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What the Russian papers say


MOSCOW, May 18 (RIA Novosti) Kudrin fears possible financial crisis /Russia reopens Bank of New York's money laundering case/Russia, EU divided by mutual stereotypes

Nezavisimaya Gazeta

Kudrin fears possible financial crisis

On Wednesday, Russian Finance Minister Alexei Kudrin lectured at the Higher School of Economics in Moscow and said national financial and banking processes closely resemble those that existed on the eve of the 1997-1998 Asian financial crisis. It is the first such dire statement by a senior government official.
Kudrin said the foreign liabilities of Russian banks have been growing more quickly in the last three to four years and could cause a crisis if the country receives less foreign currency.
He said that nationwide, inflation has increased this April on similar 2006 levels because the Central Bank has lost much of its potential for absorbing excess money supply.
Analysts said that, overall, they agree with Kudrin.
Vladimir Tikhomirov, senior economist at the Uralsib bank, said 60 to 100 banks go bankrupt in Russia each year, and in the near future medium banks will be more vulnerable to bankruptcy than small banks.
Their domestic crediting policy is too risky and has led to an increase in the number of unpaid loans.
However, he said, the overall situation in the national banking sector is more reliable and stable than that on the eve of the Asian crisis. Russia has less speculative capital, whose outflow had provoked that crisis.
Kudrin said overdue Russian loans are quite similar to those issued in Indonesia, Thailand, South Korea, Hong Kong and other countries.
He said the Asian GDP had fallen from minus 7.4% to minus 13.1% in 1998 due to state intervention in the economy and the issue of bank loans to government officials and businessmen.
Kudrin said the increased capital influx, including loans received by banks and major corporations, could cause runaway inflation.
The Finance Ministry said Russian international reserves swelled by $121.3 billion last year and increased by over $65 billion in January-April 2007. By May 10, they increased more on January-June 2006.
Freshly printed rubles, which are used to buy foreign currency, accounted for the bulk of increased money supply since 2002.


Russia reopens Bank of New York's money laundering case

Russia's Federal Customs Service is seeking $22.5 billion in damages from the Bank of New York Co., the world's second-largest custodian of investor assets, for alleged money laundering in suspicious Russian transactions in 1996-1999, about which Russian security agencies want to know.
Maxim Smal, a lawyer for the service, said after filing the lawsuit in the Moscow Arbitration Court today that he was acting jointly with Miami-based Podhurst Orseck PA, representing the service's interests in the United States.
The Bank of New York said in a press release today that while it had not "seen the complaint, based on our knowledge of the facts, we believe any such suit would be totally without merit, if not frivolous, and we would expect to defend it vigorously."
Smal said the bank was involved, or turned a blind eye, to a scheme whereby money was taken out of Russia and import taxes were evaded. According to him, Podhurst Orseck has calculated the size of the claim and provided legal substantiation under U.S. legislation.
Smal said Russian legislation allows the guilty party in Russia to be sued, but under the laws of the country where it is registered. If the service wins the suit, the court ruling will also be implemented in the U.S.
Alexander Zadorozhny, a lawyer with Yukov, Khrenov and Partners, said it could be done.
In 2005, the bank signed a conciliation agreement with the U.S. government on paying $38 million to settle two criminal probes, which did not take into account Russia's losses.
Steven Marks, an attorney at Podhurst Orseck, who is representing the Russian government in the case, said the Russian government didn't benefit from the 2005 settlement and has yet to recoup its losses.
Alexander Khandruyev, former deputy chairman of the Russian Central Bank, said the scandal was initially fuelled by the Americans, who claimed that Russia was laundering money through the Bank of New York.
Andrei Cherepanov, then department director at the Central Bank, said at that time most Russian banks had accounts with BoNY to service their export and import transactions.
Another former high-ranking official in a state agency overseeing the financial market said the culprits organized "a small settlements center within the bank" helping businessmen not to return their export revenues to Russia, and to issue fraudulent import contracts in order to remove money from Russia.
Cherepanov said BoNY's databank probably kept track of all transactions dating from that period.
Political analyst Dmitry Badovsky said that could be the Russian government's way of guaranteeing the loyalty of the national business elite.
However, the suit may provoke an international scandal, Khandruyev said, as "the United States always stands up to defend the interests of major resident corporations."
As of 9:30 p.m. Moscow time (5:30 p.m. GMT) yesterday, the capitalization of the Bank of New York fell by 1%.

Rossiiskaya Gazeta

Russia, EU divided by mutual stereotypes

Vyacheslav Nikonov, president of the independent Moscow-based Polity Foundation, said the European Union believes Russia lacks democracy, threatens European energy security and oppresses its small freedom-loving neighbors.
He said it is difficult to talk about Russian stereotypes concerning Europe. Nikonov said most Russians know nothing about the EU and confuse it with the Council of Europe, the Parliamentary Assembly of the Council of Europe and the Organization for Security and Cooperation in Europe.
He said many Russians believe the EU, which comprises only large European countries, is now mostly controlled by small East European states.
Alexander Rahr, expert of the German Council for Foreign Policies, said Europe believes Russia is reverting to Soviet-era totalitarianism and even dictatorship. It is perhaps the main and most painful EU stereotype.
Russia is convinced that the European system of values and democratic institutions is nothing but a bluff. Many political scientists in Moscow believe that EU officials in Brussels are doing their best to weaken Russia and that such an opinion of Europe can hardly be called objective.
Mikhail Margelov, chairman of the international affairs committee at the Federation Council, the upper house of parliament, said the West thinks Russians have always opposed democracy.
The concept creates an entire system of false assertions. For instance, the West believes that the Russian government is authoritarian due to a lack of inclination for democracy.
He said some Russians believe that the EU wants to destroy their country and that EU citizens are not spiritual and hate Russia.
Sergei Karaganov, head of the Foreign and Defense Policy Council, said Russia believes the EU is weak and is dominated by countries such as Poland. The EU considers Russia an energy imperialist and an unreliable supplier of fuel and energy to the West.
Russia and the EU should overcome mutual divisions in the next five to seven years. Brussels would then get used to the idea of a strong Russia, and Moscow would stop reasserting its positions. Russia would overcome its current authoritarian trends and opt for a more liberal-democratic development.
But it will never resemble Western Europe and new EU members.

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