Soros Pulls the Plug on Russia’s Open Society Institute

By Vance Serchuk

Published July 04, 2003, issue of July 04, 2003.
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George Soros has made a life out of staying at least one step ahead of everyone else. The practice kept him alive when he was growing up as a Jew in Hungary during the Holocaust. As an international financier and currency speculator, it made him a billionaire. Even in his philanthropic pursuits, Soros has been a harbinger of sorts, embracing high-stakes gambits before others dared to do so — none more audacious than the $1 billion he has spent in Russia during the last 15 years.

Last month, however, the world-famous philanthropist celebrated the anniversary of his Open Society Institute in Russia in an unusual fashion: by terminating it.

Popular perception, at least in Russia, has it that Soros’s exit was dramatic and unexpected. In fact, however, he has been gradually scaling back his commitments there during the last several years. Nonetheless, the announcement marks a striking change in the Russian political and economic landscape, the meaning and implications of which remain a subject of controversy.

Soros’s own explanation for the drawdown is simple. He estimates that two-thirds of his philanthropy has been applied toward activities that would normally be the province of the Russian government: funding scientists impoverished by the collapse of the Soviet economy, for instance, or providing public universities with Internet access and textbooks. With the Russian budget now in the black and economic growth at over 6%, Soros told a press conference in Moscow June 9, “it is no longer appropriate… to continue to subsidize the Russian state.”

And yet Soros has long defined his purpose in Russia as something more than a bailout for the Kremlin. As the name of the Open Society Institute implies, his intention has always been to foster freedom and democracy in a formerly totalitarian state. While the director of the Open Society Institute in Russia recently assured a Moscow newspaper that “civil society [here]… can handle its business on its own,” Soros has repeatedly expressed disquiet in interviews about robber-baron capitalism and the dearth of independent media.

These concerns are shared by many Russia watchers. Mark Levin, executive director of the Washington-based National Conference on Soviet Jewry, stresses the fragility of civil society in Eastern Europe, including Russia. “Some of these countries are beginning to move backwards,” Levin said. “I would hope that people… in one way or another stay involved, because the opportunities are there.”

Soros promises that he will stay involved, refocusing his efforts on sectors of Russian society that are independent of the state. At the same time, though, his decision to shutter the Open Society Institute reflects a growing consensus that, if Russian civil society is to flourish, Russians themselves must be made to assume a greater share of responsibility for it.

“I think there is recognition that the West has less of a role to play in civil society in Russia in terms of finance,” said Anders Åslund, a Russia scholar at the Carnegie Endowment for International Peace in Washington. “The civil society in Russia will largely be financed by Russians.”

Soros is even more blunt: “We tried to satisfy the expectations of those people in Russia who wanted to move to an open society and believed that they had the support of the West,” he said at his Moscow press conference. “I think that you [the Russians] have to largely abandon that illusion and act on your own.” To that end, Soros has chosen to decentralize the projects he established under the Open Society Institute, forcing them to fend for themselves both administratively and financially.

In the coming months, the Russian offices of the Open Society Institute and The Eurasia Foundation, a privately managed, publicly funded organization devoted to building democracy in the former Soviet Union, will merge to form a new organization. This entity — to which Soros will donate $1 million a year but will not contribute in any leadership capacity — is intended to establish a viable philanthropic infrastructure that can be bequeathed to, and replicated by, Russians. It is, in other words, an exit strategy for Western donors.

Soros is likewise pushing Russians to look to their fellow citizens as sources of funding. “There are now some people in Russia who are richer than I am,” he said. Indeed, Mikhail Khodorkovsky, CEO of the Yukos oil company, whose net worth exceeds that of Soros, last year became the first Russian to spend more money on philanthropy in Russia than the Open Society Institute did.

Still, it remains unclear whether Russian philanthropists — of whom, beyond Khodorkovsky and a handful of his fellow oligarchs, there is still barely a handful — are ready to fill the niche once occupied by Soros. “The immediate effect of Soros’s departure is still a great loss,” said Stephen Schmida, regional director of The Eurasia Foundation.

Furthermore, if Soros’s own experience is any indication, native philanthropists may have a difficult road ahead. Five years ago, at the 10th anniversary party for the Open Society Institute, Soros acknowledged that “the history of my involvement in Russia can hardly be considered a chain of easy decisions and success stories.” Rumors abound concerning the assorted travails of the Open Society Institute, from incompetent and corrupt management to farcical property disputes, as well as regulatory and legislative hassles with an implacable state bureaucracy.

Still, Soros endured through it all — departing only after the worst had come and gone. And that, strangely enough, may have been his plan all along.

“Soros prefers to operate in a revolutionary environment and dislikes stable situations,” said Åslund. “Of course, Russia now is very stable, and that means that the momentum for change is less.”

“The big advantage that Soros had in Russia and elsewhere is that he’s not afraid to make a mistake,” said Charles William Maynes, president of The Eurasia Foundation. “It has enabled him to take philanthropic risks that others couldn’t.”

Soros clearly remains ready to take a risk. A passionate critic of the Bush administration, he now argues that “the struggle for a global open society has to be fought primarily in the United States.” He justified his withdrawal from Russia, in part, on the argument that it will allow him to focus on the home front.

As Soros begins to redirect his philanthropic energies toward the United States, he is certain to generate a great deal of media attention and no small share of conspiracy theories — much as he did in Russia. This is a man, after all, whose own authorized biography describes him as a “messianic billionaire.”

In contemplating how Soros’s fortune may be used to impact American society, observers say, it is useful to recall how it was deployed in Russia. In the final calculus, there was little messianic about Soros’s philanthropy. He failed to leverage his good works for political or economic clout, or to bring about a top-down transformation of society. He did lead a pack of donors into the former Soviet Union — and he may now lead them out. Yet even his most devoted supporters acknowledge that the current economic revitalization has at most a tenuous connection with his charity. Russia’s transformation, most observers agree, was a historical process, too large for any one person to affect.

What Soros did offer through the Open Society Institute were discrete acts of generosity, carried out on a gargantuan scale, that helped individuals weather the transformation. If he personally did not remake Russia, countless Russians were deeply indebted to his kindness. Down the road, many Americans may end up feeling the same way.

Vance Serchuk is a researcher at the American Enterprise Institute. He was a Fulbright scholar in Russia from 2001 to 2002.

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