Legendary Soviet Central Bank Chief: Naibullina Should Shoot Herself (Gerashchenko)
“If I were in her position, I would ask for a gun, and shoot myself.”
This article originally appeared at Dances with Bears
December 17th, () - Soviet-era officials had a peculiar standard of professional morality and ministerial responsibility, as this is known in the political democracies. Make a colossal mistake, the red directors used to say — take the blame on yourself. Marshal Sergei Akhromeyev was the last Russian official of rank to do so. The anniversary of his death on August 24, 1991, is observed here.
The last head of Gosbank and twice the Governor of the Central Bank of Russia (CBR), Victor Gerashchenko, is now 76 years old, and in his second retirement. He was driven into the first following the rouble crash of 1994, under the attack of US Government economic advisors, Jeffrey Sachs and David Lipton. They called him “the worst central banker in the world”. Gerashchenko was returned to the CBR after the 1998 crash and the appointment of Yevgeny Primakov as prime minister. Primakov was criticized by US Government officials as a proto-communist and a KGB spy. He was removed from office after eight months, when he prepared to take Russia into the war for Yugoslavia, on the Serbian side. Gerashchenko lasted until 2002.
Recently, Primakov has been called back to the Kremlin to assist President Vladimir Putin restate Russian foreign policy and security strategy. Gerashchenko remains on the outer, his return to advise Putin opposed, among others, by the current CBR Governor, Elvira Nabiullina, who is 25 years his junior. Following the crisis at the Central Bank on Monday and Tuesday, Gerashchenko was asked by an interviewer what advice he would give Nabiullina: “If I were in her position, I would ask for a gun, and shoot myself.”
The third, then deputy finance minister Alexei Kudrin, was also promoted. Today he is the Anglo-American candidate for prime minister. In three self-interviews so far this week on Twitter, has attacked Igor Sechin for Rosneft’s Rb625 billion rouble bond issue, “extremely at the wrong time”; defended Nabiullina for raising the key interest rate to 17% as “forced in the present conditions but correct”; and appealed this way to Putin: “Decisions by the government on increasing the confidence of investors in the Russian economy have to follow this measure.” Overnight Kudrin has announced he is still waiting for the call to take over.
The following is a translation of excerpts of an interview with Gerashchenko by Business Online, an internet publication from Kazan. The two reporters were Yelena Kolebakina and Alexander Gavrilenko. Gerashchenko doesn’t mince words: his Russian, like his sense of humour, is easy to understand, difficult to translate. Here is the original Russian text, which was published on Tuesday.
Asked what he had done at the CBR and would do now, Gerashchenko said: “Firstly, introduce certain controls. At the time [we] allowed to leave 50% of foreign exchange earnings for exporters to remain in their foreign currency accounts. In order not to lose, especially if they had to buy things to improve our own products, machines or other things. Here the CBR began to allow these foreign currency accounts. Then, when we started to improve things, we reached the point where 75% could be left on the foreign exchange accounts. But then came the transfers through offshore companies [by those] fearing a change of power. Then the Yeltsin gang was in power — the guys who understood the economy. Neoliberals — people who read books, but who had never worked in any real economy, neither our own nor abroad. But now the whole world is fighting with offshore companies…
Secondly, it is necessary to deal with speculators. After all, we have a lot in this case involving speculators. And so were we. So, in 1998, we got hooked with our T-bills… Foreigners got involved, and transferred hard currency to buy rubles, and made forward contracts – they were for three, six months, these T-bills. With the ruble profit they bought currency. And at first the Central Bank did the forward contracts. And then, as the amount increased, they were shifted to the commercial banks…”
Regarding Nabiullina’s decision to raise the key rate to 17%, Gerashchenko responded: “What kind of loans can you give businesses here so that [the state policy of] import substitution can be carried out — at 17.2%? But then, say that the Central Bank must fight against inflation. Yes, it has to fight, but how?.. In general, I would like to note that we have lost the management approach to exercise control. Well, what is [Prime Minister Dmitry] Medvedev, except that he is married to the daughter of a submarine commander at Kronstadt, when they were in high school? Was he involved in the economy? No! He was in the legal department at Sobchak [‘s St. Petersburg mayoralty]…And how did that end? It is still in the court to settle who would pay for the theft. They were scandals. And then the whole team, the gang so to say, gradually came here [Moscow] to work. [Deputy Prime Minister Arkady] Dvorkovich [below 1]- is that a great economist or what?…
Asked what he would do if he were in Nabiullina’s place and in the Central Bank now, Gerashchenko answered: “I would ask for a gun and shoot myself…”
“Still, I don’t want to lash out at her and criticize. There is a big combination of circumstances. And, in my opinion, she probably has too many different advisors. It’s hard to be one of those, of course, especially because she started to shake up the veterans, people she didn’t know…As for advice, just so you understand my position: I don’t stick my nose where it isn’t my business.”
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