US Treasury secretary Yellen is competent woman at the helms of US Financial power house. With matchless experience in financial affairs of America she ultimately found her match. Guess who? Surprise and surprise, in Russia to boot. That is her opposite figure of Central Bank chief Elvira Nabiullina. Read for more:
Steering Russia’s economy for nearly five years, earlier she got another five year term in May 2022 immediately after the Russian special military operations in Ukraine. As top notch banker she quelled the market panic over the invasion and brought a sense of sanity. As you are aware, Central Bank of Russia (CBR) is the highest monetary authority in the Russian Federation. It sets and carries out Russian monetary policy, supervises the commercial banking system, and maintains the payments system.
Yellen’s sanctions definitely bit lot of flesh off from the Russian body corporate initially. That is what geoeconomics tools expected to do anyway. Yet, Elvira is made of steel & blood as Bismarck used to say about his Prussian troops. Yellen as recently as on Feb 23, 2023 boasted that sanctions imposed on Russia are having a "very significant effect".
To dial up pressure on Russia, USA has also frozen former’s financial assets which figure has not yet been revealed officially. But Elvira remained unruffled. “Any country can freeze financial assets in the form of reserves held in central banks or in commercial banks. At the end of hostilities, negotiations would begin in earnest to repatriate these assets with accrued returns”. As simple as it is!
True enough, there was flight of capital from Russia to the West. But as the West started to seize or block physical assets such as yachts and financial assets in banks belonging to oligarchs, they abandoned their short stay and reverted to Russia with their hoarded wealth.
That added to the surplus being piled up after heavy trading of oil & gas, got Russia in the money, so to speak. Evidently, excess liquidity need to be channelled productively, and Elvira pounced upon on this chance and facilitated investment in consumer and industrial sectors. Unsurprisingly, apt text book example of geoeconomics counter measure.
Instantaneously, Russian Central Bank has elevated her position as the most reserve rich bank in Europe. What is truly amazing, China started using this God-given opportunity to increase her stake in foreign investment in Russia within double quick time?
Elvira’s best performance to date is in her business strategy of right conversion rate of Ruble. By June last year she recommended that Ruble be tied to gold where 5,000 Ruble was equated to one gram of gold. Technically, Ruble was trading at 135 for one US dollar. At this time gold was trading one gram for 52 US$. Plainly speaking, this means Ruble is worth about one dollar equal to 96 Ruble.
At the time of writing currency traders quote one dollar equal to 80 Ruble. From technical point of view, performance of Ruble over the year is staggering. Beginning at 135 being fixed at 96 and finally now 80 in the global trading means Ruble has strengthened.
To cap it all, Elvira implemented a scheme where purchase of Russian oil & gas be paid in Ruble or in gold in the western hemisphere. This strengthened the Ruble more than the gold itself. A business strategy, like of which I have not seen in the recent past.
Cheers!
Muthu Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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