The United States said Tuesday that it will block further disbursement of International Monetary Fund aid to Russia until an investigation into Russian central bank activities is completed and safeguards are in place to prevent funds from being illegally diverted.
Testifying before the House Banking Committee, Treasury Secretary Lawrence Summers said the IMF and the World Bank must hold Russia accountable for how it handles assistance.
He testified at hearings into disclosures that billions of dollars in suspect funds have been funneled out of Russia into western banks. Some of the funds are believed to be part of IMF aid to Russia.
Questions have also been raised about billions of dollars the Russian central bank placed in offshore banks without informing the IMF. U.S. officials also question IMF funding distributed to Russian banks that subsequently failed.
The IMF approved $4.5 billion in loans to Russia after the country's financial system virtually collapsed last year, triggering losses in the tens of billions of dollars among foreign banks and investors and a massive devaluation of the Russian ruble. Russia is awaiting the second disbursement of a $640 million loan.
The United States is the biggest shareholder in the IMF and can block most of its actions. In addition to awaiting results of the probe, Mr. Summers said, the central bank needs to improve the way it manages foreign exchange reserves, intervenes in currency markets, and extends credit to commercial banks.
The Russian central bank also must allow itself to be audited regularly, and individual IMF loans will not be released until there is evidence that previous loans have been properly allocated, Mr. Summers said.
He warned, however, against setting up a blanket embargo on aid to Russia, saying that could destabilize the country politically.