Group of Seven 'sherpas' begin labour of Sisyphus

Officials of the world's seven leading industralied democracies met privately in one of Hong Kong's most expensive hotels yesterday to consider a response to the crisis in Russia, as it became increasingly clear that no Western government was either able or willing to dig into its own pockets to help President Boris Yeltsin.

The Group of Seven 'sherpas', personal envoys of their respective heads of government, were huddled in a private function suite of the Mandarin Oriental hotel, before being joined today by Russia's Deputy Prime Minister, Boris Fyodorov. As minister in charge of privatisation, he will brief the sherpas on the viability of Russian reforms.

The sherpas - so called because they prepare the groundwork and foothill stages of the G7 process before the summiteers themselves take over - were orginally due to discuss the agenda of the G7 Tokyo summit in July. They normally operate in secrecy. Events in Russia and President Bill Clinton's desire to mobilise the G7 states to help have changed all that.

As if the task of formulating a response to the crisis was not Sisyphean enough, the work was likely to be complicated by the fact that the G7 chairmanship is currently held by Japan. Japanese diplomats pledged yesterday, however, that their unresolved bilateral dispute with Moscow over the Kurile Islands would not affect any decision reached by consensus among the Seven.

Sources said that prior to Mr Fyodorov's arrival, the sherpas would seek to ascertain the exact meaning to the West of the parliamentary dispute raging in Moscow. 'One question being dicussed behind the scenes is whether this dispute really matters,' one Western source said. 'The fact is, we have one group of leaders fighting it out with another group of leaders for control over people who are no longer controllable.'

Diplomats said that not only did the individual G7 countries - the US, Germany, Japan, Britain, Canada, France and Italy - lack funds to give Russia; they were agreed that Russia lacks a starting point for making effective use of further cash injections (as was the case with the abortive plan for a rouble stabilisation fund last year, when more than pounds 4bn pledged by the G7 towards the fund was never disbursed). Douglas Hurd, the Foreign Secretary, said yesterday that any show of support would not include 'putting huge sums of money into a pocket with holes in it'.

The G7 states, which two years ago aimed their entire policy towards Moscow on the survival of Mikhail Gorbachev, are mindful the risks of pinning everything on one individual. But this time, they also appear convinced that there really is no alternative to Mr Yeltsin's leadership. 'I don't think we can really talk about reforms any more, but let's say, to pursue a direction acceptable to the West,' one official said.

The sherpas are expected to recommend that an extraordinary meeting of G7 foreign and finance ministers be held within the next few weeks, prior to the first summit between Mr Yeltsin and Mr Clinton on 3-4 April. Between now and then, G7 governments will consider means of assistance that do not require them to come up with additional funds, nor require the Russians to meet the economic criteria set by the International Monetary Fund. 'They're never going to be met anyway,' one Western source said. 'But we cannot bring the IMF into disrepute by expecting it to relax its criteria for the Russians, when the East European states have worked so hard to meet them.' One alternative might be to accept that Russia's economy as a whole is beyond help, leave the IMF out of it, and bring into play the under-utilised World Bank to help rebuild individual sectors, such as oil and gas.