More on Russia, esp. Bush's statement in the 1st debate.
Tuesday, October 17, 2000
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Chernomyrdin bucks Bushwhack
by Anne Williamson
worldnetdaily.com
After last week's presidential debate, former Russian Prime Minister and Gazprom big, Viktor Chernomyrdin, threatened to bring a suit for slander against the Republican presidential candidate, George W. Bush. A seemingly bewildered Tom Dawson, chief IMF spokesman, followed up in Washington by telling curious reporters that the Fund was "not aware of (any evidence to support) this (Bush's) particular allegation." All that was missing were the canary feathers in the corner of their mouths.
Anne Williamson
The "allegation" at issue is Bush's statement that much of the IMF's lending to Russia "ended up in Chernomyrdin's pockets and others." Truer words were never spoken.
Russia's entire domestic bond market (GKOs) was in reality a pass-through arrangement of U.S. public funds to Wall Street financial interests the Clinton administration was attempting to seduce permanently into the DNC camp. Moscow was but an exotic venue for this practice which further accommodated the unaccountable Yeltsin government by allowing it to siphon off sustenance from the many billions the IMF lent.
It was in 1992-93, when consultants from the New York Fed established what was essentially a jury-rigged system reflective of a completely artificial market. This GKO bond market quickly evolved into a pyramid scheme whose outlandish triple-digit yields were paid with the proceeds from IMF lending, a phenomenon which, in turn, starved the equities market that badly needed investors' dollars. "Sure, GKOs are definitely a pyramid scheme, but a legal one," Russia's representative to the World Bank admitted in early 1997. "In a developing economy, if the economy is bad, the pyramid can collapse, and that is why Russia takes money from the IMF. Otherwise, the pyramid would collapse." And collapse it did in August 1998.
Somewhat more favorably for Mr. Chernomyrdin, and less so for Al Gore and the IMF, World Banker Leonid Grigoriev, elaborated on his admission, "It was a scheme invented and developed by the IMF, so they cannot blame him (Chernomyrdin). What was the IMF, the watchdog of the Western economic system, doing by approving all these measures? They were present, on the spot, they were signing all these agreements, and they were so happy with him (Chernomyrdin), so why blame him? He is doing what they advised him to do, so if anything goes wrong, there is nobody to blame in Russia; they did as they were told."
And why not? If Russia -- courtesy of the IMF -- had no need to finance its own bond market by raising revenues through taxation, then the honchos at Gazprom and other natural resource producers would have just that much more to deposit in their faraway private bank accounts. It is thanks to a magical quality of money known as "fungibility" that the IMF can technically assert that none of its loans are ever stolen or misused. (Fungibility is when a quantity of a good can easily be substituted by a quantity equal in value to that of the same good, such as grain, refined sugar, gold or currency notes.) The Fund simply transfers the loan to a borrowing nation's central bank, which is then free to ship the proceeds to private accounts in Cyprus, the Cayman Islands, or domestic trust funds holding coal miners' pensions or wherever the recipient nation's central bank chooses for whatever purpose, fair or foul.
Despite the bond matter having gone very wrong indeed in the summer of 1998, Chernomyrdin was a hack from day 1, whose shenanigans involving both Gazprom and Al Gore could not withstand the discovery process. The former Soviet Oil and Gas minister rose to power in Yeltsin's Russia in the dismal days after the failure of Gaidar's "shock therapy," when Yeltsin was growing increasingly fearful of losing power. One insider characterized the resolution of the backstage intrigues as a "Faustian bargain," explaining that "Gaidar's departure (in December 1992) signaled an okay to the oil industry. The trade-off for Yeltsin to stay put was that his administration wouldn't try to wrench the wealth from those in the (energy) industry. Chernomyrdin was put in place only to ensure that the bargain was kept."
Chernomyrdin had already demonstrated to Russia's oil and gas "generals" that he was a sound bet by having become a prominent customer of Bill Clinton's former campaign donor, Grigory Loutchansky. Loutchansky ran the Austrian-based company, Nordex, whose operations involved the transfer and sale of Scud missiles, nuclear smuggling, the export and sale of natural resources Russian insiders bought at subsidized domestic prices and then resold in the West at world prices. Nordex handled the subsequent multimillion dollar transfers through a network of Swiss bank accounts and dummy companies set up in tax havens like the Isle of Man and Liechtenstein.
But Chernomyrdin outdid himself with the 1994 privatization of Gazprom which proceeded according to special rules and procedures never made fully public. The share registry's webs of deceit were initially said to be so clumsily and hastily woven that two different investment bankers told me separately that certain owners listed in the 1994 share registry were such obvious stand-ins that "Shareholder No. 1" was actually a Siberian peasant and his immediate family.
