COTEMPORARY U.S. foreign policy challenges echo those that emerged in the immediate aftermath of the Cold War. From 1989 to 1994, with the dawn of a “New World Order,” the United States began a protracted process of bringing China and Russia into a more productive engagement with the West. It was predicated on the belief that economic policy shapes political systems and that free trade is one way to demonstrate the poverty of central planning. The legacy of that era continues today, with China better off thanks to free trade and Russia worse off due to its entrenched resistance to capitalism. 

Clear-eyed statements of the challenge from that era remain valuable, and merit attention. A bracing starting point is the January 1989 Foreign Affairs article “American Foreign Policy: The Bush Agenda” by former President Richard M. Nixon, primarily addressing post-Soviet Russia. One of the most astute statesmen on the modern world stage, Nixon devoted most of his post-presidential years to international affairs, writing prolifically and engaging with leaders worldwide, urgently during this period. 

Nixon’s chief interlocutors included a contemporary international business executive, Maurice R. (“Hank”) Greenberg, as immersed in international commerce as Nixon was in geopolitical strategy. Working with trailblazing investments in China begun in 1919 by his mentor, C.V. Starr, Greenberg became prominent for founding, in 1968, what he would lead to become the world’s largest commercial insurance company: American International Group (AIG).

For many years, the two maintained a vibrant correspondence on international affairs. That correspondence, along with related exchanges Greenberg conducted with other presidents and officials, illuminates contemporary challenges and potential solutions. It remains valuable for anyone interested in the sources and conduct of American foreign policy.

Greenberg and Nixon shared much in common, though from different perspectives: Nixon, the president and public servant; Greenberg, the global business executive who made U.S. foreign policy his and AIG’s business. They were both internationalists, realists, and pragmatists. Nixon was a contemplative thinker, Greenberg a quick study. Patriots to the core, both leaders influenced governments and businesses around the world. 

Greenberg’s position at AIG gave him uniquely valuable insights into global affairs and incentives to promote free trade as well as the rule of law. The company had major operations across the world, and Greenberg engaged directly with heads of state and senior officials. This was essential to protect the interests of both AIG and its client base of large international corporations, including the United States’ most visible multinationals.

During his tenure, Greenberg maintained close working relationships with all U.S. presidents, memorialized in substantial correspondence. President Jimmy Carter expressed his gratitude for Greenberg’s support of his effort to grant most-favored-nation (MFN) trading status to China—while both recognized that their views on many other matters of political and economic philosophy differed considerably. Greenberg shared more philosophically with President Ronald Reagan, who once in a letter to Greenberg aptly called Nixon “a great American hero.”

As vice president, George Herbert Walker Bush wrote to Greenberg, congratulating him on becoming chairman of the U.S.-asean Council for Business, stressing his personal commitment to strong economic relations with South East Asian countries. Greenberg’s correspondence with President Bill Clinton included many substantive letters, revealing both clear views and open minds. The younger George Bush, when president, wrote Greenberg to affirm their shared commitments to core principles that remain a national priority: “tax relief, fiscal restraint, and less regulation.”

Few business executives had the exposure and experience Greenberg enjoyed, making him a worthy correspondent of the Oval Office. On the subjects of China and Russia, the correspondence is valuable reading on two levels—substance for the savvy strategic thinking, especially on free trade and economic policy; style for the urbane, patriotic, statesmen-like argumentation. On substantive matters, two subjects stand out in Greenberg’s presidential correspondence: adamant support for MFN status with China, including through the aftermath of 1989’s Tiananmen Square crackdown, as well as support for private economic intervention in Russia after the collapse of the Soviet Union.

THE FRIENDSHIP between Nixon and Greenberg dated to their successful joint efforts, along with Henry Kissinger, in the revival of China-U.S. diplomatic relations in 1974 and economic exchange thereafter. For the next fifteen years, the two nations enjoyed increasing interaction in many spheres, economic, cultural, and diplomatic. The American trio believed such exchanges to be in the national interest. They held to those beliefs despite domestic convulsions in China.

