For Russian foreign aid, a second act

Click here to view the image in large size.

Last December, Ethiopia’s prime minister Meles Zenawi assured delegates at a Russia-Africa business forum, “I am confident that I am speaking for Africa as a whole and not just for Ethiopia, when I declare that Africa is open for massive investment from Russia…Africa welcomes back Russian economic engagement with an open heart.”

Memories of Soviet foreign assistance run deep in the East African country, which claims one of the region’s fastest growing economies but remains beset by an array of development challenges. At the Soviet-financed Dejazmach Balcha Hospital in the capital city Addis Ababa, a portrait of Russian President Dmitry Medvedev hangs on the walls. The hospital treats approximately 20,000 Ethiopian patients each year.

Ethiopia is one of several Cold War-era allies across the developing world that once relied on the Soviet Union’s foreign assistance – $26 billion in 1986 alone. In a bid to help revive Russia’s global standing over the last decade, Medvedev and his now predecessor-turned-successor Vladimir Putin have presided over a resurgence in Russian aid. Russian official development assistance hit $472 million in 2010, a drop in the bucket when compared to former Soviet aid levels, but still a fourfold increase from 2006. 

Russia’s G-8 presidency in 2006 provided the impetus for Putin’s embrace of an aid agenda. In 2005, his administration set in motion the development of a legal basis for Russian foreign assistance, a process that continues today. In 2007, Putin signed off on a concept paper outlining the goals, objectives and principles of Russian development cooperation.

“Present-day realities of global policy and economy and Russia’s status of a superpower suggest that Russia could pursue a more active policy in international development assistance,” concluded the communique.

In the same paper, the Russian government pledged $400 million to $500 million in annual official development assistance in the coming years – a commitment which it has kept. In 2011, Russia became the first of the BRIC countries to report ODA flows to the Development Assistance Committee of the Organization for Economic Cooperation and Development, fulfilling yet another commitment from the concept paper.

Like its BRIC peers, in spite of the global financial crisis, Russia has thus far stayed its foreign aid course. Prompted by a sudden surge in demand for economic assistance from its neighbors in the Commonwealth of Independent States – a loose association of former Soviet republics – Russian ODA actually topped $785 million in 2009. That same year, the country’s GDP shrunk for the first time since Moscow defaulted on its debt back in 1998. In an interview with Devex, Patty Gray, a National University of Ireland professor who has been studying the role of Russia in international development since 2008, shed light on these dynamics.

“There’s not a very strong connection between the economic climate in Russia and Russia’s international development assistance… I think that the reasons have more to do with wanting to be recognized as a legitimate player on the global scene,” Gray said.

Of course, the future is uncertain for the Russian aid program. Putin returns to the presidency in May having won a third term on the back of promises of higher wages and benefits for public workers. These moves will require adding up to $160 billion to a budget financed by increasingly uncertain oil and gas revenues. Furthermore, mounting political unease in the country is likely to ratchet up pressure for this incoming Putin administration to spend more money at home than abroad, threatening the prospects of any significant growth in Russia’s ODA. Some Russian government officials have indicated that Moscow has no intention to increase the country’s ODA substantially in the near-term.

In his pre-election foreign policy statement, however, Putin pledged that “Russia intends to continue promoting its security and protecting its national interest by actively and constructively engaging in global politics and in efforts to solve global and regional problems” and most analysts agree that Russian foreign assistance will be an effective instrument to do just that. As Devex assessment of and reporting on emerging donors continues, the following are some important facts and considerations about the status and future of the Russian aid program.

Aid regime structure

Former President Boris Yeltsin first proposed the creation of a Russian aid agency nearly two decades ago. In August 2011, the Russian government announced that a traditional donor-style aid agency would be established on January 1, 2012, almost five years after this commitment was redefined in the 2007 concept paper. Already, Moscow is months behind launching the Russian Agency for International Development. Gray predicts that it is “probably just moving along slowly in the background and eventually it will appear.”

Initially, the Russian Agency for International Development will be tasked with the development, implementation and coordination of the country’s aid programming supported by a staff of about 50. The agency will operate under the purview of the Ministry of Finance but will coordinate closely with the Ministry of Foreign Affairs. The 2007 concept paper assigned lead roles in formulating the country’s foreign aid policies to both ministries.

Other government agencies are also involved in Russian foreign aid. The Ministry of Emergency Situations, or EMERCOM, manages Russia’s humanitarian and disaster relief operations. Meanwhile, the Ministry of Industry and Energy will help determine how Russian goods and service providers can be used in international development projects. The Ministry of Health and Social Development has also collaborated with the World Health Organization on health assistance programming. In 2008, Moscow established RosCooperation, the Federal Agency for CIS Affairs and International Humanitarian Cooperation. Since 2008, the agency appears to have played a role in coordinating Russia’s aid activities in its backyard in the CIS.

At a May 2011 conference organized by the Center for Strategic and International Studies and Moscow’s Higher School of Economics, a consensus emerged that coordination between ministries involved in Russian foreign aid was “problematic.” A 2010 CSIS report called attention to infighting between the Ministry of Finance and the Ministry of Foreign Affairs over control of the aid agenda as well as resources. The Russian government has been short on specifics explaining just how the Russian Agency for International Development would reconcile the intra-government fragmentation and fulfill its mandate. Nonetheless, establishing an aid agency would be a positive first step for the Russian government and help raise the country’s profile in the donor community much like other emerging donors such as South Korea and Brazil.

