OCTOBER’S ‘HUNT FOR RED MONEY: CENTER JOINS BONNER IN DENOUNCING NEW AID TO GORBACHEV AND MOSCOW CENTER

(Washington, D.C.): Even as the Bush
Administration is giving sympathetic
consideration to Mikhail Gorbachev’s
latest request for massive foreign aid, a
deeply troubling picture is emerging of
the sinister ends to which the Gorbachev
regime has put such aid (and other funds)
in the past. In light of recent
revelations, the arguments
against further Western
assistance to Moscow center
— as opposed to aid to republics
pursuing real democratic and free
market reform — are more compelling than
ever.

Western Aid as a Slush Fund
to Support Communist Operations Overseas

Mr. Gorbachev stands accused of
presiding over an elaborate Soviet
program to redirect Western foreign aid
and credit proceeds to prop up communist
parties abroad. On 22 October 1991, the
Russian Republic’s Justice Minister,
Nikolai Fyodorov, told a legislative
hearing that the Communist Party of the
Soviet Union (CPSU) under Gorbachev routinely
funneled funds obtained from Western
aid and credits to devious purposes.
These included supporting overseas
communist parties through front companies
they had established in countries such as
Austria, France, Greece, Portugal and
Uruguay.

According to Fyodorov, “From the
foreign credits…they intended to cover
the indebtedness of other [communist]
parties that they supported….There was
a permanent channel which had been
operating for a long time…[Gorbachev]
knew everything, 100 percent.”
Interestingly, Gorbachev has not denied
these charges. Instead, his spokesman,
Andrei Grachev, has simply acknowledged
that “This practice [of payments to
companies] existed, it was never made a
secret.”

The Tip of the Iceberg?

Unfortunately for the people of the
former Soviet Union, this
misappropriation of funds by Mikhail
Gorbachev’s CPSU appears to be the
rule, rather than the exception.
Indeed, other recent revelations suggest
that it is merely symptomatic of
a vast and ongoing effort
by Moscow center to plunder domestic and
foreign sources of funds.

For example, according to the 20
October edition of The Sunday Times
of London, Pavel Voschanov — a
senior adviser to Russian President Boris
Yeltsin and one of the principal
investigators of the CPSU’s archives —
has charged that “the party has been
siphoning billions of dollars to overseas
accounts for years.” He contends
that in the years after Mikhail Gorbachev
became General Secretary, the CPSU began
heavily transferring funds abroad, mostly
by direct bank transfers. The Soviet
newspaper Commersant estimates
that the Party has maintained more than
7,000 secret accounts across Europe; it
seems likely that many (if not all) such
accounts have been used for this and
similar purposes. (The role, if any,
played by Soviet-owned subsidiary banks
located in the West is not yet known.)

Perhaps most strikingly, The Times
quotes an American businessman
“with close financial contacts with
Moscow” who estimates that $10-30
billion was transferred to foreign bank
accounts in the first six-months of
this year alone. “If
European banks cooperate with the Russian
government, they will find out that a
crime has been committed, but I am not
free to talk.”

Unfortunately, European banks are also
reluctant to reveal just how much
business the Soviet Communist Party has
been doing with them. Their governments
appear no more inclined to be helpful.
For example, the 19 October edition of The
Economist reports that Mr. Yeltsin
asked the government of Luxembourg on
August 25th to seize any of the CPSU’s
assets held by Luxembourg’s banks,
insurance companies and other financial
institutions. Luxembourg’s Prime Minister
Jacques Santer responded by saying that
the request will be declined: “I
have to say that even the Communist
Party is entitled to benefit from
Luxembourg banking secrecy.”

Evidently, steps are also being taken
inside the former Soviet Union to conceal
the whereabouts and disposition of the
Communist Party’s “missing”
billions. The CPSU’s treasurer, Nikolai
Kruchina, reportedly “jumped”
to his death from his fifth-floor
apartment window five days following the
August coup’s failure. His predecessor,
Georgy Pavlov, also fatally plunged from
his seventh story apartment window two
weeks ago. And last week, a senior
employee of the international department
of the CPSU responsible for channeling
funds to communist parties abroad met the
same fate. The trajectories of their
falls strongly suggest that these men
were “suicided” — pushed to
their deaths lest they disclose what they
knew about Party finances.

Good Money After Bad?