In early summer 1989, demonstrators protested in Beijing’s Tiananmen Square, seeking freedom and democracy. On June 4, 1989, the Chinese government responded by massacring hundreds of the protestors and jailing tens of thousands, stoking worldwide howls of protest. In the United States, President George H.W. Bush issued executive orders halting arms shipments and high-level diplomatic engagement; the House proposed heavy economic and trade sanctions and suspended funding for a variety of U.S.-Chinese programs.

Greenberg, Kissinger, and Nixon led informal back channel diplomacy to work through the crisis. Their correspondence captured their thinking, which would ultimately inform U.S. policy. On November 17, 1989 Greenberg wrote to Kissinger, sharing highlights of his recent visit with China’s top leaders.

I don’t have to repeat for you the discussions with regard to Tiananmen Square and the attitudes in the U.S. to those events. I was blunt in my discussions in Shanghai as you were in Beijing and I was in the talks that I had. The other side of that issue is the belief on the part of Chinese leadership that they were confronted with an incipient revolution.

Moreover, as we were told repeatedly, the Chinese will not bow to pressure, never have, that simply increases their resistance and furthermore the differences in culture between our country and theirs is repeatedly pointed out as well as the original understanding when relations were reinstituted that we would not interfere in their internal affairs.

One of the purposes of the America China Society has been to maintain a continuity of bipartisan foreign policy towards China, and I would hope that the Society expresses its grave concern to the Administration with respect to pending legislation dealing with sanctions.

[S]anctions have not proven to be a successful foreign policy tool. In this instance, the application of sanctions would set back China-U.S. relations for some time. We can have more influence by maintaining relations than by freezing them. I would also suggest that it is not in our national interest, regardless of how we feel about what occurred within China.

I also believe that it is not in our national interest with respect to foreign policy in Asia and indeed the world (given the changes taking place in the Soviet Union and Eastern Europe) for us to reduce our relationships with China from where they were before Tiananmen Square.

Congress was moving on legislation that would impose punishing sanctions on China. In a letter to Nixon on November 27, 1989, Greenberg explained his opposition to these pending bills. The context was a report on two trips Greenberg had taken to China in the prior two months. On the first, he met with Zhu Rongji, then mayor of Shanghai, for a session of the International Business Advisory Council. Greenberg reported:

The session in Shanghai covered how Shanghai’s economic development could be aided and/or assisted by foreign business. I was very candid with Mayor Zhu, as you were the Chinese leadership, in expressing the outrage which was felt universally over the tragic events in June. I also explained that foreign capital is directed where it feels secure, where an adequate return on equity is assured, and where laws and regulations are in place and not subject to change at whim. In addition, I cautioned against Central planning in that it discourages foreign investment with the concomitant increase in bureaucracy and inefficiency.

Greenberg turned to his second trip of that quarter, to Beijing, where he met with the country’s top officials, including President Yang Shangkun and Premier Li Pen. He shared with Nixon the following impressions, starting with the personal: he described Secretary General Jiang Zemin as “forthright, knowledgeable, international in his outlook and, I believe, a person with whom we can do business.” On policy, the topic of sanctions, Greenberg wrote:

I share your view that sanctions at this moment are wrong—it is not in our national interest. Japan is gaining strength economically all the time and is exerting greater influence throughout Asia, making U.S.-China relations all the more important. The changes taking place in the Soviet Union and the uncertainness connected therewith, as well as Eastern Europe, reinforce the need to maintain a growing strategic relationship with China. Events in Europe, however, should not detract us from our interest in Asia…

The bill on sanctions being passed by Congress will obviously be harmful to U.S.-China relations. I personally hope that there might be sufficient amendments to this bill that would permit the President to veto it. President Bush has a keen understanding of China and has tried to contain the damage. I believe that vetoing it is in our National interest, and hence, would not result in domestic political repercussions for the President that would have any lasting damage.

