Global Policy Forum

Russian Leader Faces £3bn Questions


By Giles Whittell

London Times
July 25, 2000

Swiss officials are eager to question Mikhail Kasyanov,the Russian Prime Minister, over a $4.8 billion (£3.2 billion) International Monetary Fund loan, a Moscow newspaper said yesterday. It reported allegations that he had helped to funnel the money into foreign bank accounts after the August 1998 financial crash.

Mr Kasyanov, appointed by President Putin earlier this year, was involved in a complex series of transfers by which the loan never reached Russia but was "absorbed" by commercial accounts in the West, claimed Novaya Gazeta, citing sources close to the chief prosecutor in Geneva.

The "vanishing billions" loaned by the IMF to prop up the rouble in late 1998 have since been the subject of investigations by the FBI and Swiss officials linked to the even larger Bank of New York scandal involving the alleged laundering of up to $10 billion in dirty Russian money.

Mr Kasyanov recently secured the write-off of nearly a third of Russia's Soviet-era commercial debt. He was Finance Minister at the time of the 1998 crash and unproven allegations that he benefited from inside knowledge have given him the unwelcome nickname in Moscow financial circles of Misha Two Per Cent.

His spokeswoman last night denied any wrongdoing by the Prime Minister, but Novaya Gazeta, which is known for its relatively independent stance, stood by its story.

American investigations into the Bank of New York affair have established that much of the missing money, including most of the IMF loan, ended up in American accounts belonging to 18 commercial Russian banks, many of which have since ceased trading. Several of the banks have admitted buying IMF dollars from the Russian Central Bank and keeping them in American accounts.

The Central Bank has also acknowledged "selling" large tranches of the IMF credit, claiming it came with no strings attached and that the process of acquiring the commercial banks' roubles in exchange achieved the required aim of supporting the embattled Russian currency.

Whether Mr Kasyanov was involved in moving billions of dollars between Russian-owned foreign accounts, and if so whether he profited personally, is a key political question as he and Mr Putin attempt to make good on pledges to stamp out the corruption that has bedevilled ten years of attempts at economic reform.

According to yesterday's report, on August 14, 1998, the $4.8 billion was transferred from the New York Federal Reserve to accounts at the Republic Bank of New York, controlled by Edmund Safra, the billionaire Lebanese banker who died in a fire at Monte Carlo last year. The Russian Central Bank defaulted on most of its short-term debt three days later, triggering the crash.

In the chaos that ensued, Mr Safra received instructions from the Central Bank and the Russian Ministry of Finance to move the $4.8 billion quickly to "other foreign accounts" through a tortuous series of international transfers, the report claims.

Afraid that the investigations that followed would tarnish his name, Mr Safra allegedly decided to co-operate with the FBI and Swiss officials, setting out in detail the mechanisms by which Russians had been using American banks to launder their money.

Mr Safra's death soon afterwards has been blamed on his male nurse. But the chief prosecutor in Geneva has reportedly said he believes the murder was a result of Mr Safra's decision to help the FBI.


FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.