Robbing Russia


Finally, the rampant corruption at the core of Russia's post-Communist transformation is front-page news. On August 19 the New York Times reported that up to $10 billion in tainted Russian money may have been laundered through the Bank of New York since early 1998. It's odd to see a story long reported in The Nation treated like breaking news. Maybe prestigious news outlets have been too busy defending Boris Yeltsin to notice Western complicity in Russian corruption until now.

It's important that this not be turned into a mere police story, though the mainstream press seems to want it that way. A Times headline intended to clarify when it said, "Russian Gangsters Exploit Capitalism to Increase Profits," but it blurred the point that the real crime was the looting of the Russian state-beginning in 1991, to the point where it could not pay federal employees or pensions, enforce its laws or conduct an economic policy that would benefit citizens-and the wholesale giveaway ("privatization") of Russia's most valuable assets to a group of oligarchs linked with the liberal "reformers" Washington championed. The moral crime is that these policies have impoverished millions of Russians.

That didn't have to happen. The new Russian capitalists, or, as they are called in Moscow, "corruptionalists," have made no real investment in production or the country's infrastructure. Quite the contrary-what the US establishment calls the "transition" has been the greatest episode of asset-stripping in history, abetted and cheered on by the US Treasury, elite academic economists, the World Bank and the International Monetary Fund.

Capital flight in the Yeltsin years is estimated at about $150 billion. (The Economist, eager to preserve the essential distinctions, editorialized in favor of distinguishing capital flight, which isn't a crime, from money laundering, which is.) Not only is $150 billion more than the Latin American flight of the eighties-and about the size of Russia's entire foreign debt, which it can't service-but it's gone on far longer. In fact, it's probably wrong to think of it as capital flight (short-term outflow of panicked capital into secure instruments like US Treasury bonds); think of it rather as a chronic hemorrhaging of Russia's natural resources. That could hardly have occurred without the knowledge and complicity of Western governments, central banks and finance houses. …

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