Some of the richest Russian businessmen publicly criticized the strict monetary policy of the central bank in the country today, with one of them saying that the high interest rates created a “trap” for the economy, reported Reuters.
It is the sharpest public criticism of financial authorities since the 2024 rate hike.
Russian economic growth, according to expectations, will slow to 0.4 percent this year, after the growth of 4.9 percent in 2024. High interest rates, an overvalued ruble and Western sanctions are cited as reasons, while proposed government measures are not expected to significantly boost growth.
Most Russian billionaires have supported President Vladimir Putin’s war in Ukraine since 2022, despite Western sanctions that have restricted their access to properties and luxury yachts in Europe and North America.
But as the war enters its fifth year, with no end in sight, and profits fall, taxes rise, access to Western markets remains closed, and private property is nationalized, consensus among businessmen over war goals begins to crack.
Roman Trotsenko, a transport, fertilizer and real estate billionaire, has compared the Central Bank’s monetary policy to the “Volcker shock”, alluding to the aggressive rate hikes in the US from 1979 to 1982 under the leadership of Paul Volcker.
“This was a big experiment and no one has repeated it since, except us,” he told senior officials, bankers and businessmen at a growth panel organized by Russia’s biggest bank Sberbank, as part of Russia’s biggest economic conference in St. Petersburg.
The key interest rate in Russia now stands at 14.5 percent, after previously reaching 22 percent. But it is still considered too high for businesses to invest, especially after inflation has eased to 5.6 percent from around 10 percent.
Addressing the main plenary session of the conference, Putin said he understood the “deep sadness and alarm calls” of businessmen over high borrowing costs, but added that Russia’s economic foundations were stable.
Trotsenko said economic history textbooks would describe the interest rate war policy as “Zabotkin’s trap, which Russia fell into by mistake,” referring to the Central Bank’s first deputy chairman, Alexei Zabotkin, who is considered one of the creators of the current policy.
Zabotkin, who attended the discussion, applauded Trotsenko’s speech, but later told reporters that the Central Bank is fully aware of the difficulties facing Russian companies.
Dmitry Mazepin, owner of fertilizer maker Uralchem, compared the Central Bank’s moves to cool the economy to the efforts of hostile Western powers.
“What is the external challenge doing? Besides, as the president said, they want to inflict a strategic defeat on us, they just want to slow us down. What is going on internally? What is the Central Bank doing when it says it wants to cool the economy?” Mazepin said.
Russia’s richest man, according to Forbes, billionaire Alexei Mordashov, owner of steelmaker Severstal, said domestic demand for steel has fallen 30 percent in the past three years. Because of that, the company reduced its investment portfolio by 24 percent, and its cash flow became negative.
“I am sure that almost everyone in this room is seriously reconsidering their investment program. It is clear that with such instability and variability we will face an even greater decline in investments and an even greater decline in gross domestic product,” said Mordashov.
Russian billionaires usually avoid publicly commenting on the war in Ukraine. Many have formally relinquished control of their companies and are pursuing legal proceedings to lift Western sanctions.
German Gref, the chief executive of Sberbank, which drafted Putin’s first economic program in the early 2000s, which then led to strong growth rates for several years, told reporters after the panel that Russia’s modest growth under current conditions was “already a miracle.”
