Respected Russian central bank governor Elvira Nabiullina tried to resign after Vladimir Putin ordered the invasion of Ukraine, only to be told by the president to stay, according to four people who knew of the talks.
Nominated for a new five -year term last week, Ms Nabiullina’s current views could not be learned. He was left to manage the aftermath of a war that quickly nullified many of the things he had accomplished in the nine years since he took office. People said the departure now would be seen as a betrayal by the president, who has worked closely with him for nearly two decades.
Ms Nabiullina, 58, did not comment publicly on her reappointment and did not answer questions for this article. The press service of the central bank did not respond to a request to comment on this article. After it was published, the press service told Tass that it “did not correspond to reality,” giving no further details. A Kremlin spokesman did not respond to a request for comment. Only one senior official has resigned because of the war: longtime economic reformer Anatoly Chubais resigned as Putin’s climate envoy this week and left the country, according to people familiar with the situation.
Ms Nabiullina, favored by investors and praised by publications including Euromoney and The Banker as one of the world’s best monetary policymakers, now faces a wartime economy isolated by international sanctions and investment starvation when foreign companies leave.
With the ruble plummeting when the U.S. and its allies imposed comprehensive sanctions – including on the central bank itself – following the Feb. 24 invasion, he more than doubled key interest rates and imposed capital controls to curb cash outflows.
The central bank said it dropped intervention to defend the ruble after international sanctions froze more than half of its $ 643 billion in reserves.
“As long as there is an improvement, the central bank can only adapt to shocks,” said Oleg Vyugin, a former top official of the Bank of Russia known to Nabiullina for more than 20 years.
Some central bank officials described a state of despair in the weeks since the invasion, feeling trapped in institutions they feared would not be used for their market -oriented skills and experience as Russia was disconnected from the world. At one point, the clearance rate was so intense that the IT department lacked hands to terminate accounts. Arrows plastered along the route steer workers through the final bureaucracy as they exit.
Other departments were concentrated under heavier-than-usual workloads and even saw a barrage of resumes arriving from banks targeted by sanctions.
Prior to the invasion, officials modeled a scenario that included possible cuts to SWIFT’s financial messaging service but considered possible restrictions on central bank reserves too extreme to be anything but hypothetical, people familiar with the situation said.
Putin said earlier this month he was confident Russia would overcome current economic difficulties and emerge more independent. Comparing the current wave of sanctions with those imposed on the USSR during the Cold War, he said, “The Soviet Union lived under sanctions, developed and achieved great success.”
In a brief statement last Friday after deciding to keep the rate close to a two -decade high of 20%, Nabiullina postponed achieving its 4 percent inflation target until 2024 and warned that the economy was heading towards a contraction and turmoil with no clear end. In a break with recent tradition, he did not answer questions after the rate meeting.
Economists predict a double -digit decline in production this year, while the fall of the ruble and a shortage of goods may hurt inflation by 25 percent, a level not seen in Russia since the 1998 government debt default.
In a short video to central bank staff on March 2, Nabiullina hinted at the turmoil inside, pleading to avoid “political debate” that “only burns our energy, that we have to do our job.” Describing the economic situation he called “extreme”, the governor said “we all definitely want this not to happen.”
To date, the crisis that followed Putin’s annexation of Crimea in 2014 was the biggest test of Nabiullina’s free market courage.
He fought against capital controls – advice that Putin later ignored – and freed up the ruble, shifting to inflation targets earlier than planned.
Under its oversight, the central bank amassed one of the world’s largest reserves of foreign currency and gold, cracked down on lenders deemed mismanaged or under-capitalized, and brought inflation to the lowest level in post-Soviet Russia’s history.
“When Nabiullina came in, no one thought she would be able to stabilize inflation,” said Natalia Orlova, an economist at Alfa-Bank. “He brought the central bank to absolute international standards.”
European Central Bank chief Christine Lagarde, an opera -loving friend at the time in charge of the International Monetary Fund, in 2018 equated her quality with that of a great conductor.
Foreign investors are pouring billions into Russian debt. Putin believed him, listened to his opinions and defended his tight monetary policy in front of other government officials. But most of his legacy was undone within hours after sanctions besieged the Russian economy.
The road ahead is less clear than past crises. Rising emergency rates and restrictions on foreign exchange transactions have now created problems in the banking industry, with the Russian market only seeing a gradual reopening. The threat of default is lurking in governments and companies.
“There is no hope for the central bank to return to its old policy,” said Sergei Guriev, professor of economics at Sciences Po Paris.
Mr Guriev, who fled to Paris in 2013 and served as chief economist at the European Bank for Reconstruction and Development, has known Nabiullina for about 15 years.
“He didn’t sign up to work during the war,” he said. “He’s not the kind of person who can work with closed financial markets and catastrophic sanctions.”