In Congressional debates, while the rhetoric of retribution reverberated, a few statesmen embraced the views Greenberg and Nixon urged. For one, Senator Alan K. Simpson on November 21, 1989, on the Senate floor, lauded Nixon’s insights. He urged colleagues to learn more from him, putting into the Congressional Record Nixon’s contemporary piece, “The Crisis in Sino-American Relations.”

Senator Simpson stressed a broader point about the under-tapped value of former U.S. presidents in ongoing foreign policy, calling it a “tragedy that we do not utilize the energy, the background and the history that former Presidents can bring to us,” listing Ford, Reagan, Carter, and Nixon. While such an aspiration remains unfortunately remote in American political life today, Nixon’s influence, as well as Greenberg’s, was felt on China in the early 1990s.

THROUGHOUT THOSE years, they continued to press for sustained economic and other exchange between the United States and China. They pressed particularly on free trade, which they believed was the route to economic prosperity and ultimately political reform in China. They supported granting MFN status to China, including giving the president more autonomy on trade negotiations with less Congressional oversight (called fast-track authority). This outlook was reflected in a series of letters between the two men in mid-1991. In a May 1, 1991 letter to Nixon, Greenberg reported on AIG’s public advocacy on this issue:

Our company recently ran a full-page ad in major national newspapers in support of retaining the President’s trade negotiating authority under the “fast track” procedure. We feel strongly about this issue and its importance to enhancing American competitiveness. I thought you would be interested in seeing a copy of our ad.

The letter contained a handwritten note in black felt tip pen in Hank’s hand: “P.S.: I am increasingly concerned about MFN for China.” Nixon wrote on June 4, 1991 agreeing, calling one of Greenberg’s recent op-eds on the point “right on target.”

As you point out, while punishing China for its human rights abuses would be detrimental to American business interests, such action would be even more detrimental to those who favor human rights in China.

As we learned in Korea and Taiwan, economic reform inevitably leads to political reform. While it would take more time that also will be the case in China. If we isolate China economically and diplomatically, we will go back to the situation which existed before our opening in 1972 when there was no trade between the two countries, no Chinese students studying in the United States, and no American tourists visiting China.

 I have often made the point that the Great Wall of China is very thick. It is very difficult to be heard when you are inside the Wall. When you are outside the Wall, it is impossible to be heard. If we want to have any chance whatever to influence the hardline leaders in [China], it is indispensable that we be inside the Wall rather than outside.

Beyond Nixon, Greenberg maintained a vibrant correspondence with all former presidents, even those, such as Jimmy Carter, with whom he did not generally see eye to eye. On momentous issues of the day at the center of foreign policy and the national interest, views often coalesced. President Carter wrote to Greenberg on June 25, 1991, calling their published views “very compatible.” Carter explained:

Because I am known to be both a major advocate of human rights and someone committed to China’s future, I put a lot of thought into my recent trip to China and the way in which I have addressed the current situation. I believe that our moral pressure on behalf of human rights has a better chance of working if we keep the channels of communication open with China rather than effectively closing the door in retribution.

My move, as President, to normalize relations with China and subsequently to grant Most Favored Nation status was certainly not without its detractors. I believe that those actions had a major impact on the positive change we have seen in China.

Reaching out to Nixon would prove a helpful channel in the ensuing presidential election, where Bill Clinton mounted what would be a successful campaign against President Bush. Tidings of this concern began to appear in the Greenberg-Nixon correspondence as that campaign heated up. Greenberg stressed the need for both continuity and quiet diplomacy, in a letter to Nixon of August 26, 1992:

China policy should be fairly clear. As you have so frequently stated, we must not cut off a billion people. Staying engaged in trade and economic success will ultimately bring about political reforms. Be frank and discuss issues that we consider to be problems; i.e., human rights, sale of weapons systems, nuclear proliferation, etc., but talk privately and quietly. China rejects interference in its internal affairs and hence a delicate balance is needed. China will play an increasingly important role in Asia especially as trade and investment within the region increases. We must maintain a positive relationship.

