Russia challenges EU over IMF top job

(MOSCOW) - Russia on Wednesday gatecrashed an EU monopoly on choosing the head of the IMF by nominating a former Czech prime minister and challenging the European Union to allow fair competition for the post.

In a surprise statement, Moscow announced it was nominating former Czech premier and ex-central bank chief Josef Tosovsky to stand against the EU's candidate, former French finance minister Dominique Strauss-Kahn.

The Russian finance ministry said that countries from the developing world, including Brazil, China and India, wanted the head the International Monetary Fund to be chosen "on a competitive basis."

An unwritten agreement within the IMF -- an international lending organisation that specialises in aiding poor countries and developing economies -- stipulates that the European Union chooses new IMF heads.

The Czech government swiftly rebuffed Russia's initiative, saying that it stood behind Strauss-Kahn. At a briefing in Moscow, Russian Finance Minister Alexei Kudrin said Prague's opposition was due to "political motives."

The World Bank, another international lending institution based in Washington, is traditionally headed by a candidate from the United States.

But Kudrin told journalists that countries outside the West must have a say.

"As soon as the election process started, it quickly became clear that the unwritten rule about the EU candidate would be used. Not everyone agrees with this," Kudrin said.

"It's unfair to leading countries in the world ... The choice should be made in a professional way."

Kudrin said the major emerging economies of Brazil, China and India backed this view.

Moscow's challenge reflects a drive to reestablish Russian diplomatic, financial and military influence worldwide on the back of massive revenues for the world's biggest energy producer, analysts said.

Russian President Vladimir Putin earlier this year called for a revolution in world economic relations, saying international institutions created by the West were "archaic, undemocratic and inflexible."

"There is a sort of recognition amongst the larger emerging markets that they should have more say on what happens in international financial institutions," said Roland Nash, chief economist at Renaissance Capital.

"If you look at the producers and consumers of raw materials, those emerging markets now dominate. If you look at the capital flows they are becoming extremely important," Nash said.

Vasily Solodkov, head of the banking institute at the New Economic School in Moscow, predicted that Tosovsky, who was a caretaker prime minister from December 1997 to July 1998, had "almost zero chance" of breaking the EU stranglehold on the IMF leadership.

Tosovsky's nomination makes him the only rival to Strauss-Kahn to succeed outgoing chief Rodrigo Rato, who has announced he will step down in late October, two years before the end of his term.

The IMF has said it will accept applications for the post until August 31, and the executive board will then consider the candidates in September. The new managing director will take office in October.

After the nomination of Strauss-Kahn, the IMF issued a statement saying the leadership contest was open to any national of the Fund's 185 member countries in a clear attempt to show the openness of the selection process.

A spokesman for the French foreign ministry said that Strauss-Kahn had support from "a very large number" of countries, including many African nations as well as China.

Russia was a major IMF debtor during the 1990s when billions of dollars from the institution helped keep the Russian economy afloat. Under Putin, it has paid back its full 22 billion dollars of debt.

Tosovsky currently heads the Financial Stability Institute (FSI) for the Bank for International Settlements in Basel, Switzerland. He was twice head of Czech central bank, from 1993-1997 and again in 1998-2000.

The government in the Czech Republic, which was dominated by the Soviet government for decades, but joined the EU in 2004, rejected Tosovsky's bid and reaffirmed backing for the EU's choice.

But Tosovsky told Czech news agency CTK that he was "delighted" by Russia's proposal. "It's a big honour for me."

Last February, newspaper Dnes denounced him as a former collaborator of the communist secret police before the fall of the country's totalitarian regime in 1989. Tosovsky denies the allegation.