Asked on 22 October whether the United
States would supply new aid to the USSR,
President Bush stated:

“Nobody [there] is going to
starve, and people are not going
to be adversely affected….We’re
going to hear from the Secretary
[of Agriculture] as to what he
feels is required….We want to
help. We’ve got to coordinate
this with other countries.”

Agriculture Secretary Edward Madigan has
apparently delivered to the White House a
300-page document from Mr.
Gorbachev spelling out his aid
requirements for the immediate future. It
reportedly envisions an infusion of some
$11 billion in Western assistance for the
coming year. For his part,
according to the 23 October edition of
the Journal of Commerce, Secretary
Madigan has indicated that he would be
prepared to lift the Department’s
self-imposed $5 billion cap on its export
credit guarantee program in order to
accommodate larger loans to the Soviet
Union.

Press Secretary Marlin
Fitzwater has intimated that the White
House may use the occasion of the meeting
between Presidents Bush and Gorbachev on
the margins of the Mideast Peace
Conference next week in Madrid to
announce a major new assistance
package for the Soviet Union. This
may include new U.S. commitments for
fiscal year 1992 in the range of
$1.0-$3.5 billion just for
agricultural loan guarantees.

The Bottom Line — No More
Money Down a Soviet Rat Hole

The Center for Security Policy
has long contended that undisciplined
Western lending and assistance to Moscow
center was enabling the Soviet Union to
persist in a variety of otherwise
unaffordable activities inimical to U.S.
and allied interests. These
included: maintaining a global empire of
bankrupt communist cadres, clients and
proxies; financing a dangerous and
bloated military-industrial complex; and
engaging in acts of subversion,
espionage, technology theft and arms
financing around the world.

The Center’s thesis flew in the face
of conventional wisdom and was frequently
given less attention than it deserved. (A
notable exception was an award-winning,
hour-long television documentary,
entitled Follow the Money, broadcast
by PBS on 12 July 1989.) Had Western
governments acted more responsibly by
insisting on discipline and transparency
in past financial relations and
assistance to the USSR — in particular,
by declining to provide any untied
credits or aid to the corrupt Soviet
center — these activities would almost
certainly have been sharply curtailed.
Alternatively, the regime that engaged in
them would have had to collapse far
sooner.

In view of the accumulating evidence
that the Soviet regime has
misappropriated billions of dollars worth
of goods, property and funds, it
would be the height of irresponsibility
were the Bush Administration and its G-7
counterparts now to offer Moscow
center still further assistance.
Instead, they should join with
Boris Yeltsin and others in demanding a
full accounting of the past and
present resources of the Communist Party
and a return of such funds as have been
secretly diverted overseas.

At the very least, the United States
and its allies must not run the risk of
encouraging similar diversions by
repeating past mistakes — namely, by
giving still more undisciplined credits,
loans or other financial assistance to
the Soviet central authorities. Instead, any
and all future U.S. aid
should be channeled through those
republics engaged in genuine democratic
and free market institution building.

Yelena Bonner Concurs

Such a redirection of Western
assistance was strongly endorsed
yesterday by one of the most thoughtful
and courageous figures of the former
USSR, Yelena Bonner. In a Capitol Hill
speech sponsored by Freedom House, Ms.
Bonner — widow of Andrei Sakharov and
tireless champion of human rights — put
the decision facing the Bush
Administration starkly:

“Do we want to help the
people [of the former Soviet
Union] or do we want to help the
totalitarian monster which still
exists — and which is also
sometimes referred to as the
‘center’? You have to remember
that when you help support the
center, you are helping to
support a totalitarian economy.
That means supporting the
military-industrial complex.
[Instead,] we should help
directly the republics —
especially those where a free
market economy is emerging….and
only those that respect the human
rights of minorities….We have
had the sad experience that so
much help that is coming from the
West to our country sort of
disappears, seems to fall through
a black hole.”

The Center for Security Policy believes
that the Bush Administration and the
Congress would be well advised to ensure
that — before any
taxpayer-underwritten credit guarantees
or other aid are offered to the former
USSR — independent
monitoring groups like
those recommended by Ms. Bonner and
Freedom House be installed in every
republic to observe both
what is being done with such
assistance and the degree to which
human rights are being respected,
the rule of law is being implemented and
progress is being made
toward genuine democracy and free
enterprise.