Friday, March 27, 2015

Elvira Nabiullina:The Central Banker Who Saved the Russian Economy From the Abyss

By Evgenia Pismennaya and Ilya Arkhipov

 Panic reached the inner sanctum of the Russian central bank.

It was Dec. 16 -- the day Russian traders would later christen Black Tuesday -- and the ruble was in a freefall.

“Intervene! Intervene!” a central bank official shouted.

Governor Elvira Nabiullina watched the currency on her tablet screen react to her emergency rate increase. No, she said, not this time: Russia would no longer fight the market. Speculators needed a cold shower, she said.

That daring decision, related by two people with knowledge of the meeting, has begun to pay off for Nabiullina, 51, and her patron, President Vladimir Putin. Despite sanctions meant to punish Russia for its foray into Ukraine a year ago, the ruble has stabilized. Since Black Tuesday, when it plunged to a record low, the ruble has rebounded 19 percent against the dollar, the most among 24 emerging-market currencies.

Russia still confronts a painful recession brought on by the collapse in oil, and many of its banks are hurting. But for now, at least, the economy has stepped back from the abyss. Finance Minister Anton Siluanov last week declared the worst was over.

Inside the central bank, near Red Square, the lull passes for victory. Nabiullina no longer has to squander foreign-exchange reserves in vain attempts to prop up the ruble. Now she faces the equally daunting task of binding up the wounded economy.

Direct Line

While her central bank is nominally independent, analysts agree Putin is ultimately in charge. Yet Nabiullina has emerged as a power in her own right, with a direct line to the president.

Nabiullina isn’t afraid to speak up. When aides urged Putin to impose capital controls last year, she fought against the move and pushed for a freely floating ruble, according to people with knowledge of the matter. Putin heeded her advice -- and then let Nabiullina sort out the details.

“It was a historic moment because she convinced Putin to accept a market solution to a problem that threatened the whole banking system,” UBS AG Russia Chairman Rair Simonyan said. Russia might well have veered into economic isolation, he said.

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1 comment:

  1. We Are All Trapped-Alasdair Macleod

    On the Asian Infrastructure Investment Bank (AIIB), Macleod says, “The reason this bank is being set up is twofold. First, China . . . wants to build the largest internal market the world has ever seen. It will run roughly from the Genghis Kahn’s Straits of Bering to the gates of Jerusalem. We are talking over half of the world’s population once India joins in this. . . .From America’s point of view, she is losing a huge sphere of influence. . . . We then come over to Europe and you got NATO. The importance of the AIIB is that NATO’s members’ commercial logic is driving policy a lot more than political logic. So, even though they are all members of NATO, they are all deserting the ship as far as America is concerned by signing up to join the AIIB. So, what we have is this new bank which is specifically set up to finance huge infrastructure projects in Asia, and we could be talking about upwards of $25 trillion worth of infrastructure spending. This is enormous. . . . This is happening outside the control of America, and that is what is upsetting America.” Will this undermine the U.S. dollar? Macleod, who is also the top researcher for, contends, “Yes, in a sense, but it is part of multiple processes which, actually, collectively undermine the dollar. This is just the latest in a chain of things that has been planned for an awful long time.”