Russia’s bank chief calls for economic ‘perestroika,’ away from raw exports.

Source: www.nytimes.com : 2022-06-17 07:18:55 : Neil MacFarquhar

The governor of Russia’s Central Bank, credited with steering the economy and the Russian ruble through the early, turbulent months of stringent international sanctions, called on Thursday for the country to end its dependence on exporting raw materials such as oil and gas for income.

Elvira Nabiullina suggested that it was time to implement economic “perestroika,” the Russian word for restructuring, and a throwback term to the late 1980s when the last leader of the Soviet Union, Mikhail Gorbachev, applied the term to revamping the Communist system.

“It has always been believed that exports are our intrinsic value,” Ms. Nabiullina said in a speech at the St. Petersburg International Economic Forum, an annual summit. “We need to rethink and, finally, think about the fact that a significant part of production should work for the domestic market, more processing, more creation of final products.”

The forum used to attract investors from all over the world, but attendance by foreign firms is much reduced this year because of Russia’s invasion of Ukraine. President Vladimir V. Putin of Russia, who is due to address the forum on Friday, has said that Russia will be able to weather international sanctions without any significant domestic impact.

Russia exports more natural gas than any other country in the world and is second only to Saudi Arabia in selling oil. However, Europe, Russia’s biggest market, will ban most Russian oil imports by the end of the year, and plans to expand gas imports have been frozen.

Ms. Nabiullina and other economists have been less sanguine than Mr. Putin, suggesting that Russia will experience a significant economic contraction.

Tough sanctions have made weaning the Russian economy from natural resources necessary to prevent Russia from falling behind the West — particularly since Russia is now hobbled in its ability to import new technologies and doesn’t have the private investment necessary to develop them on its own.

“The task is modernization — but how?” Ms. Nabiullina said. “In order not to return to the Soviet Union, we need to look at private initiative in a different way. The deterioration of external economic conditions will remain for a long time, if not forever,” she said.

Officials have been warning for decades, since the Soviet Union was run by Leonid Brezhnev, that the country had to wean its income off hydrocarbons. But a combination of factors made certain that would never happen, including a poor investment climate, lack of rule of law and the habit of the government, including the security police, to interfere in the economy.

“To build a non-oil economy is a very complicated task, easier said than done,” said Vladimir Milov, a former deputy minister of energy and a longtime critic of Mr. Putin.

Investors in the non-oil sector lack the confidence needed to put their money long-term in Russian factories, he said, while a strong oil lobby continues to maintain that no changes are needed.

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