Politics of aid to Russia

now are an ability to tiptoe through political minefields and a mental

subtlety worthy of a Machiavelli. Whether the IMF team in Moscow at the

moment has these attributes is of particular significance. Within the

next few days it must decide whether to disburse $6250m for the Russian

economic stabilisation programme. Disbursing the money would be of the

utmost importance for the Russian economy but its symbolic importance

could be even greater. The IMF has had a lengthy and difficult series of

negotiations with the Russians which have been overshadowed by confusion

and upheaval in Russian politics. The political and economic elements

are tightly interwoven and, in a way they have not encountered before,

IMF officials have found themselves assessing political implications as

much as economic criteria.

Events are complicated by the fact that this will be the first

large-scale package of aid assembled by the IMF for Russia. The IMF view

on the Russian situation has come a long way from its initial

assessment, which was to view the country as a lost cause economically.

For much of last year the IMF viewpoint shifted slowly towards

acceptance of Russian protestations on reform, though these were not

always validated by what was happening on the ground. Responding to a

variety of pressures President Yeltsin has lost all but one recognised

reformer from his Government, but one of his silliest appointments was

that of the unknown geologist, Vladimir Polevanov, as head of the State

Property Committee. This made Mr Polevanov responsible for the

privatisation programme which is generally accepted as one of the few

reasonably successful elements in Russia's drive for reform. The snag

was that Mr Polevanov is clearly not in favour of privatisation. Indeed,

he caused a serious row last month by suggesting that those parts of the

oil and aluminium sectors which had already been privatised could be

moved back into state hands.

Mr Polevanov has to go; indeed hints emerging from Moscow over the

weekend suggest that he might already have been removed. If this is true

it will make the work of the IMF delegation a little easier, but it must

still grapple with the decision of parliamentary deputies on Friday to

withhold approval of Russia's 1995 budget. In some ways this is more of

a nuisance than a crisis. Amendments to the budget have been proposed by

the deputies but they mean that the proposed budget deficit will

probably end up at a more realistic figure than that claimed by the

Government originally. Two things are essential in the next few days.

Confusion over the budget must be removed and the IMF must resolve to

disburse the agreed money. It will be more of a political decision than

an economic one, and Chechnya has not helped, but in the present

circumstances it is only the political approach which can save the cause

of reform in Russia.