Nixon replied on September 8, 1992:

I found your letter of August 26 to be very perceptive and at the same time very troubling. Perceptive because of your analysis of the situation in Asia is right on the mark based on my observations over the years. Troubling because there is no chance … for any administration initiatives until we get past the election. With foreign policy rated only in single digits in the polls, neither Bush nor Clinton can be expected to endorse a bold new initiative.

To keep President Bush up-to-date, Greenberg wrote to the president on October 2, 1992: “I have just returned from Beijing and AIG has been granted the first insurance license since the Communists took over the country in 1949. This is further evidence of the reform movement gaining strength and opening more of the economy to the outside word.”

The Greenberg-Nixon vision was working, as Greenberg reported to Nixon on October 27, 1992, but seemed at risk: “I met with Li Peng and Jian Zhemin. All are concerned about a Clinton victory and the linking of trade and human rights to MFN. China’s economy is moving ahead very well … Foreign investment is increasing and if we change our bipartisan policy to China, American investment will be left behind.”

In Nixon’s November 2, 1992 letter to Greenberg, after saying he found Greenberg’s report to be “fascinating,” he continued: 

With regard to China, a crisis may develop if the polls are right and Clinton is elected President. He has strongly criticized the Bush Administration’s position on MFN which you know is absolutely sound. We can only hope that he will resist the advice of radical activists who demand that we punish China for human rights abuses by rescinding MFN to China. . . . [P]olitical progress inevitably follows economic progress as has been demonstrated by what has happened in Korea, Taiwan and Chile. Rescinding MFN, therefore, would hurt the cause of human rights rather than help it.

On November 3, 1992, Clinton was elected president. Two days later, on November 5, 1992, Greenberg spoke by phone with President Carter, and afterward sent a letter recapping his recent visits with Chinese leaders. A classic letter of bipartisan appeal in a matter of U.S. foreign policy, Greenberg wrote in the spirit of promoting policy continuity between the outgoing Republican and incoming Democrat administrations: 

During this visit I met with the top leaders in Beijing. All expressed concern about future U.S.-China relations—principally MFN. MFN has had the support of each President since relations were re-established under your Administration. Conditioning MFN would put our relations in a deep freeze and would benefit most of our competitors—the Japanese, Germans, French, Italians, etc. Moreover, it is hard to see how the United States can have an Asian policy without including China. One needs only look at the map. As you know, Mr. President, AIG was founded in Shanghai, and we have extensive operations throughout Asia. I personally visit the region several times a year and know most of the leaders in the region and would be concerned about our influence in Asia if we caused change in the bi-partisan approach that has existed for a number of years.

We don’t have to agree with China on everything and indeed we don’t. Our differences should be discussed quietly and privately. Negotiating with China in the press is a poor strategy. The Chinese do not succumb to public pressure. The economic progress taking place in China is enormous. Zhu Rongji has been added to the Standing Committee (former Mayor of Shanghai and a very good friend) and put in charge of virtually all aspects of the economy. I strongly believe that political progress will follow economic progress. In fact, punishing China by conditioning MFN will play right into the hands of the hardliners and set back reform that would otherwise take place. … [I]t would be very useful if there was some indication of President Elect Clinton’s views on [this] subject.

Greenberg’s ensuing correspondence with President Clinton likewise demonstrated mutual respect and a shared sense of the national interest. In at least a half dozen letters during 1993 and 1994, President Clinton expressed his thanks to Greenberg for input on U.S. foreign policy. In a letter to Greenberg dated June 15, 1993, Clinton confirmed his commitment to China, echoing Greenberg’s views:

As you know, [I recently] announced renewal with conditions of MFN for China. I have deep concerns about China’s record on human rights, proliferation and trade. At the same time, I am well aware of the importance of the China market to U.S. businesses. Indeed, U.S. companies are a powerful force for change in China.

The following year’s letter, of August 26, 1994, testified to the positive momentum of this policy. President Clinton wrote of his recent grant of MFN status to China, saying the “world’s fastest growing economy … will lead to more trade, more international cooperation, and a more productive dialogue on human rights issues.”

