Frozen Foreign Funds: 8 Months and Waiting

MOSCOW - More than eight months after Vneshekonombank froze anywhere from $6 to $10 billion in Russian and foreign accounts, the outrage that once echoed through Moscow has dropped to a whisper.


Many companies have written off large losses, and those that haven't don't expect to see the money any time soon.


Those that are waiting say it is better to do so patiently, than to channel anger towards the government. For now they bank on a government pledge to honor the bank's obligations by issuing long-term bonds.


Both Russian and foreign businesses have been crippled by the collapse of the bank last year, which made open letters of credit that it backed worthless, paralyzed new deals and rendered old debts uncollectible.


"We've been sitting on a vague promise that there will be an I. O. U. issued and we will be paid back in a few year", , said Michael Adams, chief executive of Young & Rubicam/ Sovero, an advertising joint venture with several hundred thousand dollars frozen in its accounti'd like to be at the head of the list when it's settled". .


"Trying to fight back would be biting the hand that fools around with your money", he added. That hand, however, may not have any money to fool around with. While businesses say the Russian government has good intentions, its rising foreign debt and budget deficit makes payback a long shot.


"The money is long gone, spent on bad trades and debt payments", said a former Vneshekonombank executive now working for a major Western - credit institution. Meanwhile, rumors and allegations continue to surface that much of the money was actually stolen, a largely unprovable charge.


There have been scattered reports of individuals who promise to free up funds for a fee. Adams says that he was approached and promised that his company's money could be retrieved for a 15 percent commission, an offer he refused.


The Russian government has at least addresed the issue and has started sending out letters to confirm bank balances in preparation for bond issuances. One business contacted says such letters mean very little, though.


"We wrote a letter to Gaidar stating we won't accept long-term obligations. We have made a decision to sue Vneshekonombank", said George Marquart, director of Svetozor, a joint venture 50 percent owned by the Polaroid Corp. , with roughly $600, 000 trapped in the bank.


Taking the bank to court, legal sources say, can be done. Winning a judgment is another story. In a bank


without money, there is little to seize. Vneshekonombank does have liquid overseas subsidiaries, though, such as Donau Bank based in Vienna and London-based Narodny Bank.


Its Moscow headquarters, however are as low on human resources as the are on funds, according to banking sources. Most Western-traineir employees have fled to other banks. The resulting brain drain makes it difficult to inquire within.


The bank has stated publicly that is has started doling out money to Russian depositors, up to $500 a day although for some this doesn't ever cover the interest lost.


Exportles, the former state timber exporting monopoly, is one example. The exporter, now a joint stock company whose owners include an assortment of timber and wood processin;


plants, has roughly $150 million in frozen funds. Because of this, the company owes some $100 million to suppliers for deals made last year.


"The frozen money affects every body. We are in a difficult position, said Adolph Krapotkin, deputy chair man of Exportles, although he said the company has worked around the problem and continues to trade.