Geographic priorities

While Moscow has not disclosed its total ODA to the CIS, analysts believe that the region – with which Russia shares longstanding geopolitical and cultural ties – garners the largest portion of its foreign aid expenditure.

In September 2010, Foreign Minister Sergey Lavrov told the United Nations: “We attach particular importance to assisting the CIS region.”

In 2009, Moscow announced a $7.5 billion contribution for a $10 billion economic emergency fund in support of the Eurasian Economic Community (Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan). 

Some observers point to Russia’s stalled application for accession to the Asian Development Bank as a barrier to its further involvement in Central Asia’s development. A leading donor to the region, ADB oversees the Central Asia Regional Economic Cooperation Program, which facilitates regional projects and policy initiatives with a focus on transport, trade and energy.

Lavrov has also underscored Russia’s commitment to support “developing countries in other regions, first of all in Africa.” In 2010, Russia allocated 16 percent ($48 million) of total bilateral ODA to Africa. Debt relief has been the centerpiece of Russian aid for the continent. As of 2011, Russia had cancelled $20 billion worth of the continent’s debt through the Heavily Indebted Poor Countries Initiative, far exceeding its 2005 commitment to cancel $11.3 billion. Moscow has attempted to capitalize on its own period of economic hardship to make the case that it is better positioned than Western donors to understand Africa’s development challenges.

“We subtly feel all the problems of the African continent,” said Putin at the 2002 G-8 summit.

Elsewhere, Russia’s increasingly aggressive engagement in the South Pacific has begun to attract scrutiny from the aid community. The small island nations of Tuvalu, Nauru, and Vanuatu recently recognized the independence of Abkhazia and South Ossetia, reportedly wooed by offers of Russian aid including $50 million for Nauru, which Moscow says will support improvements in the country’s social sector. The two breakaway Georgian provinces were at the heart of the 2008 conflict between Russia and Georgia. Already, Canberra has accused Moscow of “cheque-book diplomacy [that] undermines development assistance in the region.” Just last month, Solomon Islands Prime Minister Darcy Lilo sacked his foreign minister for accepting similar overtures from Lavrov. Russia’s interest in the South Pacific, critics argue, is driven almost entirely by the region’s heavy dependence on foreign aid leaving these island countries little choice but to follow the money.

Sector priorities

Food security and global health have emerged as Russian aid priority sectors over the last decade. In 2010, the Russian government allocated $98 million for food security, the bulk of which was disbursed through multilateral food aid programs. From 2005 to 2010, more than 106,000 tons of food was delivered courtesy of Moscow’s contributions – which appear mostly tied to Russian producers – to the World Food Program. Top recipients of Russian food aid include the commonwealth states, as well as North Korea and Afghanistan.

In August 2010, Moscow banned wheat exports following a devastating drought, sparking fears of another global food price crisis. The ban, lifted in May 2011, did not apply to humanitarian aid. In any case, having since bounced back from the 2010 drought and now set to regain its foothold as the world’s third-largest wheat supplier, Russia looks well-positioned to at least maintain its level of support for food aid programming.

In 2010, according to preliminary estimates, the Russian government allocated $80 million of its total ODA of $472 million for global health. Russian contributions for health assistance have also been primarily channeled through multilateral organizations including $317 million for the Global Fund to Fight AIDS, Tuberculosis and Malaria as of May 2011. The G-8 credits support from Russia – alongside that of Italy, Canada and the United Kingdom – with the success of the pilot Advance Market Commitment for pneumococcal vaccines launched in 2007. As of May 2011, Russia had disbursed $16 million for the AMC initiative.

According to the CSIS, Russia’s limited but growing capacity for health assistance has enabled it to implement bilateral programming in this area. Drawing on expertise and experience from Soviet-era assistance programs, as well as capacity-building partnerships with donors including the World Bank and the U.S. Agency for International Development, Russian physicians have trained their counterparts from the CIS, as well as Africa. Moscow has also begun to assume a convening role in regional health, cohosting over 2,500 participants at the Eastern Europe and Central Asia AIDS Conference in 2006, 2008 and 2009.

Russia is attempting to diversify its aid portfolio beyond food security and global health. In 2010, Moscow announced a $10 million contribution to the Global Environment Facility for 2011-2014. Under the Russia Education Aid for Development Program, Moscow is working with the World Bank to build its capacity to design and deliver aid programs in education. Primarily through EMERCOM, Russia also continues to be a leading provider of disaster relief across the globe.

“Name the disaster, the Russians are there,” says Gray.

As of December 2011, Russia was one of only six bilateral donors that had fulfilled their pledges for reconstruction efforts in Haiti.

G8 presidency in 2014: Another turning point?

Last month, Kremlin officials announced that Moscow will likely host the G-8 summit in 2014, the first time Russia will play host since 2006. Later this year, Russia will host the Asia-Pacific Economic Cooperation summit followed by the G-20 summit in 2013. Similar to the last time he chaired the G-8, Putin might take steps to bolster Russia’s donor positioning just in time to catch this moment on the stage and in the spotlight. Meanwhile, Russia’s potential entry into the World Trade Organization slated for July could pave the way for its accession into the OECD-DAC in as little as 12 months.

Lorenzo Piccio and Eliza Villarino contributed to this report.

Read more:

About the author

  • Troilo pete%2520head

    Pete Troilo

    As director of global advisory and analysis, Pete manages all Devex research and analysis operations worldwide and monitors key trends in the global development business. Prior to joining Devex, Pete was a political and security risk consultant with a focus on Southeast Asia. He has also advised the U.S. government on foreign policy and led projects for the Asian Development Bank and International Finance Corp.