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Russia: Investors Undeterred By Scandal Rumors

The ongoing money-laundering scandal, in which billions of dollars are alleged to have been diverted from Russia through the Bank of New York, is being covered extensively in the Western press. Some Russian media and politicians have denounced it as an attempt to discredit Russia. But experts on foreign investment in Russia are withholding judgment, saying they will react to facts, not rumors. RFE/RL correspondent Sophie Lambroschini talked to Russian bankers and investors in Moscow.

Moscow, 6 September 1999 (RFE/RL) -- On top of the allegations of money laundering, another revelation appeared this weekend to undermine the reputation of the Russian elite. Russia's suspended prosecutor-general, Yuri Skuratov, told "The Los Angeles Times" daily that hundreds of Russian officials are suspected of corrupt bond dealings. He also confirmed to the Associated Press news agency that Yeltsin and his daughters were being investigated in connection with bribes.

Amid the flurry of new accusations, heated denials, and conspiracy theories, investors in Russia are keeping a cool head. They say charges of corruption are nothing new.

Rair Simonyan, managing director at the investment firm Morgan Stanley in Moscow, is one investor who is remaining unruffled. He told RFE/RL that it would take more than media reports on corruption and capital flight to frighten investors who know the Russian market.

In Simonyan's words: "Seriously, for whoever knows Russia a bit, there is nothing surprising in the New York Times revelations. It's not a secret that there is capital flight out of businesses that are concerned about lack of guarantees for their revenues. So those professionals don't react to the reports of 10 or 15 thousands of millions of dollars mentioned by media reports. These are empty sums in the sense that it is not said what they mean, where they come from."

Denis Rodionov, financial expert with Brunswick and Warburg, agrees that investors are not reacting immediately. Rodionov said a good indicator of foreign investors' moods is the market index, which has stayed stable over the past few days. He said: "The investors that know Russia aren't reacting seriously to the scandals yet. Others, newcomers, are more worried."

Rodionov also says that "for most investors, the scandals first have to affect the real financial flows." But Rodionov added that a slide in the ruble's value last week may be the first symptom of nervousness among Russian and foreign investors alike.

Morgan Stanley's Simonyan sees the publicity surrounding the corruption allegations as an opportunity for the government to take some positive action to increase law enforcement in the economic sector. And Russian companies, he says, might be inspired to boost their confidence ratings by making their finances more transparent and volunteering more audits. In Simonyan's words, "This is the Russian government's chance to show that the country can play by rules, and that these rules will be applied equally to everyone."

Ordinary Russians don't share that optimism. Most Muscovites RFE/RL asked about the scandal in the past few days just shrugged and said it was nothing new.

Neither do many Russians share the anti-Western rhetoric of the Russian press. Igor, a doctor, said: "Even though there's no proof that Russia laundered money and that Yeltsin's family received bribes, it does ring like the truth, considering how this country works."

Alexei Levinson, a Moscow-based sociologist, said the Russian attitude is "a kind of withdrawal reaction." Everyone knows the corruption exists, he says, but it is never pleasant to dwell on it.