#14 - JRL 7217
Washington Post
June 10, 2003
Soros's Mission In Russia Ends, $1 Billion Later
By Peter Baker
Washington Post Foreign Service

MOSCOW -- He first came to the Soviet Union in the late 1980s and found a society beginning a long, dismal spiral of deterioration. Armed with one of the world's great fortunes, he took it upon himself to rescue scientists and scholars, then tried to midwife the birth of democratic institutions in a place where they were a foreign concept.

Now more than 15 years and $1 billion later, George Soros has concluded that his mission is over. With the government in Moscow stabilized and a new generation of homegrown philanthropists emerging, the international financier has decided to leave Russia to the Russians and effectively withdraw from a country that has absorbed much of his time and energy.

"I'm basically closing it down in its present form," Soros said of his foundation in an interview this weekend. "I've spent a very large amount of money here and a lot of it was really money where I was substituting for the state. I don't think that's appropriate anymore. Russia as a state is reestablished and doesn't need my subsidy."

He will remain involved in small projects. But Soros's exit as a major benefactor is a milestone in Russia's development since the collapse of Soviet Union in 1991. No other private initiative from the West has had such influence in shaping the new Russia as his Open Society Institute. "The Soros foundation was instrumental in the development of nonprofit organizations in Russia," said Olga Alexeeva, director of the Moscow office of the Charities Aid Foundation, a British organization. "I can't compare anyone else with Soros and that will leave a significant gap."

In some parts of the world, Soros, 72, is a mistrusted figure. The Hungarian immigrant made a fortune on Wall Street, and in 1992 was dubbed the "man who broke the Bank of England" after engaging in a series of speculative transactions that helped devalue the pound. He has been accused of triggering the Asian economic crisis that began in 1997. Last year he was convicted of insider trading in France and fined $2.2 million, a ruling he dismissed as "a queer decision" and promised to appeal.

But to Russians building a new nation, he has been the godfather of change. In the early days, he sponsored programs that gave grants to tens of thousands of Russian scientists whose state employers were suddenly unable to pay their salaries. He introduced the Internet to provincial Russian universities, supported independent media, funded artists and writers, commissioned textbooks that took a more honest view of history, and provided clean needles for drug users to stem the spread of AIDS.

Even as he gave away funds in Russia, he also was trying to make money here. Just months after denouncing the "robber capitalism" developing in Russia in 1997, he joined with one of its biggest business leaders, Vladimir Potanin, in a consortium to buy a 25 percent share of the Svyazinvest telecommunications company for $1.9 billion. He lost $2 billion a year later in the financial crash of August 1998.

Russia today bears little resemblance to the country Soros encountered in 1988. Under President Vladimir Putin, the government has balanced its books, shed a lot of debt and built a growing economy. At least some of the "robber capitalists" Soros condemned have begun opening their books for inspection and starting their own charitable activities.

"It's a big change," Soros said in his hotel room during a visit to Moscow. "I came here to help in the transition from a closed to an open society when the Soviet system collapsed. . . . The transition is over. Fifteen years is enough for transition." While much more needs to be done, he said, it is time for the Russians to do it themselves.

It's a mark of the change that one of the corporate leaders who emerged during that transition now eclipses Soros in wealth. Mikhail Khodorkovsky, the 39-year-old chairman of Yukos, Russia's largest oil company, is worth $8 billion, making him the 26th richest person in the world, according to Forbes magazine, compared to Soros's $7 billion and 38th place ranking.

Khodorkovsky has led the introduction of native philanthropy in Russia with $50 million a year in giving by Yukos. Khodorkovsky adopted Soros's interest in helping scientists and even patterned the name of his new organization after his predecessor's by calling it the Open Russia Institute.

Russian private philanthropy now totals $500 million a year, according to Charities Aid Foundation; for the first time last year most of the foundation's own budget in Russia came from Russians.

"Russia is quite a wealthy country despite all the problems we have, and we have quite a good deal of Russian philanthropy and it's starting to institutionalize," said Alexeeva, of the Charities Aid Foundation.

But Alexeeva and others worry that Russian philanthropy has not developed nearly enough to make up for Soros's departure. "Our budget is like a shadow, a glimpse of what Open Society Institute was giving," she said. "None of the private foundations working in Russia can do it."

Hugo Erikssen, an executive at Khodorkovsky's Yukos, expressed doubts about his employer's ability to fill the gap.

"It's a sad fact that at a time when corporate philanthropy is maturing in Russia, Western philanthropists and governments are reconsidering their commitment to building civil society in Russia," said Erikssen. "There's a danger that will result not in a boost in Russian philanthropy but a reduction in programs for which no Russian funding can be made available."

The Bush administration recently recommended slashing aid programs for Russia by a third as part of a process in which Russia would "graduate" from democracy assistance. The kinds of programs financed by such money, including human rights and free expression advocacy groups, are unlikely to find replacement funds from the Russian government they often battle, in the view of critics of the Bush proposal.

Soros's decision could be seen as validating the judgment that Russia no longer needs such assistance. But in the interview he rejected that logic and acknowledged that, whatever its progress, Russia still remains far from the open society he envisions.

"I don't think Russia is graduating," he said. ". . . The future of Russia is very open and institutions of civil society and independent media are fragile and it's a mistake to abandon them and I'm not abandoning them. I'm simply stopping subsidizing the state."

The Open Society Institute in Russia will become 15 organizations that will continue their work but will have to find other funding. After spending $1 billion in Russia over the last 15 years, Soros said he will scale back to just $10 million a year.

He has taken a greater interest in the developing and still largely corrupt nations ringing Russia. Soros arrived in Moscow after touring Central Asia and the Caucasus region, where he plans to increase his activities. "These are areas of instability and my involvement is undiminished in these areas," he said.

But his main focus, he said, will be his adopted country. He said he worries that concepts of open society may be endangered in the United States by some policies of the Bush administration. "I feel now the battle for an open society has got to be fought in the United States because the United States is inarguably the dominant power in the world. It sets the tone, it calls the tune for the way the rest of the world is going."