Publication: Monitor Volume: 5 Issue: 83

While the news that Moscow and the International Monetary Fund (IMF) had come to an agreement came too late to make today’s newspapers, some of them already knew of the IMF conditions for the credit, and reacted quite negatively. One paper headlined its main article today: “The government raises the rates: IMF recommendations will be fulfilled Soviet-style–vodka and gasoline will rise in price several times.” The paper reported that the average Russian will now have to pay for seven months of “inactivity” on the part of the Primakov government in the economic sphere (Segodnya, April 29).

Indeed, should the increases in taxes on vodka and gasoline–plus the cancellation of lowering VAT–pass the Duma, they will primarily affect the average Russian. Meanwhile, the country’s Central Bank has, over the past seven months, given the equivalent of US$700 million in “stabilization credits” to fifteen large commercial banks. Earlier this year the World Bank conducted a study of eighteen large Russian banks, and reportedly found that fifteen of them had “negative equity” and should be liquidated or restructured (Moscow Times, April 29).

Among these banks, undoubtedly, are institutions controlled by leading “oligarchs,” such as SBS-Agro bank (which was not long ago renamed “Soyuz”). The bank, which received Central Bank stabilization credits, has developed close ties with Agrarian Party, which is represented in the Primakov cabinet by Deputy Prime Minister Gennady Kulik. Kulik’s son sits on SBS-Agro’s board of directors. The bank’s founder, Aleksandr Smolensky, is wanted in connection with a criminal case involving embezzlement, and reportedly remains outside Russia.

Whether the Primakov cabinet will be able to fulfill the IMF conditions for the new credit remains to be seen. According to one report, the fund’s demand that gasoline taxes be raised three times was characterized during yesterday’s cabinet meeting as political “suicidal.” The cabinet apparently believes it can do no more than double gas excises (Kommersant, April 29). Whether the cabinet has the will or even the desire to bankrupt insolvent banks–or at least stop bailing them out–also remains to be seen.