Public Brawl Over Monetary Policy Continues in Russia, as Financial Warfare Escalates

Sept. 3, 2023, 2022 (EIRNS)—Speaking at a Sept. 1 event titled, “Ten Years of the Mega-Regulator: Yesterday, Today, Tomorrow,” on Sept. 1, Central Bank of Russia Governor Elvira Nabiullina again insisted that the Russian Federation should not return to the strict capital controls adopted back in February 2022 which successfully stopped capital flight and defended the value of the ruble in the face of international financial warfare. Russia, she stated, should instead keep raising interest rates to try to keep volatile capital from fleeing the country, reported TASS. Even as the value of the ruble continued to drop over the last 10 days—from 93.5 to 96.4 rubles to the dollar—Nabiullina argued that “the outflow of capital is a preference for hard currency” which should be “treated with completely different methods, including the key (interest) rate.”

Raising interest rates in this fashion is a fool’s errand, universally advocated by City of London and Wall Street bankers, using the specious argument that people will always find a way around capital and exchange controls, so why bother. In reality, raising rates in this manner will only strangle the domestic economy and it won’t succeed in stopping capital flight in any event—both of which are policy objectives of Russia’s enemies. Nabiullina has already raised interest rates from 7.5% to 12%, and she stated in her Sept. 1 remarks that further increases may be required.

The contrary policy view was unveiled at the event by Finance Minister Anton Siluanov, who argued that “we are for tighter measures on control over (currency) flows,” reported TASS.

On Feb. 28, 2022, just days after the launching the special military operation and being subjected to an onslaught of foreign sanctions, President Vladimir Putin ordered that capital controls be imposed requiring exporters to repatriate 80% of their foreign exchange earnings. That was later reduced to 50%, and then the controls were dropped altogether on June 10, 2022 by Nabiullina.

Bloomberg happily reported that “the lingering (policy) split means Russia will likely try to cope without resorting to curbs on the movement of capital that it used last year to stave off the ruble’s collapse after the invasion of Ukraine.”