘regime change’ in Eastern Europe and Central Asia.

“Democracy” gets a helping hand

US involvement in the “color revolutions” of Central Asia and Eastern Europe is interpreted by Russia and China as direct threat to their sovereignty. This is because these “revolutions” undermine governments that have traditional ties to Russia and China, and the resulting power vacuum is often filled by organized crime. The fallout is chaos along Russian and Chinese borders.

The Chinese government claims that American NGOs, the International Republican Institute (Republican Party affiliated), National Democratic Institute (Democratic Party Affiliated), Freedom House and Open Society Institute, gave media and material support to the “color revolutions.” Given that these NGOs boards are composed of former US foreign secretaries and deputy secretaries of states, current American politicians and venture capitalists their motives are viewed with suspicion.

Western involvement in color-revolutions has distinctive hallmarks. To begin, a small group of young, English-speaking “reformers” with free-market sympathies organize meetings for adolescents. The youngsters are provided with flashy advertising and a “manifesto”- that promotes non-violent revolution in the style of the Albert Einstein Institution. Media reports of discrimination exacerbate ethnic divisions within these countries. “Reformers” have a cadre of consultants and academics in the West that can explain their cause effectively. Usually, the crisis is precipitated by an unfavorable result in rigged elections, where Western-funded exit polls provide the key evidence for fraud. After the leader of the “reformers” is instated, Western governments hail the success of “the people” or a “democratic dream.”

The three “color revolutions” in the Ukraine, Kyrgyzstan and Georgia, have not produced a government that is significantly more “democratic” or less corrupt than the preceding ones. Despite the results of the first three, activists with a US-based website are pushing for a fourth “denim” revolution in Belarus. The US government and its European allies are giving the activists their support.

What makes the Russians and Chinese nervous, is that they always see the same result: increased Western influence in government, lucrative investment deals for Western-aligned elites and strained ties with Russia and China. They see no improvement in corruption or the rule of law.

How will the Chinese respond to the NGO “ threat”?

It will be easier for the Chinese government to deal with “subversive” NGOs than it was for the Russians, because elites in China do not yet rely on NGOs as part of their power structure and the Chinese people still see Beijing as their main source of support. Beijing’s offensive will squeeze foreign funding and talent out of the Chinese NGO community through targeted registration, auditing and reporting requirements. Organizations with foreign government funding will eventually be ruled out altogether.

Right now, Beijing’s NGO laws have many legal loopholes. In the future, it will be clearer what NGOs need to do to register, and these laws will be enforced. The new registration process will be arduous, and NGOs will still require sponsorship from a government agency. The difficulty in finding government sponsors will be a home-team advantage. Beijing will use the lag time to establish government-friendly institutions to meet the needs it deems are worth meeting. In fact, this is already happening as Government-organized NGOs (GONGOs) are becoming more prominent throughout China.

The government will not be rash; they will ensure that foreign businesses, and their tax base, will not suffer under any new NGO laws. However, NGOs that exploited loopholes to register as corporations, or US businesses that interfere in politics may be affected. Beijing will present to the world a comprehensive legal framework for “fairly and efficiently” dealing with NGOs that will be superficially convincing.

Beijing will use the Chinese media to encourage the public to be skeptical about NGOs: the ground for this has already been laid with the embezzlement scandals surrounding the China Youth Development Foundation and its foreign/private-funded offshoot “Project Hope”. The government will use fighting fraud as an excuse for implementing restrictive measures on foreign funding.

Beijing will impose limitations on well-known subversion techniques. For instance, there will be a tightening of public decency regulation (no sexually explicit Rolling Stones songs, a la Howard Perlmutter and social destabilization techniques). “Hate speech” legislation will be passed- with the aim of silencing people who ferment ethnic tensions in the border provinces. “Minority rights” promoters will loose media platforms.

Endgame

The Russians, and in the future, the Chinese, will act to protect their personal power and national integrity in the face of what they see as American aggression. The American public should consider the fallout from courting the hostility of Russia and China. We are spreading ourselves very thin for the “War on Terror” - can we afford to alienate everyone?

Jeremy Whitcombe is an independent NY-based analyst.