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. Last Updated: 07/27/2016

Stealth Funds for Russia

As Bill Clinton and Boris Yeltsin prepare for their first summit in Vancouver, their respective capitals, Washington and Moscow, have one curious feature in common -- a very funny attitude towards money.


In Moscow, money is so much worthless paper that just gets printed, some 6 trillion rubles last year, bringing the country to the brink of hyperinflation and making nonsense of most economic reform plans.


In Washington, there are two kinds of money, at least as it relates to President Clinton's determination not to go down in history as the man who 'lost' Yeltsin. One is the stuff that you can persuade Congress to vote, and there is very little of that.


After almost unprecedented lobbying of Congress by Clinton and his top Cabinet aides -- Secretary of State Warren Christopher has personally briefed 40 Senators and over 100 Congressmen in the past week -- the White House reckons it can just about double George Bush's plan to provide some $400 million in new money for Russia this year.


But the other kind of money that Clinton is trying to make available is best described as 'stealth' money, and like the ultra-modern war-plane after which it is named, stealth money is barely visible on Congressional radar.


There are three ways of providing stealth money. The first is in the form of trade credits, financed through the U. S. Export-Import bank and through commercial banks. The U. S. government guarantees to repay the loan if the Russians default -- and given Moscow's credit record, that looks more than likely.


Top of the bilateral list in Clinton's talking-points with Yeltsin is a special credit to underpin loans of $2-5 billion to repair and improve the Russian energy sector.


The second way to provide stealth money is through multi-lateral agencies like the International Monetary Fund. Clinton has been working on the Japanese to soften their demand for a return of the Kurile Islands before they join any new international rescue plan. He hopes to get another $3 billion out of Tokyo, a similar sum from the Europeans and Canadians, and some more stealth money from the United States.


Simultaneously, the IMF is being pressed to soften its rules on lending to get over the legal hurdle that says since the Russians have not fulfilled the economic plan agreed with the IMF, they are not entitled to any more IMF credits.


The third way of providing stealth money is by raiding the budgets of other U. S. government agencies. There are cunning schemes to get money from the Pentagon to finance reductions in the Russian nuclear arsenal, job training schemes that will draw on the Labor Department's budget, student exchange and business management school scholarships that can be put onto the Education budget and so on.


The point is that both Russia and America are playing the same game of funny money for broadly similar reasons. President Yeltsin cannot get his Congress to force the Central Bank to stop printing rubles. President Clinton cannot get his Congress openly to vote the kind of aid and funds required to give the West a serious prospect of influencing the fate of Russian reform.


And Winston Churchill once observed, democracy is the worst form of government ever devised -- except, that is, for all the others.


Martin Walker is the Washington, D. C. bureau chief of The Guardian, London.