Publication: Monitor Volume: 5 Issue: 199

Moscow has responded to the new conditions set by the International Monetary Fund (IMF) by crying foul, claiming that the conditions are politically motivated and not feasible (Russian and Western press reports). But the Russian-IMF relationship has always revolved around politics, and political considerations have heretofore generally led to the looser application of Fund conditionality to Russia than in other countries. And while Moscow may resent the fact that the political shoe is now on the other foot, the Russian economy in the longer term can only benefit from the more reformed, transparent financial system implied by the most recent IMF conditions.

Indeed, the Russian government/CBR July 13 letter of intent outlining its agreement with the IMF ( shows that the Fund’s new conditions do not constitute a dramatic departure from its previous agreement with Moscow. The letter of intent strongly emphasizes the implementation of far-reaching structural reforms, particularly in the banking system, but also in the so-called “natural monopoly” sector (that is, energy and transport). In a word, Moscow committed itself to introducing as much transparency and competition into these sectors as possible.

The experience of other transition economies clearly shows that the successful introduction of such reforms demands major commitment from the government. It is equally clear that Prime Minister Vladimir Putin’s government is in no position to make such commitment. Policy vis-a-vis the natural monopolies is Deputy Prime Minister Nikolai Aksyonenko’s brief, and Aksyonenko has proven to be largely uninterested in reforming “his” part of the economy. A similar resistance to transparency is apparent at the CBR, which has dragged its feet on bank restructuring and broader disclosure of its activities. Instead, the Russian political class seems more about who controls the cash generated by these companies during the run-up to the December parliamentary elections.