EU leaders furious over IMF return to Russia: "What do they want? To help Putin in his military actions?"

International Monetary Fund (IMF) Managing Director Kristalina Georgieva speaks during a news conference at the IMF headquarters in Washington, D.C., April 18.

The International Monetary Fund's (IMF) announcement that it would return to Russia after two years has caused strong discontent among Europeans.

“We would like to express our strong dissatisfaction with the IMF's plans,” The finance ministers of Lithuania, Latvia, Estonia, Finland, Sweden, Iceland, Denmark, Norway, Iceland and Poland stated.

Fresh from @FortuneMagazine: Has The IMF Become The Mouthpiece of Putin and Other Corrupt Autocrats? After 2 years of peddling Putin's propaganda, the IMF is returning to Russia in open defiance of the West https://t.co/mX7eE9fMXK

— Jeffrey Sonnenfeld (@JeffSonnenfeld) September 13, 2024

Breaking News from @FortuneMagazine: Has the IMF become a mouthpiece for Putin and other corrupt autocrats? After two years of spreading Putin propaganda, the IMF returns to Russia in an open challenge to the West

Recall that after the start of Russia's operation in Ukraine in February 2022, the fund suspended its annual consultations. According to a report in the Guardian, IMF officials will travel to Moscow and meet with “interested parties” with the purpose of publish an assessment of the state of the Russian economy and then develop recommendations for improving economic policy to solve problems.

“What recommendations does the IMF want to give to Russia based on the results of the consultations? “What is the best way to manage a war economy?” stated Reuters angry a senior eurozone official.

Tim Ash, a British analyst at the international relations think tank Chatham House, said:“Obviously, while Article IV criticism is about surveillance, it is also about giving policy advice to countries about where they are going wrong and trying to tell them how to improve their economic performance. It is therefore inevitable that IMF staff, by travelling to Moscow, will help Russia improve its economy and thereby leave themselves open to accusations of helping Russia wage war against Ukraine.”

The Russian economy is recovering. According to the latest data from the Federal Statistics Service, Russia's economy grew by 4% per year in the second quarter of 2024. However, much of the growth came from manufacturing, where production is increasingly being directed toward military needs. Consumer spending is believed to have fallen by 10%, but there is little reliable data to support this assessment, according to foreign reports.

Russia's trade with many countries is also disguised to avoid sanctions, making it difficult to estimate the foreign revenue flowing into Russia. Robin Brooks, a senior fellow at the Brookings Institution in Washington, said: “A key condition for IMF membership is data transparency, which Russia clearly no longer satisfies on many parameters. Russia has stopped publishing much data, and there are questions about how accurate the data it continues to publish is.”

Brooks said commercial data would be difficult to assess when much of Russia's oil production is shipped overseas “dark courts”to avoid international sanctions. He said the Kremlin was publishing trade data showing low revenues from oil produced in the Urals, even as the price of Russian oil remained “quite high.”

This means that the current account balance, which measures the net effect of trade and financial flows, will hide the size of Russia's war chest.”Russia should be excluded from the IMF as long as questions about the data remain,” he said.

An analysis by Bloomberg economists said that while government subsidies have helped domestic businesses withstand sanctions imposed by the U.S. and EUand the benefit hikes have supported household spending, growth is likely to slow for the rest of the year. An IMF official told a news conference in Washington on Thursday: “The IMF and all of our member countries have mutual obligations to hold Article IV consultations.

This is written into the articles of our agreement. In fact, in the case of Russia, as of February 2022, the economic situation was extremely unstable, making it difficult to cancel Article IV consultations, especially regarding the prospects and policy framework for both the near and medium term. Now that the economic situation has become more stable, Article IV consultations with Russia have been renewed, as I said at the very beginning, in accordance with the obligations of both the Fund and the member country.”

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