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12 December, 2016

Chubais – The next neoliberal head to roll in Russia?

I venture that few outside the Russian Federation will even know the name of Anatoly Chubais, today the CEO of a Russian high-tech company called Rusnano. Following the high-profile November 15 arrest of Prime Minister Dmitry Medvedev’s Minister of Economics, Alexei Ulyukaev, on charges of accepting at least $2 million in bribes in a state privatization involving Rosneft and Bashneft energy companies, the spotlight has turned to the company of Anatoly Chubais, Boris Yeltsin’s 1990s privatization czar, today CEO of state-owned Rusnano. If charges are formally brought against Chubais–undeniably one of the most hated of the Yeltsin-era kleptocrat “reformers” who worked with the CIA during the 1990’s to plunder Russian state assets worth hundreds of billions for just pennies – it will signal that Putin feels in a strong enough position to purge the pro-free market liberal mafia that still holds a lock grip on the development of the Russian economy.

by F. William Engdahl for the Saker blog

On 16 November, the day after the dramatic arrest of Ulyukaev, state prosecutors and police raided the offices of Chubias’ Rusnano. Notable about the reports of the prosecutors’ questioning Chubais and other top officers at Rusnano, is the fact that several have fled Russia in recent months to avoid prosecution. To the present, Chubais remains, and vehemently claims innocence.

In my view, there is vastly more at stake here than the innocence or guilt of Chubais. This move, if combined with the arrest of Ulyukaev, signals a major cleanup of corrupt elements who, beginning even before 1991, organized to sell Russia to the CIA and Western speculators like George Soros.

Some history that has generally been blacked out in the West about the true role of Anatoly Chubais and the Yeltsin Presidency are instructive to also understand the irrational rage of Washington and US banks and oligarchs directed at Putin and at everything he does to re-establish Russian sovereignty and stability.

Part 2 - Russia’s Shock Therapy, Harvard and CIA

As part of the dissolution agreement, Russia took title to all state assets of the former USSR, now non-existent, as well as assuming all foreign debts of the USSR. Yeltsin was told to make a 32-year-old friend of George Soros named Yegor Gaidar his Economics Czar. Gaidar, who formally was made Finance Minister of the new Russian Federation in February 1992, made another young economist, Anatoly Chubais, his privatization head.

Gaidar was taken to Poland to study the Polish “Shock Therapy” model, the process that had been introduced by George Soros’ young Harvard economist protégé, Jeffrey Sachs. Back in Moscow, Yegor Gaidar, using the Polish example of Sachs, convinced Yeltsin to “let prices rise to increase supply and to scrap trade barriers so that foreign commodities could begin to fill store shelves.

It was a lie. The Soviet economy was self-sufficient in everything except perhaps bananas and coffee. The shops were full until Yeltsin announced in November 1991 the exact date when price controls were to be lifted, December 31 of that year. Shop-owners hid their goods waiting for the announced profit bonanza of price decontrol. Shops were suddenly empty. Within a week of the Yeltsin speech, rationing was imposed on Muscovites.

Gaidar was instructed by the US Treasury from the new Clinton Administration that took office in January 1993. The key person at Treasury for the ensuing Gaidar-Chubais looting of Yeltsin’s Russia was a former Harvard economist named Lawrence Summers. Summers used the powerful influence of the US Treasury Department to get International Monetary Fund dollars to the cash-hungry Yeltsin government, telling Yeltsin and Gaidar that Russia must open itself to unrestricted imports if they wanted to receive IMF and other Western loans.

Gaidar soon delivered a policy that served the demands of Washington and of the KGB’s new banking oligarchs around Mikhail Khodorkovsky’s Menatep Bank and others. Under the Gaidar decrees, Russian manufacturing was to go bankrupt in the face of unrestricted foreign competition, but domestic banking, such as Menatep, controlled by the rogue KGB generals and the CIA-tied Western banks, was to be protected from competition.

