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By John Helmer, Moscow

Ksenia Yudaeva, the first deputy governor of the Central Bank of Russia (CBR) in charge of Russia’s reserves and the foreign exchange rate, was sacked on January 14. A notice appeared on the Tass wire in the evening of the Old New Year’s holiday, quoting Governor Elvira Nabiullina (above). She defended herself and Yudaeva. “I want to emphasize especially that we keep both strategic and tactical reference points in the monetary policy; the ideology of the monetary policy will maintain continuity with how we worked in 2013 and 2014.” Yudaeva, claimed Nabiullina, was keeping her title and her seat on the CBR board as “one of the best economists in the country.”

The action was disclosed the next day when Yudaeva’s replacement, Dmitry Tulin, a veteran central banker who has served twice before, was officially announced. The text of the CBR release didn’t mention Yudaeva. It said: “Dmitry V. Tulin has been appointed as a First Deputy Governor of the Bank of Russia from 21 January 2015. Dmitry V. Tulin will take up monetary policy issues.”

The Kremlin’s economic policy advisor, Andrei Belousov, had let the cat out of the bag before the Tass notice appeared, telling the press at a Moscow economic policy forum that Tulin’s appointment to run monetary policy “wasn’t a chance appointment”. He intimated that Yudaeva wasn’t up to her job because “the central bank now faces new challenges, and the tasks are more complex than during the previous period.” He meant Nabiullina too; but since Tulin is capable of running the show without demanding Nabiullina’s head, er title, she has hung on to it.

A spokesman for the Central Bank said this morning she doesn’t believe that in the recent history of the Central Bank, any governor has been dismissed for incompetence.

Sackings of CBR governors are rare. Since 1991 they have happened when the rouble plummeted, and CBR officials have either lost control themselves, or lost the policy options argument with government officials, or both. Yudaeva’s removal follows a whispering campaign by international bankers that President Vladimir Putin has lost control.

Putin himself admitted publicly a month ago: “Everything is being done right… They should probably move at least half a pace faster. Of course, I see the criticism levelled at the Central Bank and its Governor. Some of it is justified, some is not… they can criticise Nabiullina all they like, but one should bear in mind that overall their policy is right. The Central Bank is not the only one responsible for the economic situation in the country.

The last three CBR governors to be sacked were governor Sergei Dubinin (below left) and deputy governors, Sergei Aleksashenko (centre) and Denis Kiselev (right).


Following the collapse of the oil price and the rouble, then the government bond and bank defaults of August 17, 1998, Prime Minister Sergei Kirienko was dismissed, and replaced by Yevgeny Primakov. Dubinin announced he was resigning on September 8. The next day he defended himself, publicly accusing other officials in the government. “Under my leadership,” Dubinin claimed, “the Central Bank did not print worthless money. However, monetary policies cannot forever compensate for weaknesses in tax collection and the management of the national debt.”

Dubinin was replaced by Victor Gerashchenko, who had been dismissed himself after the rouble collapse of October 1994. With the support of Primakov, Gerashchenko then fired Aleksashenko, who had been responsible for currency policy, and Denis Kiselev, who had been in charge of the major banks which had gone bankrupt. The CBR press archive for 1998 has no record of their exits. Aleksashenko went on to write a book justifying himself, and took employment with Merrill Lynch. Kiselev moved to the US.

At the time, the CBR reserves were about $10 billion (not counting gold). Most of a $4.8 billion emergency loan from the International Monetary Fund (IMF) loan had disappeared in the currency trading and capital export in the days preceding the August default. The foreign exchange policy on which all three CBR officials had agreed before they got the boot was that the Central Bank should not introduce currency or capital controls and restrict the freedom to trade of the major banks. With the advantage of hindsight, international bank analysts now claim that emergency controls should have been introduced. Gerashchenko thought so at the time. He thinks so still – and blames Nabiullina for failing her responsibility.

Retrospectively, the CBR’s failure to introduce capital controls to head off the crisis of August 1978 has been explained by the Russian government’s reluctance to go against IMF and US Government strictures. The Russian explanation is that the defaulting banks, as well as Aleksashenko and other officials benefitted from inside trading of currencies during the crisis. In February 2013 Aleksashenko lost a Moscow court case he had brought, claiming his innocence of these allegations.

