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. Last Updated: 07/27/2016

Official Criticizes West's Restricted Markets

Russia's top trade official on Wednesday criticized the West for not opening its markets and expressed concern that $1. 5 billion of IMF loans needed to fund Russia's economic reforms may be delayed.


Alexander Shokhin, deputy prime minister in charge of debt and trade negotiations, said at a press conference that he feared the IMF might delay until a board meeting in September the $1. 5-billion loan that Russia says is crucial to its strategy for cutting inflation.


He also asked Western countries to support Russia's application to join the General Agreement on Tariffs and Trade, a crucial 111-nation trade-negotiating body that will help Russia get free access for its exports on world markets.


The IMF agreed to issue $3 billion in special credits in May after the Russian government and Central Bank announced an economic austerity program designed to reduce inflation and stabilize the ruble.


But Shokhin said that the IMF might now delay the first $1. 5 billion of funds on the ground that Russia was not living up to its promises of economic austerity.


He said that this was unjustified and that Russia was keeping its part of the deal, including a promise to tighten Russia's money supply by raising interest rates.


"We are not breaking the promises we made", Shokhin said.


Kathleen Dillon, chief economist for the IMF in Moscow, said the credits had not been delayed because no date had ever been set for the IMF board meeting on the credits to Russia.


Earlier in April, Reuters had quoted IMF managing Director Michel Camdessus as saying that the first line of credits could be opened in June, but Dillon said that the IMF had been waiting for the official request for aid from Russia, which arrived Tuesday.


Dillon said she expected the board to meet within the next three weeks to decide on the first credits, but confirmed that the IMP decision would depend in part on Russia keeping its promises, in particular pledges to tighten the money supply by raising interest rates. Shokhin also suggested that the second batch of $1. 5 billion in IMF credits, to be delivered later this year, be granted to neighboring republics for purchases of Russian goods, rather than to Russia.


Shokhin said he was worried that neighboring republics that still use the ruble could upset Russian plans to cut inflation, thereby endangering the IMF credits, Reuters reported. He threatened to cut credits to neighboring republics, which have asked for $3. 6 billion in loans.


Instead, Shokhin said he would ask the IMF to grant the second batch of $1. 5 billion in credits to the neighboring republics, rather than to Russia, for purchases of Russian goods such as natural gas. That way the IMF, rather than Russia, would run the risk of not getting paid by cash-starved republics, Shokhin said.


Dillon said that Shokhin's proposal to transfer loans between countries was unprecedented but the IMF was considering a Russian plan for a special fund to boost Russian trade with neighboring republics, in addition to the credit lines. It would be based on contributions from IMF members and administered by the IMF, she said.


Russia has also been seeking to boost exports to help it meet its growing foreign debt repayments and has been campaigning strongly for increased access to world markets.


Last week, President Boris Yeltsin formally applied for membership to the General Agreement on Tariffs and Trade, but Shokhin said that it would take at least several months for Russia to gain GATT membership, because it would require Russia to lower export tariffs and raise domestic prices.


But Shokhin asked for Western countries to support quick membership, adding that "Russia already follows a more liberal trade policy than many members of GATT".


Russia's bid found support among Japan, the European Community and the United States at a special GATT meeting in Geneva Wednesday.


Earlier this month, Russia and the European Community failed to reach a Partnership and Cooperation Agreement that would boost trade because the EC refused to drop a clause that allowed for special import restrictions on Russian goods.


If the EC imposes punitive import tariffs on Russian goods, Shokhin said, Russia could impose countermeasures. He said Russia could react by slapping extra duties on EC textile sales to Russia, which he said were seven times higher than Russian sales of textiles to the EC.