Ukraine’s current stalemate with Russia has frustrated many people, including the former’s military chief. A largely stymied counteroffensive this year gained little ground, especially as Ukraine still lacks certain technology that could help with meaningful breakthroughs. But one important aspect of the struggle against Russia has been surprisingly absent from the recent debate on how Ukraine can win.
Ukraine’s current stalemate with Russia has frustrated many people, including the former’s military chief. A largely stymied counteroffensive this year gained little ground, especially as Ukraine still lacks certain technology that could help with meaningful breakthroughs. But one important aspect of the struggle against Russia has been surprisingly absent from the recent debate on how Ukraine can win.
I’m talking about the Russian economy—and the people who hold it together, like Elvira Nabiullina, the head of the Central Bank of Russia. It’s tempting to say that Nabiullina is often overlooked because she is a woman, but then again, talented Nazi economist Hjalmar Schacht is not exactly the star of many documentaries, either. Economists may keep the wheels of a war machine greased, but because they’re not the people in snappy uniforms, it’s easier to disregard them.
As an economist, Nabiullina has a long track record of saving Russia from sanctions following Russia’s initial attack on Ukraine in 2014. Her decisions, which included inflation targeting, and, more specifically, floating the exchange rate, earned her fawning interviews with the International Monetary Fund even as her bosses continued to kill Ukrainians prior to the mass-scale 2022 invasion. She was furthermore praised as an effective communicator of Russian economic policy—thus helping prevent panic.
Shortly after Russia’s full-scale invasion of Ukraine began in February 2022, Russian sources rushed to tell Western journalists that Nabiullina tried to resign but was not allowed to do so by President Vladimir Putin. Gossip, as ever in Russia, resulted: as I heard the stories, Nabiullina had been blackmailed, people close to Putin terrorized her, they showed her pictures of her husband in bed with another woman in order to break her spirit, and so on.
A lot of the more salacious information was later deleted from gossip websites, which makes it seem more plausible. I found this exercise in PR very interesting, as it echoed the narrative of Schacht himself—whose defense at Nuremberg rested on his insistence that he was not powerful enough to stop Hitler, and that he furthermore was in touch with the resistance.
I don’t buy the narrative of a trapped and martyred Nabiullina. She has done her job too well for it to be reality. I spent the first year of Russia’s war analyzing tension between the Kremlin and the Central Bank—the Kremlin being where the blood-crazed fascists are, and the Central Bank being where the pragmatists who don’t want to see the Russian economy destroyed are—and there’s plenty of evidence that the Central Bank had room to sabotage the Russian war machine if it had chosen to do so.
A lot of that evidence was shown to me by anonymous sources who don’t want to get snatched by the Russian secret police, but you don’t need to be speaking to terrorized economic experts on a burner phone to see just how hard Nabiullina has fought to keep the ruble afloat. Her strategy has included bold rate hikes and constant communication with the Russian public, as she knows the cost of panic. As she executes her vision, Nabiullina suffers constant attacks from conservatives and religious extremists in Russian politics and media, but she has not let that deter her.
The struggle to keep the ruble afloat is one that the Central Bank will likely lose, but not fast enough. Innocent Ukrainians continue to die, while demagogues and Putinists alike are seizing this moment in the war to call on Western governments to abandon Ukraine entirely.
But the gap between the Central Bank’s relative technocratic efficiency and the demands of the war machine is there—and can be exploited. The Russian fear of slipping into poverty is a powerful force. Millions of Russians are already there, of course, with many more joining them constantly—the zealous falsification and manipulation of data on that front belie the problem.
Even many of the older Russians who live relatively comfortable lives today retain painful memories of defaults and economic chaos in the 1990s, the same chaos that helped Putin seize power. The devaluing of the ruble is a particularly triggering scenario for them, but potential defaults even more so.
This fear finds its way into everything, from political rhetoric—as Putin and his minions regularly seek to remind Russians that they were “saved” by his administration—to Russian popular culture and beyond. It is evident in wealthier Russians’ fanatical, embarrassing love of obscene luxury. It can be both a motivating factor and a destabilizing factor. They may support the war, but economic anxiety makes their contract with the Kremlin a fragile one.
This fragility is evident in the deep suspicion most ordinary Russians exhibit toward economists, technocrats, and other people they consider unreliable. These societal fissures are deepened by the fact that Russian economic statistics are already completely unreliable.
The Kremlin boldly lies about its economic prospects both to the West and its own people, but it’s Russians who are actually more capable of recognizing the lies. They know the duplicity their government is capable of much better than most Western analysts. This knowledge creates additional opportunities for instability, because the groundwork for mistrust and rebellion has been laid by the Kremlin itself.
The Central Bank and the Kremlin are in league. But there is a paradoxical element to their relationship, wherein the Central Bank wants the Russian economy to be more transparent and to function normally, while the Kremlin is in a protracted fascist spiral that threatens these goals. Emphasizing those discrepancies, and tightening the screws on the economy, can cause the fissures in the relationship to fracture.
Conservative Russian zealots will be eager to blame Nabiullina once even falsified economic data can no longer distract the population from what’s happening, but as financial hits continue to pile up, both the Kremlin and the Central Bank lose. There are political wedges here to widen in the meantime, as ingrained mistrust of the Central Bank makes its position fragile, and fragility exists to be exploited in a time of war.
Conflicted or not, Elvira Nabiullina should not get to have her war and keep her economy.
