Is Russia blackmailing the West ?

by John Laughland

Key words: john laughland, pierre verluise, soviet union, russia, perestroika, glasnost, socialist countries, capital outside, debt, strategy, western europe, eastern europe, gorbatchev, eltsine, poutine, kgb, fsb, coface, european community, paris club, russian loan, germany, france

Pierre Verluise, "The New Russian Loan", review by John Laughland, in The Wall Street Journal Europe, Friday - Saturday, April 26 - 27, 1996

"Perestroïka should not be understood as an attempt to make the Soviet system work. It should instead be understood as a means by which to associate the international community with the maintenance , the equipment and the feeding of socialist countries. It consists in taking the domestic political measures necessary to make the international community consent to the parasitism of the socialist bloc".

This quotation, from an essay published in 1990 by the French Sovietologist Françoise Thom, sums up the message of Pierre Verluise’s " The New Russian Loan " (" Le Nouvel Emprunt Russe ", Odilon Media, 211 p, 130 French francs. www.alapage.com and www.chapitre.com ). The book, not yet published in English, argues that perestroïka had one overriding aim: to obtain Western aid for the Soviet Union. Having sucked dry its own territory and then, after the war, that Eastern Europe, the Soviet Union needed a third circle on which to draw: Western Europe. The Russian debt is, therefore, according to Mr. Verluise, a deliberate strategy to obtain both subsidies from, and a political leverage over, Western Europe.

The book deals mainly with the period from 1985 to 1994. But written before the announcement of a International Monetary Fund’s historic $10 billion loan in Moscow, before two recent German loans of four billion marks and one billion marks, before a French loan of four billion francs, and before the fourth rescheduling of the Russian debt in March 1996, its assertion that Russia is engaged in determined parasitism is as compelling as it is prophetic.

The argument has three stages

First, Mr. Verluise shows that the Soviet Union deliberately inflated its debt from 1985 onwards. Previously, the Soviets were known for their tiresome punctuality in repaying debt, but between 1985 and 1991, Soviet debt tripled from $22.5 billion to $70 billion. Calculating theses figures is an extremely difficult task (one which Mr. Verluise has accomplished admirably for the period under study), but the total debt is now estimated at between $80 billion and $ 200 billion.

Secondly, the author estimates the total Soviet capital outside the Soviet Union to have reached between $70 billion to $100 billion by 1991. He estimates the capital outflows for 1992 alone between $17 billion and $40 billion, and believes that they are continuing even now at a rate of $1 billion per month. Various clandestine methods are used: Funds from the sale of oil, hydrocarbons and arms are placed in secret accounts and the KGB uses the Mafia to help it dispose of funds. The flows often take the form of undeclared physical transport of gold ingots and diamonds in personal suitcases. Indeed, in 1993 the Uzbekh president himself deposited a suitcase full of gold with a bank on the Champs-Elysees. Despite this, the Soviet Union unilaterally suspended payment of its debt on Dec. 4, 1991, arguing that it had money left in the state bank. At the stage, the Soviet debt was $70 billion , half " private " and half public, a difficult distinction to make in Russia. The fortune of the Communist Party, the most criminal element of a largely criminalized society, was estimated at between $150 billion and $190 billion by the Russian procurator-general in 1990. If this figure is correct, it would not be difficult to stash away a few tens of billions in tax havens abroad, where the cash is safer from the demands of Western creditors than it would be if it remained in Russia.

The third stage of the argument is that the Russian debt is held overwhelmingly - 75% - by Western Europe. Of the 18 creditor countries, 14 are in Western Europe: Germany is in the first place with 36%, France comes second with 10%. At the same time as they were lending to the Soviet Union, the 12 members states of the European Community , and the EC itself, were providing 73% of the aid to the Soviet Union. By contrast, the United States held mere 1.25% of its debt, and even that continued to be repaid, unlike the European debt, when the Soviet Union officially suspensed its payments in 1991.

These figures represent a considerable sum for each European taxpayer. Even if the money was lent by private banks, and even if some of the debt is in form of unpaid bills for imports, European states very often underwrite such loans. The four billion marks lent in March by a consortium of German banks was announced by a German government spokesman, presumably in order to underline its political quality. Similarly, the French state organism, COFACE, underwrites French exports; when debtors fail to pay, COFACE pays instead.

Rescheduling of debt often results in less interest being paid and an effacement of debt, the difference being paid by the creditors state. Between 1991 and 1994, according to Mr. Verluise’s sources, successive rescheduling simply led to direct subsidy of Russia by the West. In 1994, he claims that the post-ponements represented a support of some $7 billion. This process has not stopped, even though Russia has a persistent trade surplus.

On March 18, 1996, was admitted as an observer to the Paris Club of world creditors, with a view of becoming a full member in due course. It is thus strange to be reminded by Mr. Verluise that Russia unilaterally broke many of its rules. In 1993, the Paris Club was so generous in rescheduling the Russia debt that Russia had to pay only $2 billion that year instead of $12 billion. The " concession " by the Paris Club was little but the recognition of a fait accompli : that Russia was refusing to pay. The Russians know that if you owe the bank $1,000 and cannot pay, you have a problem, but if you owe the bank $1 billion and cannot pay, the bank has a problem.

Mr. Verluise sees here the key to Russian strategy

The Soviet system has been in a permanent state of reform and decline: The first " reforms " date from the 1960s, excluding Lenin’s New Economic Policy in the 1920’s. By the 1970s, the Soviet economy was collapsing. At the same time, the KGB realized the Western suspicion of the Soviet Union could be overcome if the West was told what it wanted to hear.

Quoting Alexander Zinoviev, the author argues that the Soviets simply invented a new lie, which this time they directed mainly to the West. When Mr. Gorbatchev came to power in 1985, he was exactly what the West had always wanted, " liberal ", " democratic ", and, above all, socialist. The Gorbymania of the time camouflaged perestroika’s real aim of securing Western aid.

Evidence of Western connivance in Russian strategy is hard to ignore. Russia has just been admitted to Europe’s principal human rights body, the Council of Europe, even though it has publicly announced what is perfectly obvious - that it had no intention of obeying its rules. Russia has also announced its intention to join " all other European institutions ", and still proclaims its desire to be part of a pan-European security structure. The Chechen war continues, financed by Western money. The Soviet Union is in process of being reconstituted, by means of various treaties of " economic integration ", and Moscow still claims the right to determine which security alliances its former satellite states can join. And yet, Western governments continue to pretend to believe in the charade of " reform " in the former Soviet Union. Are they just very gullible, or are they , as Mr. Verluise implies, being blackmailed ? "

Texte présenté avec l'aimable autorisation de John Laughland