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The Colour of Russian Money Part 24: how to help bank looters get away with it...

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Stephen KomarnyckyjLatvia the EU Ukraine
The Colour of Russian Money Part 24: how to help bank  looters get away with it...
Christine Lagarde is popularly viewed as a strident anti corruption voice at the IMF- why have both her and the fund been eerily lenient about Latvia?


On 11 October 2019 Ukraine's negotiations with the IMF over a new $4bn loan programme ground to a halt. The fund was concerned over a dispute between Ukraine and two powerful oligarchs who once owned Privatbank. The bank had been nationalised in 2016 having been looted former owners Igor Kolomoisky and Gennadiy Bogolyubov. Kolomoisky sponsored the current president Volodymyr Zelenskyy's election bid and his lawyer Andriy Bohdan is Zelenskyy's chief of staff.

The former National Bank of Ukraine official responsible for taking over the bank in 2016, Valeria Gontareva was recently run over by a car in London in what may not have been an accident. Ukrainian court judgments routinely go Kolomoisky's way because officials know that his foes have suffered "a series of unfortunate events" including being murdered.

The IMF is taking a tough stance until Ukraine resolves its relationship with the crooks who looted its largest bank. Why then is the organisation so lenient on tackling what was in proportionate terms at least the far larger theft of funds from Latvia's Parex bank in 2008? The theft resulted in a brutal austerity plan to cover losses which were finally refinanced by bonds sold mostly to the European Central Bank (ECB) to pay off the IMF loan which had shored up Latvia. Reverta was wound up in 2017, with the bad assets, largely caused by the looting of Parex being paid off via these expensive cash injections. Latvia's debt is spiralling as a result and Latvians outside the mafia, political and oligarchic elites are footing the bill. 

The ECB, IMF and the EBRD have never tackled the then Latvian administration over the failure to address Parex and in particular the suppression of a crucial audit report detailing suspicious financial transactions as the bank collapsed. Christine Lagarde has often been photographed staring dewy eyed at Dombrovskis the former Latvian prime minister in charge when the theft was largely swept under the carpet and the two have mutually brown nosed each other on several occasions.  Is this a case of Latvian bank looting good, or at least acceptable, Ukrainian bank looting bad? 

The relationship between nation states, International Financial Institutions (IFIS), and journalists and Think Tanks is largely theatrical. In the aftermath of the Parex collapse the then Latvian government was able to produce a play which satisfied the think tankies, journos and the IFIs. It might have been entitled "It's all Sweden's Fault." The collapse of Parex was blamed largely on tough competition from Swedish banks operating in the Latvian market with more robust financing due to their parent entities. While advocates of this view acknowledge that there were signs of impropriety prior to the bank's collapse the scale of the looting by the Parex owners Krasovickis and Kargins is not acknowledged as the primary reason the bank fell. The government's suppression of probable information regarding the looting is never addressed. The Latvian government's theatrical production succeeded because they were able to enlist allies from the think tankies, IFIS and journos.

Ilmars Rimsevics the governor of Latvia's Central Bank and Valdis Dombrovskis the Latvian PM knew just the language to use when they performed for these audiences. Wear a suit, throw in a few words about confidence, stability, systemic banks and fiscal responsibility and hey presto! No one will notice the fact that you have allowed the Russian mafia to loot your country's largest bank and funnel the proceeds through dodgy shell companies, ludicrous loans etc.

Dombrovskis wrote a book with Anders Aslund, economist and Washington think tankie par excellence in 2011. The tome entitled "how Latvia came Through the Financial Crisis" presented Dombrovskis and Rimsevics as heroic figures fending off financial chaos. Numerous sources have suggested that Rimsevics was happy to take bribes from financial institutions to turn a blind eye to their malfeasance throughout his career. It beggars belief that Dombrovskis was unaware of the questionable transactions at Parex and he ha never explained why they were never thoroughly investigated. But Aslund and others were happy to sing their praises.

