Chechen War Sparks Criticism Of World Bank Loan

Date: December 29, 1999
Source: Reuters

A $100 million World Bank loan to Russia came under fire on Tuesday from human rights activists, who said it could help fund Moscow's military campaign in breakaway Chechnya.

Human Rights Watch and other groups said the bank, which quietly approved the payment this week, should have followed the lead of the International Monetary Fund and the U.S. Export-Import Bank and suspended loan payments during the war.

The West is missing a chance to pressure the Russians to halt their advance deep into the rebel province on Russia's volatile southern rim, they said.

"The bank's stated commitment to addressing the 'human aspects' of development rings hollow when its funds are paid directly to a government pursuing the kind of abusive campaign we are witnessing in Chechnya," said Holly Cartner, director of Human Rights Watch's Europe and Central Asia division.

The World Bank said the $100 million payment was part of an $800 million package approved in December 1997 to help Russia modernize its coal sector. Spokeswoman Gina Ciagne said the money was "specifically earmarked" and could not be diverted.

But human rights groups said the World Bank's money could be channeled into the war effort and the payment would only encourage Russian leaders to intensify their bombardment.

Critics, including the U.S. State Department, say Moscow's Chechen campaign is violating international norms. Russia describes it as a war against bandits and terrorists.

The World Bank loan payment comes almost a week after the United States blocked a $500 million Export-Import Bank loan guarantee package for Russia's troubled oil industry amid Western criticism of Moscow's campaign against Islamic militants in Chechnya.

Disbursements from a $4.5 billion IMF loan to Russia have also been frozen as the United States and the European Union press Moscow to negotiate a settlement to the Chechen crisis.

Ciagne said World Bank management was "deeply concerned" about the fighting in Chechnya but Russia was entitled to the money because it met the loan conditions.

While costly to Russia, the campaign "has not threatened macroeconomic stability," Ciagne said. But she added, "We have made clear to the government that we will have to monitor developments closely in the event that the conflict is prolonged."

Critics said the payment cast doubt on the resolve of the Clinton administration to try to rein in Russia. The United States is the World Bank's largest shareholder, and it has enormous clout in the bank.

It could also undermine the World Bank's already tarnished reputation in a hostile U.S. Congress.

"What's going on in Chechnya is unspeakable, and now the World Bank is implicated in it," said Holly Burkhalter of Physicians for Human Rights. "Their inability to use common sense and common humanity on a loan like this makes many people, including many in Congress, think that the World Bank does more harm than good," she added.

"Blame rests with the Clinton administration and the other shareholders in the World Bank," Human Rights Watch's Elizabeth Andersen said. "They are sending a mixed signal."

Clinton administration officials had no immediate comment.

Russia has defended its campaign by saying it aims to destroy the Islamic fighters whom Moscow blames for a series of deadly bomb blasts in the capital and other cities.

The United States has repeatedly denounced Russia's military campaign and has called for Moscow to begin a dialogue to try to produce a political solution.