The Merry telegram: How US aid and economic shock therapy deformed Russia
Jan 11, 2025Just before last Christmas, the National Security Archive based at George Washington University, published an illuminating cable on US-Russian relations. Authored by political analyst E. Wayne Merry in March 1994 from Moscow’s US Embassy, it was sharply prescient – so much so that it had to be sent by the Dissent Channel to limit its incendiary worth. It’s theme: the failings and potentially insidious effects of US “shock therapy” for the post-Communist Russian economy, along with aid that was endangering, not just Russian pride, but the relationship between Washington and Moscow.
The Briefing Book put together by Svetlana Savranskaya and Tom Blanton, regards Merry’s assessment as so prophetic and significant as to warrant comparisons with George F. Kennan’s Long Telegram of April 1946. As the chief of mission to the Secretary of State in Moscow, Kennan’s assessment of the Soviet Union’s intentions shaped Cold War policy in all its manifestations.
In Kennan’s view, Washington faced “a political force committed fanatically to the belief that with the US there can be no permanent modus vivendi”. The security of Soviet power depended on disrupting and destroying “our traditional way of life” and breaking “the international authority of our state”. To combat this, Kennan offered a menu list. Soviet power would, for instance, retreat when faced with “the logic of force”. The Soviets remained, vis-à-vis the West, “by far the weaker force.” The durability of the Soviet system had yet to prove itself. Soviet propaganda would be “relatively easy to combat” by means of “any intelligent and really constructive program.”
As things turned out, Kennan was right about the durability of the communist system. Having run out of the “diseased tissue” necessary to keep it thriving, it had suffered something of a cannibalistic implosion. The termination of the USSR as a political entity by the Belovezh Accords, and the emergence of the Russian Federation, raised two fundamental, linked questions: What would a reformed Russian Federation look like and what would its relationship with the West be?
Merry’s long telegram of 28 March 1994, titled “Whose Russia is it Anyway? Toward a Policy of Benign Respect” offered invaluable, and ultimately ignored suggestions. It enabled Merry to assess what he regarded as the critical failings of US policy towards Russia, notably on the issue of economic reforms and aid to a beleaguered, impoverished post-communist system.
It was precisely such reforms that had been encouraged by Western advisers in President Boris Yeltsin’s inner circle, along with such Russian free market converts as Yegor Gaidar and Anatoly Chubais. As Katharina Pistor of Columbia University points out, “nobody paused to consider that Russians might first want a chance to develop a sound constitutional foundation for their country, or to express through an election their preference for who should govern them”.
It was a central contention of Merry that what was contributing to an increasingly cooling relationship between Moscow and Washington by 1994 was the role of foreign aid and an increasing suspicion in the country of the radical “marketeers”. Russia had been turned into a crippling charity case, flooded by bright eyed US aid specialists derisively called “assistance tourists” by the locals. (Many of these tourists hailed from the Harvard Institute for International Development, which was given almost exclusive control over the US economic aid program to Russia.)
The obsession with economic reform and aid, the telegram goes on to explain, utterly ignored the creation of accompanying civil institutions. An entire civil service, in effect, had to be trained to replace the command economy.
Merry was particularly critical that the provision of US aid to Russia lacked the coherence and institutional maturity of the post-Second World War Marshall Plan. The latter made a special point of channelling aid into clearly stipulated channels to stimulate growth in a devastated Western Europe. In contrast, American “assistance tourists” rarely thought of asking “their hosts for an appraisal of Russian needs”. This had contributed to “a net detriment to the bilateral relationship”.
The telegram offers three critical reasons proved far from negligible in creating the Russia of today: the overselling of assistance comprised primarily of “financial intangibles and technical assistance”; the failure of much of the assistance to ever leave US shores or enter Russian hands (a matter that only invited more suspicion); and the “friction” caused by the intrusiveness of the programs and “linking assistance with Russian actions in other spheres”. Rather severely, Merry suggests that the point had been reached “where it is arguable that the best service our aid program could now serve could be to permit Boris Yeltsin publicly to tell America to take its money and shove it”.
The Russia of Vladimir Putin is now routinely condemned in the West as authoritarian, even tyrannical. It is seen as an agent of chaos, a fomenter of instability and war. But it is worth noting that such a mutation had much help. Russia was famously promised by US Secretary of State James Baker in February 1990 that NATO would not expand “one inch eastward”. Domestically, the Russia of oligarchs and kleptocrats grew from the economic reforms that saw democratic reforms as secondary. As a result, the democratic project withered, and the strongman program of executive decrees triumphed. Russia, as Anders Åslund observed, eventually became a market economy without becoming democratic.
We can only speculate what would have happened had Merry’s assessments gone beyond their limited circulation. US Treasury officials were none too keen to show them to the chief advocate of neoliberal market reforms at the time, Larry Summers. As Undersecretary of the Treasury for International Affairs between 1993 and 1995 and with close ties to the Harvard Institute for International Development, Summers would have, in their view, received “a heart attack”. Given the vile consequences of neoliberal policies in Russia enacted under Yeltsin’s tenure, that would have been a small price to pay.