RUSSIAN MONEY LAUNDERING CONTROVERSY DELAYS DISBURSAL OF IMF CREDIT.

Finance Minister Mikhail Kasyanov said today that Russia could receive the next US$640 million installment from a multibillion dollar International Monetary Fund loan at the end of this month or the beginning of November. Kasyanov’s comments followed a meeting he had with President Boris Yeltsin, whom Kasyanov described as being worried about the fate of the IMF tranche (Russian agencies, October 1).

The IMF credit was supposed to have been disbursed this month, but was delayed as a result of the controversy surrounding alleged Russian money laundering through the Bank of New York. According to press reports in August, U.S. law enforcement investigators believe that US$200 million or more from IMF credits were laundered through the Bank of New York. U.S. officials, including Treasury Secretary Lawrence Summers, have noted repeatedly that no evidence has been presented showing that IMF funds were misappropriated. But during U.S. congressional hearings into the Bank of New York scandal, Summers emphasized that Washington will back no further credits to Moscow until there is a proper accounting of how previous credits were used.

The international auditing firm PriceWaterhouse Coopers has been commissioned to carry out that audit. The company was hired earlier this year by Russia’s Central Bank (CBR), to audit the activities carried out by FIMACO, an obscure Channel Islands’ asset management company into which the CBR had placed billions of dollars from Russia’s hard-currency reserves. PriceWaterhouse Coopers’ auditors found new illegalities concerning FIMACO, but noted that they were given insufficient information by the CBR to do a proper audit.

Finance ministers from the G-7 leading industrial nations, meeting in Washington, issued a statement last weekend demanding that Russia clean up its Central Bank, audit its hard currency reserves every three months, take measures to strengthen its control over budgetary expenditures and submit an anti-moneylaundering law to the State Duma. The ministers said that the quarterly audit should be a condition for further loan disbursals (Vremya-MN, Moscow Times, September 28). These demands were poorly received by Russian officials, including Central Bank Chairman Viktor Gerashchenko, who called them “nonsense.”

One paper this week even stated that U.S. Treasury Secretary Summers has suddenly become a “hawk” on the issue of loans to Russia because, in the wake of the money laundering scandal, his close ties with Russian officials such as Anatoly Chubais has made him politically vulnerable. The paper implied that last year Summers used his Russian contacts to help a former employer, Goldman Sachs, avoid disaster on the GKO market, Russia’s now-defunct short-term treasury bills. “The latest scandal does not leave any doubt that his friendship with Russian officials may cost his career too much,” the paper wrote (Kommersant, September 29).

For his part, Finance Minister Kasyanov predicted that the money laundering scandal was being “fed by political sources” in the United States and predicted that it would soon “die away” (Russian agencies, October 1). Earlier this week, USA Today reported that Russia’s Federal Security Service had rejected a U.S. Justice Department request to Russia’s Central Bank and Prosecutor General’s Office for bank statements and other documents related to the money laundering investigation (USA Today, September 28).

While putting tougher requirements on credits to Russia, Michel Camdessus has denounced the press reports that IMF funds were laundered through the Bank of New York. He also said that it would be the “height of irresponsibility” for the IMF to turn its back on Russia, and that Russia had “overperformed” in fulfilling the commitments it had made to the fund in July (Reuters, September 28, 30).

CRISIS IN CHECHNYA MAINTAINS STATUS QUO.