SCHROEDER AND CHIRAC DENY RUSSIAN MISUSE OF IMF FUNDS.

Yesterday, in an apparent attempt to assuage hurt Russian feelings, several Western leaders called for continued aid to Russia from the International Monetary Fund (IMF), and cast doubt on Western press reports alleging that billions of dollars were laundered through Western banks.

German Chancellor Gerhard Schroeder told reporters that the international community should not jump to hasty conclusions concerning the charges of moneylaundering by the Russian mafia. He noted that allegations that Russia had allowed IMF credits to be misused have not been proved, adding that the international financial institutions had themselves carried out audits and found no evidence of wrongdoing. For his part, French President Jacques Chirac said the international community “must and will” continue to aid Russia, but added that Russia’s leaders “must carry out strict control to ensure that the aid is used strictly as prescribed.” He said that it was “premature” for the G-7 group of industrialized nations to hold a special meeting to discuss the misuse of aid to Russia, given that there is “no information so far” that these funds are being misused (Russian agencies, September 2).

The comments by Schroeder and Chirac would appear to be a reaction to comments made earlier this week by U.S. Treasury Secretary Lawrence Summers, who suggested that Washington would oppose the disbursal of further IMF credits until previous ones are properly accounted for (see Monitor, September 2). Some Western press reports have stated that US$200 million in IMF money may have been part of the billions of dollars from Russia allegedly laundered through the Bank of New York.

For his part, Mikhail Zadornov, Russia’s IMF negotiator, said that it was impossible for IMF funds to have been misused. He noted that IMF credits could have been used only to pay off Russia’s hard currency foreign debts or converted into rubles and used to help fulfill the federal budget. He added that the US$640 million Russia received from the Fund in July went toward paying off debts to the Fund.

As some observers have noted, money is fungible, and it is therefore possible that the money provided by the IMF freed up other money to be misused. In any case, Zadornov did call on the Russian government to take active part in investigating operations carried out through the Bank of New York. Likewise, former Prime Minister Sergei Stepashin, who recently forged an electoral alliance with Grigory Yavlinsky’s Yabloko movement, called on President Boris Yeltsin to order an investigation into the scandal, warning that it “cannot be hushed up” (Russian agencies, September 2).

The Wall Street Journal, meanwhile, reported yesterday that U.S. authorities suspect that Russian organized crime placed “moles” inside major Western banks and securities firms to help them launder money (Wall Street Journal, September 2).

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