According to four persons familiar with the conversations, Russia’s highly regarded central bank Governor Elvira Nabiullina attempted to quit when Vladimir Putin launched an invasion of Ukraine, but was encouraged by the president to stay.
Nabiullina’s current opinions could not be learned when she was nominated for a fresh five-year term last week. She’s been left to deal with the aftermath of a conflict that has fast undone much of what she’s accomplished in the nine years since taking office. According to the sources, leaving now would be viewed as a betrayal by the president, with whom she has collaborated for nearly two decades.
Nabiullina, 58, has made no public comments about her reappointment and did not respond to a request for comment for this piece. The press staff of the central bank did not respond to a request for comment for this article. The press department told Tass after it was published that it “doesn’t relate to reality,” but gave no further specifics.
A request for comment from the Kremlin was not returned. According to sources acquainted with the issue, only one senior official has resigned over the war: longstanding economic reformer Anatoly Chubais stood down as Putin’s environment envoy this week and departed the country.
Nabiullina, who has been acclaimed as one of the world’s top monetary policymakers by magazines such as Euromoney and The Banker, now finds herself in a wartime economy isolated by international sanctions and famished for investment as foreign corporations depart.
She more than quadrupled the main interest rate and introduced capital controls to stem the outflow of cash as the ruble plummeted as the US and its allies slapped sweeping sanctions — including on the central bank itself — in the aftermath of the Feb. 24 invasion.
After foreign restrictions froze more than half of the central bank’s $643 billion in reserves, the central bank stated it would no longer intervene to safeguard the ruble.
“The central bank can only adapt to shocks as long as there is an escalation,” said Oleg Vyugin, a former top Bank of Russia official who has known Nabiullina for over 20 years.
In the weeks after the invasion, some central bank staff have described feeling bleak, imprisoned in an institution that they worry would have little use for their market-oriented talents and experience as Russia is sealed off from the rest of the world. The rate of departures became so high at one point that the IT department ran out of hands to close accounts. Employees were guided through the final bureaucracy on their way out by arrows pasted around hallways.
Other departments hunkered down under a higher workload than normal, and a flood of resumes from sanctioned banks arrived. According to those familiar with the situation, authorities modeled scenarios that included a possible cut-off from the SWIFT financial messaging service, but they regarded the possibility of sanctions on the central bank’s reserves to be too extreme to be anything more than hypothetical.
Putin stated earlier this month that he believes Russia will overcome its current economic challenges and become more self-sufficient. “The Soviet Union lived under sanctions, developed, and achieved great triumphs,” he remarked, comparing the current wave of limitations to those placed on the USSR during the Cold War.
Nabiullina put off meeting her 4 percent inflation objective until 2024 in a brief statement released last Friday after deciding to retain rates near a two-decade high of 20%. She also cautioned that the economy is destined for contraction and turbulence with no clear end in sight. She didn’t answer questions following the rate meeting, breaking with recent practice.
Economists forecast a double-digit decrease in output this year, while the ruble’s depreciation and supply shortages might trigger inflation of up to 25%, the highest level since Russia’s government defaulted on its debt in 1998.
On March 2, Nabiullina alluded at the internal turmoil in a short video to the central bank’s personnel, begging to avoid “political disputes” that “just consume our energy, which we need to accomplish our job.” “All of us would have wanted this not to happen,” the governor stated, describing a “extreme” economic position.
The crisis that followed Putin’s invasion of Crimea in 2014 was the most severe test of Nabiullina’s free-market prowess to yet. She opposed capital controls, advising Putin to do the same, and freed the currency, turning to inflation targeting sooner than intended.