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After the West imposed the most crippling sanctions in modern
history to punish President Vladimir Putin for the war in
Ukraine, Russia's economy is facing its biggest contraction
since the years following the 1991 fall of the Soviet Union.
Elvira Nabiullina, feted as one of the last economic liberals
left at the top table of Russian policy-making, has been left
with the job of steering the $1.8 trillion economy through the
challenges of war and sanctions.
Speaking at Russia's annual economic conference in the former
imperial capital of St. Petersburg, Nabiullina called for a
structural "perestroika", or reconstruction, of the economy.
In essence, she criticised the assumptions that have underpinned
Russia's economy since Soviet geologists found oil and gas in
the swamps of Siberia in the decades following World War Two.
"We export at a discount, import at a premium. And in these
conditions, of course, in my opinion, it is necessary to rethink
the benefits of exports," Nabiullina, 58, said. "A significant
part of production should work for the domestic market."
But in a tacit acknowledgement of how difficult the transition
would be, she added: "Everyone is worried that this structural
perestroika, in conditions when we lose access to usual sources
of technology, will really lead to degradation."
PAINFUL MEMORIES
The reference to "perestroika" evokes painful memories in Russia
of Soviet leader Mikhail Gorbachev's efforts to open up the
moribund economy of the 1980s to some free enterprise and
competition while fostering greater political freedoms - an
ambitious strategy that led to economic collapse.
"The task is modernisation - but how? In order not to return to
the Soviet Union, we need to look at private initiative in a
different way. The deterioration of external economic conditions
will remain for a long time, if not forever," she said.
Putin has said that Russia, the world's second largest oil
exporter after Saudi Arabia and its largest exporter of natural
gas, will thrive despite Western sanctions, which he says amount
to a declaration of war against Russia.
He has vowed that no new Iron Curtain will fall over Russia's
economy but he has also quipped about being glad some foreign
companies had left the country because home-grown businesses
could take their place.
Nabiullina, who has run the central bank since 2013, was once
mentored by one of Russia's most prominent free-market
economists, Yevgeny Yasin, and is by no means the first Russian
policymaker to call for measures to diversify the economy.
But that need has become more urgent due to the sanctions. And
Russia's new economic isolation was highlighted by the lack of
members of the Western financial elite at the very forum - long
dubbed the "Russian Davos" - Nabiullina was addressing.
She called for the scrapping of most capital controls introduced
by Russia in response to the sanctions, though added that those
affecting citizens of countries deemed "unfriendly" by Moscow
could only be lifted in a reciprocal manner.
Nabiullina said there would be no ban on Russians holding bank
accounts in U.S. dollars or other foreign currencies.
(Editing by Guy Faulconbridge and Gareth Jones)
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