§ Mr. CohenTo ask the Chancellor of the Exchequer how much money(a) the UK and (b) the international 170W community have provided overall to Russia for economic assistance over the past five years; what assessment he has made of the proportion misappropriated or not used for the purpose for which it was intended; and if he will make a statement. [94806]
§ Miss Melanie JohnsonSince the beginning of 1995, the international community has provided the following loan finance (net of repayments over the period) through the International Financial Institutions (IFIs): £8.8 billion through the IMF, £4.0 billion through the World Bank, and £728 million through the EBRD; the IFIs have also provided technical assistance. In August, the Paris Club rescheduled $8.1 billion of Russia's Soviet-era debts. The EU has also provided technical assistance to Russia through its TACIS programme, and food aid.
The UK has made no direct loans to Russia. Since the beginning of 1995, the UK has made £592 million of export credit guarantees available to British firms doing business with Russia, on which Russia is current with repayments. The UK has made technical assistance and humanitarian aid available to Russia. Other countries have also provided bilateral assistance.
There is no evidence that any IMF or World Bank funds have been misappropriated. An investigation by PricewaterhouseCoopers discovered that an overseas subsidiary of the Central Bank of Russia (CBR) had used some of its foreign reserves to guarantee loans to commercial banks and buy Russian Government debt in breach of IMF rules and without the IMF's knowledge. Given this misuse of IMF resources, and the seriousness 171W of the allegations of misappropriation of IMF and World Bank funds, G7 Finance Ministers' Statement of 25 September said:
…we emphasised the critical need for intensified efforts to combat corruption in Russia and money laundering and the importance of adequate safeguards to ensure that funds provided by the international financial institutions are used for their intended purpose…IMF financing will be disbursed into an SDR account for the purpose of repaying Russia's obligations to the Fund. Furthermore, we agreed that the CBR, prior to disbursement of the next tranche of the SBA, should take steps identified by the IMF to improve internal controls and to initiate quarterly audits of CBR reserve management…In the case of the World Bank, we welcomed the new safeguards, involving greater control and auditing of World Bank funds, introduced in June, and called on the World Bank to work with Russia on additional safeguards…There is no evidence the EBRD funds were used for a purpose other than that intended at the time of disbursement. A portfolio review conducted by the EBRD, and further investigations carried out by its External Auditor, have satisfied the Bank that disbursements were applied as intended. One case of contract failure involving UK export credit guarantees is being investigated, on which I cannot comment at this stage.
As regards EU assistance, on 16 September, Neil Kinnock made a Commission statement on Russia:
…Community assistance is, as this House will know, primarily delivered through the TACIS programme which is centrally managed from Brussels. The funds concerned are predominantly used to pay EU firms to provide technical expertise and advice for Russia. Only a very small proportion of the funds therefore goes to Russia…the Community food supply programme for Russia, that was launched earlier this year, is subject to very close monitoring which involves, amongst other things, checks on the use of the funds generated from the sale of relevant food products on local markets. Moreover, Russia does not currently receive Community loans, and the lending mandate of the European Investment Bank for countries outside the EU does not extend to Russia…