For the second time in less than a decade, Elvira Nabiulina is driving the Russian economy through treacherous waters.
In 2014, faced with the collapse of the ruble and rising inflation almost one year after taking over the Central Bank of Russia, Ms. Nabiullina forced the establishment into the modern era of economic policy making by sharply raising interest rates. This politically risky move slowed the economy, tamed high prices, and earned her an international reputation as a tough decision maker.
In the world of central bankers, among the technocrats tasked with monitoring prices and stabilizing financial systems, Ms. Nabiullina has become a rising star for her use of traditional policies to manage a runaway economy often linked to the price of oil. In 2015, she was named Central Bank Governor of the Year by Euromoney magazine. Three years later, Christine Lagarde, then head of the International Monetary Fund, dedicated that Ms. Nabiullina could make “central banks sing.”
Now it is Mrs. Nabiullina’s responsibility to guide the Russian economy through a deep recession, and to keep its financial system, insulated from most of the world, sound. The challenge comes after years it spent bolstering Russia’s financial defenses against the kind of strong sanctions that have been imposed in response to President Vladimir Putin’s geopolitical aggression.
You have led the extraordinary recovery of Russia’s currency, which lost a quarter of its value within days of the invasion of Ukraine on February 24. The central bank has taken drastic measures to prevent large sums of money from leaving the country, stem the panic in the markets and stem the potential run on the banking system.
In late April, the Russian parliament ratified Ms Nabiullina, 58, for another five years as president after Mr Putin nominated her for a third term.
It is an important beacon for the stability of the Russian financial system” said Elena Rybakova, deputy chief economist at the Institute of International Finance, an industry group in Washington. “Reset it has a symbolic value.”
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In her last crisis, she turned a disaster into an opportunity. In 2014, Russia was hit by two economic shocks: the collapse of oil prices – caused by a jump in US production and Saudi Arabia’s refusal to cut production, which weakened Russian oil revenues – and the economic sanctions imposed after Russia’s annexation of Crimea.
The ruble fell. Ms. Nabiullina has abandoned traditional policies – such as spending massive amounts of foreign currency reserves to prop up the exchange rate – and shifted the Bank’s focus to inflation management. It raised interest rates to 17 percent, and has remained relatively high for years.
It was a painful readjustment, and the economy shrank for a year and a half. But by mid-2017, she had managed something that seemed out of reach only a few years earlier: the rate of inflation had fallen to less than 4 percent, the country’s post-Soviet low.
“It was a model of a modern central bank,” Said Richard Portes, Professor of Economics at the London Business School, who participated in the seminar stages with Ms. Nabiulina at the conferences.
“She was doing what she had to do,” he said, even when it was politically difficult. “If you want a show of the alternative, you need to look only at Turkey,” Mr. Ports added, “where years of political meddling at the central bank have allowed inflation to spiral out of control, reaching as high as 70 percent this month.
Under the supervision of Ms. Nabiullina, the central bank continued its modernization efforts. She improved her communications by scheduling key policy decisions, providing policy guidance, meeting with analysts and providing interviews with reporters. The Russian Central Bank has come to be seen as the country’s main economic brain, attracting distinguished economists from the private sector.
At its annual conference in Saint Petersburg, the central bank attracted economists from around the world, and Ms. Nabiullina attended international gatherings, including the Federal Reserve’s annual symposium in Jackson Hole, Wyoming and regular meetings of central bank governors held by World Bank settlements in Basel, Switzerland.
She has been described as elegant, focused, always well-groomed, an advocate of market forces (despite her Soviet-era economic education) and an admirer of history and opera. She was born in Ufa, a city more than 700 miles east of Moscow famous for heavy industry, studied at Moscow State University, one of the most prestigious in the country, and is married to a fellow economist.
Besides her record on monetary policy, Ms. Nabiullina has won praise for her pursuit of a thorough clean-up of the banking industry. In her first five years at the bank, she revoked about 400 banking licenses – essentially shutting down a third of Russian banks – in an effort to slay weak institutions that were conducting what she described as “suspicious transactions”.
