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. Last Updated: 07/27/2016

U.S. Democracy Aid Goes Astray in Kazakhstan

ALMATY, Kazakhstan — When the Franklin Printing Co. was founded here with $3 million of U.S. taxpayer money in 1995, U.S. officials pledged it would help promote freedom of the press in Kazakhstan, an oil-rich Central Asian country that the U.S. State Department was hailing as "an emerging democracy."

Fast forward five years to the summer of 2000. A corruption scandal has erupted at the highest levels of the Kazakh government, linking the country's authoritarian president to multimillion-dollar deposits by international oil companies in Swiss bank accounts. The scandal is covered widely in the press in the United States and Europe, but it is barely mentioned in Kazakhstan's leading newspapers, including those printed by the U.S.-funded publishing house.

The printing company — named for Benjamin Franklin — is now owned by a firm linked to the president's daughter. Its co-founder, a Russian businessman who also ran Kazakhstan's most successful independent newspaper, says he felt obliged to leave after receiving what he describes as "an offer I could not refuse" from a senior member of the regime.

Such are the perils of promoting democracy in a part of the world that is more accustomed to the rule of khans, commissars and presidents-for-life. What happened to the Franklin printing house could be a parable of the way in which U.S. foreign aid programs launched with the best of intentions can be undermined by authoritarian leaders keen to protect power and privileges.

In the decade since the end of the Cold War, democracy assistance has become a U.S. growth industry, providing jobs for a small army of political advisers, media consultants and election observers. The U.S. Agency for International Development, or USAID, spent $649 million on democracy programs in 2000, up from $165 million in 1991.

In such countries as Yugoslavia, Slovakia and Peru, democracy-building campaigns appear to have helped show the door to authoritarian governments with free elections. In other parts of the world — Central Asia is an obvious example — the programs have drawn criticism as being little more than constitutional window-dressing for corrupt autocracies.

U.S. democracy-builders plead for patience, saying the aid programs are laying the foundations for long-term change. "We are helping political parties, NGOs [nongovernmental organizations] and political activists build a political base," said Eric Kessler, Central Asia representative for the National Democratic Institute, which is affiliated with the U.S. Democratic Party. "We shouldn't turn our backs on the political activists of these countries just because the regimes will not let them be effective for many years."

NDI activities in Central Asia include working with student activists to improve conditions in universities and combat endemic campus corruption, which includes bribing professors for better grades and paying for textbooks that should be free. Other U.S. organizations hand out grants to Kazakh political activists, train journalists and provide legal advice to the Kazakh parliament.

Democracy building can be dangerous work. In 1994, as Kazakhstan's president, Nursultan Nazarbayev, was beginning to crack down on opponents, the Almaty representative of the International Republican Institute, which is identified with the U.S. Republican Party, was brutally assaulted; the attack on Eric Rudenshiold had the hallmarks of secret police intimidation. Mystery continues to surround the November 2000 murder of the IRI's representative in Azerbaijan, John Alvis, shortly after Western monitoring groups sharply criticized the Caspian republic's election procedures.

Pragmatic President

Kazakhstan, the largest and most prosperous of the five newly independent Central Asian republics born from the Soviet Union, has been a favorite of the democracy-building lobby for years. Despite his communist past, Nazarbayev has been viewed in Washington as a pragmatic, modernizing leader who places high priority on relations with the West. A country four times the size of Texas, Kazakhstan also has the good fortune to be sitting on huge oil reserves in the Caspian Sea, giving it the resources to make rapid economic progress.

At first, Nazarbayev seemed inclined to play along. "Our post-communist elite wanted to join the world community," said Yevgeny Zhovtis, who heads an independent human rights group in Almaty, the former capital. "This meant playing the rules of the game as laid down by the U.S."

Under Western pressure, Nazarbayev accepted a degree of press freedom and political pluralism. But the limits of his tolerance soon became clear: There could be no infringement on his personal power or on the control of the ruling elite over key sectors of the economy, particularly oil.

According to Zhovtis, U.S. pressure on Nazarbayev to introduce political reforms began to slacken after 1994. Nazarbayev discovered that as long as he did nothing outrageous, such as throwing an important opponent into prison, there would be little outcry from abroad. In Zhovtis' phrase, Kazakh leaders came to understand that the West is less interested in human rights than geopolitics, preserving Kazakhstan as a stable buffer between Russia and China and keeping its oil flowing.

"Without the support of the host government, we could not do very much," said Barnabas Johnson, a U.S. constitutional scholar who worked in Kazakhstan in the mid-1990s on a rule-of-law project. "We dumbed everything down."

William Courtney, a former U.S. ambassador to Kazakhstan, said he believes the USAID programs helped convince ordinary Kazakhs that the United States stands "on the side of democracy." At the same time, he was struck by the disparity between the grandiose U.S. rhetoric in Central Asia and the relatively modest results.

An example of the limitations of U.S. assistance is the Franklin Printing Co.

In March 1995, it began life with $3 million from the Central Asian American Enterprise Fund, a U.S. taxpayer-funded venture capital institution. The idea, said Stephen Solarz, a former chairman of the fund, was to encourage private enterprise and the development of a free press. Before Franklin's creation, all Kazakh newspapers were published on state-owned presses.

Franklin was founded as a joint venture between the U.S. fund and Kazakhstan's leading independent newspaper, Caravan, which was owned by Boris Giller, a Russian businessman. The U.S. contribution consisted of a 50 percent stake in Franklin for $1 million and a $2 million loan to be repaid over five years.

At first, Caravan was both profitable and widely read. It published occasional articles by former Prime Minister Akezhan Kazhegeldin, who had emerged as Nazarbayev's leading critic and rival for the presidency.

