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The obligations Russia has taken on at the G20 summit fully coincide with Kudrins own ideas.
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Nov. 18, 2008
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Kudrin Names the Price of the G20
// Russia will give the IMF credit, gets advice in return
Russian Deputy Prime Minister Alexey Kudrin told the government presidium the obligations Russia took on at the G20 summit in Washington on November 15. Russia, which regularly received credit from the International Monetary Fund in the 1990s, will begin crediting it before the end of the year. It is possible that $1 billion will be needed. Participation in the salvation of troubled economies will not free Russia from the international recommendations. Like the other participants in the G20, Russia is being required to tighten financial regulation.
Deputy Prime Minister and Finance Minister Alexey Kudrin told members of the government and Prime Minster Vladimir Putin yesterday about negotiations at the G20 summit in Washington in which President Dmitry Medvedev took part. So far, the Russias main accomplishment has been the recommendation of a so-called Financial Stability Forum adopted by developing countries there. The FSF was founded in 1999 by the worlds largest countries to counteract the Asian financial crisis and the economic problems of the former USSR, including Russia. The G20 decided to use the FSF to coordinate part of its actions to overcome the world crisis. According to Kudrin, the G20 will develop a global solution with a new architecture for world financial markets.

The final decisions of the G20 countries were recorded in an eight-page statement. The G20s measures to combat the crisis show the necessity for coordinated action by national regulators, such as central banks and finance ministries, to strengthen the role of international organizations. In the next four months, the G20, IMF and FSF experts will discuss anticrisis actions making changes to national legislation and determining what pooled resources the G20 can use in the international fight to reverse the fall of the world economy.

As part of the G20, Russia may become a major donor for the first time within such a program. The parties took on obligations to study the need for supplemental funding for the IMF, which took applications in September from participating countries for stabilization credits. Credits for Ukraine and Hungary have already been approved. Belarus and Iceland are awaiting approval now, and Bulgaria will probably join them. Deputy Finance Minister Valery Pankin said yesterday that Russia may provide a loan of up to $1 billion for emergency support to national economies. If that happens, Russia will become a donor to the IMF anticrisis programs. In July 1998, the IMF loans Russia $4.781 billion as aid to ward off the attack on the ruble. The final tranches of that credit were stopped because of Russias default on state treasury bonds after the loss of $9 billion in reserves protecting the national currency and the imposition of restrictions on the movement of capital. (They were later removed.) Now, as in 1998, the Central Bank of Russia is facing an attack on the ruble and is defending it with a similar strategy, but the Central Banks reserves are ten times greater now than in 1998 and the states domestic and foreign debt that much less.

Russia is the second country, after Japan, to declare its willingness to provide supplemental funding. The size of its support for the IMF is comparatively small. IMF managing director Dominique Strauss-Kahn told the BBC in an interview at the end of the summit that the estimated reserves of the IMF for provision of stabilization credits was $200 billion. Decisions have already been made on the disbursement of a quarter of that amount and the IMF will need an additional $100 billion. Russias share may reach 1 percent of the sum needed. The Japanese government has promised to provide up to 100 percent of the amount needed. Russia has not shown particular generosity in bilateral talks either. Pankin confirmed yesterday that negotiations with Iceland are continuing. Iceland has applied to Russia for a stabilization credit of 4 billion, but Pankin said that Russia may limit it to a lower sum. The IMF has declined to make any decision about Iceland so far.

Russias changing role in the IMF does not change its obligation to follow the recommendations of international organizations. Before, they were the conditions for receiving credit, and now they are the voluntary obligations reflected in the final declaration of the summit. As recommendations, the obligations fully coincide with Kudrins own ideas. For example, there is a recommendation to buffer the consequences of the cycles in regulatory policy. Much of the Russian government, including the Ministry of Economic Development, is insisting on a pro-cyclical, rather than anti-cyclical, policy, that is, on the stimulation of economic growth during the declining phase of the economic cycle.

The G20s immediate recommendations in a number of cases are more specific than general principles. The summit participants agreed in the final declaration to impose more stringent disclosure requirements by March 31, 2009, to make corrections in their practices when working with national and international ratings agencies and to tighten requirements for banks for the structure of credits and securities. Russia, along with the rest of the participants, is obliged to stimulate the development of a new system to estimate risk in the financial sector. The Central Bank, Finance Ministry and Federal Financial Markets Service will do most of that work.
Dmitry Butrin

All the Article in Russian as of Nov. 18, 2008

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