…REASONS FOR THE BAILOUT OPEN TO DEBATE.

IMF and U.S. representatives insist that the package was put together because they are confident that the Russian government is committed to structural reform. A second factor cited was the $7 billion or so in lost export revenue this year as a result of the 30-40 percent slide in world oil and gas prices.

The IMF board will meet to approve the loans on July 20. Their decision will supposedly depend on whether the State Duma approves the government’s package of twenty anticrisis measures this week. Moscow promised the IMF to cut the budget deficit to 5.8 percent of GDP in 1998 and 2.8 percent in 1999. The New York Times reported that “the Clinton administration considers Sergei Kirienko, the new Russian prime minister, and his team of aides the most reform-minded Government Russia has had in years.” (New York Times, July 14)

While one admires the White House’s mind-reading skills, the reality is more grim. World leaders looked down into the abyss and saw a Russian government on the verge of collapse. President Boris Yeltsin’s remarks to military leaders on Friday, July 10 about the danger of an extremist coup were a thinly veiled threat to do what he did in 1993–launch military action to close down the parliament.

Over the last two weeks, the IMF dragged its feet in negotiations with Russia, knowing that repeated promises over the last two years to improve tax collection, close the budget gap and so forth have come to naught. The dashed hopes of the young reformers’ “spring offensive” in 1997 have not been entirely forgotten. But pressure from the U.S. administration forced their hand. Japan and Germany quietly complied, being in no position to challenge the U.S. policy on Russia. Chancellor Helmut Kohl faces a tough election in the fall, and Hashimoto resigned as Japan’s prime minister early yesterday.

To some extent, whether Russia’s State Duma accepts the entire package of emergency measures this week is irrelevant. If it does not, the government will sequester spending regardless to try to meet the IMF targets. If it does accept, there is no guarantee that the funds will be effectively implemented. International lenders need the mirage of “structural reform” to justify their decision to bankroll the Yeltsin administration for another year.

RUSSIAN MARKETS REVIVE ON NEWS OF IMF CREDIT.