Renfrey Clarke    Johnson Russia List    23-Sep-1998    Plucked from the gutter
"Instead, the banks have made high profits out of currency manipulations and from lending to the government on the short-term debt market.  Many, especially among the smaller ones, are reputed to be fronts for mafia money-laundering operations.  The banking industry has also played a big role in expediting illegal capital flight, estimated at a staggering US$140 billion over the past seven years.

Such are the institutions that Primakov, at serious peril to Russia's economy and society, has now plucked from the gutter and set back on their unsteady feet." Renfrey Clarke

The Renfrey Clarke article below is being circulated by e-mail.  It seems to have originated in the Johnson Russia List (JRL), and been copied from there to the soc.culture.russia newsgroup.

A comment as to why some material concerning Russia, such as the Renfrey Clarke article below, has been added to the Ukrainian Archive recently can be found in the UKAR introduction to a Los Angeles Times article by Richard Paddock.

Another relevant comment that can be found on the Ukrainian Archive is a list of the topics that pertain to the plunder of the Slavic world, but that tend to be avoided.  In the Renfrey Clarke article below, a central observation which is avoided is that the saving by Prime Minister Yevgeny Primakov of the Russian oligarchs so that they can continue to plunder Russia is the saving by a Jew (Primakov was born Finkelstein) of oligarchs, six out of seven of whom are Jewish.  Although this observation is striking, it may be immaterial and irrelevant, as perhaps would be the observation that these same individuals all had brown eyes, or all frequented the same restaurants.  If it is the case that the avoided observation is immaterial and irrelevant, then it would seem appropriate that the observation be first acknowledged, and then explicitly allocated its proper devaluation.  What does not seem appropriate is to treat the discussion of any striking observation as a taboo.  Bowing to taboos is forsaking the path of understanding in favor of the path of political correctness.

As far as I can see, the hypothesis that the Russian Revolution amounted to the Jewish conquest of Russia remains tenable, and the ethnic composition of Russia's oligarchs, as well as the ethnic membership of Russia's prime minister, as well as the indulgent treatment by Russia's prime minister of Russia's oligarchs, suggests further that such a conquest continues to this day.  If American Jews exercise a disproportionate influence over American foreign policy, then American backing of Primakov and the oligarchs might be viewed as the backing by American Jews of the plundering of the Slavic world by Slavic Jews.  Perhaps this interpretation is false or exaggerated, in which case let it be openly discussed and proven to be false or exaggerated.  The interpretation must be openly discussed because there is some chance that it is true, and if it is true, then to suppress its discussion might be dangerous.


By Renfrey Clarke

MOSCOW After weeks in which it was regarded as a certainty, there will be no crash of Russia's speculative, mafia-infested banking system not yet, anyway.  Instead, the crash is likely to take place in the living standards of anyone in the country whose income is calculated in rubles rather than dollars, or who is not well-placed in financial or resource-exporting circles.

This is the upshot of a deliberate choice made sometime in mid-September by the new government of Prime Minister Yevgeny Primakov.  Appreciating that if it did not capitulate to Russia's most powerful business magnates the so-called oligarchs it would have to mount a serious offensive against them, the government opted for surrender.

On September 18, banks in Moscow, St Petersburg and several other important regions took part in a state-supervised "debt swap".  This was intended to overcome the paralysis that had gripped the banking sector since August 17, when the previous government of Sergey Kiriyenko devalued the ruble and defaulted on huge sums in short-term bonds.  In technical terms, the banks were permitted on September 18 to settle their debts with the state, their depositors and one another by borrowing from the reserve funds they are required to lodge with the Central Bank.

In a later process completed on September 19, the banks were allowed to "pay back" the new loans using the bonds on which Kiriyenko's government had earlier refused payment.  But this repayment was fictitious, since the bonds were almost worthless.  The Kiriyenko government defaulted on them because it had no way of raising the money to redeem them.  Simply issuing unbacked credits in the term often used by journalists, cranking up the printing presses was considered at the time to pose an unacceptable risk of sparking uncontrollable inflation.

The new authorities do not share Kiriyenko's scruples.  Because the "debt swap" credits are effectively a gift, the effect of Primakov's manoeuvre is that billions of new rubles, backed by nothing more than thin air, have entered the general money supply.  According to the English-language Moscow Times on September 22, the Central Bank put the additional sum at 4.2 billion rubles, equivalent to about US$250 million.

While this is only about 4 per cent of the total money supply, analysts fear it will have a catastrophic "trigger" effect on price rises.  At 43 per cent in the first two weeks of September alone, these are already in the hyperinflation range.  Increased inflation is virtually guaranteed by the use to which many of the banks are expected to put their newly-restored liquidity buying dollars, thus forcing down the ruble rate and raising the cost of the imports which account for around half the purchases made by the Russian population.

