ECONOMICALLY FLAILING RUSSIA FINANCES A WAR

ECONOMICALLY FLAILING RUSSIA FINANCES A WAR

The sheer audacity of cental bankers occasionally takes the breath away.

Michel Camdessus, managing director of the International Monetary Fund, and Victor Gerashchenko, chairman of the Central Bank of Russia, decided between themselves last week to finance Russia's war against Islamic militants in Chechnya by issuing a new series of government securities.Between $1 billion and $2 billion of these bonds will be required to cover a year of fighting against the jihad - crusade - being waged by the militants. But paying for victory, like the victory bonds the anti-German governments issued during World War II, may take longer, and be more expensive.

''If I see the budget (of Russia) is overshooting because of an uncontrolled increase in military spending,'' Camdessus explained to a French newspaper, ''we shall interrupt our support.''

Gerashchenko understood him to mean that, so long as spending for the war is not shown on the federal books as a ballooning deficit item, Camdessus will continue to roll over Russia's international debt with fresh IMF loan installments. He will enable Gerashchenko to conserve his bank's reserves and other assets. Camdessus and the U.S. Treasury will also be able to go to the U.S. Congress to replenish the IMF's loan funds without having to admit they are paying for the war in Chechnya.

According to Gerashchenko, who introduced the bonds on a Russian TV show, paying for the war this way will be a contribution to monetary stabilization, just what the IMF likes to hear. War bonds, said Gerashchenko, will be anti-inflationary tools for soaking up excess liquidity ''because banks have cash which anyway is not invested in the real sector.''

Let's not fault Mick's and Vic's big idea by pointing out that, apart from death, warfare has often been a lucrative outlet for investment in the real sector. At the IMF, the death of populations has always been a small depreciator on the balance sheet of reform.

When George Soros wrote his May 11, 1992, memorandum advising the IMF to make loans to Russia conditional on dismantling - oops, I mean reforming - Russia's military-industrial complex, he was making an ideological point, not economic sense. Now Camdessus and Gerashchenko have devised a fresh way of debilitating the Russian state - and one that pays the monetary dividends the IMF insists upon.

But who does Gerashchenko think will buy the jihad bonds?

Saudi Arabia, Kuwait, India, Greece, and perhaps China might be agreeable.

The Saudis and Kuwaitis, it will be recalled, gave the last Soviet government more than $1 billion in soft loans in exchange for Moscow's acquiescence in the United Nations' campaign against Saddam Hussein.

Now that renegade Arabs and fundamentalism are rearing their nasty heads on the slopes of the Chechen mountains, the Saudi and Kuwaiti treasuries might be pried open once more, especially because it is Russian soldiers who carry the battle to the common enemy.

Greece was once one of Russia's more reliable friends in the Mediterranean, and both countries would benefit if the Russian military can demonstrate that creeping annexation of territory by pseudo-religious mercenaries can be defeated. A Greek investment in jihad bonds would be a cheap way of testing Turkey's expansionist ambitions westward, as well as northward.

India and China are part of the phantom triangle that ex-Prime Minister Yevgeny Primakov once proclaimed as Russia's strategic foundation. Both have reason to be sympathetic to the predicament Moscow faces: the secessionist movement in Chechnya spilling its violence right across Russia.

Even if the Indians and Chinese would have managed the problem differently, they may conclude that Russia's government cannot be allowed to fail in its efforts for want of a few bonds. And they would be the last to ask Gerashchenko the question all Russians would ask: What guarantee does he offer that he won't default, like his predecessor?

A $1 billion bond issue, placed in $200 million lots between the banks of these five countries, shouldn't cause as much financial indigestion as would ensue if Gerashchenko tries to get Russia's commercial banks to pony up. Is the entire surviving Russian banking system capable of buying even one lot of jihad bonds?

To answer this question, Gerashchenko would appreciate the irony of obliging those Russian bankers - who, according to state audits, effortlessly diverted the funds to finance the 1994-96 war in Chechnya - to return the cash this time around.

But though Gerashchenko may be a wit, a tsar he is not. The reason he can be confident he can find Russian banks to buy his jihad bonds is that he can always supply them with his own Central Bank funds to pay the bill.

That is a device Mick and Vic know international auditors have criticized, and will continue to criticize. But there's one advantage Gerashchenko has over Camdessus. He can ignore what they say.