By John Helmer, Moscow
@bears_with
During the Battle of Bến Tre, Vietnam, in February 1968, a US Army major was quoted as telling a reporter for Associated Press after an artillery barrage and air bombing of the provincial capital and its 75,000 inhabitants: “it became necessary to destroy the town to save it.” Because the soldier was never named, and the reporter who made the quote famous is dead, it isn’t certain the words were ever said.* The American warfighting intention, however, was certain. Also certain is that in seven more years of war, the US was defeated by the Vietnamese whom it aimed to kill at Bến Tre.
The Governor of the Central Bank of Russia (CBR), Elvira Nabiullina, is certain that if the war against the US and Europe continues on the Ukrainian battlefield, Russia will be destroyed. Nabiullina is certain because she will destroy it in order to save it. She declared her intention in a speech to State Duma policy committees on Monday, November 9.
“Attacks on our oil refineries, other industrial facilities, data centers, and logistics hubs,” Nabiullina said, according to Tass excerpts of her speech, “have constrained production capacity. We believe this is a temporary situation, as both the business sector and the government are making tremendous efforts to restore the affected facilities. As long as this recovery process remains incomplete, demand should grow at a moderate pace. There is no question of a decline in GDP, but excessive growth in demand under current circumstances could accelerate inflation, which is necessary to avoid… The period of tight monetary policy that we are currently experiencing is a necessary step toward low inflation and moderate interest rates…this path must be followed to the end…It is too soon to rush into cutting the key rate [14%]. That would lead to the opposite of the intended result: an increase in interest rates across the economy, rising prices, and new difficulties for our businesses.”
There is no record of the questions asked by Duma deputies. The CBR has not published the full text of the speech.
Instead, a press release of November 5 acknowledges that the war against the Russian economy may continue beyond “temporary”, and that if spending on the military budget grows in the meantime, Nabiullina will react by raising the key rate above 14%. “Proinflationary risks associated with a long period of wage growth outpacing productivity growth as well as with a deterioration in the global economic outlook and rising global price pressures amid geopolitical tensions are still in place. Disinflationary risks involve a more significant slowdown in domestic demand. The Bank of Russia takes into account the announced parameters of fiscal policy. On the medium-term horizon, fiscal policy will help slow down inflation. Changes in the fiscal policy parameters may require an adjustment in the monetary policy pursued.”
In CBR-speak, “geopolitical tensions” means the war against Russia in the hinterland and , on the high seas. “Changes in the fiscal policy parameters” means a growing state budget deficit as tax revenues from the shrinking economy fall, and the expenditures required for defence and security rise.
This isn’t new. Nabiullina has been attacking the military budget, and by implication the war, since the Special Military Operation began in February 2022.
For the time being, there is almost no public Russian criticism of Nabiullina, not even as the end of her third term approaches and the Kremlin must decide soon what to do with her post at the CBR. The polls show Nabiullina’s line is unpopular. However, her name is generally unrecognized: it is off the bottom of the current list of state officials whose performance voters say they approve. Her name was last recognized in voter polling of trust and distrust in 2020, almost at the bottom of the list. In earlier polling, Russian women don’t recognize her for “Woman of the Year”.
After hearing Nabiullina at parliament on Monday, Mikhail Delyagin, a Duma Economic Policy Committee deputy chairman, has responded guardedly: “sometimes there is a feeling that this control [of the economy] is carried out on the basis of methodical and consistent trampling of common sense. And from ignoring reality. You can ignore reality in some local matters. For example, thinking ‘what is the reason for the price increase in Russia?’ You can turn a blind eye to the arbitrariness of the monopolies, continuing to lament some ‘inflationary expectations’. But if ignoring reality becomes something that isn’t episodic, if the desire to vigorously pursue reality leads you, in catching up, to trample it, and this becomes an everyday habit, then it penetrates into all spheres of your activity. Then you start explaining with Orwell.”
Delyagin called on the CBR to “limit financial speculation. Tomorrow we [should] make the credit available. Affordable credit is a 2% key rate. Otherwise, money will all go to the currency market…and to other speculative markets.”
In Nabiullina’s defence, Vzglyad, the Kremlin-supported internet publication on national security policy, has now published a report in which experts from the Moscow money and credit markets are quoted to repeat and endorse the CBR line, without demurring on the CBR’s calculations of economic recession and stagnation – and also without referring to the war.
The timing of Nabiullina’s declaration on the eve of the Abdu Dhabi talks with the US and the Ukraine is not accidental. Nabiullina is attempting to provide President Vladimir Putin with an alibi for terms of agreement, including territorial concessions and the policing of security arrangements inside Ukraine by NATO and the US, which are intended to convince (override) criticism from the General Staff and Defense Ministry, and from the sceptical media. Sources in Moscow believe, as one says: “At this stage this is mathematical and not a matter of wish and will. All the sides are exhausted. Everybody needs a deal to last for two to five years.”
This is the Kremlin Wall alibi. It is saying the terms of agreement which the US has drafted with European and NATO agreement, and tabled in Abu Dhabi this week, should be accepted now so that the economic recession and pauperisation which Nabiullina is promising for the next two years can be avoided.
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