A source close to the CBR adds: “noone gets fired for incompetence. The reasons for dismissal are always euphemistic, and not only in Russia but elsewhere as well. Noone gets fired for incompetence outright, as the Labour Code has no such qualification. If someone is incompetent today, then he or she was so yesterday too, so the superiors who appointed such a person may be held responsible. Large corporations, public or private, rarely call things by their proper names. Admitting mistakes and apologizing publicly might be or not be an element of the national culture. It is very rarely the case — I am not talking about Japan.”

Nabiulina GrefThe principal official standing behind both Nabiullina and Yudaeva is German Gref (right). He kept his post as a privatization official in August 1998, and was promoted to be Minister of Economic Development in 2000. In 2007 Nabiullina then replaced him as he took over Sberbank. Gref opposes capital controls. He acknowledged this week: “The state will capitalize the banks and increase its stake in them, and the banks will buy industrial enterprises and become financial-industrial groups. All our economy will be state-run.” What Gref means is that there will be no future for him, Nabiullina, or Yudaeva.

The CBR continues to report that Yudaeva’s (below left) duties are, in order of priority, “monetary policy; reserves management; refinancing and liquidity provision operations; modelling and forecasting; setting the official exchange rates of foreign currencies against the ruble.” In fact, Tulin (right) has taken charge of everything but “modelling and forecasting”. The CBR spokesman says she cannot confirm Tulin’s new duties, or Yudaeva’s, until after Tulin starts work on January 21.


Yudaeva is an academic economist. She studied for a PhD at Massachusetts Institute of Technology; was employed for a time by the Carnegie Institute Moscow, [semi-colon] and then worked for Gref at Sberbank between 2008 and 2012. She did more research for the Kremlin’s Experts’ Directorate, before following Nabiullina to the CBR in September 2013.

At the time Yudaeva took over, the CBR’s reserves were $514.9 billion; the gold stock was worth about $39 billion. . Just before they were taken from her control, the reserves amounted to $386.2 billion (gold $46 billion); the loss is almost $129 billion. CBR reports for calendar year 2014 show that capital outflow reached its highest-ever level — $151.5 billion; this was more than double the volume in 2013, and 13% higher than the previous record of $133.6 billion in the crisis year of 2008. Roughly half the capital outflow ($72.9 billion) left the country in the last quarter of 2014.

Aleksashenko recently wrote in the Financial Times that Nabiullina and Yudaeva have mistaken their monetary instrument and exchange rate options in a way that has benefited the banks and the oligarch groups.

“This strange position of the CBR was accompanied by the injection of another 1.5tn roubles provided as credits to the banking system under the same negligible rate in just two days. So the rouble kept on falling: by 3 per cent immediately after the CBR’s rate increase, and another 5 per cent and 10 per cent over the next two days.”

“Stupidity is worse than theft”, a Kremlin economic advisor, Sergei Glazyev, wrote in November, arguing that Nabiullina and Yudaeva are more academic fools than oligarch tools. “The heads of the central bank are guided by fantasies gleaned frtom student textbooks on macroeconomics… Such economic ‘theory’ degenerates into scholasticism, unsitable for practical use…. The escalating crisis that we see today reminds us in more than one way of the situation which prevailed in 1997…Now, as then, instead of instituting capital controls, interest rates were raised leading to capital contraction on the financial markets. As a result, then as now, there was no incentive to provide credit to the industrial sectyor and the rate of investment in industry began to fall.”

Glazyev’s (below left) recommendations for capital controls, combined with investment stimulus from the state banks, have been countered with Putin by other officials, including Nabiullina, Belousov (right) , Gref, and candidate prime minister, Alexei Kudrin. The story of how they managed to oust Glazyev from the regular advisors’ meetings with Putin can be read here.

European and US bankers have long campaigned against Glazyev for being a proto-communist and nationalist; he is the only economic policymaker in the Russian government to have been sanctioned by the US, the European Union, Canada and Switzerland.


Kudrin and Deputy Prime Minister Igor Shuvalov, who is in charge of the government’s anti-crisis group, have said nothing in public to explain why they oppose capital controls. This week they refused to answer direct questions on the point.

The day she lost power, Yudaeva gave a speech at the Gaidar Economic Forum in Moscow. She concentrated on inflation, claiming the Bank will bring down the rate to between 8% and 10%. She was unconvincing, according to the UralSib Bank report of what was said.

Just how convincing Yudaeva is can be judged from this interview with the New York Times in June 2013, just before she moved to the Bank. According to UralSib Bank, “we believe that the discussions at the forum clearly suggest that the government does not have a coherent strategy for dealing with the unfolding economic crisis, and that the government’s response will be limited to technical measures to stabilize the ruble and support the banking system.”

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