Russia’s President Boris Yeltsin would surely have liked a fresh International Monetary Fund (IMF) loan to showcase this month, just in time for today’s parliamentary elections.
In the past, IMF loans to Russia have emerged at fortuitous times for both the Yeltsin administration and the West. Russia received an IMF loan in March 1996, shortly before presidential elections, and in July 1998, when Russia’s currency devaluation and debt default threatened the global economy. An April 1999 loan, during NATO’s military campaign in Kosovo, was also conspicuously timely. In those cases, Russia’s failure to meet economic conditions certainly wasn’t a pressing concern.
For this parliamentary election, Mr. Yeltsin has no loan to bolster the standing of pro-Kremlin candidates in the Unity Party, but he has something even better an immensely popular military onslaught against the Chechens. The war on Chechnya has done more to boost support for those candidates than an IMF loan ever could. In fact, international condemnation of the conflict has given Mr. Yeltsin and his team shining opportunities to taunt the West with blustery statements. In response to President Clinton’s criticism of the Chechnya campaign, Russian Prime Minister Vladimir Putin impressed fellow Russians by saying this week, “We are not used to such language, since Russia has a nuclear shield.”
As uncouth as Mr. Putin’s comments may have seemed to Western ears, the premier was simply articulating what has been one of Mr. Clinton’s overriding fears regarding Russia. In fact, Moscow’s economic and nuclear ability to cause global harm has prompted Mr. Clinton to oblige Russia in a variety of ways, compromising U.S. leadership in the process.
The White House, for example, has been an active supporter of IMF aid to Russia, even when Moscow didn’t meet the lending agency’s own economic criteria. “Russia is too nuclear to let it fail,” has been the unstated policy. In July of this year, the IMF received the first $640 million quarterly installment of a $4.5 billion loan to Russia. Earlier this month, the IMF officially announced that it had decided to suspend payment of the second installment of that loan because Russia had failed to improve its tax collection and push through more effective bankruptcy legislation and improved baking regulation.
This is a rather extraordinary pronouncement, since the IMF’s outgoing director, Michel Camdessus, told the Associated Press in late September that “Russia is a program that works.” One wonders about Mr. Camdessus’ change of heart. Did the IMF director really believe that the Kremlin could have successfully achieved all those economic conditions in a little over two months? Why didn’t Mr. Camdessus worry about those conditions in July?
The answer is that the IMF is just as much a political institution as a financial one. Due to the West’s opposition to the war in Chechnya, especially from European countries, the political climate for doling out loans to Russia became quite chilly. But rather than give false pretenses for withholding aid to Moscow, the IMF should have been more explicit. Unlike past political considerations, the reasoning for denying aid to Russia due to the Chechen war is valid. A $640 million loan would have freed up more resources for the assault on Chechnya, since aid is fungible. The IMF should have said so, rather than concoct financial excuses.
The IMF seems to be following a White House policy of making no public association between aid to Russia and the Chechen war although the military campaign was clearly an unstated consideration for the fund. European countries, meanwhile, have taken a much more forthright approach. “We cannot continue to assist Russia if Russia does not respect basic humanitarian norms,” Robin Cook, the British foreign secretary, said last week. In rather Clintonesque fashion, Mr. Camdessus has been silent on the Chechen matter, except to warn against “crazy” military spending and say the campaign was hurting Russia’s global image.
This wasn’t Mr. Camdessus’ position when Indonesia failed to prevent the slaughter of the East Timorese, however. In September, Mr. Camdessus said that the IMF program with Indonesia would remain suspended until the situation in East Timor stabilized and the government produced a report regarding alleged corruption at the Bank of Bali.
In light of genocidal war on Chechnya, the IMF-White House policy of appeasement appears to have been dangerously myopic. Mr. Camdessus probably wishes the whole Chechen affair would just go away, just in time for Treasury Secretary Lawrence Summers’ fund-raising campaign on behalf of the IMF.