Clinton was right—and so were Presidents Carter, Bush, and Nixon, as well as Greenberg. As told in The AIG Story, published in 2013:

China and the U.S. should open negotiations for a free trade agreement between them. Negotiations will be protracted and punctuated by impasses, but instead of trading accusations and meeting dead-ends, by discussing concerns in the context of a formal negotiation driving toward an agreement, the chances of success are substantially improved. While agreement on some issues may prove impossible, progress on others are all but certain and will create a productive trade climate. Greenberg believes that China is prepared for such an agreement and that it is in U.S. national interest. A free trade agreement is far superior to a trade war.

Those words still resonate. Russia was a different story.

NIXON’S JANUARY 1989 Foreign Affairs opus dissected the challenges in Russia with scrupulous, if unorthodox, care. Nixon sent Greenberg a copy, with a note saying he’d “find that it differs from some of the conventional wisdom embodied in the fashionable Beltway line.” The principal themes drove a middle course between the day’s hawks and doves, offering a pragmatic realist assessment of Russia under Gorbachev. Some highlights:

Those who urge the West to “help Gorbachev” with low interest loans and subsidized credits fail to realize that such actions are not in our interest until he makes an irrevocable break with the Kremlin’s past policies.

Gorbachev has launched his reforms and pursued a more conciliatory approach to the West because the communist economic system failed at home and the Soviet Union’s foreign policy became counterproductive.

Unlike his predecessors, Gorbachev sees the world without ideological blinders. He has realistically assessed the Soviet Union’s enormous economic, political, imperial and geopolitical problems.

Gorbachev’s goal is to reinvigorate his country’s communist system. He does not want to overturn the Soviet system; he wants to strengthen it. To paraphrase Churchill from another context, Gorbachev did not become general secretary to preside over the demise of the Communist Party.

Greenberg replied on February 7, saying of Nixon’s framework: “The new foreign policy team in Washington would do well to follow this road map.” Greenberg added: 

I couldn’t agree more that Gorbachev is a super public relations campaigner and is in desperate need to enlist all the help he can from the West to try and rescue his economy. The likelihood is that no amount of capital, credits, even managerial assistance, will make much difference in the end. He can issue all the statements he would like to separating the political apparatus from economic/managerial decision making, but “memorandum” won’t accomplish the end result.

The culture is embedded and will take decades to unwind and not without great sacrifice. Change, if there is to be change, will come from public dissatisfaction with the system, but how will this occur in the Soviet Union given the strong security apparatus that exists?

By year-end 1989, Nixon and Greenberg continued to be skeptical of Gorbachev, even as many worldwide celebrated him. Nixon published a one-page essay in Time magazine and sent a copy to Greenberg.

The picture Nixon painted, in broad strokes, began by noting that, in one sense, the Cold War was over. The West had won. Democracy and capitalism had defeated communism and planned economies. On the other hand, the Soviet Union was still standing and, Nixon wrote, “a Communist named Gorbachev is the most popular man in Europe.” While citizens of newly-liberated eastern European countries rejoiced in their rediscovered freedom, Gorbachev remained a “proud Russian nationalist” dedicated to Marxism.

Before the Soviet Union’s collapse, Gorbachev ran a military superpower using Third World economic power. Facing enormous economic demands to pay subsidies to its far-flung client states—Cuba, Vietnam, Ethiopia, Angola, and Nicaragua—and an expensive war in Afghanistan, some kind of change was imperative. After sobriety and anti-corruption reforms failed, boldness was in order, Nixon said, noting that his “purpose was not to abandon Communism but to save it.”

In doing so, he fooled the West, becoming “the darling of Western intellectuals and pundits.” Gorbachev’s political reforms, called Glasnost, were “breathtaking” compared to the erstwhile Soviet oppression. To Nixon, however, they remained “totally inadequate compared with a free society.” Worse, his economic reforms, called Perestroika, had been “an abject failure,” as Russian per capita income had fallen. To Nixon, while Gorbachev had only marginally changed Russia, he had transfixed and transformed the world by making the West believe his reforms were real when they were not.

