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Putin’s Central Banker Nabiullina Recites Verlaine as Regulator

June 12, 2013

Vladimir Putin is handing the keys of his central bank to a poetry-loving Francophile who pays homage to the victims of Russia’s totalitarian past.

The first woman to head a Group of Eight central bank, Elvira Nabiullina’s appointment surprised even herself, according to four colleagues who asked not to be identified because the deliberations weren’t public.

“Elvira’s heart belongs to poetry, not prose,” her husband, Yaroslav Kuzminov, who heads the Higher School of Economics in Moscow, said in an interview. Among her favorites are Anna Akhmatova, whose husband was executed by Soviet leader Josef Stalin’s secret police, and Paul Verlaine, many of whose works she can recite in French from memory, Kuzminov said.

Putin also surprised all 15 economists in a survey by picking Nabiullina, his 49-year-old economic aide, over Alexei Ulyukayev, who’s been the top deputy of outgoing Bank Rossii Chairman Sergey Ignatiev for nine years. A majority of those economists expected Ulyukayev to get the post. The others pegged former Finance Minister Alexei Kudrin, whom both Nabiullina and Ulyukayev have worked under.

Though she was among a handful of people Putin chose to help vet candidates, nothing was ever said in those meetings to suggest she was being considered for the job, the people said. She learned of Putin’s decision shortly before it was announced and said yes quickly because the objectives were clear and challenging, they said. She takes over the post June 24.

The most important of those objectives is overseeing the largest expansion of the bank’s powers since it was established after the Soviet Union’s collapse, First Deputy Prime Minister Igor Shuvalov said.

Mega Regulator

“First of all, the government expects Nabiullina to focus on creating a unified regulator,” Shuvalov said in an interview. The lower house of parliament is finishing a bill that will extend Bank Rossii’s remit to include the functions now performed by the Federal Financial Markets Service.

That means Nabiullina will be in charge of overseeing 4,500 financial organizations and 10,000 companies with tradable securities, as well as the money supply, interest rates and $518 billion of foreign currency and gold reserves, the world’s largest stockpile after China, Japan and Saudi Arabia. And then there’s what Shuvalov called the “huge argument” among officials over the bank’s refusal to cut its main interest rate for nine months because of concern it would stoke inflation.

“It is a difficult task,” Nabiullina said in an interview in April.

Ulyukayev’s Poetry

While Nabiullina, who was economy minister during the worst of the global credit squeeze, is a technocrat who shuns the limelight, according to the four colleagues, Ulyukayev, 57, is a frequent guest on domestic and foreign television programs who serves as the public voice of Russian monetary policy.

Had Putin gone with the consensus and chosen Ulyukayev, he would have promoted someone who branched into political commentary two years ago by publishing poems that urged his children to leave Russia and look for a place where “one’s mouth isn’t always plugged and sometimes truth is spoken.” Ulyukayev, who speaks English and French, received a doctorate from Pierre-Mendes France University in Grenoble after graduating from Moscow State University. His first poem was published in 1978, according to the magazine Znamya.

In bucking that consensus, Putin still got a banking regulator with a poetic streak, just one more publicly supportive.

Marx, Lenin

Elvira Sakhipzadovna Nabiullina was born in Ufa, the capital of the oil-rich and mainly Muslim Bashkortostan republic between the Ural Mountains and the Volga River, in October 1963, a year after the Cuban Missile Crisis brought the Soviet Union to the brink of nuclear war with the U.S. She is the oldest of two children born to a father who worked as a driver and a mother who worked in a factory.

Growing up in the 1970s, Nabiullina, an ethnic Tatar, stood out for being different, Kuzminov said. She spent most of her time studying French, listening to classical music and reading novels by Leo Tolstoy, Fyodor Dostoevsky and Franz Kafka, Kuzminov said, adding that she recently started developing a taste for opera, which she finds “relaxing.”

In the early 1980s, she moved to Moscow to attend Moscow State University, where she majored in the history of economic thought, which was less dominated by Soviet ideology than other specialties of the social science. Karl Marx and the early writings of Vladimir Lenin formed the bulk of her curriculum.

Liberal Economist

Her chosen course of study also gave her access to western economic texts by authors including Robert Higgs and Joan Robinson that weren’t available to the general population. Nabiullina has described herself as a liberal economist, one with no hint of radicalism, according to a friend who has known her since university. She believes the state’s economic policy should be guided by grassroots efforts and public consensus, not dictated from above, said the friend, asking not to be identified because their relationship is private.

Irina Yasina, a fellow student at Moscow State and daughter of then-economics professor Yevgeny Yasin, said Nabiullina travelled with her to Komarovo, near St. Petersburg, to pay tribute to Akhmatova at her grave.

In 1985, the year Mikhail Gorbachev came to power, Nabiullina joined the monolithic Communist Party, which considered students with good grades and working-class backgrounds star recruits. As disappointment grew with the pace of Gorbachev’s transformation effort, she quit the party by slipping her membership card under the door of the party’s office on campus. It was around that time she met Kuzminov, who was one of her teachers.

Economic Meltdown

As the Soviet Union headed for disbandment, future Russian President Boris Yeltsin gave up his Communist card, too, at what would become the party’s last congress, in July 1990. Within 18 months, the union would be dissolved, paving the way for the economic chaos of the 1990s.

After writing a dissertation she never defended, Nabiullina in 1991 went to work for Yasin, her friend’s father, as an economist at the Soviet Science and Industry Union, which would later become the Russian Union of Industrialists and Entrepreneurs, a lobby group for some of the wealthiest businessmen.

