Global Policy Forum

By Catherine Belton and Oksana Yablokova

The architect of Russia's at times disastrous transition to a market economy, Yegor Gaidar, has been invited by the U.S.-led coalition authority in Iraq to help craft a recovery plan for that country's war-torn economy.

The announcement, made by Union of Right Forces co-leader Boris Nemtsov at his party's congress Monday, nearly stole the show from the party as it announced its list of contenders for December's parliamentary elections. At a mid-congress briefing, reporters were more interested in Gaidar's plans for Iraq than in his party's plans for Russia. "Many of the problems they are experiencing in Iraq are problems created by the collapse of a totalitarian regime that had a high level of state participation in the economy," Gaidar, a co-founder of the party, told the conference. "These problems have parallels with the histories and practices of post-socialist countries. They want to work out how to minimize the risks and privatize the economic system in the shortest period possible."

As President Boris Yeltsin's first -- and youngest -- prime minister, Gaidar spearheaded the country's move away from a planned economy. He was also the overall architect of the largest and swiftest privatization in world history. Seeing himself as a "kamikaze" who didn't have much time to bring about revolutionary change before opposition forces moved in, his program of "shock therapy" was aimed at combating potentially disastrous shortages of goods. It ended up sparking a wave of hyperinflation that saw prices increase by a factor of 26 within a year, wiping out the life savings of an entire generation overnight.

His scheme to privatize as rapidly as possible saw the crown jewels of the economy handed over to a handful of well-connected insiders for next to nothing. This time, however, it's unlikely that Gaidar will have quite as much influence. An official at the U.S. Embassy in Moscow said Gaidar had been invited to take part in an international conference in Baghdad later this month "with a view to explaining how European experience with economic reform might help Iraq manage its transition."

The official said experts from nine Central and Eastern European countries had been invited to speak and about 50 Iraqi leaders, including members of government committees and some ministry advisers, would be in attendance. He could not say, however, what role the conference will play in deciding Iraqi economic policy, or what the future role of participants might be. The U.S. authority in Baghdad could not be reached for comment.

In a telephone interview later Monday, Gaidar said he had only received the invitation Friday and had yet to discuss any plans with representatives of the U.S. administration. "Time would tell" if he would have to pack up his work in Russia and move full time to a brief advising Washington on reconstructing Iraq, he said.

The decision to pick some of the world's most experienced brains on transition economies comes as U.S. President George W. Bush seeks to extend responsibility for postwar Iraq to non-coalition countries. Ironically, it also comes shortly after Iraq's new oil minister, Ibrahim Bahr Al-Uloum, told the Financial Times that his country is preparing to privatize its oil sector. "It would be fantastic if [Gaidar] were handed the opportunity to deal with the same giveaway twice in one lifetime," said James Fenkner, head of research at Troika Dialog. "It's the same sector too," he said, drawing a parallel with Russia's oil-dominated economy.

A longtime critic of Russia's reforms, Marshall Goldman of Harvard's Davis Center for Russian and Eurasian Studies, said by telephone that Washington could have made a worse choice -- it could have asked advice from fellow Union of Right Forces member Anatoly Chubais. "If they had invited Chubais, that really would have set off a firestorm. That would have really been too much," he said. Chubais was appointed by Gaidar in the mid-1990s to run Russia's privatization program.

Goldman, however, said that Gaidar could prove to be an important voice for Washington. "Gaidar had the best of intentions. Maybe this is not such a bad idea. Having seen what happened to Russia, he will be aware of the pitfalls," he said. "He can help Iraq avoid making the same mistakes." "Bush has clearly said we need help. This is no longer going to be an American show. Bringing in someone like Gaidar will give the Russians a sense they have stake in Iraq too," Goldman said. "Maybe [Russia] will send in troops."

Moscow's diplomatic battle with Washington -- first over whether the war was necessary at all and then over whether the United Nations should play a more prominent role in governing Iraq -- has threatened to damage burgeoning ties with the Bush administration. Before the war, Russia had taken a leading role in Iraqi industry. Gaidar, however, said his role would not involve defending Russian companies' contracts in Iraq. "This should be what the Russian government does," he said.

One problem could be that Iraq, like Russia before, does not have much time to carry out reforms if further political unrest is to be avoided. But Gaidar said reforming Iraq would probably prove less complicated than reforming Russia. "There were very many problems in Russia, more than in Iraq," he said. "We tried to do everything to avoid a civil war and economic catastrophe. In the end, we succeeded."

He said battling inflation in Iraq is a key issue, but that doing so would not be as difficult as it was in Russia, where the matter was complicated by the implosion of the Soviet Union into 15 former republics, with each printing its own currency. He said the main problem would be stabilizing the economy after the collapse of the previous regime. Gaidar said he did not want to comment further on Iraq until he had time to study the situation. He said he does not even know if he will be getting paid for his work. "We have not discussed such technical things yet."

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.