Another unique aspect Chernomyrdin et al. built into Gazprom shares is that they trade at two prices, one heavily discounted and said to be for the benefit of average Russian investors, and another, higher price on the world market at which foreigners are obliged to make their purchases. In reality, two prices for the same good provides enormous opportunities for insiders to profit. Anyone with access to the discounted shares and a competent, discreet broker in the West would have a lock on a steady stream of mind-boggingly easy money.
A citizen would be wrong to think any of these hefty insider bites out of Russia's cash cow especially alarmed either the IMF or the Clinton administration. Quite the contrary.
For example, when the IMF touted a 1996 $10.2 billion loan on the basis of what an extraordinary job Russia had done in meeting the conditions of a 1995 $6.7 billion loan, one crucial detail went unmentioned. The $6.7 billion loan was extended without any conditions via the IMF's Systematic Transformation Facility, a program then-U.S. Treasury Undersecretary Lawrence Summers designed especially to funnel money to Russia in return for "the promise to reform." Also left unsaid was that -- thanks to the fungibility of money -- the $6.7 billion loan financed almost to the kopeck Yeltsin's bloody and disastrous assault on Chechnya. Following the Russian Communists' success in the December 1995 parliamentary elections, the Fund proceeded into even dodgier territory with the 1996 $10.2 billion loan, which came front-loaded with a billion dollars meant for Yeltsin's reelection. Clearly the Fund was made to understand the potential embarrassment to Clinton's own reelection bid, should the card-carrying Gennady Zyuganov to be elected to the Kremlin.
When candidate Yeltsin wanted to please farmers by yielding to their demand for higher import tariffs with a 20 percent increase and a promise to use the new funds for social programs, the IMF barked that an increase in import tariffs would derail the loan. The cagey Yeltsin quickly slapped a 20 percent hike on frozen American chicken, a $700 million dollar market, $258 million of which had been earned by Tyson Chicken. Let us recall that it was Tyson's agents who engineered Hillary Clinton's short, but steeply ascendant career trading cattle futures. And it was Tyson that had come through with a particularly well-timed loan to the 1992 campaign that proved critical in facilitating the Clintons' last minute get-away from Arkansas and federal banking investigators via the ballot box. Clinton, steeped in the political folkways of his home state, soon flew to Moscow and advised Yeltsin they ought "to help each other." After that, all talk of a chicken tariff increase ceased.
Yeltsin's coming electoral triumph only began taking shape once the first payout of a billion-plus dollars arrived the following May. The campaigning Russian president pulled out all the stops; back wages for state employees and pensions were paid, and after the IMF's billion was consumed, the capricious Siberian ordered his initially mulish Central Bank to hand over a billion more. The West's IMF watchdog kept its mouth shut.
But weren't we told that Russia's financial oligarchy paid for Yeltsin's reelection? To the contrary, Russia's bankers made serious money on Yeltsin's electoral weakness by buying government bonds at distressed prices using cheap money handed over from government deposits. The domestic Russian bond market's high yields were always paid with IMF loans. Grigoriev explained, "Of course, the government was to return this money and that is why the yields on 3-month paper reached as much as 290 percent. The government's paying such huge, impossible rates on treasury bills, well, it's completely unbelievable. It had nothing to do with the market and therefore such yields can only be understood as a payback, just a different method."
Should Chernomyrdin carry out his threat to litigate, I suspect investigators armed with the appropriate legal powers would discover that the secret deal restricting the Russian arms sales to Iran the New York Times revealed last week wasn't the only one Viktor and Al struck.
Was there, for instance, any particular agreement regarding a future payback to Gore 2000 coffers in return for the vice president's championing of Yeltsin's and Chernomyrdin's cause in the 1996 Russian presidential election? And in championing the two Russians was Gore not actually championing the interests of the Wall Street powerhouses who sat on the Capital Markets Forums, a key part of the Gore-Chernomyrdin Commission?
Andrei Shleifer, the Cambridge-based manager of Harvard's USAID-funded consultancy (currently the subject of a $120 million civil suit filed by the federal government which also targets Harvard's Moscow-based manager, Jonathan Hay, both men's wives and the university), organized participants into groups devoted to such juicy topics as "Investor Protection," "Capital Market Infrastructure," "Collective Investment Vehicles," and "Taxation, Accounting and Auditing." The Russian members of the forum were representatives of the intelligence community, various oligarchical banks, and Moscow brokerages, including a financial outfit with a prophetic handle, the CJSC Center of Dematerializing Promissory Notes. (Actually, the reference is to a peculiar Russian quasi-currency known as veksels.)
