November 19, 2008
ODESSA, Ukraine (JTA)—Across the former Soviet Union, Chabad’s outreach network is facing an acute financial crisis that has slashed budgets across the board and left the region’s largest network of Jewish schools scrambling to stay afloat.
Accounts of the depth of the financial crisis for Chabad in the former Soviet Union vary widely among rabbis and professionals working for the organization. But everyone agrees that the group’s main benefactor, Lev Leviev, racked by the world financial crisis, has been forced to dramatically scale back funding for the Or Avner network of schools, which he founded.
The repercussions of the setback run deep in a community that has relied greatly on Leviev’s largesse to proliferate its operations throughout the Soviet Union.
Leviev’s main holding company, Africa Israel, has lost some 85 percent of its value this year. Israeli news reports suggest a steady sell-off of other assets in recent months.
Forbes estimated Leviev’s wealth at the beginning of 2008 at $4.5 billion. Though local Chabad officials are mum, most estimates put Leviev’s yearly funding of the Chabad-run Federation of Jewish Communities and the Or Avner Foundation at $60 million. The Or Avner school system was founded by Leviev in 1992 as a tribute to his father. It serves 13,000 people through its network of 75 day schools and 20 other programs.
Leviev’s woes come as the global financial crisis takes particular hold in the two largest countries of the former Soviet Union—Russia and Ukraine. The crisis has hit the region’s oligarchs the hardest and drastically reduced the pool of capital available for local charitable donations.
Share prices on the Russian stock exchange have fallen 75 percent since May, and the oligarchs have been the hardest hit so far. Their net worth has fallen from $300 billion in May to just over $70 billion today, according to an article in the leading Russian business daily Vedomosti.
The financial crisis has constricted all the usual pipelines through which Jewish money flows into the former Soviet Union to educate the young, feed the infirm and bolster community ties.
The two other networks of schools in the region, the secular ORT system and the Orthodox Shma Yisrael, have suffered from cutbacks undertaken by the Jewish Agency for Israel. Shma Yisrael has lost $200,000 in funding and the ORT schools are struggling through a budget cut of $1.2 million in recent months, according to ORT officials.
Two of the largest local funders of Jewish causes in Ukraine, Igor Kolomoysky and Gennady Bogolubov, also have lost billions since the financial crisis hit, according to a report by Dragon Capital published in the Kyiv Post.
Here in Odessa, the southwest limit of Chabad’s reach in the former Soviet Union, the head rabbi has already relegated Leviev’s charity to the past tense, a luxury no longer to be relied upon.
"The help that Mr. Leviev gave, it was unique help. It was stable and every month you knew the foundation was good," Avraham Wolf said, sitting behind the desk of his office in the back corner of a two-story synagogue. "We were very thankful that he opened the schools. He gave us a big help. Now it depends on every city and every rabbi."
The rumblings of a coming crisis appeared in mid-August, Wolf said, and the money from the Or Avner Foundation stopped coming at the beginning of September.
He has closed one section of a school and started bussing children across town for classes. Four school branches are now consolidated into three with 490 students. They have shortened the hours of the schools. School directors across Ukraine described similar situations.
"You can’t tell a child that lives near you that tomorrow morning there won’t be a glass of milk," Wolf said, referring to the kosher breakfasts they serve each morning.
Thirteen Israeli families living and working in Odessa had gone without pay for two months because of budget shortfalls, he said.
Some employees of the Chabad-run Federation of Jewish Communities in Moscow also have been working with reduced or no salaries for two months, said one local community member with close ties to Chabad.
Ukraine is one step removed from Leviev’s funds, which are sent to local accounts from the Russian foundation, and that money stopped coming this fall, according to a Jewish community leader in Ukraine.
Russia’s head Chabad Rabbi Berel Lazar met with rabbis from across Ukraine in Kiev last week to discuss the financial crisis.
Speaking by phone Wednesday from New York where he was attending an annual gathering of Chabad emissaries, Lazar told JTA that the rabbis were determined to continue in the face of the crisis.
"They are going to places where there are no local sources to fund raise, and they are not giving up," Lazar said. "Our rabbis are standing out there, saying we’re not going to let the rebbe down," referring to the seventh Lubavitcher rebbe, Menachem Mendel Schneerson, who inspired Chabad’s emissary missions.
Rabbi Shmuel Kaminetsky, the head rabbi of the Ukrainian city of Dnepropetrovsk, said that last week the Or Avner schools in Ukraine received their first infusion of cash from the Moscow-based foundation in two months, though it wasn’t as much as the schools usually receive.
Both Chabad officials in Moscow and a spokesman for Leviev say that the funds have not stopped, rather that there has been a cut of 30 percent across the board. Leviev also has asked the Chabad-run Federation of Jewish Communities to cut costs, according to Chabad officials in Moscow.
Lazar said that rabbis had been told not to take out loans to cover the costs of their communities, because of credit rules and cultural norms in Russia that make credit more problematic.
He said the cuts came as no surprise to Chabad leaders in the former Soviet Union.
"Mr. Leviev was one of the first people that said it looks like the crisis is going to hit us and that we have to get ready it for it," Lazar said.
Chabad’s other major funders include Russian billionaire Roman Abramovich and the New York-based philanthropist George Rohr. British newspapers abound with accounts that, in the wake of the financial crisis, a cash-strapped Abramovich has been forced to cut back the budget for his Chelsea soccer team, but Chabad representatives would not disclose drops in funding from other donors.
In Ukraine, a collapse of the commodities market forced the country to seek a $16.5 billion loan from the International Monetary Fund this month. There, Ukraine’s oligarchs have born the brunt of the collapse as well.
Kaminetsky said that even the billionaires themselves had no idea how much they had lost and that their commitments had not changed.
Vadim Rabinovich, a Ukrainian media magnate and donor, said during a panel on fundraising in October that he hoped to meet with rabbis to discuss the financial crisis and its impact on Jewish education.
In Ukraine, each Chabad rabbi is more reliant on his own efforts to find local or international sources to fund community projects. There has been no head Chabad rabbi for the country since the post was vacated in September.
Russia has a more centralized model built on the fund-raising contacts of the Moscow-based federation that are then distributed to communities.
Whether the funds have been completely frozen or slashed by a third, the Chabad-run federations of both countries have been forced to tighten their belts and make cuts.
David Mondshine, the head of the Or Avner Foundation, said that schools had been consolidated, hours had been shortened and some programs had been pared down in recent months.
Funds from larger and richer communities have been diverted to smaller schools, he said. But in Ukraine, it’s been more difficult. One school in the town of Khmelnitsky has already shut down, though Chabad officials in Moscow said it was preparing to close anyway for lack of local support, and there may be more closings.
No rabbi wants to be the first to close the doors.