The New York Times
July 12, 1997
A Promoter of Democracy Angers the Authoritarians
By Judith Miller
MINSK, Belarus-- For the past decade, George Soros, the Hungarian-born financier and philanthropist, has spent more than a billion dollars promoting a free press and political pluralism abroad -- everything the world's authoritarian rulers despise. Now some of those political leaders are fighting back.
In Albania, Kyrgyzstan, Serbia and Croatia, Mr. Soros's foundations have been accused of shielding spies and breaking currency laws. His employees have been assaulted and threatened with imprisonment or financial sanction for alleged crimes.
Here in Belarus, Mr. Soros recently suspended operations after the Government, headed by Aleksandr Lukashenko, the popular but autocratic 42-year-old President, fined a Soros foundation $3 million for alleged tax violations and seized its bank account.
While expressing a desire to resolve the crisis here and lessen tensions with other authoritarian governments, the man whose own fortune was made in high-stakes business gambles is vowing not to back down.
"We would like to continue working in Belarus, to do what we can wherever we can," Mr. Soros said in a recent interview in New York. "But we insist that all our foundations remain independent. We will not play by Mr. Lukashenko's rules."
The growing pressure on Mr. Soros's philanthropic empire, which stretches from South Africa to Haiti and employs 1,300 people in 24 countries, with two regional offices in New York and Budapest, appears to have only stiffened his resolve.
This year he opened five new offices in Central Asia -- Mongolia, Tajikistan, Uzbekistan, Azerbaijan and Armenia -- and one in Guatemala, his first in Latin America. And soon he is to open nine new foundations in southern Africa, he said, expanding the number of countries in which his foundations are active to 40.
Moreover, given his growing personal fortune, which friends estimate at $5 billion, his efforts are likely to continue at current levels for at least a decade, and perhaps for two.
While American foreign aid in the last decade has been cut in half in real terms, Mr. Soros, 66, recently signed a 20-year lease on his new headquarters in New York.
In Central Europe alone, he spent more than $123 million between 1989 and 1994 trying to help democracy take root -- roughly five times the sum spent by the United States Government's chief democracy-promoting foundation, the National Endowment for Democracy.
Unlike United States Government development aid, about 80 percent of which is given to American contractors and consultants, most money Mr. Soros distributes is given quickly and with few strings to local groups and individuals, says Thomas Carothers, a former State Department lawyer at the Carnegie Endowment for International Peace, because local activists are less expensive and more efficient at spreading the democratic, free-market mantra.
Mr. Soros's philanthropy has its critics. Some say it is too impulsive and mercurial, too arrogant and micromanaged, too confined to friends on the left of center and not as open to public scrutiny.
Others criticize his investment in countries to which he gives; Mr. Soros's defenders reply by citing strict rules within the foundations for avoiding conflicts of interest.
Mr. Soros noted, for example, that his investment company sold its 6 percent interest in Alliant Techsystems Inc., a Minneapolis weapons manufacturer, because Alliant made land mines, a direct conflict with his program to ban land mines.
But Mr. Soros has permitted his foundation in Russia to own GTS, now the second-largest telecommunications company in Russia, because the profits accrue to the foundation, not to him or to his investment funds.
The Personal Touch, And Its Perils
Some of those involved with his foundations wonder whether the financier is spreading himself too thin.
"His Central European giving has been effective partly because of his personal involvement and familiarity with the region and its problems," said a long-time associate, noting that Mr. Soros visits Eastern Europe about five times a year. "But can he possibly have the same passion for nine new African countries?"
Mr. Soros himself acknowledges that he has had setbacks, including, for example, his foundations in Russia, which he was forced to restructure after discovering that employees were diverting foundation funds into Swiss bank accounts and using them to buy luxury cars.
"I never have regrets," Mr. Soros said, "about having spent a lot of money trying to make things better." The current struggle in Belarus is shaping up as a test of Mr. Soros's staying power and a benchmark for him and perhaps for Central Europe.
Serbia last year revoked his foundation's permit before finally restoring it under Western pressure. Croatia has put three Soros foundation employees on trial, charged with currency violations, a criminal offense.
But no government has ever forced a Soros foundation to close permanently.
"If Lukashenko can take Soros down, no one is safe," said Andrei Sannikov, Belarus's former Deputy Foreign Minister, who quit his post last year. "Perhaps not even in Russia, where our President's right-wing allies in Moscow sit and wait for Boris Yeltsin to die and their nationalist moment to come."
Standing up to the West by taking on a man as powerful as George Soros would enhance Mr. Lukashenko's standing among hard-line nationalists, another diplomat said. "Kicking out Soros," he added, "is like shutting down General Motors."
Moscow Is So Far, Yet So Near
Mr. Soros's troubles in Belarus can be traced to the 1994 elections, when Mr. Lukashenko, a former boss of a collective farm, won an overwhelming victory.
While Belarus's previous Government had stressed national identity and sought to free the country from Russian control, Mr. Lukashenko campaigned on a platform of reunifying Belarus with the Russian heartland and its fellow Slavs, while ending corruption.