Russian military power and related spending was sustained. To quote Nixon again: “Even if he has been sounding to some hopeful ears like a dove, his bristling talons still make him look like a hawk.” As for freedom spreading across Eastern Europe, to Nixon these were the result of forces Gorbachev knew he simply could not control. The new Russia had not suddenly come to embrace Western values such as political pluralism, individual rights, or a free-market economy, Nixon said. Without radical shifts from central planning to decentralized spontaneous economic coordination, Western dollars would encrust communism and Gorbachev’s grip on power, rather than facilitate the “advent of democracy,” to use a phrase Nixon borrowed from Andrei Sakharov.

Greenberg concurred. He did not find the Washington consensus, focused on Marshall Plan type foreign aid, to be the right approach. He sought a private-sector solution, one that would target development of an economy in Russia that would push back against political oppression. Gorbachev had been succeeded, in 1991, by Boris Yeltsin, taking the title of president of Russia and seeming more open to genuine economic reform ideas.

IN A letter dated September 3, 1991, to David Abshire of the Center for Strategic and International Studies (CSIS), Greenberg’s ideas were clearly the perspective of a business executive: a private sector initiative, enlisting the best global companies, incentivized with profits, and creating targeted economic opportunities. Each leading multinational in every major industry would adopt a Russian counterpart by making a substantial equity investment, providing strategic and managerial direction, to build the country’s infrastructure across all sectors, from agriculture to transportation. Financing would be supported by soft loans from global export-import banks.

Nixon agreed with Greenberg, noting that prevailing talk of an effort equivalent to the Marshall Plan was flawed. In a March 9, 1992, letter to Greenberg, the former President wrote:

The Marshall Plan analogy does not work for the Soviet Union. While five years of devastating war did not destroy the management class in Western Europe and Japan, seventy years of Communism did exactly that in the Soviet Union. A new class cannot be built through government action, but only by enlisting private enterprise on a massive basis.

On the same day Nixon wrote his letter, Greenberg had sent one to President Bush. It referenced the recent remarks of Ambassador Vladimir Lukin expressing enthusiasm for some form of partnership between Russia and the United States to solve Russia’s enormous economic problems.” Greenberg said he was “writing to outline one way I believe this partnership might work very effectively.” Reflecting both Greenberg’s political astuteness and his farsightedness, he prefaced the proposal as follows: 

The future of Russia may seem a second or third level issue for many Americans in this political year with its focus on domestic economic issues. But if we relegate the issue to that status, we may lose not only Russia, but the peace dividend as well as an historic opportunity. It is not pleasant to contemplate the world in ten years if Yeltsin fails in his efforts to transform the Russian economy and power reverts to a right-wing group reasserting Russian nationalism.

Those words, alas, would prove prophetic. The premise to the proposal was designed to counter the direction policy seemed to be taking: “Money alone will not be enough, no matter how much the G-7 nations might pledge. The lack of a financial infrastructure, a managerial class, and a culture of entrepreneurship are serious impediments.” A slightly more formal and delineated version of the proposal he had sent to Abshire followed. Greenberg spelled out the proposal in just a few paragraphs:

The United States and the other G-7 countries develop a program of soft loans to a select group of companies, who would in turn “adopt” Russian companies, providing managerial, technical and financial assistance, and obtaining equity in the Russian enterprises in return. This is surely better than outright grants to Russia, as the funds would be used more productively and combine with the skills the Russians really need.

Under this approach, we and the Russians could target the highest priority sectors—e.g., agriculture, distribution, consumer products, transportation, financial services for detailed economic development programs, with investments being made in various time frames.

The G-7 countries would sell equipment and other material, thus creating jobs at home and benefitting the Western economies. The incentive for the companies involved would be to gain an equity foothold in a potentially huge market. By targeting specific industries, building in a systematic way from the ground up, and delegating responsibility to the private sector, we would avoid the bureaucratic quagmire that is otherwise certain to occur.

