The United States began providing limited assistance to the Soviet Union in December 1990 to support the reform effort and then increased assistance after the Soviet Union dissolved in December 1991. In October 1992, the Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act of 1992 (P.L. 102-511), commonly known as the Freedom Support Act, was enacted. It further increased assistance to the former Soviet Union and established a multiagency approach for providing assistance. It also called for the designation of a coordinator within the Department of State whose responsibilities would include designing an assistance and economic strategy and ensuring program and policy coordination among federal agencies in carrying out the act’s policies. The Freedom Support Act sets forth the broad policy outline for helping former Soviet Union countries implement both political and economic reforms. It also authorized a bilateral assistance program that is being implemented primarily by USAID. In January 1994, the State Department Coordinator approved the first overall U.S. assistance strategy for the former Soviet Union, and in May 1994, the Coordinator approved the strategy specifically for Russia. This strategy has three core objectives: (1) help the transition to a market economy, (2) support the transition to a democratic political system, and (3) ease the human cost associated with the transition. As of December 1994, USAID had obligated $1.4 billion and spent $539 million for programs and projects in Russia since fiscal year 1990. (See app. I.) USAID’s assistance to Russia has focused on 13 sectors, such as health care and housing, that support the three U.S. objectives. Hundreds of U.S. contractors and grantees are responsible for implementing individual projects in the 13 sectors. The 10 projects we reviewed showed mixed results in meeting their objectives. Two projects—coal industry restructuring and housing sector reform—met or exceeded their objectives. Five projects—voucher privatization, officer resettlement, small business development, district heating, and agribusiness partnerships—met some but not other objectives. Three projects—health care, commercial real estate, and environmental policy—met few or none of their objectives. Three of the 10 projects we examined were contributing significantly to systemic reform—that is, they were making fundamental structural changes. These projects were effecting change because they had sustainability—benefits that extend beyond the project’s life span—built into their design and they focused on issues on a national or regional scale. The housing sector project helped Russian ministries and agencies implement 38 laws, regulations, and decrees to reform housing policies and practices. The Urban Institute, which implemented the project, also completed a series of pilot projects related to housing maintenance, mortgage lending, rent reform, and property rights. Many of the activities affect the entire country or could be replicated in additional cities. The project helped create new institutions, strengthened existing ones, and distributed procedural guides and manuals to local governments as a way to sustain the reforms. The contract for implementing the voucher privatization project called for Deloitte & Touche to establish 35 voucher clearing centers in cities throughout Russia. This project encountered some difficulty in meeting its initial time frames and establishing all the centers, but overall the project was successful. The active centers handled 70 million voucher transactions as part of Russia’s unprecedented privatization program, and over half the centers participate in ongoing capital market activities. Partners in Economic Reform (PIER), which implemented the coal restructuring project, has facilitated movement toward the transformation of the entire coal sector. PIER helped build a consensus for reform among the Russian government, mine labor unions, and mine management. It was also instrumental in facilitating a World Bank review that could lead to a restructuring loan. To sustain the project’s contribution to systemic reform, PIER helped establish long-term business relations between the Russian and U.S. coal industries, formed a consortium of U.S. coal-related business, and is involved in social safety net and new job-creation activities. Finally, PIER helped facilitate the sale of U.S. equipment in Russia. Seven projects we examined did not contribute significantly to systemic reform because they either did not meet their objectives, were narrowly focused, or lacked sustainability. The University of Alaska sought to help develop small businesses by establishing American Russian Centers in four cities across the Russian Far East. The centers’ purpose was to help train entrepreneurs, help form new businesses, and build lasting business ties between the region and the United States. To become self-supporting after USAID stopped funding, the centers planned to develop partnerships with counterpart institutions. However, the centers have so far been unable to attract alternative funding. CH2M Hill International Services, Inc., signed a contract in September 1993 for an environmental policy development and technology project. The contractor had difficulty filling critical staff positions in Russia and providing required work plans for the activities. Of the work plans due in November 1994, one was approved in May 1995, while the other was still being revised as