Publication: Monitor Volume: 5 Issue: 174

Treasury Secretary Lawrence Summers was the first witness yesterday in the hearings being conducted by the U.S. House of Representatives’ Banking Committee into alleged Russian money laundering through the Bank of New York and high-level Russian corruption in general. In his opening statement, Summers enunciated what appears to be the Clinton administration’s line of defense against Republican charges that it looked at with benign neglect–or even facilitated the growth–what Congressman Jim Leach, the banking committee’s chairman, has referred to as a “kleptocracy.” Summers said that while the administration is “fully committed to a full investigation into the problem,” it would be a mistake to “quarantine, contain or write off Russia as too corrupt.” He also pointed to democratic freedoms and mass privatization as among many positive developments over the last decade. A similar line was put forward in an op-ed piece by Summers’ predecessor and former boss, Robert Rubin (New York Times, September 21).

Summers also promised that the administration would propose ways to strengthen anti-moneylaundering laws and oppose further International Monetary Fund (IMF) credits to Russia until a full accounting was provided on how previous loans were used. He added, however, that no proof has yet been produced that IMF loans to Russia were misused.

But if the administration’s line is to stick by the IMF, which has been under increasing criticism by Republican congressmen and presidential candidates, it would appear to be moving away from its policy of unequivocal support for Russian President Boris Yeltsin. Indeed, coinciding with the opening of the money laundering hearings, a newspaper yesterday quoted unnamed senior Clinton administration officials as saying that last week the FBI, in the course of the Bank of New York investigation, had come across transactions with the bank carried out by Pavel Borodin, head of the Kremlin’s property management department, and Leonid Dyachenko, husband of Yeltsin’s younger daughter and adviser, Tatyana. U.S. officials were quoted as saying that both men had moved “substantial” sums through the Bank of New York (New York Times, September 21). On September 20, a Swiss investigative magistrate said that investigators had uncovered links between the Bank of New York case and Swiss bank accounts frozen during an investigation into kickbacks allegedly paid by the Swiss construction firm Mabetex to Kremlin officials for lucrative restoration contracts (see the Monitor, September 21).

Meanwhile, Western law enforcement officials have reportedly been monitoring at least one foreign bank account allegedly set up for Tatyana Dyachenko, under the name “Svetlana.” For its part, U.S law enforcement is reportedly investigating a Svetlana Dyachenko, whose address as listed in British corporate records was the same as Peter Berlin, the man suspected of setting up various companies used to launder billions of dollars through the Bank of New York (The Times (UK), September 21).