After the November 1992 US election victory of Bill Clinton, Larry Summers, the new US Treasury Deputy Secretary responsible for Russia “reforms,” also a former Harvard economics professor, brought a group of his former Harvard colleagues including George Soros’s Polish Shock Therapy adviser, Jeffrey Sachs, and economics professor, Andrei Shleifer, to Moscow under the auspices of their Harvard Institute for International Development (HIID). The Sachs-Schleifer-Summers triangle essentially orchestrated all key aspects in the implementation of Gaidar-Chubais “shock therapy” in the early 1990’s Yeltsin years.

In 1991, Summers had been chief economist at the World Bank, where Summers named his former Harvard student, Schleifer, a Russian-American, as World Bank “adviser” to the Yeltsin government. Soon after Summers became Deputy Treasury Secretary in the Clinton Administration in 1993, Schleifer would join Jeffrey Sachs’ Harvard Institute for International Development (HIID) as the head of their Moscow operations.

HIID was cleverly chosen by Summers as the key advisory agency to work with Gaidar and Chubais to organize the colossal looting known as Russian privatization. Summers, from his Washington Treasury office, named all key actors in the Chubais privatization rape of Russia in the early 1990’s. They were what could be called a Harvard mafia. Summers hired David Lipton from Harvard, a former consulting partner of Jeffrey D. Sachs & Associates, to be his Deputy Assistant Treasury Secretary for Eastern Europe and the Former Soviet Union. Sachs was named Director of HIID in 1995. His HIID received USAID grants for the institute’s “work” in Russia.

The USAID was known as a CIA front agency, keeping the CIA role of regime change and such hidden behind the veil of a charitable US Government agency spending for economic development. It was a key money link for the directing of every step of the Chubais privatization operations through the Summers-Sachs Harvard Boys.

Harvard was a clever choice to be the CIA hands-on operator for the Chubais privatization. CIA monies via a Harvard University front gave an aura of impartial academic respectability and of plausible deniability that the CIA was responsible. Shleifer, a Russian-born émigré, and protégé of Summers, was already a tenured professor of economics at Harvard in his early 30s. He became Sachs’ head of HIID’s Russia project, based in Moscow. Then Summers brought in yet another Harvard Boy, another former World Bank consultant for Summers named Jonathan Hay. In 1991, while at Harvard Law School, Hay had also become a senior legal adviser to the Chubais GKI state privatization agency. In the following year 1992, Hay was made HIID’s general director in Moscow. Hay assumed vast powers over contractors, policies and program specifics. He not only controlled access to the Chubais circle but was its spokesperson.

Both Jonathan Hay and Andrei Schleifer were identified later as CIA agents.

Vladimir Putin in an April 2013 annual dialogue with Russian citizens, though he discreetly did not name the names, referenced Hay and Schleifer as identified CIA agents working with Chubais and Gaidar in the criminal Russian privatization. Putin said: “We learned today that officers of the United States’ CIA operated as consultants to Anatoly Chubais. But it is even funnier that upon returning to the US, they were prosecuted for violating their country’s laws and illegally enriching themselves in the course of privatization in the Russian Federation.

In 2006 US District Court in Boston had fined Hay and Schleifer them personally $2 million and Harvard University $26.5 million for fraud and embezzlement of government funds for private enrichment. That same year 2006 Summers–who by then had become Harvard President was forced to resign on revelation of his role in the Moscow HIID scandals. Berofr he had managed to get Schleifer an endowed Harvard Professor chair. Hay later resurfaced as founder of the Ukraine branch of the Polish “free market” Centre for Social and Economic Research (CASE) during the CIA coup d’etat in Kiev in 2014.

The criminal Russian privatization of invaluable state assets that Hay and Schielfer created together with Anatoly Chubais and Yegor Gaidar after 1992 was done to the last detail by Chubais in cooperation with his new American advisers. When the announcement of the proposed “vouchers-for-shares” privatization received cold response from Russians, already reeling from the economic shock of price liberalization, Hay and Schleifer arranged for slick US Public Relations experts from Burston-Marsteller and the Sawyer Miller Group to devise an ad campaign to be aired on the TV channels of the newly-created Russian oligarchs to convince Russians to accept the program.

