Pictures from the session

Having attended an IMF session in Washington, Kommersant correspondent Konstantin Smirnov was convinced that the West is no longer afraid of Russia. He is afraid that other countries will follow its path.

Washington financial officials are completely confused by the Russian negotiators. Russian Finance Minister Mikhail Zadornov arrives and negotiations are underway. Suddenly news comes from Russia: First Deputy Prime Minister Yuri Maslyukov has been appointed responsible for relations with international financial organizations. And it would be nice if there was some kind of unity of opinion in the Russian government on how to build relationships with creditors - then changing people would not be so important. But the same Maslyukov just recently almost threatened the fund: you are obliged to give us new loans - it is you who are to blame for the Russian crisis. There is something to think about.
But that is not all. While Zadornov is conducting negotiations, and Maslyukov is being appointed responsible for observing the agreements reached, other figures do not leave the stage - Yegor Gaidar, Boris Fedorov, Alexander Livshits and Anatoly Chubais. On the sidelines of the Washington session they say that Fedorov and Chubais are trying in vain to restore trust in Russia with telephone calls. And Gaidar and Livshits could simply be found on these very sidelines.
Who to negotiate with? Here's a popular Russian joke in Washington: in September, a mission from the IMF and the World Bank arrived in Moscow. And I sat in the Metropol for a week - I didn’t know who to talk to about the reorganization of the banking system.
On top of that, the Russian crisis has completely undermined confidence in IMF experts. The Republican majority in the US Congress stigmatizes narrow-minded financial officials. And, with an unkind word for the Russians, who, in their opinion, received loans only because they knew who to negotiate with in the fund, they demand that the IMF be completely liquidated so that it does not squander the American people’s money.
In short, the officials of the IMF and the World Bank have reasons to go crazy. It is clear that in this situation they are trying not to have anything in common with Russian emissaries. A hint of ties to Russia is the worst insult that can now be inflicted on an international financial official. At every opportunity, the management of the fund and the bank repeated at the session that they always maintained objectivity and never went beyond the scope of official contacts with the Russian authorities. And recent staunch supporters of Russian assistance, IMF Deputy Director Stanley Fischer, for example, overnight became its harshest critics.

The only thing the Russian negotiators managed to achieve was the World Bank’s promise to allocate already approved loans by the end of this year. This is $500 million of the second tranche of the SAL-3 structured loan, $200 million of the second tranche of the coal loan and money from the Japanese government, combined with loans from the World Bank. As a result, you can get about $1 billion. However, the vice-president of the bank, Johannes Linn, clearly stated that the bank, following the IMF, is tightening control over compliance with lending conditions. In addition, there is an essential detail: the World Bank issues loans no earlier than the economic program of the borrowing country is approved by the IMF.
The saddest thing for Russia is not that Zadornov came to Washington without a program approved—even by the government, not to mention the Duma. The trouble is that money will most likely not be given now for any program. The times when loans could be taken out for reforms are over. Now they can only be obtained after reforms.
Bring your program, they say to the IMF. We'll look into it. Then we will make sure that it is carried out according to the agreed schedule. Let's evaluate the results. And after that we can talk about loans. In this situation, it is not so important what will be in this program. Emission? Let the emission. If she helps you, of course. Nationalization of banks? Let it be partial nationalization if it will save the banking system. The main thing is the result. Ukraine, for example, is clearly inferior to Russia in terms of the speed of reforms. Nevertheless, at the session it was emphasized many times that the situation there is better - because it is reliably controlled by the authorities.
In general, IMF analysts are very concerned about the negative impact of the Russian crisis on neighboring countries. In their “World Economic Review” (released shortly before the session), they note that it was as a result of the Russian August events that Ukraine had to actually devalue the hryvnia, the Czech crown, forint and zloty fell. Government bond yields in Hungary, the Czech Republic and Poland rose, while corporate stock prices went down.
But at the same time, Washington stopped responding to Moscow’s veiled threats: if you don’t give money, economic chaos, civil war will begin, Russia will collapse and pull others with it. If the situation in Russia worsens, the West, it seems, is going to help not her, but her neighbors. The same Ukraine, the countries of Eastern Europe, who cannot wait to be allowed to join NATO. The West is ready to protect Russian neighbors from Russia and wait for the moment when Moscow can dictate any conditions.

The only thing the West is afraid of is a Russian default. The point, of course, is not that foreign creditors will go bankrupt without receiving the $17.5 billion that Russia must pay next year. For global finance, this is a paltry amount. The Paris Club will easily survive the Russian default.
As for private investors, the IMF is not going to answer to them for the default. Now they are demanding that the fund help Russia so that it can pay them back. But the IMF abdicated all moral responsibility. Investing private capital is a personal matter for its owner. And no one forced this owner to focus on the IMF and, following its example, give money to Russia. Informally, the fund advised private investors to act independently. What they are doing now: Zadornov and the head of the Central Bank Gerashchenko held a series of meetings in Washington with representatives of the subclub of foreign GKO holders and firmly promised to solve their problems by the end of October.
The West is afraid not of a Russian default as such, but of the fact that it will become a bad example. The 90-day debt moratorium announced by Russia has created fears in the financial market that other countries with transition economies will also embark on a path to default. And if, say, Indonesia, Brazil, Mexico, South Korea, which together owe hundreds of billions of dollars, refuse to pay, then international creditors will really have a bad time. But Russia will definitely not get better from this.

A HINT OF CONNECTION WITH RUSSIA IS THE BIGGEST INSULT THAT CAN NOW BE DATED TO AN INTERNATIONAL FINANCIAL OFFICIAL
IF THE SITUATION IN RUSSIA BECOME DANGEROUS FOR ITS NEIGHBORS, THE WEST WILL DEFINITELY HELP. BUT ONLY TO NEIGHBORS

Magazine "Kommersant Power" No. 39 dated 10/13/1998, page 12

Authors:

Konstantin Smirnov

Themes:

IMF activities