In 1994, after Yeltsin unleashed his “shock therapy” program that triggered hyperinflation and plunged most of the country into poverty, Nabiullina joined the government as deputy head of the Economy Ministry’s Reforms department.

‘Quick Thinker’

“I always knew she was a quick thinker, so when a vacancy surfaced I immediately offered it to her,” said Sergei Vasilyev, who was deputy economy minister at the time and is now deputy chairman of state development lender Vnesheconombank.

A few months later, Yeltsin gave the top job at the ministry to Yasin, one of the few Soviet economists who pushed for more liberal markets under Gorbachev. Within two years, Nabiullina was promoted to head of her department and executive secretary of Yeltsin’s Economic Reform Commission, which was led by Anatoly Chubais, an architect of privatization and the man at the center of the financial storm that would culminate in the government defaulting on its domestic debt and ruble devaluation in August 1998.

“We had a shared vision at the time,” Yasin, 79, said in an interview in Moscow. “It was the most fruitful period of our cooperation.” said Yasin, who is now an academic supervisor at the Higher School of Economics.

Learning Experience

In 1997, a year after Yeltsin won re-election over a resurgent Communist Party led by Gennady Zyuganov, Nabiullina replaced Vasilyev as deputy economy minister while remaining on Chubais’s commission, which was the main decision-making body for policy initiatives throughout the 1998 crisis.

“Elvira stood out by her intelligent manners and professionalism,” said OAO Sberbank (SBER) Chief Executive Officer Herman Gref, who became deputy head of the State Property Management Agency the month Russia defaulted.

After the default forced Prime Minister Sergei Kiriyenko’s government to resign, Nabiullina left public service to join Promtorgbank, a mid-sized lender owned by Kakha Bendukidze, who was a member of the Union of Industrialists and Entrepreneurs. Promtorg was a pocket bank, which provided services mainly to companies affiliated with its owner.

She was there just four months when she accepted the executive directorship of Eurasian Ratings Service. Russia’s first debt rater was formed in 1998 in partnership with Standard & Poor’s, which later absorbed it. Colleagues at Promtorgbank said she told them when she left that she preferred analytical work to rudimentary banking.

Following Gref

In 1999, when then-Prime Minister Putin was preparing to run for the presidency, he hired Gref’s Center of Strategic Studies to draft a development program for his first term. Gref then named Nabiullina vice president of his research group. In 2000, after Putin named Gref economy minister, Nabiullina followed as his first deputy, a position she would hold for four years. Playing “second fiddle” is a position Nabiullina is comfortable with, according to the colleagues.

She quit the government again in 2003 to return to Gref’s Center of Strategic Studies, which she ran until Gref left the government himself in 2007 to join state-run Sberbank, the largest lender in eastern Europe. It was then that Putin surprised Nabiullina for the first time by asking her to replace Gref as minister, the colleagues said.

Kudrin, Putin

When she joined the cabinet, the economy was humming, with growth reaching 8.5 percent in 2007, the second-highest rate in Putin’s 14 years in power. Within a year, though, Russia and most of the world was in the throes of a financial crisis, forcing Putin’s government to recapitalize banks and secure new sources of funding for many of the country’s biggest companies.

Kudrin, who ran the finance ministry at the time, worked closely with Nabiullina, Ignatiev and Ulyukayev to develop an emergency lending program that Putin later credited for stemming the damage. Russia’s economy has contracted just one year since 1999, shrinking 7.8 percent in 2009 after prices for oil, the country’s biggest export, plunged by more than half over a five-month period.

“She’s an expert on institutions,” Kudrin said in an interview in Moscow, explaining one of the reasons he thinks Putin picked her over Ulyukayev to replace Ignatiev.

In the past few years, Nabiullina has helped draft a string of laws refining the functions of the state, from government procurement policies to social programs. That experience has helped prepare her for overseeing the creation of the mega-regulator, Kudrin said.

Compromise Choice

Nabiullina’s candidacy emerged as a compromise choice after a split among officials over calls for monetary stimulus, which Bank Rossii has so far rebuffed as it prepares to shift its policy focus to targeting inflation by 2015. With Ignatiev agreeing to stay on as an adviser to Nabiullina, Putin’s choice signals a willingness to bridge those differences without making major changes to monetary policy, Natalia Orlova and Dmitry Dolgin, economists at Russia’s largest private lender Alfa Bank in Moscow, said in an e-mail March 13.

Even so, Nabiullina said she’s rethinking central bank policy to encourage more corporate lending and cap cash transactions to help curtail corruption.

As a former economy minister, Nabiullina will also seek more sway over the government’s tariff policy -- how much it lets monopolies such as OAO Gazprom (GAZP) and OAO Russian Railways charge for goods and services.

“I am shifting my position on tariffs toward restraining them,” she said in the April interview.

‘No’ to Putin

Her most valuable asset is that Putin trusts her, according to an official in the Kremlin administration who asked not to be identified because he’s not authorized to speak to the press.

Yasin, the economist who helped mentor Nabiullina, sees things differently.

“She’s been working for Putin for the past 13 years, which proves we no longer share views,” Yasin said. “As a central banker, she will have to display firmness, say no to the president. That’s going to be a challenge for her.”

To contact the reporter on this story: Evgenia Pismennaya in Moscow at epismennaya@bloomberg.net

To contact the editor responsible for this story: Hellmuth Tromm at htromm@bloomberg.net


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