Putin taps close ally as Russia central bank chief

AFP-JIJI

Russian President Vladimir Putin said Tuesday he intends to nominate Kremlin economic adviser and his close ally Elvira Nabiullina to Parliament as Russia’s next central bank chief.

Nabiullina, who served as economic development minister in the last government, would replace the widely trusted Sergei Ignatyev, who is retiring after heading the Bank Rossii (Bank of Russia) since 2002.

“I intend to propose the candidature of Elvira Nabiullina for the post of chairman of the Russian central bank,” Putin said.

“The years of the crisis, most difficult and dangerous for our economy, passed with relatively minimal losses, including due to your input,” Putin told Ignatyev as he met with both the outgoing chief and Nabiullina.

Economists had been nervous about Putin’s eagerly anticipated decision for one of the top economic posts in Russia, at a time when the country is seeking to balance declining growth with resurgent inflation.

While a trusted adviser of Putin, Nabiullina’s appointment may reassure some who were fearing he could make a far wilder choice like his much more radical economic aide Sergei Glazyev or banker Andrei Kostin.

But her reputation as a close ally of the president may trigger fears that Nabiullina will be ready to heat up the economy by trimming rates and stoke up inflation expectations.

“Nabiullina is considered too close to Putin and, thus, definitely open to political pressure,” said Ivan Tchakarov, chief economist at Renaissance Capital.

“When she was economy minister, she always supported a macroeconomic policy that was at odds with the more conservative and prudent approach pursued by the Finance Ministry,” Tchakarov said. “Nabiullina will mean higher inflationary expectations and weaker currency. This will still be a blow to central banks perceived independence.”

But Nabiullina, 49, said she would, like Ignatyev, to stay on as her adviser if she is formally appointed by the Russian Parliament, as required. Ignatyev’s four-year tenure expires on June 23.

If confirmed, Nabiullina will become one of the most prominent female figures in Russian public life and one of few officials of Muslim origin to hold a major federal post.

A native of the Muslim region of Bashkortostan, soft-spoken Nabiullina worked in the Economy Ministry in the 1990s. After a brief stint in the commercial sector, she went back to the government with Putin’s ascent to the Kremlin in 2000.

She served as economy minister when Putin became prime minister in 2008, and shifted to the Kremlin together with many other ministers as he began his third presidential term last year.

Her ministry frequently clashed with fiscal hawks of the Finance Ministry led by Alexei Kudrin, especially during the financial crisis.

Her imminent appointment comes as the Bank of Russia is facing key policy choices as it tries to keep a lid on resurgent inflation without harming economic growth. The bank’s relatively hawkish recent stance has frustrated some of Putin’s allies who want looser monetary policy.