Publication: Monitor Volume: 5 Issue: 42

On February 26, Nikolai Gonchar, a member of the State Duma’s budget committee, charged that top Central Bank officials had used accounts in FIMACO–the obscure offshore firm which managed billions of dollars from Russia’s hard currency reserves over five years–to pocket millions of dollars in profits reaped from Russian treasury bills (see the Monitor, February 9, 16-17).

Gonchar said that soon after the launch of the GKO, Russia’s now-defunct short-term treasury bill, the country’s financial elite created a system by which its members received “personal income by making the country indebted.” He charged that between March and June 1996, Central Bank officials used FIMACO–which is owned by Eurobank, a Central Bank subsidiary–to invest US$143.3 million dollars from Russia’s hard currency reserves in GKOs. While half of the US$38.9 million in profits from this investment should, Gonchar charged, according to law have been repatriated to the federal budget, no money was returned. He also claimed the Central Bank had issued a special regulation which allowed it to hide records of these transactions, and that a top Eurobank official had even ordered that trades involving FIMACO accounts be done over the telephone, using code words. Gonchar also said officials of Eurobank may have used insider information in making GKO trades.

Gonchar charged that Viktor Gerashchenko, who now heads the Central Bank, has illegally classified information on the bank’s activities–including materials concerning the “formation, placement and management of Russia’s currency reserves” and all materials pertaining to how the International Monetary Fund’s stabilization credit of last year, worth more than US$4 billion, was used (Russian agencies, February 26).

On February 25 “Nezavisimaya gazeta” cited what it said were official documents charging that high-ranking Central Bank and finance ministry officials “abused their offices in order to receive illegal revenues” from GKOs. Nikolai Bordyuzha, Yeltsin’s chief of staff and secretary of the Security Council, yesterday ordered the Council to look into the charges made in the “Nezavisimaya gazeta” article. As the Monitor noted yesterday, the article also contained charges of corruption against members of the Primakov cabinet.

Another newspaper reported today that the Central Bank’s hard currency reserves may have been used in early 1996 to help pay off pension and salary arrears to state workers. The paper noted that Yeltsin’s popularity rating had been extremely low at the time, and he had faced an uphill election battle against Communist leader Gennady Zyuganov (Kommersant daily, March 2). If the reserves were used for this purpose, it would undermine arguments made by the Central Bank’s defenders that the bank should retain its independence from the government. Leftists in the State Duma have long pushed to transform the Central Bank into an instrument of government policy. In a recent letter, which was made public, the International Monetary Fund warned against such attempts to rob Russia’s Central Bank of its independent status.