Le Moment Kasparov: Democratic Champion to be Honored as his Forecast of Soviet Center’s Demise is Fulfilled

(Washington, D.C.): With the financial
collapse of a reconfigured Moscow center
now imminent and the Group of Seven
nations scrambling to stitch together a
Gorbachev rescue package, World Chess
Champion and master strategist Garry
Kasparov will be delivering a major
address on Wednesday, 20 November, on the
outlook for the former Soviet Union.
The Center for Security Policy will be
honoring Kasparov at a black-tie gala at
the ANA Westin Hotel as the second
recipient of the Center’s annual ‘Keeper
of the Flame’ award. (Last year’s
recipient was former U.S. Secretary of
Defense Caspar Weinberger.)

Kasparov has long urged the West to
cease its massive overinvestment in
Mikhail Gorbachev and the Soviet central
authorities in favor of real
democratic and free market forces taking
root at the republic and local levels.
Recent events establishing Moscow
center’s utter bankruptcy —
literally and figuratively — have
more than validated his advice and
that of the Center for Security Policy
on this score:

• In the past few days, senior
  Soviet officials have confirmed
  that Moscow’s external
  debt exceeds $81 billion.
  While some in the West continue
  to low-ball Soviet indebtedness
  (e.g., Germany’s Deutsche Bank
  claims it is only about $56 to 60
  billion), it has been evident for
  years that the true amount was
  significantly higher. Although
  the Russian Republic has pledged
  to repay past Soviet
  indebtedness, it has announced
  that it will not honor
  any new debts incurred
  by the Kremlin after 15 November.
• Grigory Yavlinsky, a Gorbachev
  protege appointed to the
  reconfigured center’s post of
  deputy chairman of the Committee
  for the Management of the
  National Economy, revealed on 14
  November that [the Soviet Bank
  for Foreign Economic Affairs, Vneshekonombank]
  has continued to function only by
  plundering some $4 billion in
  hard currency accounts held by
  Soviet enterprises and
  individuals. Press
  reports indicate that even foreign
  depositors’ holdings have been
  raided or encumbered.
• Vneshekonombank — or V-bank —
  is the central Soviet banking
  institution charged with the
  responsibility for managing the
  vast majority of Moscow’s
  international financial
  transactions and borrowings; the
  G-7 and other lenders have
  traditionally regarded it as the
  ultimate guarantor of Soviet debt
  obligations. Unfortunately for
  such creditors, the
  Yavlinsky disclosure must
  decimate any residual
  confidence the Western
  financial community or Soviet
  public might place in
  Vneshekonombank.
  Ironically, this latest blow
  comes at the very moment that
  Western governments are looking
  to V-bank as the obligor for
  total Soviet hard currency
  indebtedness and the principal
  coordinating body for the
  upcoming Soviet debt rescheduling
  and for most “new
  money” flows.
• The Yavlinsky report also
  revealed that Moscow
  center’s scheduled debt
  repayments in 1992 and 1993 (as
  much as $20 billion annually)
  would absorb approximately 100
  percent of all Soviet hard
  currency income during this
  period. The report
  averred that the Soviet Union has
  been able to make its debt
  repayment obligations in recent
  years only by exhausting
  strategic gold reserves.
• Saudi Arabia, South
  Korea, and Italy have reportedly
  suspended further loan
  disbursements to the Soviet Union
  because of the unacceptable level
  of risk involved in any further
  business with Moscow center.
  Meanwhile, COFACE — the
  French government’s export credit
  agency — has recently declined
  to cover 100 percent of the
  credit risk on a $287 million
  Franco-Soviet oil-for-sugar swap
  arrangement. As such an
  absolute taxpayer-underwritten
  arrangement is now effectively
  required for the Soviet market,
  COFACE’s decision to guarantee no
  more than 90 percent of the
  transaction amount will most
  likely result in the project’s
  collapse.
• The Kohl government and Germany’s
  leading commercial banker,
  Deutsche Bank chief executive,
  Hilmar Kopper, are engaged in
  open warfare over the extent and
  implications of the Soviet
  financial crisis. Kopper calls
  the Soviet Union’s hard currency
  shortfalls “extremely
  acute” and predicts that Western
  aid will be too late to prevent a
  Soviet default. For his
  part, Foreign Minister
  Hans-Dietrich Genscher — an
  unreconstructed apologist for
  Soviet totalitarianism —
  disputes Kopper’s claims,
  labeling the assertions
  “dangerous and not
  objective” according to the
  15 November New York Times.
• Also on 15 November, Russian
  President Boris Yeltsin took
  control of the production and
  distribution of — and the
  hard currency revenues associated
  with — oil, diamonds, gold
  and other precious metals on
  Russian territory. His
  decree announcing a review of all
  existing oil contracts, with the
  possibility of curtailing some
  (if not all) oil exports, has
  substantially heightened
  anxieties in both the Western oil
  and credit markets. On 17
  November, Yeltsin extended that
  control to include all remaining
  structures of the Soviet finance
  ministry, including its authority
  to control hard currency flows.

This cavalcade of debilitating
financial developments must clearly
render “dead-on-arrival“
any further attempt by President Bush to
certify that the former Soviet Union is
creditworthy and thus eligible for
additional U.S. taxpayer-underwritten
credit guarantees or investment insurance
(read, Overseas Private Investment
Corporation coverage). It also validates
Garry Kasparov’s visionary arguments that
Western governments and banks still
clinging to the authority of the Soviet
State Bank (Gosbank) and Bank for Foreign
Economic Affairs are not only helping to
prop up the totally discredited Soviet
central authorities but, in so doing,
placing their taxpayers or
shareholders/depositors squarely in
harm’s way.