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No more IMF subsidies for dictators

A year ago, US European Command warned of an impending crisis in Ukraine. Vladimir Putin had deployed more than 100,000 members of his military to hold Ukraine’s neck in the largest mobilization since Russia annexed Crimea in 2014. As Mr Putin prepared to invade a sovereign democracy, the Biden Government advances on more than $17 billion International Monetary Fund allocations to Moscow.

President Biden and Treasury Secretary Janet Yellen finally got what they wanted in August, when the IMF distributed more money than ever in a general allocation. The IMF’s $650 billion issuance of promissory notes backed by the US Treasury – called Special Drawing Rights – sent money to Moscow as the world watched as Mr Biden ceded Bagram Air Force Base to the Taliban. Iran got access to about $4.5 billion through the IMF deal, and China had a $40 billion windfall.

In this case, there were no sanctions to circumvent because the Biden administration simply handed the money over to Vladimir Putin, Ayatollah Ali Khamenei and Xi Jinping. The IMF Special Drawing Rights act as subsidies, as countries that have been allocated these tokens can exchange them for hard currencies such as dollars and euros when needed, without having to repay the principal amount. Immediately after the White House finalized these subsidies, Russia’s foreign exchange reserves hit a new high.

To further put that $17 billion in perspective, Mr. Biden asked Congress for just $10 billion in aid to Ukraine after Russia’s violent invasion began topping every newscast.

The White House’s most egregious move may be yet to come. The Biden administration has purposefully structured the 2021 allotment as a down payment on another flood of special drawing rights this year totaling $350 billion. Some Democrats asked Ms. Yellen to back a roughly $2 trillion tranche in November. In any case, the Treasury Department would once again lay tens of billions of dollars at the feet of dictators and terrorist states. But more free money doesn’t create better behavior.

As the new Axis of Evil got richer last fall, they became significantly more warlike. Russia invaded Ukraine, Iran became more incorrigible in its calls for a nuclear deal, and China recently signaled that it believes its claim on Taiwan is even stronger than Russia believes Ukraine has.

Mr Biden and Ms Yellen cannot say they were not warned. I began last March imploring Ms Yellen not to subsidize our enemies in the name of Covid relief, as did the journal’s editorial board.

The Biden administration also cannot claim that it was coerced into the deal by the IMF, as the US has the largest voting stake in the fund. The allocation, which lined Messrs. Putin and Xi’s pockets, had to be approved by the US because the world’s largest economy can oppose key IMF decisions.

The Treasury cannot claim that it had no other options. The IMF could have avoided spending most of the $650 billion general allocation on dictators and countries that didn’t need the aid by making the special allocation for the poorest countries. Those sites, too, pointed out that Mr. Biden’s objection to a tailored approach was that he would have to submit to Congress – which he seems generally reluctant to do.

The White House’s eyes were wide open and its hands were untied. Team Biden knew that Mr. Putin was mobilizing against Ukraine and already greenlit $17 billion for Russia while it slowed down military aid to Ukraine.

China and Iran took notes at every turn. Mr. Biden’s final run for Congress left breakaway leaders emboldened and enriched. His job now is to get America out of the Iran deal negotiations, push Russia out of Ukraine, and keep China out of Taiwan.

He has to show determination. He can start by rejecting future IMF allocations that would send money to Russia, China, Iran and the like. Let’s turn off the IMF’s tap on communists and terrorists and make sure it stays shut.

Mr. Kennedy, a Republican, is a US Senator from Louisiana.

Journal Editorial Report: Democrats face major policy challenge of high energy bills. Image: Michael Nagle/Bloomberg News

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https://www.wsj.com/articles/no-more-dictator-subsidies-imf-treasury-biden-yellen-allocate-exchange-russia-ukraine-11647981985 No more IMF subsidies for dictators

Ethan Gach

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