Publication: Monitor Volume: 5 Issue: 176

The Senate Foreign Relations Committee held hearings yesterday on the subject of Russian corruption. Among those who testified were former CIA and NSA official Fritz Ermarth and E. Wayne Merry, who served as a political officer in the U.S. embassy in Moscow until 1994. Both men put forward thoughtful systematic critiques of what they characterized as the Clinton administration’s failure to address the corruption issue, and its over-investment in President Boris Yeltsin and the various “reformers” he employed. While the Republican members of the committee were, not surprisingly, harshest on the administration, some Democratic members, such as Senators John Kerry and Bernie Sanders, were also rather critical. Another Democrat, Senator Joseph Biden, said that while an outside auditor had found that the Russian Central Bank ultimately returned billions of dollars of its reserves–including IMF funds–from FIMACO, an obscure Channel Islands financial management company, its behavior was “outrageous” and “unacceptable.” “If the Russians want to become part of the international community and be like other normal nations,” Biden said, “they have to be made to understand that.”

But perhaps the most interesting moment in the hearings was an exchange between Senator Jesse Helms, the committee’s chairman, and Deputy Secretary of State Strobe Talbott, the lead witness. The exchange concerned whether IMF funds were stolen. Talbott, like Treasury Secretary Lawrence Summers during his appearance Tuesday (September 21) before the House Banking Committee, claimed that there was no evidence that IMF loans to Russia had been “misappropriated.” Under the North Carolina Republican’s questioning, however, Talbott refused to state that IMF funds have not been “subject to massive capital flight,” as Helms put it. Talbott also passed up the opportunity to deny the assertion recently made by Yuri Skuratov, that most of last summer’s US$4.8 billion IMF tranche to Russia was sold directly to Russian commercial banks–meaning that the money never entered Russia. Skuratov claimed that US$3.9 billion from the tranche, which was meant to go into the Central Bank’s reserves to support the ruble, went from the IMF’s accounts in the United States to the Russian Central Bank’s U.S. correspondent accounts to correspondent accounts that the Russian commercial banks had in the Bank of New York (see the Monitor, September 15). Talbott would only say that he could not “vouch for” Skuratov’s “assertions,” but promised Helms that he would promptly “provide… for the record our analysis of and reaction to his allegation.”