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. Last Updated: 07/27/2016

INSIDE RUSSIA: Capital Flight Bought With IMF Dollars




Last week, the International Monetary Fund declined to give Russia money to refinance its debt to the fund. You can't say that the IMF didn't want to give Russia that money. But to do so against the backdrop of the ubiquitous Bank of New York scandal would have just been bad form.


Already, accusations are flying that tranches released by the IMF to Russia left the country through Benex and wound up in unidentified offshore bank accounts. I have already written that Benex - like a restaurant - was selling its house special to all who wished to eat. The hungry were mostly Russian importers. However, it seems that a little before Aug. 17, 1998, huge sums began pumping through Benex. This probably was money from the GKO bonds that were sold off by banks, investment houses and individuals - including foreigners - who had inside knowledge about the ruble's looming crash.


Whose money was it? It could have belonged to whomever, maybe some company that dumped a lot of stock at the beginning of August. Or let's imagine this kind of picture: A big foreign investment bank operating in Russia gets information about the pending cancellation of GKOs. The management of this bank quickly sells its GKOs, gets rubles and buys dollars with them. To convert rubles the bank usually uses its own channels, but this time we are speaking of a secret operation with the personal accounts of the management. For this they will use the convenient and reliable Benex. After Aug. 17, the bank goes bankrupt, the clients get the loss - and the management comes out in the black.


Who could have had accurate information about the date of the cancellation of the GKOs? The oligarchs, highly placed officials and the managers of foreign investment banks who were close to them. Next come the names of Anatoly Chubais, Alexander Livshits and something about the IMF's stolen credits.


The dollars that were purchased by the participants of such deals were IMF dollars. But here we have to note that these dollars were used on exactly what they were supposed to be used on and in accord with the IMF's macroeconomic strategy. If this same macroeconomic strategy can at once be called both "support for the ruble" and "money laundering," well, that's not really a question for the Russians to answer. That's a question for the IMF. Did the IMF understand it was giving money to the biggest insider deal in history? Did it understand that the money made it possible for the oligarchs and those close to the negotiations to legally change their rubles into dollars with only negligible loss? (When dollars next left the country, it wasn't so legal, but that's another question.)


Over a few years, the IMF gave Russia money as a deposit on future reforms. That's like giving a druggie money for a bag of cocaine with the understanding that he will snort one last line and be done with it for good. Of course, the addict was not done with it, and sometime around Aug. 17, he snorted a bad line. It's the addict's fault, of course, but the person who gave him the money shouldn't sleep any easier for that.


If the Bank of New York scandal means Russia won't be getting any more money to help it sink itself, then the scandal should be praised.


Yulia Latynina writes for Segodnya.