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Russia: Analysis From Washington: Many Shades Of Gray

  • Paul Goble



Washington, 15 September 1999 (RFE/RL) -- An apparently arcane aspect of money -- its fungibility -- makes it less likely that many money-laundering charges against Russians will ever be definitively proved and more likely that the scandal will cast a larger shadow over both Moscow and the West.

The fungibility of money means that when cash from two or more sources are put together in a single account, be it that of a bank or of a government agency, no one can definitively say which particular unit of money comes from which particular source.

Thus, if money from a criminal enterprise is pooled in one account together with money that is entirely legitimate and only part of it is then transferred to yet another account, it is very difficult if not impossible to be certain whether the latter contains legitimate or illegitimate funds.

That is what ever more financial experts are suggesting may be the case with the current money laundering scandal involving Russian money passing through the Bank of New York.

Some of the funds sent through the accounts of that bank were undoubtedly from illegal sources, but others may have been entirely legitimate, at least within the loose definition of that term in the current Russian financial situation.

As a result, investigators are discovering that they may face impossible obstacles, not least of which is the lack of adequate record-keeping in Russian governmental and financial institutions, in sorting out just how much money fell into one category or another.

And because of these difficulties, the investigation is likely to face three other obstacles as well.

First, many officials in Moscow and the West already are highlighting this difficulty both to defend their past policies and to challenge critics to indicate how they would have behaved differently.

Second, many Russian businessmen and their partners will be able to testify that their operations were legitimate or at least entirely defensible in American law and that any violations they may have made were of the complex and often contradictory Russian legal code.

And third and perhaps especially important, many Western bankers who have benefited from the deposit of such funds which they appear to have accepted in good faith are likely to demand standards of proof that no one will be able to meet.

But these difficulties in proving specific allegations seem likely to make the current scandal in Moscow more serious rather than less, precisely because ever more people in both Russia and Western countries appear unlikely to begin to make some critical distinctions.

For most of the past eight years, both Russians and their Western partners tended to downplay charges of corruption, arguing that such illegal activities were both marginal and a price worth paying for the transformation of the Russian economic system.

But now, ever more critics -- Russian as well as Western -- are denouncing what some have called the Russian kleptocracy -- a system based on the corrupt theft of state property -- and appear prepared to tar most if not all of Russian economic activity as criminal at its core.

In Russia, such attitudes are helping to generate support for those parties, including the Communists, who are deeply suspicious of capitalism in general and private ownership in particular, and others, who have become convinced that the Yeltsin regime is totally corrupt.

And in the West, such attitudes are providing ammunition not only for those who have criticized the West's approach to Russia, its reliance on international financial institutions rather than government-to-government aid, but also for those who believe the West should not help Russia at all.

In this way, the search for the clarity of black and white in the current situation is likely to leave Russia in a still darker gray, a shade all the closer to black because so many people have worked so long and hard to deny that the situation had been gray all along.

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