Having made the proposal, bracing in its combination of boldness and simplicity, Greenberg concluded on a note of both patriotism and private sector initiative:

I strongly agree with your often-stated view that we cannot separate domestic issues from foreign policy in today’s world. This is especially true when it comes to an issue of such vital importance to the West as the future of Russia. I believe, Mr. President, that you can seize the moment by exercising the strong leadership that is your trademark.

American business stands ready to help, as I am sure does the private sector in every Western industrialized nation. The United States is the country that rightly should lead this effort. I hope we will.

Nixon concurred. In a letter to Greenberg of March 20, 1992, he called the letter, using a favorite phrase when describing proposals that he supported, “right on target.”

Greenberg got to work that spring, building the relationships and taking the necessary steps to effectuate his vision. In an August 26, 1992 letter, he updated Nixon:

I have just returned from a business trip to Moscow and spent the better part of two days with Uri Skokov. We are working towards the development of a Russian/U.S. Investment Bank and one or more insurance companies. Things are not getting any better there. In fact, there is an ever-growing concern that the Gaidar Plan is failing and that more and more old military-industrial complex managers are coming back into power. Skokov, of course, is one of them, and he continues to indicate there is a limited window of opportunity, as you repeatedly pointed out.

Nixon responded soberly in a letter of September 8, 1992: “I share your concerns with regard to developments in Russia.” Nevertheless, fruits of Greenberg’s toils were emerging by the fall of 1992. In an October 27 letter to Nixon, Greenberg wrote: 

I returned from Moscow last night after an hour and a half meeting with President Yeltsin where he signed the Decree which provides for the first (and only) Russian-American Investment Bank. AIG is the major investor on the U.S. side, along with Chemical Bank, Smith Barney (Frank Zarb), and Wolfensohn Rothschild. On the Russian side, it is a collection of many of the Republics within the Federation that control the vast majority of oil, gas, and other natural resources.

The Pension Fund for Russia as well as the Fund for the benefit of the military and the City of Moscow are shareholders The Investment Bank will be responsible for assisting in privatizing joint ventures, financial advice, and development projects within Russia. Obviously, it is expected that Russian shareholders will use the Bank for the purposes described. It will also be an entry point for many foreign companies wishing to establish relationships with any of the Russian shareholders.

In developing these financial initiatives, it remained the goal to help evolve both Russia’s economy and its political stability. To this end, personalities continued to matter a great deal. Where Greenberg and Nixon had been deeply skeptical of Gorbachev, Yeltsin seemed a promising turn. Greenberg continued in his October 27, 1992 missive:

I believe President Yeltsin is in far better shape politically than the press makes it out to be. The demonstrations that took place in Moscow over the weekend could hardly be noticed, but the press had people believe thousands of thousands of people were demonstrating. Gaidar’s tenure is to be short lived. There will be a change in the Prime Minister probably before the year end.

One of the possible successors will be Uri Skokov (the one with whom I negotiated the Investment Bank). He now has been given the added responsibility for manufacturing and industry and to negotiate with the Republics in the Federation of Russia to develop a new constitution. Skokov is currently Secretary of the Security Council. I get along with him quite well and like him. He is a pragmatist.

Yeltsin spoke very highly about President Bush and is concerned that a Clinton victory, if it occurs, will slow down the progress in US Russian relations but was careful to say that he met with Clinton and the American people have to decide who their President will be. He spoke very highly of you, Mr. President, and pointed out that I was sitting in the same chair you sat in a few weeks ago when you met with President Yeltsin in the Kremlin. He also spoke approvingly of the “Fund for Democracy”. I said we would try to have the Investment Bank work closely with the “Fund for Democracy.”

Nixon replied in a November 2, 1992 letter, as follows:

I found your letter … fascinating. I was particularly pleased that you have gone forward with the Russian-American Investment Bank. Unfortunately, one of the negative fallouts from the present campaign among many is that the most important issue of our time—the survival of democracy in Russia—is on the back burner. I’m sure you were as shocked as I was to see that State Department spokesmen were suggesting that because Yeltsin was not going forward fast enough removing troops from the Baltics, it would be necessary to delay the modest amount of aid provided for in the Freedom Support Act.

