DEFERRED LOANS BAD FOR RUSSIA, DEFERRED LOANS GOOD FOR RUSSIA.

Publication: Monitor Volume: 5 Issue: 185

The Bank of New York indictments against Russia come at a very sensitive time, given that the country is waiting for a US$640 million tranche from the IMF, which was supposed to be released last month but was delayed due to the money laundering scandal. Some Russian media are warning that the scandal could lead to a freezing of the tranche and a collapse of negotiations between Russia and the London club of creditors–holders of Russia’s Soviet-era debt. This in turn, these press reports have warned, could have a domino effect–causing, for example, the government of Japan to reconsider its plans to make loans to Moscow–ultimately leading to a Russian default. One Russian newspaper, echoing the view of other media, claimed that these negative developments–along with the possible removal of Camdessus as IMF head–are part of a politically motivated campaign to do harm to Russia (Kommersant, October 7).

There are, however, dissenting voices in Russia concerning the effect of deferred loans. Andrei Illarionov, head of the Institute for Economic Analysis, said today that a delay in lending would actually benefit the Russian economy. The economist argued that such loans actually increase Russia’s budget deficit and state debt, and that the country could pay both its state debt and foreign debts on its own without catastrophic consequences (Russian agencies, October 7).

RUSSIAN-BELARUSAN “COALITION FORCES” SET UP.