‘Grey cardinal’ faces her most important test: keeping the Russian economy afloat

Elvira Nabioellina has been faced with hot fires before, but now the president of the central bank is faced with an almost impossible task: to support the Russian economy and currency.

She was once called “the most expensive woman in the history of this country” in the Duma. As we write 2014, the communist Vyacheslav Tetyokin accuses Nabioellina that the Russian central bank under its care has already had to spend $70 billion in foreign reserves to stem the fall of the ruble.

In part, this was due to what is still bothering the ruble today: Western sanctions after an invasion of Ukraine, albeit limited to Crimea at the time. Yet there is also an important difference. At the time, the oil price dropped, which also dried up a major source of income. At the moment, that exchange rate is very high, and for the time being oil and gas money will continue to flow to Russia.

Yet the Russian economy is in the doldrums due to the war and sanctions. This is also reflected in the national currency, which has already lost more than 30 percent against the euro since the beginning of the year.

In 2014, Nabioellina finally had to give up the fight on the foreign exchange market. The central bank is not giving up yet. It is once again deploying its international reserves, and also hiked its key rate (short-term interest rate set by the central bank for its transactions with commercial banks) this week from 9.5 to 20 percent to combat screeching inflation.

Limit damage

This means that the woman who is called the ‘grey cardinal’ because of her technocratic image and sober style (simple suits in dull colours, low heels and a minimum of make-up) faces an almost impossible challenge: limiting the damage.

She owes that assignment to Vladimir Putin, who has served her in various capacities for 15 years. Before joining the Russian central bank in 2013, Nabioellina was its minister of economic affairs and trade for five years. A period in which she had to steer Russia through the financial and economic crisis as best she could.

After Putin’s re-election in 2012, Nabioellina briefly became the chief economic adviser to Russia’s most powerful man, before instructing her to run Russia’s central bank.

A surprise, also for her, because the then vice president of that institution, Alexei Ulyukayev, was seen as the big contender. His political poems probably killed him. In one, he called on his children to leave Russia and go somewhere “where your mouth is not always shut, and sometimes the truth is spoken.”

It must have come as little consolation to Ulyukayev that Nabioellina herself is a great lover of poetry. In this way she can quote many of Paul Verlaine’s poems from memory.

“As a central banker, she will have to stand firm and dare to say no to the president,” her mentor and former economy minister Yevgeny Yasin had warned when her appointment became known. ‘That will be quite a challenge.’

After a shaky start in which she acted rather half-heartedly, Nabioellina grew into her role. She mainly focused on more and better supervision of the financial markets.

fearless

Her job is not without danger. In 2006, Vice-President Andrei Kozlov, in charge of regulation, was shot dead in the street by a hit man. But Nabioellina seems fearless, and dares to go against the grain of even the most powerful Russian. For example, it raised interest rates several times against the wishes of the Kremlin when inflation made it necessary.

Putin’s acceptance of this is reflected in the stature of the 58-year-old economist who was born into a Tatar working-class family in the city of Ufa, located between the Ural Mountains and the Volga. Husband Yaroslav Kuzminov explained to Bloomberg news agency that as a child she was mainly engaged in learning French, listening to classical music, and reading Tolstoy, Dostoevsky and Kafka.

In the 1980s, Nabioellina went to Moscow State University to study economics. Although the curriculum still relied heavily on the writings of Marx and Lenin, her electives also gave her wind of the ideas of Western economists such as Robert Higgs and Joan Robinson. She resolutely came to call herself “a liberal economist.”

At the university she also met her husband Yaroslav Kuzminov, who is now director of the Higher School of Economics. He was one of her teachers at the time. It is also during this period that she resigns from the Communist Party, disenchanted with the slow reforms with which Mikhail Gorbachev is trying to keep the Soviet Union afloat.

As a central banker, she has built up a good reputation by guiding her country through two financial crises. But a war is different. The weapons at Nabioellina’s disposal are mainly aimed at the domestic economy, but the fireworks come from outside.