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. Last Updated: 07/27/2016

PARTY LINES: 'Courageous' Circle of IMF Cash for War

Belying his meek and mild banker-like exterior, International Monetary Fund Managing Director Michel Camdessus has been railing lately against allegations in the Western media that several hundred million dollars of IMF credits to Russia may have been laundered through the Bank of New York. In a French magazine interview published this week, Camdessus declared that even the Central Intelligence Agency, with all its technological wizardry, had failed to find evidence that "even one cent" of IMF money had been stolen. In an apparent disclaimer, however, the IMF chief added that the Fund does not have the means of accounting for the ultimate destination of every dollar in the vast sea of international financial currents.

I guess it all depends, to paraphrase an American president, on what the meaning of the word "stolen" is. Money, after all, is fungible - as U.S. Deputy Secretary of State Strobe Talbott recently noted in his Congressional testimony - which makes the comments of Camdessus seem rather like splitting hairs. In the past, the IMF chief himself admitted that aid can free up governments to pursue various policies and activities that some might consider irresponsible or nefarious. In February 1996, for example, just two days after signing off on a $10.2 billion loan to Russia, Camdessus was asked during a Moscow press conference whether the IMF largess would in essence finance the war in Chechnya, which had already killed tens of thousands of civilians. "[I]n some ways, yes, because we are financing Russia," he answered.

The same principle applies to corruption: If you finance a country that Transparency International has consistently rated as among the world's most corrupt, the odds are high that the money you give will be misused, or will free up other funds for misuse. Give a junkie money for dinner and, unless he's in a closely-supervised rehab center, you're effectively promoting his habit. The IMF itself tacitly accepted this principle in August 1997, when it withheld a loan to Kenya because of its concerns about high-level governmental corruption.

A separate standard has always been applied to IMF loans made to Russia, whatever Camdessus and other IMF officials say to the contrary. For example, during the same February 1996 press conference at which he admitted that IMF funds would "in some ways" go toward financing the war in Chechnya, Camdessus then claimed, rather illogically, that refusing to lend Russia money would not shorten the war by even one day. In any case, he concluded, "[t]he tragic developments in Chechnya are not sufficient reason not to help Russia on its courageous road to recovery."

Russia's courageous road to recovery, we now see, was circular. Russian forces are once again bombing Chechnya, and Deputy Prime Minister Ilya Klebanov announced Thursday that $160 million would be added to the 1999 defense budget to purchase planes, helicopters, communications equipment and night-vision goggles for use against Chechen guerrillas. The Russian government, meanwhile, waits impatiently for the next $640 million installment of the multi-billion dollar IMF loan agreed to earlier this year, expressing its annoyance at the delay caused by the Bank of New York money-laundering scandal.

Camdessus, meanwhile, praises Russia for "overfulfilling" its pledges to the Fund.