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. Last Updated: 07/27/2016

THE ANALYST: IMF Shouldn't Be Tricked Into Giving Russia Money




The International Monetary Fund is back in town. Time for some serious window-dressing.


Over the next two days we will see an unparalleled display of fussing, fawning and sycophantic hypocrisy by government ministers. Russia's highest officials this morning and next will put on their charm masks (the kind with the cunning Richard Nixon smile), shine their shoes and generally pretend to be interested in real structural reform in the economy. In one united voice, Prime Minister Yevgeny Primakov and his anti-Western compatriots will tell the IMF that the fate of Russia's budgetary policy in 1999 is in the hands of the West. Should the IMF listen to such logic?


Many believe it shouldn't. And if truth be told, many want to close the IMF altogether. The notion isn't novel, and has gone in and out of style since the collapse of the fixed-rate mechanism in the early 1970s. Created in 1944 at the legendary Bretton Woods summit (which, by the way, was attended by the father of Central Bank chairman Viktor Gerashchenko), the IMF was a vehicle to support established exchange rates between sovereign nations. But once the gold standard was dropped and currency rates were allowed to float on the basis of supply and demand, the IMF was deprived of the basis for its existence.


Instead, the institution has become a so-called "lender of last resort," handing out money to nations that have ended up in a financial fix. In other words, the IMF is turning into a global central bank. The recent string of economic disasters in emerging markets has placed the IMF and its managing director Michel Camdessus on the coals, and more often the two are having to justify their existence. Renowned economists such as Milton Friedman are calling to have the entire place shut down.


Camdessus, however, is complacent. At a news conference on Oct. 1, he said: "If we were to go back to July 1997 for Thailand, or November-December 1997 for Korea, and if we were to know what we knew at the time, we would do the same thing again." So much for the IMF's doctrine in getting nations to clean up their fiscal-monetary act in return for financial assistance.


Today, Tuesday, begins what very well may be the greatest dilemma for Camdessus and his organization. A very powerful country that can do nothing right and that can only with difficulty be called a democracy will ask for $4.5 billion because after seven years it still hasn't been able to establish a system of gathering revenues. Essentially, Primakov and his deputy Yury Maslyukov will tell Camdessus and crew that they prefer borrowing instead of collecting taxes. If the IMF plays stubborn, the Russians will say, then the government will just have to credit the entire economy. Continuing the logic, then the IMF will be the one to blame for next year's hyperinflation, and Primakov's anti-Western frame of mind will be justified.


Russia doesn't deserve a dime. Not just for reasons of wishy-washy economic policies or an underdeveloped reform program, but for an appalling performance in foreign policy. Russia is slowly - albeit quite surely - becoming a pariah on the world stage. The country openly supports butcher presidents and totalitarian irredentists.


Thanks to Russia and former Foreign Minister Primakov, maniacs like Yugoslav President Slobodan Milosevic and Iraq's Saddam Hussein will remain in power for years to come. Thanks to Russia, Iranian students can study the mechanics of how to build the bomb in Moscow and St. Petersburg. Thanks to Russia, the Iranians are acquiring the technology to throw such a bomb several thousand kilometers. Who is Russia's best friend? Belarussian President Alexander Lukashenko, a former paratrooper who is by nature as likable as Alexander Korzhakov and Boris Berezovsky combined.


But foreign policy, luckily for Russia, is not an IMF criterion for issuing credit. Regardless, if the IMF can - in the intensity of the negotiations and press coverage that will follow over the next 48 hours - remember its moral responsibility before the world and Russia, then the international financiers will demand results from the Russian government before any disbursal of cash.


Enough is enough. Russia's bureaucrats have traveled abroad enough, have seen plenty of foreign economic models to understand what they need to do in order to make a budget function normally. There is money in Russia; now go collect it. Stop begging for money, stop allowing tax officials to take bribes, and learn how to work.


The last time negotiations with the IMF dragged on, President Boris Yeltsin had to ring up U.S. President Bill Clinton and then German Chancellor Helmut Kohl. For this round of talks, such last-minute maneuvering is out of the question. Which means Camdessus is going to have to rely on his own best judgment. Which means the Camdessus backers will be watching closer than ever before.