Russian leaders reacted with deepening anxiety today at fallout from the probe into financial flows through the Bank of New York and expressed surprise at a press report quoting Treasury Secretary Lawrence Summers as suggesting Washington might oppose further International Monetary Fund lending to Russia.
In their first official reaction to the New York investigation, which reportedly focuses on billions of dollars in Russian money-laundering and cash transfers, Russian officials portrayed the disclosures as a smear campaign. While promising to investigate, most expressed doubt about the veracity of the reports.
Foreign Minister Igor Ivanov, speaking to a school that trains future diplomats, took the lead in questioning the recent revelations. "I repeat, we have fought corruption, and we will fight corruption," he said. "But to cast aspersions on our country, on our society under the pretext of the struggle against corruption, this is something we will not tolerate."
He said Western media reports "under the pretext of still unconfirmed facts" have tried to "besmirch our country, besmirch our society, to besmirch our business community and our entrepreneurs." He said such efforts "go beyond the struggle against corruption; it is politics, and we will never agree to such politics."
The view that the New York allegations are being aired as part of a smear campaign against Russia has been expressed across the country's political spectrum in the last two weeks, from Communists to reformists.
Anatoly Chubais, the government electricity chief and architect of Russia's privatization program, said last week: "There are political forces [in the United States] that are interested in showing that everything in Russia has collapsed, everything is destroyed and everything is stolen." Gennady Seleznov, speaker of the lower house of parliament, said today: "I don't like this. I want charges brought against specific criminals, who must face the law, rather than against my country."
Many politicians and financiers have also suggested that the timing of the disclosures was no accident. "These are very definite games," Ivanov said, "explained by the start of the election campaign in our country and the start of the election campaign in the United States."
Prime Minister Vladimir Putin said: "If somebody wants, for political reasons, to blow up some subjects, let them. . . . This will not accelerate or interfere with the work of our law enforcement bodies."
Viktor Chernomyrdin, a former prime minister, seemed stunned when reporters asked him about suggestions that Vice President Gore turned a blind eye to corruption allegations involving Chernomyrdin.
"Who is accused of corruption?" Chernomyrdin demanded.
"You," said a reporter.
"Me? What are you talking about? Is that the Americans?" Chernomyrdin asked.
"Yes," the reporter said.
"What has suddenly made them wake up?" Chernomyrdin said. "Where were they before? Why have they come up with this?"
When told by a reporter that Gore shielded him somehow, Chernomyrdin added: "Me? What sort of foolishness is this? How could this have happened? You could say that about anybody."
The biggest worry here was a report about a possible delay in a $640 million loan installment to Russia from the IMF, due in the next several weeks. USA Today quoted Summers as saying that the United States--the IMF's dominant member-- will not support any more such credits for Russia "without adequate safeguards to assure that any funds disbursed are used properly [and] without adequate accounting for the previous use of funds."
Summers's comment, which roiled Russian financial markets, appeared to contradict assurances by IMF Managing Director Michel Camdessus that the money is on track, and Alexandr Livshits, Russia's special envoy to the Group of Seven major industrial democracies, described the remarks as "not understandable."
The U.S. Treasury scrambled to make clear that Summers was not demanding new conditions for the loan and that he did not intend to imply that Washington would oppose it. U.S. and IMF officials noted that, because of revelations this year that Russia's central bank had secretly funneled money to overseas subsidiaries, the terms of the current IMF loan require that the money be used solely to repay Moscow's earlier debts to the IMF. Indeed, the IMF is not disbursing the money directly to Russia but instead is transferring it from one IMF account in Washington to another to ensure there is no skimming or misappropriation.
Moreover, the upcoming installment has always been subject to satisfactory completion of an audit on the flow of funds from the central bank to several overseas subsidiaries, covering areas that previous audits had not examined. Treasury officials said they could not offer assurances that Russia will get the money, because the IMF is reviewing whether Moscow has met other economic conditions, as it normally does. But they sought to quash any impression that Summers was signaling a decision by Washington to raise the bar.
The current U.S. policy is "consistent" with its prior position, Treasury spokeswoman Michelle Smith said in a statement. "It would be premature to make any judgments as to whether Russia will meet the conditions for [the] disbursement. The United States has insisted that there be adequate safeguards in place with respect to the current program and that there be an adequate accounting for the use of past funds."
Staff writer Paul Blustein in Washington contributed to this report.