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

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 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
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

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

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

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
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?

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.”

Note: Read our discussion guidelines before commenting.