What we all have to realize is that there is no acceptable alternative to Yeltsin. We have to stick with him as he makes necessary pragmatic compromises in trying to implement his economic and political programs. If Clinton wins, as most polls predict, hope that some of the Jackson Democrats, who are on the board of the Fund for Democracy and Development, will take him on the mountaintop and convince him that he should play a more positive role in helping Yeltsin survive in this very difficult transition. I intend to continue to address this problem whenever I have the opportunity to do so.

Two days after Clinton’s election, Greenberg’s November 5, 1992 letter to Carter included this update on Russia:

I recently returned from a meeting with President Yeltsin in Moscow, where he signed the decree permitting the establishment of the Russian American Investment Bank, the first and only one of its kind. This institution, in which AIG led the way, will assist in privatizing Russian industries, encouraging joint ventures, etc. But most important is the effort that should be undertaken with a high priority by the new Administration to assist Russia in her conversion from a command to a market economy.

The current effort underway simply won’t work. The approach is too “academic” and lack of experience in institutions so vast as to make it impossible to see any real hope in their current struggle. The likelihood is that they will soon slow down the current process and take more time to achieve a conversion to a market system...

Greenberg wrote to Nixon on November 30, 1992: “I hope the Clinton people don’t take too long in recognizing the importance of [supporting] Russia. When I met with Yeltsin a few weeks ago, he was very concerned that there would be a vacuum for months which would be intolerable from their point of view.”

President Clinton wrote to Greenberg on July 1, 1993: 

Our objective is to support the historic movement toward democracy and free markets that is taking place in that region. As Russia’s first democratically elected leader, President Boris Yeltsin has our support, as does his reform government and all reformers throughout the Russian Federation.

I [recently] announced initiatives that will provide immediate and tangible results for the Russian people. The programs are already funded and are in the process of being implemented. … A productive and prosperous Russia can add billions of dollars in new growth to the global economy. That would mean new jobs and new investment opportunities for Americans. … We are investing not only in the future of Russia but also in the future of America. As we move to create a more prosperous and more democratic world, I appreciate your ideas.

CLINTON’S SENTIMENTS were sound, but this chapter of history differs greatly from that of China in the comparable period. As recounted in The AIG Story:

Yeltsin was poised to adopt an aggressive approach to economic reform, including the rapid transformation of how resources were allocated. Under this radical approach, however, some dark forces emerged as communist era apparatchiks became oligarchs grabbing control of large chunks of the economy. Greenberg urged Yeltsin and other officials to take a more moderate approach, one that centered principally on adopting policies that would attract foreign investment into the country. This meant embracing the principles of private property, freedom of contract, and the rule of law. Greenberg believed that it was important to help Russia attract capital needed to resurrect its collapsed economy, rebuild its eroded infrastructure, and establish a reliable banking system.

These efforts for a private investment bank in Russia, however, came at the wrong time. The rule of law in Russia was simply too vague to support the kinds of commitments inherent in the investment banking relationships that … Greenberg envisioned. It was impossible to persuade Yeltsin to support the policies that would attract requisite foreign private investment. Although the oligarchs were enthusiastic about becoming investors themselves, they did not invariably support the kinds of reforms necessary to protect outside investors. The Russian economy stagnated through 1995 and, as erstwhile satellite states of the Soviet Union broke free across Eastern Europe, Russia defaulted on its sovereign debts in 1998. The ensuing crisis stoked Soviet-style appetites for order. In 1999, this brought to power Vladimir V. Putin, who reasserted substantial state control over the economy.

That control continues to this day. Had Greenberg’s visionary insights and recommendations been followed more closely, a different outcome might have been possible. Several decades later, his keen judgments have lost none of their force.

Lawrence A. Cunningham, a professor at The George Washington University Law School, is the author of a dozen books, and co-author, with Mr. Greenberg, of The AIG Story.

Image: Reuters.