High-powered financiers are always interested in the management of large investment portfolios, corporate bond offerings, shareholding offers, syndicated loans, derivative contracts, lucrative privatizations, oil, gold and other precious metals, natural gas, and they further enjoy a wealthy, private clientele who are themselves interested in acquiring diamonds, furs, rare species trophies, antique pearl-encrusted icons, high brow art from Czarist collections, and so on. Their Russian counterparts were the minions of the most successful ex-Komsomol ("Young Communist League") banksters who had control of fabulous assets that provided immense cash flows to their personal Western bank accounts and who were very interested in putting those accumulating sums to work profitably in the West's asset-inflated equities markets. How much, I wonder, would it be worth to this crowd to have Al Gore and Viktor Chernomyrdin advancing their agenda?
A close look at Itera, a Florida-based client company of Gazprom, would raise yet more questions. Itera, about which it has so far been impossible to even establish who the owners are, is believed to be used by Gazprom executives and their relatives to siphon money out of the company (as is an Irish-registered company, Milford Holdings Ltd.). The firm has already been fingered as the source of contributions to certain, Florida state politicos. And yet the EBRD says it is ready and willing to make a new loan to Gazprom!
But the most intriguing set of circumstances and possibilities revolve around a particularly obscure figure in Chernomyrdin's circle, one Peter Castenfelt, a London-based Swedish financier who operates an outfit called Archipelago Enterprises. I first spied Castenfelt in the winter of 1994, when he acted as an intermediary between Camdessus (the IMF chairman) and Chernomyrdin during Russia's negotiations for an IMF loan. But how, or why, I wondered at the time, could a private Swedish businessman with offices in London intercede between some of the most powerful governments in the world and their proxies? And how and for what purpose had Chernomyrdin become involved with a heretofore unknown Swedish financier?
The next I heard of Castenfelt was from Truth in Media's Bob Djurevic who chronicled how Castenfelt, described in the Hamburg-based paper, Welt am Sonntag ("World on Sunday") as a "trustworthy" contact of the German government was secretly dispatched to Belgrade on 20 May 1999 via Bulgaria, equipped "with a bag full of sticks and carrots." Castenfelt, Djurevic established, finished off a 13-day stay at the Intercontinental Hotel with a visit to a Belgrade banker where he presented a memorandum of the West's demands and possible fudges to Slobodan Milosevic's representatives. Schroder's foreign affairs adviser, Karl Kaiser, later said, "Castenfelt played a central role in showing Milosevic how the accord could be made to look better than what was offered at the Rambouillet peace talks."
Could it be that a large chunk of discounted Gazprom shares, possibly to be hand-delivered by Chernomyrdin, looked "better" to Milosevic, especially knowing Castenfelt was there to market them at the world price and then deposit the proceeds in a secret bank account in the appropriate tax haven?
The only error George W. Bush made when he questioned Gore's management of the Clinton administration's Russia policy is that he made his target too narrow by naming only the IMF. By rights, Mr. Bush should have mentioned too the World Bank, the International Finance Corporation, the European Bank for Reconstruction and Development, the Overseas Private Investment Corporation, the Export Import Bank of the United States and the Russian American Enterprise Fund. The lending of these institutions goes towards specific projects and enterprises via the recipient government after having been agreed upon with donor nations' international debt merchants. Their patron saints are Waste, Fraud and Abuse.
Unfortunately, for Russians and Americans who want answers, Jim Leach, Chairman of the House Committee on Banking and Financial Services, has quietly dropped the investigation of exactly what happened to the IMF's $4.5 billion bailout in August 1998. Instead, Leach has been pursuing legislation Lawrence Summers favors which proposes a global "Know Your Customer" regime that will effectively end American citizens' financial privacy while crushing the tax competitive "havens." In other words, whether he realizes it or not, Leach is proposing to penalize American citizens in hopes of policing a nonstop flow of loans to corrupt governments through the multinational public lenders on behalf of an imperial executive branch. As if the comparatively modest Caribbean financial hideaways of stolid, middle class professionals suffering high tax rates are the problem! Leach's climbdown in combination with the Republicans having gotten through their political angst with the release of the Cox Report means that taxpayers best hope today of getting any real answers as to how their money was squandered by the Fund, the Clinton administration and the New Russia's camarilla government would be if Chernomyrdin did file suit!
The only question George W. Bush really needs to be asked in this evening's debate is: What exactly does he intend to do, should he prevail on Nov. 7, to stop the abuse of taxpayers and other innocent people around the world at the hands of the arrogant, ethically rotten and deluded collection of market bubble-blowers who are today despoiling U.S. foreign policy from within the inappropriate confines of the U.S. Treasury?
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Anne Williamson has written for the Wall Street Journal, The New York Times, Spy magazine, Film Comment and Premiere. An expert on Soviet-Russian affairs, she is currently working on a book, "Contagion: How America Betrayed Russia." |
