Publication: Monitor Volume: 5 Issue: 161

While the International Monetary Fund Director Michel Camdessus has denied Western press reports that US$200 million from International Monetary Fund (IMF) credits to Russia may have been laundered through the Bank of New York, the Clinton administration apparently fears that the charges may have merit. The scandal has become a major political issue in Washington, with Republican presidential hopefuls–and Democratic challenger Bill Bradley–accusing the Clinton administration and Vice President Al Gore of mismanaging U.S. policy toward Russia. Under intense pressure, the White House is struggling to define its position toward the disbursement of IMF funds to Russia. U.S. Treasury Secretary Lawrence Summers was quoted yesterday as saying that Washington “will not support disbursement of the next tranche without safeguards that any funds disbursed are used properly.” In an apparent reference to the Bank of New York investigation, Summers added, “As these investigations continue, we’ll have to make judgments about what constitutes a satisfactory accounting for the use of past funds” (USA Today, September 1).

What followed Summers’ statement appeared to be a damage-limitation exercise: One news agency quoted an unnamed Treasury Department spokeswoman as saying that Summers’ remarks did not necessarily mean that the administration was planning to declare a moratorium on IMF loans to Russia (Reuters, September 1). Meanwhile, White House Chief of Staff John Podesta, during a speech at the National Press Club in Washington, also tried to calm the waters concerning the allegations that IMF funds were misused: “I think we want to make sure that IMF money is going to reform-oriented projects…. But we want an accounting of the way the IMF money has been spent. There have been a number of audits of that and, I think, we shouldn’t jump to too many conclusions” (The White House Bulletin, September 1).

The allegations of possible diversions of IMF funds into offshore banks follows the controversy earlier this year concerning FIMACO, the Channel Islands-based investment company into which Russia’s Central Bank deposited as much as US$50 billion from Russia’s hard currency reserves during a five-year period. While a subsequent audit conducted at the IMF’s behest found that no laws had been broken, the auditor, PriceWaterhouse Coopers, stressed that their conclusions were drawn only from information provided to them by Russia’s Central Bank.