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. Last Updated: 07/27/2016

USAID Shifts Focus to Smaller Lending

The U.S. Agency for International Development -- whose efforts to promote Russian reforms through large-scale aid to the federal government hit roadblocks in the 1990s -- has shifted its focus to smaller loans and grants, many to grass-roots groups outside Moscow, the agency's head in Russia said Wednesday.

Of the $100 million a year that the United States now spends on USAID programs in Russia -- down from some $300 million in the early and mid-1990s -- only about 10 percent goes directly to the federal government, said Carol Peasley, USAID mission director in Russia.

The rest goes mostly to small businesses and nongovernmental organizations, she said -- such as a man who got help opening a bakery in the Far East region of Khabarovsk and three breast cancer survivors who launched an awareness campaign in the Siberian city of Novosibirsk.

Peasley said that USAID began to shift its focus away from the federal government toward the end of the last decade, when economic and democratic reform efforts had stalled amid a standoff between President Boris Yeltsin's government and the Communist-dominated State Duma.

At the time, USAID faced criticism over concerns that its money was being siphoned off by corrupt officials and a scandal in which it accused two staffers of the Harvard Institute for International Development, which was paid $43 million by USAID, of using their positions for private gain.

USAID also had to turn away from the federal government because of restrictions that the U.S. Congress put on cooperation due to worries about trade with Iran, Peasley said.

The agency was also forced to scale down the size of its programs after a decrease in its annual budget for Russia.

But she said the new focus also stemmed from a realization that Russia's transformation to a more prosperous and democratic society would take more than a few years and could be pushed along more effectively from the ground up rather than the top down.

"When something is successful down at the regional level, those policies have filtered up to the federal level, and I think we saw that as the way to go," Peasley told journalists at a news conference at the U.S. Embassy.

She said that despite a reputation for passivity and resistance to change after seven decades of Communist rule, many Russians are budding activists, eager and able to take the initiative to push for reforms on a local level.

USAID also rewards initiative among Russian entrepreneurs, providing small-business loans ranging from a few hundred dollars for an operator of a street kiosk selling food to as much as $10,000 to manufacturers with as many as 30 employees.

Some of the reforms USAID supported in the 1990s were stymied at the time.

But Peasley pointed out that some reforms -- such as land reforms and a revamp of the once-overly complicated tax system -- are now being implemented under President Vladimir Putin, who has far more backing in the Duma than Yeltsin had.