After taking office, he set out to restore at least the symbols of Russian rule, and appeared determined, one diplomat said, to make this Kansas-sized nation of 10 million people a "Soviet theme park."
This year he and President Yeltsin signed a "unity" agreement, though it was watered down at the last minute at the insistence of Mr. Yeltsin's liberal advisers, who dislike Mr. Lukashenko and fear his right-wing Russian friends. But Mr. Lukashenko lost no time in (literally) re-hoisting the red flag.
"We have McDonald's, but no freedom of assembly," said Mr. Sannikov, the former Deputy Foreign Minister. "People have subsidence potatoes and vodka; the streets are clean and well-maintained. Lukashenko doesn't kill massively because he doesn't have to. This is the new face of dictatorship in Europe."
To express its displeasure, Washington has suspended some $40 million in aid. Europe, too, has frozen aid, as have the World Bank and the International Monetary Fund, all so far without visible political effect.
A report in April from the Organization for Security and Cooperation in Europe accused Belarussians of "constructing a system of totalitarian government" and found a "clear pattern" that the Government was using tax audits and fines to silence opposition.
The report also criticized a referendum last November that allows the President to rule by decree, and permits random arrests of opposition leaders. The new definition of "order" was characterized as "a complete lack of public expression of any views not authorized by the authorities."
Tax Auditors As Police Officers
It is no accident, diplomats say, that the first person expelled from Belarus was Peter G. Byrne, an American who directed the Belarus Soros Foundation, which finances about 80 percent of the country's tiny independent sector. (In Belarus there are 1,115 officially registered associations not controlled by the Government, only a handful of which are politically active or foreign sponsored.)
Mr. Lukashenko has set his tax collectors against virtually every major foreign-supported foundation, as well as the independent news media, arguing that they support the opposition.
"Lukashenko's gone over the edge," said the Rev. Paul Moore, an American who heads Citihope International, a New York charity that has provided more than $5 million in medicine since 1992 and which was recently told it must pay tax on its contributions. "As of now, we are out of business in Belarus."
The Belarussian Soros Foundation made 5,000 grants totaling just over $6 million last year.
One of the largest went to the foundation's "Step by Step" education project, which enrolls 1,000 Belarussians from kindergarten to high school. The program, which encourages children to think for themselves, had won the support of two education ministers and four deputy ministers since its inception four years ago.
But problems abounded even before the Government charged the foundation with tax fraud, said Irinia Lapitskaya, its director. Customs officers, for instance, kept a $5,000 wooden play house for Kindergarten No. 56 in Minsk in storage for more than a year until hefty duties were paid.
Also in jeopardy is Mr. Soros's support for high school debates, Belarus's only law library, the "Transformation of the Humanities" project, which oversaw the selection and publication of 53 new textbooks last year, and a $500,000 program to link Belarus to the Internet, a mainstay of Mr. Soros's philanthropy.
"The irony is we have connected state institutions to the Internet, but not yet the independent sector," said Igor Boskin, the foundation's technical director. "So from the Government's standpoint, this is a perfect place to stop our work."
Ivan I. Antanovich, the Foreign Minister, insisted in an interview that Belarus was becoming more democratic, but slowly. He said Mr. Soros had been "let down by his staff," who he said were supporting opposition political groups. In addition, he contended, the foundation had been "extremely careless with financial matters," a charge for which he offered no evidence.
"The foundation has not financed nor will it finance the opposition," Mr. Soros replied in the interview. "We insist on preserving our independence. We would like to stay in Belarus, but not at any price."
Looking Ahead, Mostly in Hope
If Mr. Soros regrets his decision to spend two-thirds of his time and half of his annual income on promoting democracy abroad and a more tolerant society in the United States, there is no sign of it.
He exudes the quiet confidence of a man who knows his access to almost any world leader, including President Clinton, is just a phone call away.
In the interview, he said his philanthropy was still most heavily influenced by his former professor, Sir Karl Popper, a philosopher who wrote a renowned critique of Marx and Marxism.
It was Popper's emphasis on addressing "unintended consequences" that led to some of Mr. Soros's most creative giving -- the $127 million in grants he made between 1992 and 1996 to Russian scientists to discourage them from selling their nuclear know-how to the highest bidder, for instance; or his $50 million gift in 1992 to help alleviate the suffering of Bosnia's civilians.
But he acknowledged that he was increasingly concerned about political developments in the Balkans and efforts by East European governments to centralize power.
Mr. Soros is deeply disappointed in Washington's failure to seize what he saw as a "historic moment" created by the fall of Communism. The West, he said, has failed to pour money and resources into bolstering the former Communist nations' pluralistic, tolerant and independent forces -- the forces that underpin Western democracies.
At the same time, he said, he is encouraged by the "growing social cohesion" of the people of the former Soviet bloc.
Yes, he had known failure, Mr. Soros said. "But I'm willing to have the failures to get the successes," he continued. "I was just naive in thinking that it was only a question of time before the U.S. Government and the American people would feel the same."
Copyright 1997 The New York Times Company