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PRESS RELEASE


Paulson Spends Two Days in Moscow Discussing Financial Crisis

July 1, 2008 (EIRNS)—U.S. Treasury Secretary Henry Paulson spent the weekend in Moscow, meeting with President Dmitri Medvedev, Prime Minister Vladimir Putin, and Finance Minister Alexei Kudrin, before departing for Berlin this morning. The talks were part of the run-up to the July 7-9 Group of Eight summit in Japan, where Medvedev has indicated he intends to present proposals for new international financial arrangements. As Lyndon LaRouche observed in his just-released article on "The Economic Debate About Russia," as well as after Medvedev's St. Petersburg International Economic Forum speech on this matter in early June, the Russian financial policy-makers have not broken free from the axioms of monetarism.

The meetings were featured on Russian national TV and widely covered under headlines like, "Russia Will Not Abandon the USA to the Financial Crisis." Little was revealed about their talks behind closed doors; Kudrin only said they discussed "real prospects for getting out of the financial crisis." Paulson, at a press conference and in a radio interview, effusively praised the benefits of Russian investment in the United States, particularly the investment of parts of its Reserve Fund and National Welfare Fund (the recently divided former Stabilization Fund, made up of oil export earnings that are kept out of Russia's own economy) in U.S. government securities. Putin jumped on Paulson for calling these funds "sovereign wealth funds," objecting that "we do not have a sovereign wealth fund yet; you must be confusing us with someone else," but adding that "we're ready to do this, if you want us to." Kudrin has packaged the NWF investments to include up to 15% U.S. and European securities, including Fannie Mae and Freddie Mac bonds.

Paulson promised that the Bush administration would push to get the Cold War-era Jackson-Vanik Amendment, which restricts trade with Russia, lifted in the context of Russia's continuing attempt to join the World Trade Organization. He portrayed himself as the friend of Russia's financial interests, as against expected opposition from Congress. Last month, Sen. Joe Biden held hearings on the danger to the U.S.A., allegedly represented by growing Russian investment here, not only in securities, but also the acquisition of American companies by Russian ones.

The KM.ru online magazine portrayed Paulson as cocky but desperate, because of the plunge of the dollar. KM.ru's commentator questioned how long Kudrin's preference for dollar investments will hold up, as pressure grows inside Russian policy-making circles to shift more towards investment relations with China, in particular.