It was considered a brave crusade: In 2006, a central bank official began a vigorous campaign to shut down banks suspected of money laundering. assassinated.
“Fighting corruption in the banking sector is a job for very brave people,” said Sergei Guriev, a Russian economist who left the country in 2013 and is now a professor at Sciences Po in Paris. He called its program flawed, though, because it was largely limited to private banks. This created a moral hazard problem that made the state-owned banks feel comfortable taking on a lot of risk while protecting the government, he said.
Mr. Guriev, who said he had known her for 15 years, added Ms. Nabiulina’s integrity had never been questioned. “She was never suspected of being involved in any corruption.”
build a fort
Ms. Nabiullina has been a high-ranking official in Mr. Putin’s regime for two decades. She was his chief economic adviser for just over a year before taking over the central bank in June 2013, having already held the position of economic development minister while Putin was prime minister.
“She has great confidence in the government and the president,” said Sofia Donets, an economist at Renaissance Capital in Moscow who worked at the central bank from 2007 to 2019. In recent years, it has been quite clear that all kinds of policy questions are being asked, and in the financial sphere the central bank has been empowered, she added.
This trust was built while Ms. Nabiullina was supporting the Russian economy against Western sanctions, especially from the long-term US sanctions. In 2014, the United States cut several major Russian companies from its financial markets. But these companies have had significant foreign currency debts, raising concerns about how their debts will be serviced.
Ms. Nabiullina set out to squeeze as many US dollars out of the economy as possible, so that companies and banks would be less at risk if Washington imposed more restrictions on the state’s use of dollars.
It also shifted the bank’s reserves, which grew to more than $600 billion, towards gold, the euro and the Chinese renminbi. During her tenure, the share of dollars in reserves has fallen to about 11 percent, from more than 40 percent, Ms Nabiullina told Parliament last month. She told lawmakers that even after the sanctions froze the bank’s foreign reserves, the country had “sufficient” gold and renminbi reserves.
Other safeguards against sanctions have included an alternative to SWIFT, the global banking messaging system, which has been developed in recent years. And the bank has changed the payments infrastructure to process credit card transactions in the country, so even the exit of Visa and Mastercard will have little impact.
in March , Bloomberg News And The Wall Street JournalCiting unknown sources, it was reported that Ms. Nabiullina tried to resign after the invasion of Ukraine, which was rejected by Mr. Putin. The central bank rejected those reports.
Last month , Canadian government He placed her under sanctions for being a “close partner of the Russian regime”.
Mr. Guriev, who was not in recent contact with Ms. Nabiullina, said he believed she would probably stay in her position because she could convince herself that if she resigned, inflation would spiral out of control and Russian citizens would be hit harder. strongly.
“However, I think it really does support Putin’s war economy,” he added. “She’s actually doing something she’s not involved in.”
Having spent nearly a decade building a reputation for curbing inflation and bringing traditional monetary policy to Russia, Ms. Nabiullina’s post-invasion Western financial sanctions quickly forced her to abandon her preferred policies. The interest rate more than doubled, to 20 percent; Capital controls were used to severely restrict the flow of money out of the country; closing of stock trading on the Moscow Stock Exchange; Regulations on banks have been relaxed so that they do not stop lending.
These measures stopped the initial panic and helped the ruble recover, but capital controls were only partially lifted.
Now Russia is entering a severe recession with a closed economy. On April 29, the bank reduced Interest rate to 14 percentIn a sign that he was shifting from quelling a financial hurricane to trying to reduce the lingering impact of sanctions on households and businesses as inflation accelerated and businesses were forced to reinvent their supply chains without importing goods.
Inflation has risen sharply, and may reach an annual rate of 23 percent this year, according to the central bank’s forecast. She said the overall economy could contract by up to 10 percent.
“We are in a region of enormous uncertainty,” Ms. Nabiullina said.
Liz Alderman Contribute to the preparation of reports.
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