‘CHALK’ ONE UP FOR THE U.S. TAXPAYER: NEWS STORY RE: LOBBYIST BEGS HARD QUESTIONS ABOUT YAVLINSKY AND THE ‘GRAND BARGAIN’

(Washington, D.C.): On the eve of
highly publicized meetings with senior
Bush Administration officials including
President Bush, Secretary of State Baker
and economic advisor Michael Boskin, Grigory
Yavlinsky — a young Soviet
economist and the leading force behind
the “Grand Bargain” being
drafted at Harvard University — features
prominently in a disturbing article and
other materials obtained by the Center
that should give pause to both the
Administration and Boris Yeltsin, alike.

The article, a copy of which is
attached, was produced by Associated
Press and appeared in Monday’s Washington
Times under the headline href=”91-P43at.html”>”Russian
Republic Hires D.C.
Lobbyist to Pursue Aid.”
It reports that O. Roy Chalk has been
retained by the Prime Minister of the
Russian Republic, Ivan Silaev, at a rate
of $250,000 per month (of
which $50,000 would go to Mr. Chalk
personally, with the remainder going to
unidentified “associates”). The
purpose of the contract: to secure
billions of dollars in U.S. taxpayer
funding for a proposed “Russ/Sov
Privatization Plan for Economic
Advancement” under the auspices of a
group he calls the Intra-National
Privatization Fund, Ltd. Interestingly, this
Fund is co-chaired by Mr. Chalk and
Mr. Yavlinsky.

According to the Associated Press
account and documents produced by Mr.
Chalk in the Center’s possession, the
Intra-National Privatization Fund would
secure some $5 billion from the U.S.
government for two projects. The first
would be involved in the entire food
processing sequence from the
“purchase of raw grain to packaging
and distribution for sale” and would
“work closely with several leading
commodity dealers such as
Archer-Daniels-Midland.” It would
initially purchase “in cooperation
with the Commodity Credit Corporation $2
billion basic raw food products for
delivery during the period
1991-1992.” The second would be an
industrial corporation with $3 billion in
additional credits for infrastructure and
industrial development obtained under the
recommendation of the Department of
Commerce and other U.S. government
agencies.

The idea — which AP quotes the first
secretary of the Soviet Embassy in
Washington as calling a “beautiful
plan’ and one “we have to promote
… with all the resources we have”
— would be for the Russian Republic and
the USSR each to own 42.5 percent of the
stock of these Western capitalized
corporations. The remaining
15 percent would be owned by the
Intra-National Privatization Fund, to be
sold to unnamed foreign
investors.

It would appear, therefore, that Mr.
Chalk stands to benefit handsomely from
his lobbying efforts on behalf of this
venture. In addition to the $6 million
which the Russian Republic is committed
to pay him over the life of the two-year
contract, he could preside over the sale
of a cool $750 million worth of stock —
stock whose value would derive, largely,
if not entirely, from contributions made
by American taxpayers.

More interesting perhaps, but as yet
unknown, is the extent to which
Mr. Yavlinsky would similarly benefit
from the fruits of his efforts to broker
the umbrella agreement under which the
transfer of this $5 billion – and perhaps
as much as $145 billion more from several
nations over the next five years — will
flow into Soviet coffers. This
arrangement, which is being marketed as
the “Grand Bargain,” envisions
trading massive Western aid for Soviet
reforms and has been the subject of
intensive meetings between Mr. Yavlinsky
and other Soviet economists on the one
hand and several academics at Harvard
University on the other. The latter
include Graham Allison, Jeffrey Sachs and
Robert Blackwill, until recently a Soviet
specialist on the National Security
Council staff.

The Center for Security Policy
believes that, before any consideration
is given to expending taxpayer funds on
such a venture, a number of hard
questions need to be carefully examined.
For example:

• Does the Yavlinsky
  initiative have a “for
  profit” element, an
  arrangement that would enable him
  and his associates to skim
  substantial fees off the top of
  Western public resources
  ostensibly intended as a quid
  pro quo for structural
  reform in the USSR?
• As the contract between Mr. Chalk
  and the Russian Republic is
  signed for the latter by Prime
  Minister Silaev, what
  does Boris Yeltsin know about it
  — and when did he know it?
  Is he fully supportive of the
  substantial role the
  Intra-National Privatization
  Fund’s scheme would have the
  central authorities play in
  owning and operating its
  ventures?
• Conversely, to what extent does
  this undertaking represent an
  effort by Prime Minister
  Silaev, whose
  credentials as a reformer are
  nowhere near as credible as
  Yeltsin’s, to preserve
  for Moscow center a role far
  beyond the sharply delimited one
  envisioned by
  true democrats? Silaev,
  after all, was reportedly not
  Yeltsin’s choice for Prime
  Minister; his nomination
  represented a sop to the Soviet
  establishment. It is hardly out
  of the question that Silaev’s
  intentions for the Chalk program
  and the Yeltsin agenda are not
  one and the same.
• In any case, where is the
  Russian Republic finding a
  quarter-of-a-million dollars per
  month to fund the Chalk
  operation? Given that it
  is a “Russ/Sov”
  initiative, is it unreasonable to
  believe that at least some of
  that stipend is being provided
  not by the devolution- and
  reform-minded republic but by
  the Soviet central authorities
  themselves? And what
  activities is Mr. Chalk engaged
  in that could conceivably justify
  such a breathtaking level of
  compensation?
• What is the role of the
  Archer-Daniels-Midland Company in
  the proposed “Russ/Sov”
  food corporation? To
  the extent that this company has
  been particularly aggressive in
  its efforts to increase U.S.
  taxpayer exposure in the USSR,
  does its advocacy of expanded CCC
  credits — which could be used to
  finance an enterprise in which
  ADM might hold stock — represent
  a potential conflict of interest?
• Mr. Chalk is quoted as saying in
  a 25 April letter to Mr. Silaev
  that he is “confident
  that the Intra-National
  Privatization Fund will receive
  full cooperation and consideration
  from the U.S. government, various
  European governments and
  several Far Eastern
  governments.” Is
  such a statement merely cocky
  self-promotion or does it signal
  commitments on behalf of the
  American and other governments
  that have yet to be made public?

The Center believes that questions
like these should be addressed urgently
by both the executive branch and the
Congress. It calls, in
particular, on the relevant congressional
committees (i.e., Finance, Foreign
Relations and Banking) to initiate
inquiries into the structure and purpose
of the Intra-National Privatization Fund
and its relationship, if any, to those
public and private sector officials
formulating and marketing the so-called
“Grand Bargain.”