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. Last Updated: 07/27/2016

A Question of Aid, Need and Time

It was a rare opening of the closed box in which the deliberations of the International Monetary Fund usually take place.

Jean Foglizzo, the IMF's station chief in Moscow, spoke on Tuesday about the difference between short-term and long-term assistance - and was unequivocal about which the IMF favored.

Short-term money, he said, was for short-term need: a lack of vaccine in St. Petersburg, for example. Long-term lending and assistance was for long-term need - but also designed to create a "virtuous circle", in which the money would not be eaten as bread but buried as seed.

"I have the feeling", said Foglizzo, "that the West is intent on proving that it can do visible things to help: and the faster we go, the more likely we are to be in the first category".

This is a central part of the debate which now continues, mostly behind the scenes, about aid to Russia (and by extension, to all of the post-Communist economies). On what terms, across what time period, to what projects, should assistance be given? How far is the aid a stimulus to doing the right things, how far is it conditional on at least having started to do the right things?

The Russian government, its economic policy now under the control of Boris Fyodorov (the real tactician behind the moves on the cabinet chess board announced last week), is firmly against "conditionality", or reward for observable reforms. Andrei Schleiffer, an adviser to the State Privatization Committee, said Tuesday that still more lectures on what to do before access was gained to pots of assistance, would be of no use: "If you again say, 'Do this and you will get that', it will be taken skeptically".

There are high stakes in this debate. In the talks with Bill Clinton in Vancouver over this weekend, Boris Yeltsin may be offered as much as $1 billion - if Clinton feels he can persuade a reluctant public to hand it over. In all, Fyodorov has costed an aid package at around $20 billion and, it seems, a complete moratorium on debt servicing for the next six months, while emergency financial measures are put into place.

It is clear enough that the West is divided on the issue as never before. President Francois Mitterrand of France, no doubt playing to a domestic gallery and seeking to establish a lien on foreign policy as his socialist government faced the defeat which duly came, has made the strongest pitch for urgent aid. Douglas Hurd, the British Foreign Secretary, sniffs that it does not do to put money in pockets full of holes. The Japanese, linking aid to the Kuril Island issue, also think that the Russians have little in the way of either a program or controls with which they could sensibly use the money.

Against this backdrop, Russia has staged a constitutional crisis that is ritually said to be the prelude of a civil war, or wars. This could ne cynically construed as the most dramatic presentation on a national canvas of the scene in which a desperate man holds a gun to his head and demands money on pain of his own death.

This is, as Jean Foglizzo noted in his welcome presentation on Tuesday, "a very important and historic question for which there is no obvious answer". In fact, he did provide his answer: a continual application of IMF criteria to the problem, the determination to conclude an agreement with Russia and to develop and execute a program across the long term.

There are others: the "hard Japanese" position of not giving anything much until they show they know how to use it; and the "soft French" position, of putting in as much as possible to save Russia from collapse and Europe from the fallout.

The indispensable common denominator is consistency: a policy on which Russia policy makers can rely, and which is relatively transparent. Will we see this emerge in Vancouver, and in the other pleasant cities in which the crisis is to be discussed this summer?

John Lloyd is the Moscow correspondent for the Financial Times.