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A Reassuring Choice for the Central Bank of Russia

by | March 13th, 2013 | 11:23 am
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On March 12, President Vladimir Putin appointed Elvira Nabiullina, 49, chairwoman of the Central Bank of Russia. This is an important political appointment, and a reassuring one. Nabiullina is eminently qualified, and her selection puts the central bank in a safe pair of hands at a time of roiling uncertainty over other aspects of the Russian economy. Her appointment was also a great surprise, first rumored to be in the offing only the day before.

The chairmanship of the central bank has been subject to dispute and extensive speculation. The incumbent, Sergei Ignatiev, has to retire this year because of his age. For most of the time since Putin first came to power in 2000, fiscal and monetary conservatives with a market economic conviction have held all senior economic positions. They have all come from the group formed by the original reform leaders Yegor Gaidar and Anatoly Chubais.

Last June, however, Putin appointed Sergei Glaziev, a prominent statist and nationalist, as his economic advisor. Since then, Glaziev has pursued a febrile agenda of more nationalization, state interventionism, and particularly a looser monetary policy. He was obviously campaigning for the chair of the central bank. With a strong base in the Academy of Sciences and the military-industrial complex, he represented a real threat to macroeconomic stability. Putin has evidently been influenced by him, repeatedly citing his works.

The liberals have been in disarray. Their obvious candidate for the central bank job, former Finance Minister Alexei Kudrin, declared that he was not interested. Two alternative candidates were former ministers and current state bankers German Gref and Mikhail Zadornov, but neither of them really gained support.  The liberals’ natural default candidate was First Deputy Chairman Alexei Ulyukaev, who established his career as economic advisor to former Prime Minister Gaidar. Ulyukaev is a brainy and eloquent monetary hardliner, yet not very close to the one person making the decision—Putin.

Clearly, the liberals scratched their heads and put forward Nabiullina as their ideal candidate. Since May 2012, Nabiullina has been Putin’s able and loyal economic aide. All economic policy goes through her. In the five preceding years, she was minister of economy, and her biggest feat was to take Russia into the World Trade Organization. Previously, she was First Deputy Minister of Economy under Gref, and head of his think tank.

I met Nabiullina for the first time in 1994. At that time, she was already a central player in the Moscow economic think tank community, specializing in enterprise restructuring. She was connected with the Higher School of Economics, where her husband Yaroslav Kuzminov is president, and former Minister of Economy Yevgeny Yasin was her mentor. While Nabiullina belongs to the Moscow liberal economic establishment, she is not identified with very strongly held views. Among many opinionated people, she was always the sensible person who tried to get things done. In the best sense of the word, she is an able technocrat. Clearly, Putin thinks so too. Interestingly, Nabiullina is not only a woman, but ethnically a Tartar of Muslim origin.

The political importance of her appointment is that the liberal economic establishment managed to block the appointment of Glaziev. But the selection also shows how strong Glaziev’s position was. Nabiullina, who may be considered the last-ditch effort by the free market economists to influence policy, had to be mobilized by these advocates. Given her closeness to Gref, who has persistently favored a looser monetary policy than the one pursued by Ignatiev and Ulyukaev, she is seen by many commentators as likely to opt for a looser monetary policy. But I doubt that. She is more likely to keep the eminently competent Ulyukaev, who has far stronger views about monetary policy than the conciliatory Nabiullina. For the time being, Russia’s macroeconomic stability has been secured.