Was pumping up the banking system with unbacked credits the best choice available?  Central Bank Deputy Chairperson Andrei Kozlov insisted on September 18 that it was.  "The negative consequences of this action are less than of any other," Reuters quoted him as saying.

But this is simply not true.  The government had a perfectly workable alternative to emitting money.  It could have nationalised the banks.

With the banks under state management, their debts to depositors could have been paid out or put on hold in line with the government's real possibilities.  The available funds could have been directed not toward currency speculation, but toward ends such as maximising production, employment and the payment of wages.

All this would have met with furious resistance from the oligarchs, backed up by Western governments and financial interests.  The Russian banking sector, along with energy and raw materials exports, represents a vital component in the business empires of the country's most notorious "crony capitalists".

The resistance of the business moguls could, however, have been effectively countered through mobilising Russia's workers and poor that is, the prime victims of inflation.  At a time when the oligarchs are weaker than at any time since the early 1990s, mass demonstrations could have forced them to swallow their losses.

But there is no point in looking to Primakov to call such actions.  A long-time senior Pravda correspondent and foreign policy adviser, Primakov served the Soviet elite faithfully for decades, and remains loyal to them now that they have metamorphosed into owners of capital.

With the decision to emit billions of rubles to bail out the banking sector, many of Primakov's utterances on the economy have to be regarded as pure demagogy.  In an interview published on September 20 in the German newspaper Bild am Sonntag, the prime minister stated: "The biggest problem to tackle is that of [unpaid] salaries and pensions."  He also pledged to boost industrial and agricultural production.

The question of whether unbacked credits could be used to pay wage arrears without disastrous results has been the topic of sharp debate in Russia in recent weeks.  In an article in Nezavisimaya Gazeta on September 16 prominent economist Leonid Abalkin maintained that the Russian economy was heavily demonetised, and that there was a need for controlled emission to drive pseudo-money such as bartered goods and promissory notes out of circulation.

It could be argued that paying wage and pension arrears would have been an ideal mechanism here, since the rubles would not as a rule have been used to buy dollars, but to purchase cheap foodstuffs and other basic consumer goods.  The extra money would thus have translated directly into additional demand for the products of Russia's heavily depressed consumer manufacturing and agriculture.

But now that unbacked credits have been poured into saving the private banking system, and inflationary expectations are at extreme levels, the possibility of paying off wage and pension arrears without sending prices into orbit seems effectively nil.

Deputy Prime Minister Aleksandr Shokhin admitted as much on September 20 when he ruled out emitting more money to meet wage and pension payments, saying it would depreciate the ruble.  "The best option is to attract external resources to pay our obligations," Shokhin said.

"External resources"?  Who is going to lend money to Russia now?  What Shokhin could not bring himself to say is that the government has no serious plans for meeting the arrears.  The sum that might have been used to begin this process has been given to the oligarchs.

Primakov's weakness for "solutions" that fail to challenge the rich and do nothing for the ordinary population is showing up in other areas as well.

To curb the dollarisation of the Russian economy, restrict capital flight, and build up the Central Bank's hard currency reserves, the new Prime Minister has promised to tighten controls on the foreign exchange market.  According to the English-language Moscow Times, the Central Bank on September 18 announced it had drafted a presidential decree requiring exporters to sell 25 per cent of their foreign currency revenues to the Central Bank, in addition to the 50 per cent that already has to be sold through the currency exchange.

However, analysts quoted by the paper pointed out that the new measure would encourage exporters to conceal their earnings, and implied that they would have little trouble doing just that.  The inflow to the Central Bank's reserves, the sources predicted, would not be great.

The Russian state's reserves of hard currency and gold were badly depleted during the effort, abandoned on August 17, to maintain an artificially strong ruble.  Replenishing these reserves is vital if the government is to have even a medium-term prospect of stabilising its finances.

If exporters above all in the oil, gas and metals sectors sabotage this effort, the case for nationalising their firms is strong.  But after rescuing the oligarchs' banking interests, Primakov is hardly likely to strip the business chiefs of their energy and raw materials operations.

Meanwhile, what are Russian banks like, that the prime minister should be willing to risk sending inflation over the moon to keep them in business?

In all but a few cases, these institutions bear little resemblance to banks in the West.  The great majority have never shown any interest in building up a large network of depositors.  Few provide anything remotely like Western-level services to their clients.  Only a handful have a record of lending substantial sums to producers in the "real economy".

Instead, the banks have made high profits out of currency manipulations and from lending to the government on the short-term debt market.  Many, especially among the smaller ones, are reputed to be fronts for mafia money-laundering operations.  The banking industry has also played a big role in expediting illegal capital flight, estimated at a staggering US$140 billion over the past seven years.

Such are the institutions that Primakov, at serious peril to Russia's economy and society, has now plucked from the gutter and set back on their unsteady feet.