The news for both the “Father of Russian Democracy” and his “friend Bill” was equally bad in the second week of September. A wave of bombings had killed some 300 Russians, murdered by an elusive terrorist gang as they slept in their beds (with some people pointing an accusing finger at the Kremlin; see “Banking on Boris” in the December 1999 Chronicles). The war against Islamic militants in the North Caucasus was dragging on, and the Swiss investigation into the Mabetex scandal was uncovering evidence of links with the Bank of New- York (BNY) money-laundering scandal. Meanwhile, back in Washington, Congress was preparing for hearings on the BNY case, which President Clinton’s opponents are sure to use as a pretext for an embarrassing “Who lost Russia?” political bash, while Clinton’s anointed successor, Al Gore, was in deep trouble, with polls showing presidential wannabes George W. Bush and Bill Bradley both thumping him. Thus, the two beleaguered presidents had occasion to talk over their misfortunes and, perhaps, engage in the blame game, both seeing the other as the source of his own domestic problems.

The Russian press had a field day with Boris Yeltsin’s September 9 conversation with Clinton on the Kremlin hotline. The Kremlin’s walls were gushing with leaks: Reportedly, the main topics of conversation were the interconnected BNY and Mabetex scandals. Yeltsin and his entourage, the “family,” stand accused of accepting kickbacks for Kremlin refurbishment contracts from shady Kosovo Albanian Begzhet Paccoli. According to media accounts, Paccoli provided the “family” with credit cards having a generous credit line, which he paid. He also set up Swiss accounts for the “family” into which Russian budget funds —and IMF funds —were allegedly funneled. According to Russian newspapers, Clinton asked Yeltsin if he had accepted bribes, and Yeltsin reportedly beat around the birch tree, not denying the charges, but complaining that the whole scandal was “politically inspired.” What he meant was that Washington’s political allergy to the Clintons was causing Yeltsin problems. Clinton, according to Nezavisimaya Gazeta‘s informants, was “not completely satisfied ” with Yeltsin’s halfhearted denials.

Judging from subsequent events, Clinton and Yeltsin probably had a serious—and acrimonious—discussion about how to counter the rising tide of political sewage that threatens to drown them both. Clinton had already kicked off the campaign by having his national security advisor, Sandy Berger, downplay the Russian corruption stories in the September 5 Washington Post. In banal bureaucratese, Berger admitted that there are “many problems in Russia today” and needled Yeltsin for vetoing an anti-money-laundering bill passed by the Duma. But he also repeated a claim made by Moscow apparatchiks and IMF spokesmen: “We have no evidence that IMF funds have been stolen.” Berger called for Russian cooperation in investigating the BNY scandal, something Yeltsin pledged four days later during his talk with Clinton. The very next day, September 10, Yeltsin gave his law enforcement chiefs a serious tongue-lashing, telling them he was shocked, shocked, that they had not followed through with Russian pledges to join the International Commission Against Money Laundering. Yeltsin demanded that the Duma pass enabling legislation sanctioning Russian participation in the European Conventions on Extradition and Mutual Legal Assistance. Furthermore, Yeltsin ordered a team of Russian security personnel to fly to Washington to facilitate the American investigation of the BNY scandal, preferably before the kickoff of congressional hearings set for late September, which roughly coincided (coincidentally, no doubt) with the annual meetings of the IMF and the World Bank. Russian Central Bank (RCB) Chairman Viktor Gerashchenko and Russian Finance Ministry officials would also be on hand to negotiate the release of the next $640 million “tranche” of the IMF “stabilization credit” to Russia, which they hoped to get by October 10.

It looks like the plan for covering the political hindquarters of the Clinton administration and the Kremlin “family” goes something like this: first, continue denying that any IMF funds were “diverted” and have Price Waterhouse Coopers audit the RCB. (Of course, the RCB’s books are cooked to well done, as anybody who has followed reporting on questionable RCB economic data could surmise; Russian and European media have often claimed that official RCB figures for currency and gold reserves—figures used by creditors to help determine Russian creditworthiness—are entirely fictional, and the RCB itself has admitted it used its reserves to speculate on the collapse of the ruble in August 1998. The profits were funneled offshore via RCB affiliates.) Next, demand quarterly reports from the RCB on its financial state; of course, the Russians will protest a bit over this intrusion. (Gerashchenko has called the demands for quarterly reports “nonsense.”) Then, after delaying the release of the “tranche”—now postponed until at least October 20—in a show of Washington’s tough love for Moscow, send it along in due time. In the meantime, send a delegation of Russian Duma deputies to take part in the Capitol Hill show trial orchestrated by House Banking Committee Chairman Jim Leach (RIA), while the IMF and World Bank spokesmen keep repeating how important it is to remain “engaged” with Moscow. Former Treasury Secretary Robert Rubin and his successor, Lawrence Summers, the IMF’s Michel Camdessu, and the World Bank’s James Wolfensohn have all stressed this last point. Camdessu hailed Russian reforms and economic progress (!) and stated that the IMF’s next “tranche” would shortly be approved, while Wolfensohn characterized the reporting on the Kremlin scandals as “hysterical.”

For all that, the Clinton and Yeltsin sham “investigation” has faltered, the victim of carefully timed leaks from Swiss, Russian, and American law enforcement and security agencies. As October begins, Russian, American, and European media have reported that Russian investigators, confronted with “irrefutable” evidence of Russian money laundering (including evidence of RCB involvement in the possible “diversion” of IMF funds), refused to hand over materials requested by the Americans to facilitate the investigation. Swiss investigators have frozen the accounts of numerous Russians —including tens of millions of dollars in accounts held by Yeltsin’s Rasputin, “financier” Boris Berezovsky—who may be connected to the Russian mafia’s money laundering operations, which could include IMF funds as well as money made through the drug trade, prostitution, and other illicit activities. The Italian paper Corrierre della Sera, which has taken the lead in exposing the Kremlin’s Mabetex connection, reported that Swiss investigators complain of Moscow’s attempts to block their investigation, which reportedly has linked alleged Mabetex and RCB money laundering to the BNY. Tatyana Dyachenko, Yeltsin’s daughter and de facto chief of staff, has been tied to the BNY scandal via her husband, who has a hefty account in an offshore BNY affiliate.

The litany of leaks appears to undermine the Clinton-Yeltsin effort to whitewash the scandal; what comes next is anybody’s guess. But we poor taxpayers, suffering from an overdose of Clinton/Yeltsin fatigue, will probably not see any serious effort by either the Washington or Moscow “party of power” to question, much less halt, the dubious IMF/World Bank gravy train. The game will likely go on.