As Elvira Nabiullina steered Russia through a series of economic shocks in recent years, investors watched with concern as the central bank governor’s rotating collection of brooches for clues to macroeconomic policy. A hawk meant a return to rate hikes; a rain cloud meant she was looking to dampen inflation expectations.
But after devastating Western sanctions on Monday sent the ruble 29 percent below its previous all-time lows, Nabiullina sat, face ashen, next to the Economic Cabinet at the other end of a 20-foot-long table from Vladimir Putin, dressed all in black — and with no brooch in View.
“Nabiullina has been through every kind of stress test, but no war,” says a former senior official who knows her. “No one told her this was coming.”
The conflict in Ukraine has strained the governor’s ability to keep the economy running. Despite years of patiently building a $643 billion war chest
Panicked Russians formed long lines in front of the bank branches. Even when the central bank froze trading on the Moscow Stock Exchange, shares in London-listed Russian companies fell 98 percent. In response, Nabiullina raised Russia’s key interest rate to more than 20 percent, admitting that its economy was “struggling with a completely unusual situation” in “fundamentally changed conditions”.
To ease the pressure, Putin approved capital controls that force Russian companies and individuals to sell 80 percent of their foreign exchange earnings, ban Russians from transferring foreign currency abroad, and ban Russians from taking out new foreign loans.
“These are desperate measures in a desperate situation. And she has almost no choice,” says Sergei Guriev, an economist at Sciences Po University in Paris. “I don’t know what you can do if something like this happens.”
But such drastic steps have shocked Nabiullina’s longtime confidants. “I respect her so much. She’s so smart,” says a senior Russian banker. “But she once told me that if capital controls were put in place, she would resign. Now capital controls have been put in place and she has not resigned.”
A lover of French poetry and opera, Nabiullina — an ethnic Tatar and one of Russia’s few female senior officials — has shown a steely determination since taking office in 2013. First US and EU sanctions on Ukraine halved the ruble’s value against the dollar. It first burned more than $70 billion to prop it up, then switched to a free float and hiked interest rates to 17.5 percent.
Although Russia fell into recession, Nabiullina stuck to her ultra-conservative monetary policy. Within a few years, the country returned to growth and inflation fell. That success led to several publications naming her the world’s top central banker and earning her Putin’s trust, according to two longtime mutual acquaintances. He praised Nabiullina for creating a “macroeconomic foundation” and praised her “energetic efforts”. [against] Banditry” in a crackdown on bank corruption.
But her foreign counterparts are also increasingly associating her with Putin. “She is a very professional, experienced macroeconomist and central banker. There is no doubt about that,” says Valeria Gontareva, who headed the Central Bank of Ukraine from 2014 to 2017. “But without values, your professionalism is nothing.”
Just before Russia began massing troops and equipment on the Ukrainian border, Nabiullina seemed more successful than ever. She spoke of bringing post-pandemic inflation even below the 4 percent target. She found support for one of the world’s toughest stances on cryptocurrencies. But their work has now been turned on its head: currency controls are artificially inflating the ruble, while Russians are turning to crypto to evade sanctions.
“The only way forward for them is to fix the trade, grab all the restrictions now, stop the bank panic – and hand in their resignation letter. And she will be a respected person in the world,” said Gontareva, the former central banker of Ukraine. “Otherwise she’ll be in The Hague with all these bandits.”
So far, Nabiullina has not spoken directly about the conflict, but some of her stunned friends believe she shares her horror at what is happening in Ukraine.
Others have made what they call crass moral choices. Boris Lvin, a senior adviser to Russia’s representative at the World Bank, told colleagues that “I can no longer join my government in light of current events.” Oleg Anisimov, a senior Russian climate delegate, said at a summit he could find “no justification” for the war.
Even if the situation worsens, perhaps Nabiullina has made up her mind. “She believes that this work is important for Russian citizens and that she does it better than anyone else, which is not unlikely. So she has to be loyal to Putin and not resign,” says Guriev. “If she starts speaking out against Putin, she will be kicked out and will not be able to help the Russian people.”