Washington, 27 September 1999 (RFE/RL) -- The U.S. Congress appears to be growing increasingly skeptical of the Clinton administration's concern about corruption in Russia.
Senator Jesse Helms, the Republican chairman of the Senate Foreign Relations Committee, opened a hearing last Thursday by saying the administration's approach is entirely backward. He took issue with the argument that critics of U.S. President Bill Clinton's foreign policy want America to turn its back on Russia.
Helms said: "The administration's defense is [that the] alternative to looking the other way was to abandon our policy of engagement with Russia. I contend that opposite is true. By not pressuring Russia's leaders to expunge corruption, the United States has led the Russian people to lose faith in market economies and democracy."
Testifying at the hearing was U.S. Deputy Secretary of State Strobe Talbott, the administration's leading expert on Russia. The event had been anticipated as a confrontation between the administration and its congressional critics. But Talbott managed to sidestep some of Helms' questions.
Talbott's outlook on Russia was mostly positive, echoing testimony given by U.S. Treasury Secretary Lawrence Summers. On Tuesday, Summers told the Banking Committee of the U.S. House of Representatives that it is time for Washington to scrutinize its financial relationship with Moscow more carefully.
He also said the Clinton administration supports the International Monetary Fund's decision to extend to Russia loans that can be used only to repay outstanding IMF debt.
But Summers stressed that it is in America's best interest not to "abandon" Russia, as he put it, despite widespread corruption there.
Paul Saunders, a member of a conservative private think tank, followed Summers in testifying before the Banking Committee. Saunders said he believes the Clinton administration has long been aware of corruption in Russia but, as he put it, "has chosen either not to act or to act in ways that ultimately were not effective."
He said the administration's view of the political forces in Russia is "oversimplified," leading the United States to mistake which leaders are trustworthy and which are not.
U.S. concern about institutional lawlessness in Russia surged with allegations that as much as $15 billion from Russia were "laundered" through accounts at the Bank of New York over the past three years. Russian organized crime figures and even government officials are suspected to be involved, and some news reports suggest that some IMF money may have left the country illegally.
Money laundering is moving illegal earnings through a series of bank accounts to obscure the source of the money and make it appear legitimate.
On Wednesday, James Robinson, the U.S. assistant attorney general in charge of the Justice Department's Criminal Division, told the first day of the House Banking Committee hearings that there is little American prosecutors can do to fight foreign money laundering if no domestic laws are broken.
Russia itself has twice tried to enact its own laws against money laundering, but President Boris Yeltsin vetoed both bills. Testifying after Robinson at Wednesday's hearing, Yuri Shchekochikhin, a journalist and member of the Russian Duma, said Yeltsin rejected one of the measures for a small technical flaw. While the legislation was not perfect, Shchekochikhin said, it would have been far better than no law at all.
Meanwhile, Swiss prosecutors are investigating whether Yeltsin, his two daughters and other Kremlin officials received credit cards that were paid off by a Swiss construction company. The firm, Mabetex Project Engineering, won a lucrative contract to renovate Russian government buildings, including the Kremlin. Yeltsin's supporters say the allegations are false and that the president's political opponents are behind them.
And in testimony before the House Banking Committee on Wednesday, Thomas Renyi, the chairman of the Bank of New York, confirmed an article in The Wall Street Journal that Leonid Dyachenko, Yeltsin's son-in-law, is listed as the holder of two Cayman Island accounts at the bank. Together, the two accounts hold $2.7 million, the newspaper reports. Beyond confirming the account, however, Renyi said he could say no more because the investigation is still in progress.
Dyachenko is married to Tatyana Dyachenko, not only Yeltsin's daughter but also a senior Kremlin official.
Marital ties figure elsewhere in the growing scandal. Renyi conceded during his Banking Committee testimony that the Bank of New York was lax in monitoring the enormous flow of money through the suspect accounts. The accounts belong to Peter Berlin, a Russian-born businessman based in the United States. Renyi said the bank accepted the assurances of one of its senior officials, Lucy Edwards, that the account activity was legitimate. Edwards is married to Berlin. The bank has since fired Edwards.
So far, however, no evidence has emerged that anyone has broken the law. Nevertheless, even some of Clinton's - and Russia's - backers in the U.S. Congress are showing signs of impatience with Washington's current relationship with Moscow.
Senator Joseph Biden, a member of Clinton's Democratic Party, expressed frustration at Thursday's hearing of the Senate Foreign Relations Committee:
Biden said: "Did Russians cheat when they moved some of their Central Bank funds to this off-shore bank? Yes, they did - my view. But were IMF funds stolen or diverted for criminal purposes? I don't know. At the insistence of IMF, PriceWaterhouse, an independent accounting firm, undertook a review of those IMF funds and the deal that I mentioned and found no evidence that IMF funds were ultimately misappropriated. At the end of the day those funds were returned to the Central Bank."
Biden added: "Still, this kind of behavior is outrageous and unacceptable, and if Russians want to become part of the international community and like other normal nations, they have to be made (to) understand that. As I understand, the IMF is doing just that now. They're beginning to change the way in which they'll deal with loans. Have there been consequences because of this deal and other outcomes? The IMF will not deposit funds now and the most recent loan to Russia. This time the IMF retains full control using funds to pay off Russian ongoing obligations without any participation by the Russians themselves. It's something that doesn't ordinarily - you don't baby-sit most countries to whom you give IMF funds. But obviously they demonstrated they need a baby-sitter."