U.S. Warns Russia to Fight Graft, Says Aid Threatened

Secretary of State Madeleine Albright threatened Thursday to withdraw crucial U.S. backing for new International Monetary Fund and World Bank loans to Russia unless Moscow takes “fully adequate” steps to protect aid money from corrupt and criminal elements.

“We have made clear that we will not support further multilateral assistance to Russia unless fully adequate safeguards are in place,” she told a gathering of foreign policy specialists and diplomats here. “Our message to Russian leaders has been to get tough on corruption.”

Her comments marked the most comprehensive Clinton administration response yet to the stinging criticism that has followed revelations of the latest Russian financial scandal, an alleged money-laundering scam in which Russian criminal elements are believed to have channeled vast sums through the Bank of New York.

Albright also applauded the decision by Russia’s new prime minister, Vladimir V. Putin, to send a team headed by a senior intelligence official to the United States this week to help investigate the scandal.

During her 30-minute speech and a brief question-and-answer period that followed, Albright gave no hint of any significant shift in the direction or emphasis of U.S. policy in dealing with Russia, instead pleading for time and greater awareness of the enormous problems facing that nation as it moves along in its transition from Communist rule.

The administration has been especially sensitive about the scandal’s impact because it comes at a time when U.S. relations with Moscow have been strained by the war in Kosovo and the continued fallout from the collapse of much of the U.S.-inspired Russian reform effort.

Earlier this month, shortly after the Bank of New York allegations surfaced, White House Chief of Staff John Podesta said the U.S. would demand an accounting of how Russia spent funds it borrowed from the International Monetary Fund, or IMF.

“This has been a very tough year for U.S.-Russia relations,” Deputy Secretary of State Strobe Talbott said in a recent interview. “These allegations of corruption play into the problem.”

While federal criminal investigators dealing with the Bank of New York case have released few details, they have told the administration’s senior policymakers that they have so far found no evidence that either U.S. or international aid money is involved, nor have they uncovered any link with Russian government officials.

Still, the scandal and its link to a reputable New York bank have touched off a new assault against the administration’s broader handling of relations with Russia.

House Majority Leader Dick Armey (R-Texas) earlier this week labeled the Russia policy pursued by President Clinton and Vice President Al Gore as the greatest failure in U.S. foreign affairs since Vietnam.

“The stated purpose of the Gore-Clinton policy was to help the Russian people become a peaceful and productive free-market democracy,” Armey said.

“Instead, Russia has become a looted and bankrupt zone of nuclearized anarchy.”

Armey spokeswoman Michelle Davis on Thursday dismissed Albright’s declaration as “more of the same rhetoric about doing more but with no sign of any follow-through.”

Armey’s statement Tuesday followed a series of more measured, but critical, newspaper articles, including an extensive New York Times Magazine cover story titled “Who Lost Russia?”

Albright’s speech Thursday was partly a counterattack against this criticism.

“The suggestion that Russia is lost is simply wrong,” she said, going on to cite progress toward two of the major goals that have dominated U.S. policy since the Soviet Union collapsed eight years ago: reducing the risks from Russia’s aging nuclear arsenal and supporting efforts to build a free-market democracy.

The administration is using the threat of withholding vital, big-ticket loans as a stick to push for Russian reforms that will safeguard money provided by all aid programs, large and small.

In practical terms, however, there seems little danger to the biggest of these multilateral loans.

Conditions on the most recent $14.5-billion IMF loan package to Russia, approved in July, restrict its use to repayment of Moscow’s existing IMF debt, which stands at $16.8 billion.

An IMF spokesperson said the first tranche of the new loan didn’t even leave the fund’s headquarters in downtown Washington.

“It was a couple of internal electronic transfers,” the spokesperson said.