EU considers curtailing Russia’s rights in IMF over invasion sources

© . FILE PHOTO: The International Monetary Fund (IMF) logo is seen outside its headquarters in Washington, US, Sept. 4, 2018. REUTERS/Yuri Gripas/File Photo (Adds the missing word “banks” in section 9) By Jan Strupczewski and Francesco Guarascio BRUSSELS () – European Union officials are investigating restrictions on Russian influence and access to finance at the International Monetary Fund after the invasion of Ukraine, six officials told . This scenario now under discussion would increase the pressure on the Russian economy and financial system and also be an important symbolic step, deepening Moscow’s international isolation. One option being considered is to remove Russia completely from the institution that acts as a lender of last resort, officials said, although some noted that doing so would prove difficult, if not impossible. “There is a discussion going on, but cutting Russia out altogether is probably unrealistic because of the quora required,” said a senior eurozone official, referring to the broad support needed among countries, including China. Other options under investigation include suspending Russia’s voting rights and blocking access to an IMF special currency called the Special Drawing Rights, officials said. An IMF spokesman did not immediately comment. Russia has become economically isolated after Russian troops invaded Ukraine in the biggest attack on a European state since World War II. Moscow calls the attack a “special operation.” IMF restrictions could be part of a new round of sanctions as the war in Ukraine enters its second week. Russia has already been hit by a freeze on its central bank assets, a ban on the airspace of the EU, Canada and the US, the removal of some of its banks from the international SWIFT payment system and sanctions against a group of Russian magnates. The United States and the EU are now concerned that Moscow, cut off from much of its $630 billion reserves, could have access to $17 billion in IMF reserves it received last year when the IMF gave them a boost to fight the COVID-19 pandemic. The SDR is an IMF currency based on a basket of dollars, euros, sterling, yen and yuan. To spend the $17 billion in SDRs, Russia would have to find countries willing to exchange them for the underlying currencies, a prospect considered unlikely. PRESSURE BUILDING The officials confirmed that while there was talk of curbing Russian membership rights in the IMF and blocking access to the SDRs, the discussion was even broader, about Moscow’s membership. “There is an ongoing discussion to kick Russia out of all international financial institutions,” said a second senior euro-zone official, adding that the discussion over the IMF has mainly been about how to stop Moscow from using its SDRs. However, it is not legally possible to completely expel Russia from the IMF, another official said. “The consensus legal reading is that it cannot. Even for members who have committed genocide, it has not been done, because it would require proof of a legal violation of the IMF agreement, so it is highly unlikely,” he said. the third officer. When asked when the talks could come to an end, the first official said the issue was urgent, but some other members of the IMF, which groups 190 countries, may object. One of the officials said Russia’s rights were under investigation over concerns it could use the IMF to avoid sanctions against Russia’s central bank. “The United States is also investigating this. But … China, India and others could be a problem,” the first official said. US Republican lawmakers have also urged US Treasury Secretary Janet Yellen to block Russia from exchanging the $17 billion in IMF reserves it received last year. They said the allocation of $650 billion special drawing rights to IMF members had undermined previous sanctions against Russia. (This story is archived to add the missing word ‘banks’ in section 9)

Leave a comment