Chubais as head of the state GKI state property agency issued 150 million “vouchers” to each and every citizen. In turn, they could invest their voucher in a small share in a Russian privatized state company or shop, or sell it at an established market price pegged to the US dollar, of course. As most Russians were then concerned when if ever the next pension payment would be paid, or where jobs could be found in the collapsing industrial economy that was a predictable result of the Sachs-Harvard-Chubais Shock Therapy, millions simply sold their vouchers for some cash. It was an insane idea if Chubais and Gaidar cared about the economic future of the Russian Federation. It was brilliant if they wanted to create billionaire dollar oligarchs, which is just what they did.

Vouchers could be bought or sold on every street corner in Russia at the start in June 1992. They were traded at the new unregulated Moscow commodity exchanges set up by Harvard’s Jonathan Hay with the USAID monies channeled via HIID. Unregulated (deliberately a decision of Gaidar, Chubais and their Harvard CIA advisers) voucher investment funds sprung up everywhere to gather citizens’ vouchers in the millions. The ruble was domestically made convertible to the US dollar on the advice of the Sachs HIID team. In the twenty months the voucher-for-shares program lasted, the price swung from a high of $20 to a low of $4 a voucher. As they were made freely tradeable, it was ripe for the billionaire oligarchs around Yeltsin who already had huge cash hoardes to buy them up, just what they did.

Nearly six hundred voucher funds obtained 45 million vouchers. The largest, calling itself First Voucher, collected 4 million vouchers.

At the stated price for the vouchers, Chubais and his Harvard Boys had valued the entire Russian economy–which included the world’s largest nickel company, some of the world’s largest oil and gas companies including Sibneft and Gazprom, RUSAL, the world’s largest aluminum company–at a total that was less than the market value of the US General Electric company. The face value of each voucher was 10,000 rubles which Chubais promoted by lying to the public, stating one voucher would be sufficient to buy two or even three Volga cars.

Because they had been allowed by the Bush CIA networks that controlled the financial side of the Yeltsin mafia to be the first Russians with big money, the select Yeltsin oligarchs were able to buy up hundreds of thousands of vouchers and redeem them for entire industries, which would later be stripped and sold. Although they were supposedly acting on behalf of the state, the bank auctioneers of oligarch-owned banks rigged the process. This was how Bank Menatep’s Mikhail Khodorkovsky got a 78 percent share of ownership in Yukos, worth about $5 billion, for a mere $310 million. It was how Boris Berezovsky got Sibneft, another oil giant, worth $3 billion, for about $100 million.

Using his connections, Khodorkovsky was able to purchase several factories in investment tenders, and large blocks of shares in timber, titanium, pipe, and copper smelting. In total, he gained control of more than one hundred companies before getting Yukos. In the auctions, based on the number of total vouchers that were circulated, the entire Russian industrial system, mines, oil companies, factories, had a total value of under $12 billion.

Under pressure from Parliament, Chubais agreed to prohibit voucher sale of state companies to foreign investors. There were, however, two notable exceptions Chubais made. In 1995, in the wake of the Yeltsin Referendum victory financed by Soros, the Harvard Management Company (HMC), which invests the university’s large endowment, and George Soros, who brought Harvard’s Sachs to Chubais, were the only foreign entities allowed to participate. Both HMC and Soros became major shareholders in Novolipetsk, Russia’s second-largest steel mill, and Sidanko Oil, with reserves exceeding those of Mobil. HMC and Soros also invested in Russia’s high-yielding, IMF-subsidized domestic GKO bond market. And in 1997 he bought 24% of Sviazinvest, the telecommunications giant, together with Uneximbank’s Vladimir Potanin, the nominal spokesman of the new Russian oligarchs. At one point Soros stated he had invested $2.5 billion in such Russian assets for the dirt-cheap prices Chubais had deliberately set.

Source and references:


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