For the second time in less than a decade, Elvira Nabiullina has led the Russian economy through dangerous waters.
In 2014, less than a year after serving as head of Russia’s central bank, in the face of a devaluation of the ruble and soaring inflation, Ms Nabiulina forced the institution into an era of modern economic decision-making by sharply raising interest rates. The politically risky move has slowed economic growth, dampened soaring prices and earned her an international reputation as a tough policymaker.
In the world of central bankers, among the technocrats charged with controlling prices and the stability of the financial system, Ms. Nabiulina has become a rising star as she uses orthodox policies to manage a market often linked to oil A price-pegged unruly economy. In 2015, she was named Central Bank Governor of the Year by Euromoney magazine. Three years later, Christine Lagarde, then managing director of the International Monetary Fund, said triumphantly that Ms. Nabiulina could make “central banks sing.”
It is now up to Ms. Nabiulina to steer the Russian economy through a deep recession and keep its financial system, cut off from much of the rest of the world, intact. For years, she has bolstered Russia’s financial defenses against the kind of tough sanctions imposed against President Vladimir V. Putin’s geopolitical aggression.
She guided an extraordinary rally in the Russian currency, which lost a quarter of its value in the days following the Feb. 24 invasion of Ukraine. The central bank has taken aggressive steps to stem the flow of large sums of money out of the country, contain market panic and stem a possible run on the banking system.
In late April, after Putin nominated her for a third term, Russia’s parliament confirmed Ms Nabiulina, 58, as president for another five years.
“She is an important beacon of stability in Russia’s financial system,” said Elena Ribakova, deputy chief economist at the Institute of International Finance, a trade group in Washington. “Her re-election is symbolic.”
Prescribe drastic remedies
In her last crisis, she turned disaster into opportunity. In 2014, Russia was hit by a double economic shock: a slump in oil prices — which dented Russian oil revenues as U.S. production surged and Saudi Arabia’s refusal to cut output — and economic sanctions imposed after Russia’s annexation of Crimea.
The ruble plummeted. Ms Nabiullina abandoned traditional policies – such as spending large foreign reserves to support the exchange rate – and shifted the bank’s focus to managing inflation. She raised the interest rate to 17%, which has remained relatively high for several years.
It was a painful adjustment, and the economy shrank for a year and a half. But by mid-2017, she had achieved what seemed far-fetched a few years ago: Inflation fell below 4 percent, the lowest level in the country in the post-Soviet era.
“She has been the model for a modern central banker,” said Richard Portes, a professor of economics at London Business School, who shared the panel discussion stage with Ms Nabiulina at the conference.
“She’s doing what she has to do,” he said, even when politically difficult. “If you want to show an alternative,” Mr Portes added, “you just have to look at Turkey,” where years of political interference with the central bank have sent inflation out of control, reaching 70% this month.
Under the guidance of Ms. Nabiullina, the Central Bank continued its efforts to modernize. It improves communication by arranging key policy decisions, providing policy guidance, meeting with analysts and interviewing reporters. Russia’s central bank is seen as the country’s key economic brain, attracting respected economists from the private sector.
At its annual meeting in St. Petersburg, central banks drew economists from around the world, and Ms. Nabiulina attended international gatherings, including the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, and International Banking for Central Banks. Regular meetings are held in the settlement of Basel, Switzerland.
She has been described as personable, focused, always ready, an advocate of market forces (despite her Soviet-era economics education) and a fan of history and opera. Born in Ufa, a city more than 700 miles east of Moscow known for its heavy industry, she attended Moscow State University, one of the most prestigious schools in the country, and traveled with an economist.
clear the bank
In addition to her track record on monetary policy, Ms Nabiulina has been credited with sweeping the banking sector. During her first five years at the bank, she revoked about 400 banking licenses — essentially closing a third of Russia’s banks — to weed out weak institutions that conducted what she called “suspicious transactions.”
It was considered a valiant crusade: In 2006, a central bank official who had launched a violent campaign to close a bank suspected of money laundering was assassinated.
“Fighting corruption in banking is the work of very brave people,” said Sergei Guriev, a Russian economist who left the country in 2013 and is now a professor at Sciences Po. However, he called her plan flawed because it was largely limited to private banks. This, he said, created a moral hazard problem, leaving state-owned banks willing to take a lot of risk under the protection of the government.
Guriyev added that Ms Nabiulina’s integrity was never questioned, saying he had known her for 15 years. “She was never suspected of any corruption.”
build a fort
Ms Nabiulina has been a senior official in Putin’s regime for two decades. She served as his chief economic adviser for a little over a year before she was appointed head of the central bank in June 2013, and she has served as minister of economic development during Putin’s tenure as prime minister.
“She is very trusted by 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. Various policy issues have become apparent in recent years. She added that in the financial sector is mandated to the central bank.
That trust was built at a time when Ms. Nabiulina supported the Russian economy against Western sanctions, especially under the long-term impact of U.S. punishment. In 2014, the United States cut off capital markets for many large Russian companies. But the companies are saddled with large amounts of foreign currency debt, raising concerns about how they will be able to repay their debts.
Ms. Nabiullina set out to squeeze as much dollars out of the economy as possible so that companies and banks would be less vulnerable if Washington further restricted the country’s use of the dollar.
She also transferred bank reserves, euros and yuan to gold, euros and yuan. Ms Nabiullina told parliament last month that the dollar’s share of reserves fell from more than 40% to around 11% during her term. She told lawmakers that the country had “sufficient” gold and yuan reserves even after sanctions froze the bank’s overseas reserves.
Other safeguards against sanctions include the development of an alternative to the global banking information system SWIFT in recent years. The bank changed its payments infrastructure to process credit card transactions in the country, so even if Visa and Mastercard dropped out, the impact would be minimal.
In March, Bloomberg News and The Wall Street Journal reported, citing unnamed sources, that Ms. Nabiulina had tried to resign after the Ukrainian invasion, but Mr. Putin had refused. The central bank rejected the reports.
Last month, the Canadian government sanctioned her for being a “close associate of the Russian regime.”
Mr. Guriyev, who has not been in touch with Ms. Nabiulina recently, said he thought she might stay in her role because she could convince herself that if she stepped down, inflation would get out of control and ordinary Russians would suffer more. Serious injuries.
“However, I think she’s actually supporting Putin’s war economy,” he added. “She’s actually doing something she’s not registered for.”
After Ms Nabiullina spent nearly a decade building a reputation for curbing inflation and bringing traditional monetary policy to Russia, economic penalties imposed by the West following the Ukraine invasion quickly forced her to abandon her preferred policy. She more than doubled interest rates to 20%; used capital controls to severely limit the flow of money out of the country; shut down stock trading on the Moscow Exchange; and eased regulations on banks so lending doesn’t stand still.
The measures quelled the initial panic and helped the ruble rebound, but capital controls were only partially lifted.
Now, Russia is plunging into a deep recession due to economic closure. On April 29, the bank slashed interest rates to 14%, a sign that it was moving from quelling financial tornadoes to minimizing the long-term impact of sanctions on households and businesses as inflation accelerated and businesses were forced to reshape their supply chains without importing goods .
The central bank predicts that inflation has climbed sharply and could reach an annual rate of 23 percent this year. The overall economy could shrink by as much as 10%, it said.
“We are in an area of uncertainty,” Ms Nabiulina said.
Liz Alderman contributed reporting.