From the Washington Post, 23 December 1993, pp. A1 and A18

U.S. - IMF Clash Looms on How West Can Best Aid Russia

In the aftermath of the strong showing by anti-reform candidates in Russia's legislative elections this month, the United States and the International Monetary Fund are heading for a showdown on how best to keep Western aid flowing to Russia.

Administration officials fired the first salvos by pointing fingers at the

Firing salvos, by pointing fingers, in a show-down?!!
IMF, the main conduit for international aid to Russia, saying the organ had set overly cautious conditions.

Yesterday, a senior official of the IMF countered, saying that while the institution would be flexibile, it would not abandon its longtime policies. ``We will move as rapidly as we can. But if it means signing off on a bad program that will make things worse, that we will not do,'' Ernesto Hernandez-Cata, an IMF deputy director in charge of Russian programs, said in an interview yesterday.

The sturggle concerns the credibility of Western governments and international lending institutions that face the monumental challenge of shepherding Russia through a transition to free markets and democracy.

The Clinton administration has listed Russia among its foreign policy successes. Now it is a problem area, and U.S. officials have been quick to place the blame elsewhere: in Russia, where U.S. officials said reformers lacked unity and the election was a ``wake-up call'' for them; in Europe and Japan, which in Washington's view have been stingy with aid; and at the IMF.

The IMF is being pressured to break from its fundamental principle that financial aid must be accompanied by economic reforms to curb inflation and runaway budgets --- goals Russia is far from achieving. The basic conflict is over what strings, if any, should hbe attached to Russian aid.

Western governments want to give Russia more money, ``no matter what,'' said Stanley Fischer, a Massachusetts Institute of Technology economics professor. The IMF and the World Bank cannot do that unless they decide to throw out their rules in order to help Russia.

The Clinton administration and other Western governments feel they cannot afford to do the job themselves, leaving them nowhere to go but the international institutions, said Fischer and other experts. By way of contrast, the Marshall Plan created to rebuild Europe after World War II was funded and implemented almost entirely by the United States.

Even though the Western governments dominate the boards of the world financial institutions, operations are in the hands of international officials deeply committed to the institutions and their long-standing policies.

``To criticize the IMF is nothing new,'' said Dmitri Simes, an expert on Russia at the Carneige Endowment for International Peace. ``It's natural for the IMF to act as bankers. There is no room for the administration and its allies to criticize. They don't want to pay the political capital necessary to help Russia themselves, but at the same time, they want the IMF to change its rules for political reasons.''

Some analysts believe, however, that the IMF will bend its rules, as it has in the past, and provide Russia with $1.5 billion more in assistance early next year. ``Now the IMF is being forced to consider politics,'' said Anders Aslund, director of the Stockholm Institute on Eastern European Economics.

Recently, the administration has been pressing the IMF to release the money as part of an effort to jump start reform by helping Russia purchase badly needed imports and meet other needs. An initial $1 billion in loans was extended in 1992 and $.5 billion more was delivered last spring after heavy pressure from Washington, but the remaining $.5 billion has depended on Russia devising an economic plan that satisifies IMF officials.

Administration officials have indirectly criticized the IMF by suggesting that its prescription of spending cutbacks, higher interest rates and the closing of uncompetitive companies was ``shock therapy'' on a fragile social, political and economic situation.

Strobe Talbott, the Clinton administration's special coordinator on Russian policy

``Coordinator'' not good enough for you, eh?
eeoffered a new prescription Monday, telling reporters that what was needed was ``less shock and more therapy for the Russian people.'' The statement implied that Russia had been treated to heartless IMF policies, the same medicine administered to countries as distant as Poland and Argentina
obviously they meant "as far apart as Poland and Argentina"
as conditions for international loans.

But Russia has never undergone any such treatment, says Aslund. If anything, the United States and other Western donor nations have tolerated slow, disjointed steps toward economic reform in the name of keeping Russia stable.

``The political pain in Russia is not from shock therpay, but its abscence,'' said Michael Mandelbaum, an analyst at the Johns Hopkins University School of Advances International Studies. ``There certainly would have been pain under shock therapy, but at least there might also have been results. Lack of shock therapy means no prospect for recovery.''

``The problem now is that people are blaming shock therapy --- which has not taken place in Russia. They are drawing completely the wrong lesson,'' he said.

In contrast to the dissatisfcation expressed with the IMF, little has been said about Washington's performance. ``Unfortunately, everyone is trying to defend the record of the last year,'' said Jeffery Sachs, a Harvard economist an consultant to the Russian government, who himself is under criticism for the reformers' performance.

Clinton administration officials made much during the past months about the need to increase and accelerate international aid to Russia. But of the $1.6 billion in aid pledged by the Clinton administration in the spring, about $1 billion has been spent, State Department officials said. Little of an additional $2.5 billion approved by Congress in the fall has been provided because of disagreements over spending priorities.

A much publicized privatization fund, meant to ease the passage of state- owned industries into private hands, has also yet to get off the ground. The United States and its allies pledged $3 billion to the effort but that promise is also largely unfulfilled, a senior U.S. official said. Nothing was provided to help set up programs in Russia that would take over social welfare functions like hospitals and schools previously operated by state-owned companies.

``We should have done better, but at the same time, we don't apologize,'' said a senior administration official. ``It takes time to set up these programs. Humanitarian aid is much easier. We expect things to go faster in '94.''

Talbott suggested that the United States will try in the future to pay more attention to improving social welfare in russia, but that is not likely to translate into more aid for purposes such as unemployment benefits, a senior official said.

``We have not gotten into the business of setting up social safety nets, and we won't now,'' said the official. ``There's not enough money. We can change focus a little bit, but not much.''