of June 1995. The project to provide health care financing training in the United States to Russian health professionals was implemented by Partners for International Education and Training (PIET), several training institutions, and USAID. Although PIET and the institutions provided the training as required, the Russian participants did not have the authority, expertise, or resources to make systemic changes. In addition, changes in Russia’s health reform plans have made the training irrelevant. A commercial real estate project, implemented by International Business & Technical Consultants, Inc. (IBTCI), was intended to create a standard approach for increasing the availability of commercial real estate in six Russian cities. The project design called for a pilot project/roll-out concept, but IBTCI did not roll out the pilot in any of the cities and used a different approach in each city. Also, Russian officials said the project had little or no effect on the availability of commercial real estate in their cities. The district heating project, which USAID recommended we review, was implemented by RCG/Haggler Bailly and met its objectives primarily by conducting energy audits and training as well as providing energy efficiency equipment to two Russian cities. However, as of February 1995, some of the equipment in one of the cities had not been installed. Russian officials said the equipment may never be installed because Russian authorities never certified it. USAID had not monitored the use of the equipment or followed up on the impact of the studies produced for the project. Consequently, we found no indication that the project contributed to systemic reform in the energy efficiency area. The agribusiness partnerships project, implemented by Tri Valley Growers, helped two U.S. companies establish joint ventures in two Russian cities. Although the involvement of U.S. companies increased the probability that the business ventures would be sustained, the limited scope of the partnerships makes it unlikely that they will have a significant effect on reforming Russia’s agricultural sector. USAID has discontinued the entire agribusiness partnerships project in Russia. The Russian officer resettlement pilot project was not intended to be sustainable after its completion, but instead was motivated by the United States’ desire to encourage the withdrawal of Russian troops from the Baltic countries. The $6-million pilot project objective was to construct 450 housing units to resettle demobilized officers by July 1994. As of February 1995, 422 units were either occupied or available for use, so in that sense the project was successful. Successful projects (1) had strong support and involvement at all levels of the Russian government, (2) had a long-term physical presence by U.S. contractors in Russia, and (3) were designed to achieve maximum results by supporting Russian initiatives, having a broad scope, and including elements that made them sustainable. A critical element to a project’s success was the degree to which Russian officials were committed to reform in the particular sector. Russians at both the federal and local levels demonstrated a strong commitment to the projects that were contributing to systemic reform. The Russian government also provided financial or in-kind support, and Russian nationals held leadership roles in the projects. For example, PIER’s approach to implementing the coal project included working with officials in the Ministry of Fuel and Energy, Fund of Social Guarantees, and the federal coal company; academic institutions; oblast’ and city officials in the two targeted regions; local mine management; and representatives of two labor unions. Russian nationals served as codirectors, and PIER staff received free apartments and office space. To accomplish the housing sector reform project, the Urban Institute worked closely with officials in the Ministries of Finance and Economy and the State Committee on Architecture and Construction at the federal level, the Moscow city government, various maintenance firms, banks, and grass-roots condominium associations. Although office space in Moscow is expensive and scarce, the Institute received free office space. In addition, Russian nationals played a key role on the Institute’s staff. In contrast, many less successful projects lacked the buy-in of Russians at either the local or federal level and had little Russian involvement or contribution. For example, the State Committee of the Russian Federation for the Management of State Property (GKI), Russia’s federal agency overseeing the privatization effort, was instrumental in designing the voucher clearing and commercial real estate projects. However, in some cities, local officials were not involved in designing the projects and had little interest in them; as a result, these projects were not fully successful. The officer resettlement project established housing in several cities, but not in Novosibirsk, where city officials reneged on a previous administration’s commitment to provide needed infrastructure support. Because officials at the federal and oblast’ levels were not involved in the initial agreements, they had no authority to require the new city administration to fulfill the contract, nor were they willing to provide additional funding for the project. The district heating project was not completed in Yekaterinburg because local officials did not allow monitoring equipment to be installed.