Russia's Most Powerful Woman Gets Five More Years
24th March 2017
Russia's super star central banker, Elvira Nabiullina, is arguably the most powerful woman in Russia. If not the most powerful, she is surely one of the most revered. Vladimir Putin refers to her on all matters of monetary policy. When the ruble is sinking, don't panic: Elvira is at the helm.
She's navigated the country through tough times. She's overseen the shuttering of dozens of bad banks. She stripped the ruble of its fixed trading range two years ago and sent it from the 30s to the 70s. Russia haters applauded. It was the end of Putin. It was the end of Russia. If the economy that Senator John McCain refers to as "one big gas station" is not yet on its last legs, thank Nabilluina. Global financiers recognize her as one of the best in the business. She received at least two recognition awards for the world's best central banker over the past two years. And on Friday she was given five more years to lead.
"Her reappointment is confirmation that the banking system in Russia operates as free of politics as any non-G3 economy in a world where it's impossible to diverge the two," says Tim Seymour, managing partner of Triogem Asset Management and founder of EmergingMoney.com. "Nabuillina is highly respected. She's well versed and experienced in the volatile cross currents of Russian financial markets."
Mike Reynal, fund manager with Sophus Capital in Des Moines, says Nabiullina provides credibility and consistency in a very difficult environment. "She communicates well to the market and has our confidence," he says.
Moscow investors love her too. Irina Marina, an analyst with Specialized Research and Investment Group, a hedge fund firm, says she will likely continue to clean house in Russian banks. That mess is "far from over," Marina says. "I think Putin personally likes and respects her."
Last year, The Economist magazine got it right when they called her "Putin's right hand woman."
Like many of Russia's technocrats, she was educated in the U.S. She's a Yale alumn. Her mother worked in a factory. Her father was a chauffeur. From that blue collar background she was smart enough to make it into Yale and take control of Russia’s transition into a market economy in the early 2000s when she was a deputy economic minister.
When Putin became president in 2000, he pledged to end the chaos of the Boris Yeltsin years. But Putin is a political animal and nothing more. “Putin didn’t have clear ideas,” Yevgeny Yasin, a former economy minister told The Economist. He entrusted economic policy to a cadre of professionals with orthodox views, including Nabiullina, who became the economy minister in 2007.
A year later, all hell broke loose.
The crisis of 2008-09, when oil prices fell and the world economy stagnated, sent Russia back to the 90s again, exactly where Putin did not want to return. Foreign and domestic investors pulled money out of the country. Nabiullina pulled $200 billion from central bank reserves to keep banks liquid. GDP fell by around 8%. At the time, the ruble was still not fully free-float.
Putin admits to knowing next to nothing about the economy. He knows even less about monetary policy and the machinations of global forex markets and its impact on his country's currency. His faith and trust is placed in the hands of Elvira Nabiullina, one of the world's most respected central bankers. (AP Photo/RIA-Novosti, Alexei Nikolsky, Presidential Press Service)
"Since the crisis of 1998, Russia's central bank has proven that it is willing and able to take bold and difficult steps to maintain financial stability, even as their economic plan has not allowed Russia to evolve much past an oil state," says Seymour.
She now oversees a dwindling pile of bank assets for the world's tenth largest economy. The country continues to face economic sanctions for its military intervention in Ukraine and the annexation of Crimea. Yet, Nabiullina is counted on to hold this ship steady through sheer fiscal discipline that pleases Putin as much as it does Wall Street.
"Her management of the triple whammy facing Russia in 2014 and 2015 was text book," says Jan Dehn, head of research for the Ashmore Group in London. Russia was faced with three shocks at the same time: sanctions, declining oil prices and an investor panic. National income was declining. She hiked rates to 17% and let the ruble tank. "In so doing, she protected reserves and the public finances. She also stayed clear of capital controls. And she used Russia's large reserves to help sanctioned names to refinance, avoiding a major crisis. This was perfect policy management."
She is the second woman to run Russia's central bank. The first was Tatiana Paramonova, who served briefly as the acting Bank of Russia chairwoman in 1994 and 1995.
Rate Cuts Today
Russia's central bank cut the key interest rate down to 9.75% from 10% after standing down on rates for the past three months. The market consensus favored an on hold decision, according to Bloomberg.
The rate cut means that inflation is looking good and if that remains the case, than a further 25 basis points of cuts will follow, VTB Capital analysts believe. They forecast rates to fall to 8.5% this year.
Today's decision has Russia besting the MSCI Emerging Markets Index. Both the VanEck Russia (RSX) and the VanEck Russia Small Cap (RSXJ) ETFs are up two to three times that of the benchmark.
Source: Forbes