Edward Lucas, renowned journalist and Kremlin watcher, later described Dombrovskis as a magician for his implementation of an austerity programme in the Economist and rushed to Rimsevics defence on twitter in February 2018 when the Latvian functionary was accused of taking bribes. Yet Rimsevics's racket was widely known in Latvian banking and only never previously addressed because people were frightened of the consequences. He is currently on trial accused of taking EUR 0.5m in bribes but this is likely to be only the tip of an enormous iceberg. His role in keeping stum about Parex merits further exploration. The government needs to explain why, despite the apparent existence recordings of Rimsevics making dodgy deals dating back to 2013, it reappointed him as the Bank of Latvia's governor in 2014. 

The IFIS were as bedazzled as the journos and think tankies by the dynamic Latvian duo. The EBRD helped the cover up by pretending to own part of a new good bank created out of the smouldering ruins of Parex. Parex had been nationalised by Latvia after its collapse in 2008 and then pretended to sell a 25% stake in the bank to the EBRD. The EBRD would be given the money EUR 35m to purchase the shares by Latvia and a subsequent bung of over EUR 53m for its complicity under a guarantee incorporated in a still secret agreement. The "privatisation" of these shares was in effect a loan to Latvia at exorbitant terms disguised as a still undisclosed guarantee.

The EU and EBRD were unstinting in their admiration of Dombrovskis in consequence of the millions of Latvian taxpayer euros he threw in their direction. He would rise to become Vice President of the European Commission until 2018 and has been promoted to European Commission Executive Vice President in 2019 .

Another major EU financial institution the ECB had bizarrely rushed to Rimsevics's defence after his prosecution was launched and insisted that he retain its post as governor on the ECB board after Latvia had suspended him.

The IMF too played its part in laundering Latvia's image post Parex. Christine Lagarde the managing director of the IMF gave a speech in Riga on 5 June 2012 in which she praised the country's "recovery." Life was harsh for many Latvians outside of the Great Guild building where she "celebrated" the "achievements" of its government. This numerically small nation is still paying  footing a bill running to billions of Euros for the wholesale theft at Parex An austerity programme had been implemented much to the delight of the IMF and Lagarde  who did not explore what was happening to the billions being thrown at Parex's bad assets. However, she noted without a hint of irony that "'a greater push to reduce inequality would also help a lot.' Indeed. Dombrovskis was present basking in her warm words. He would return the favour on 17 September 2019 when he spoke in support of her appointment as head of the European Central Bank. Dombrovskis who was addressing a plenary debate of the EU parliamentn said that she had "all the credentials" for the job. She had glided seamlessly from one organisation which had helped Latvia mask the losses caused by the looting of Parex to another. 

Far away from the EU Parliament in Brussels and Strasbourg the Parex looters remain untouched and the gang involved crops up time and again in dodgy transactions and shell companies. Their survival owes much to the theatrical manner in which Dombrovskis and Rimsevics handled the journos, think tankies and IFIS. Ukraine, similarly, managed the think tankies well initially with Aslund's Atlantic Council portraying the trash talking comedian Zelenskyy as a reformer.

However while the Parex looters slunk into the background, and were subject to a few token prosecutions Kolomoisky is a noisy presence in the world's media and remains untouched by Ukrainian law enforcement. He has just given an interview in the New York Times in which he spoke about NATO soiling itself at the thought of Russian tanks. The car accident in London and the terrorised Ukrainian judges making judgement after judgement in his favour have not helped the IMF. Zelenskyy doesn't get it. If you give these IMF guys any scope at all to retain credibility they will be more than happy to help you brush a few billions in dodgy transactions under the carpet. Ask Kolomoisky to STFU  and take a holiday (perhaps only after you have beefed up your security by detailing several Spetsnas units to accompany you everywhere including the lavatory)  and get the courts to launch a useless prosecution or two against him. Slash public spending and invite the IMF honchos to a conference in Kyiv on Ukraine's new found fiscal responsibility. Everyone  who matters, particularly the crooks, will be happy. Just ask Latvia.

#Latvia, #Ukraine, #Corruption, #ECB, #EBRD, #IMF

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