As a 1999 election approached, Giller says, he came under increasing pressure from the authorities to sell his business and move back to Russia. He will not say exactly who pressured him to sell Caravan or how, but he compares his predicament to a scene out of the Mafia film "The Godfather."

"I understood that if very serious people make a very serious offer, you have to say yes," he said.

By the time Giller left Kazakhstan in March 1998, he had bought the entire U.S. stake in Franklin except for a single share as part of the U.S. program to put assets in the hands of locals. But there was still a large loan outstanding. The president of the American U.S. fund, John Owens, said in an interview that the identity of the new owners was of "scant interest" to the fund as long as the loan was repaid on schedule. It was, in May 2000.

Under the new owners, Caravan became a mouthpiece for Nazarbayev. The Franklin press, meanwhile, refused to publish anything at odds with the government line. While the ownership structure of Caravan and Franklin remains obscure, Western diplomats in Almaty say that control over the publishing house now rests with a company run by the president's daughter Dariga that has large media holdings in Kazakhstan.

"It is very frustrating," said Solarz, a former nine-term U.S. congressman still on the board of the enterprise fund, which was established under the 1992 Freedom Support Act. "We had no way of knowing that [Giller] would sell his shares to relatives of the president. Had we known that, we would never have made the investment."

The Image Problem

As millions of dollars of U.S. aid money were being spent to preach democracy in Kazakhstan, Nazarbayev and his principal political opponent, Kazhegeldin, spent millions in the United States trying to influence U.S. public opinion and policy-making.

The money went for high-priced Washington lawyers, public relations firms and lobbyists; some of it was channeled through Liechtenstein-based foundations and offshore companies in the Caribbean, U.S. federal records show.

The spending peaked in 1999 during the run-up to presidential and parliamentary elections. Prominent recipients of Kazakh government largess during this period included the law firm of Akin, Gump, Strauss, Hauer & Feld ($1 million), the Carmen Group public relations company ($700,000) and Mark A. Siegel & Associates ($470,000), a Washington-based political consulting firm, according to records filed with the U.S. Justice Department under the Foreign Agents Registration Act.

As the election campaign heated up, U.S. consultants and public relations experts flooded the country. Some were on the USAID payroll with the goal of teaching democracy in a nonpartisan way; others received generous retainers from the Nazarbayev government.

At the same time the NDI was working with grass-roots activists, attempting to challenge the authoritarian power structure, one of its board members, Mark Siegel, was working for Nazarbayev as a political consultant.

U.S. Justice Department records show that Siegel, a former Democratic National Committee executive director, was paid $3,000 a day for public relations activities on behalf of the Kazakh government and for providing advice on "democratization." As an NDI director, Siegel is responsible for overseeing its operations in Asia.

While most Western monitors criticized the election process as seriously flawed, Siegel argued that the elections had been largely free and fair, according to Western diplomats and aid officials who heard his briefings. He also helped organize trips to the United States by Nazarbayev and other Kazakh officials.

In an interview, Siegel said there was no conflict of interest between his role as an NDI board member and his activities on behalf of the Kazakh government, as he never claimed to represent NDI while in Kazakhstan. "If anything came up at an NDI board meeting on Kazakhstan, I would recuse myself," he said, adding that he no longer receives a retainer from the Kazakh government.

Siegel is scarcely the only U.S. political activist or public figure to have been close to the Nazarbayev government. In the middle of the 1999 election campaign, Roger Clinton, brother of former U.S. President Bill Clinton, made two trips to Kazakhstan to give concerts hosted by the ruling party and had a cordial meeting with Nazarbayev. The Kazakh official media hailed the younger Clinton as a "goodwill ambassador" of the United States.

Carmen Group's filings to the Justice Department show that the firm paid for an October 1999 trip to Kazakhstan by U.S. Representative Jack Metcalf, Republican-Washington. The filings say that Metcalf subsequently delivered on the House of Representatives floor an assessment of Kazakh democracy based on talking points provided by the PR firm. A few months later, Metcalf's top aide, Christopher Strow, who had accompanied him to Kazakhstan, got a job with the Carmen Group.

A May 4, 1999, letter from the Carmen Group to the Kazakh foreign minister, obtained by The Washington Post, promised to generate favorable press coverage for Kazakhstan in the U.S. media by organizing all-expenses-paid "orientation tours" for Western journalists. According to Justice Department filings, journalists who accepted such invitations included syndicated columnist Georgie Anne Geyer and the editor in chief of the conservative American Spectator, R. Emmett Tyrrell Jr.

U.S. officials concede there have been mixed results in the democracy-building efforts: University students, for instance, are standing up for their rights. But in free elections, Kazakhstan may be less democratic than it was 10 years ago.

Ivan Sigal, who heads the Almaty office of Internews, a media watchdog organization funded by USAID, says that in the past decade the ruling elite has continued to consolidate power. "Our assumption has been that the harder we press, the more the Kazakhs will move. But it is now clear that this is a region in transition — not to democracy, but to autocracy."

According to Thomas Carothers, vice president for studies at the Carnegie Endowment for International Peace and author of "Aiding Democracy Abroad," democracy assistance is most effective "when a country is clearly moving forward to democracy" or at a moment of political ferment such as in Yugoslavia last year.

It is less effective in regions such as Central Asia, where democratic reform is not a high priority, either for the local leadership or the U.S. government.

Natalya Chumakova, who heads an independent Kazakh human rights group called the Center for the Support of Democracy, said she feels that groups like hers might not have survived without assistance from abroad. In the end, however, "it is not for USAID to create democracy here," she said. "Democracy must grow in our hearts. As long as it is not there, no amount of outside help will create it."