Russian Architect of Putin’s Economic Counterattack

 When sanctions helped make Russia’s fortress less impenetrable, Maxim Oreshkin came up with a signature gamble to try to break the economic siege.

Russia’s war on Ukraine was not yet a month old and its blitzkrieg was already turning into a slog. The economic blow was also harsh, as the government struggled to avoid default and the ruble declined.

On 23 March, Vladimir Putin hit back, demanding that Russia’s opponents in Europe pay their large bills for its natural gas in rubles.

According to officials familiar with the matter, Oreshkin, the president’s 40-year-old economic aide, was the author of gambling to break contracts and set a precedent for decades.

Since the February 24 invasion, he has emerged as a key member of Putin’s inner circle on economic policy, one of several insiders with Western financial experience now helping to drive the Kremlin’s response.

“They are now busy figuring out how to deal with sanctions and are doing it quite successfully,” said Sergei Guriev, an economist who advised the government in the early years of Putin’s rule. Po. “But all the money earned goes to war.”

The defenses have helped the Kremlin avoid the worst economic damage since sanctions were first imposed. Forecasters now see the contraction half deepening this year. The ruble has recovered its initial losses to become a top performer as tens of billions of dollars and euros flow in for energy and other exports.

Oreshkin’s demand for the ruble allowed Putin to fight back against early sanctions, taking advantage of Russia’s dominance over the gas supply to Europe. This eventually forced the EU to back down as most major consumers signed off on new terms, including the requirement to open special accounts with Gazprombank JSC, while keeping the lender free from sanctions.

“I consider the impact of the use of the gas plan for the ruble to be positive,” Oreshkin told Bloomberg, refusing to comment on his role in formulating it.

He has whispered rhetorical flourishes which then wind up in presidential speeches. He coined a phrase that Putin would soon repeat over and over again, describing Russia’s confiscation of international reserves, in fact, as “a genuine default” by the US and the European Union on its obligations to Russia.

He has also helped devise a plan to limit the fallout as Russia’s bank is cut off from the SWIFT financial messaging service and pushed back against calls from other influential insiders for more state control as Russia’s economy is cut off from the world. Belongs to the isolated Oreshkin and his associates once sought closer.

Putin brought them along on a recent visit to Iran, which has decades of experience in defying Western sanctions. Asked about the Islamic Republic’s ideas for overcoming borders, Oreshkin bragged, “Ours are much better.”

A former banker in the Russian unit of Societe Generale SA, he is now using his Western experience to blunt the effects of sanctions. Oreshkin is part of a cadre of officials who have long tried to tread a fine line between creating investor-friendly economic policy and increasing repression by Putin.

The war made that balance impossible, but Oreshkin and his allies were hit with sanctions, as their economic policies serve the Kremlin’s war machine.

“I can exactly see how one of the technocrats would say, ‘Here I’m doing this really important work on the payment system, on banking, that’s my area of ​​responsibility. I’m maintaining stability and I’m going to continue that. I’m going to keep,” said Jacob Nell, who as Russia’s economist at Morgan Stanley once took investors to meet with Oreshkin.

“It was defensive before February 24, but it is not after,” said Nel, who is now a member of an international working group advising the US and Europe on how to design sanctions against Russia.

Oreshkin is part of a bridge generation that stepped into the late Soviet era and spent his teenage years in Russia known as the 1990s, a period of hardship and economic adventure.

Thirty years Putin’s junior, he was the youngest of two sons in a family of Moscow academics, growing up in a world apart from the presidency’s difficult start in post-war Leningrad.

Oreshkin’s group of technocrats includes Bank of Russia deputy governor Alexei Zabotkin, 44, and deputy finance minister Vladimir Kolychev, 39. A graduate of elite Russian economic schools, he took a stint at state investment bank VTB Capital before winning appointments to European lenders. For top state roles.

Leaving the private sector, he devoted himself to building Putin’s financial fortress. As harsh as Putin was with critics and rivals abroad and at home, he became as inevitable when major setbacks to keep the economy afloat would come.

During his three-year stint in the finance ministry, Oreshkin was among officials who worked to convert hundreds of billions of dollars in revenue from oil and gas exports into a sovereign fund to help weather crises like the first waves of the Kremlin. A system was devised for this. US and European sanctions on Crimea in 2014.

However, years of sanctions—protecting the economy and building up reserves—were not enough to protect the economy after the invasion. The US and its allies froze the $600 billion in reserves that Oreshkin’s policies helped build. For all its efforts to deflect blame, Russia failed to make debt payments and defaulted for the first time in a century. The economy isn’t doing as badly in the wake of the invasion, but it is still one of the deepest recessions in decades.

Recently seen as a political lighthead, Oreshkin in particular has emerged as the economic right hand of a president at war.

“Putin still trusts our economists,” Guriev said.

As some powerful Kremlin players assert state control over the economy, Oreshkin has so far successfully fought the battle.

“Russia is not going to give up on the market economy,” Oreshkin said in response to Bloomberg’s questions. “On the contrary, it is moving in the opposite direction. Private initiative is now particularly encouraged. This is consistently noted by the President in his speeches.”

Nevertheless, he and his allies are increasingly adopting the scathing rhetoric of Russia’s once marginal critics of Western capitalism.

Oreshkin compared the US currency to “a drug used for drug addiction all over the world”. Alexei Moiseev, 49, deputy finance minister and another VTB Capital alumnus, has said the intensity of the sanctions is equivalent to the detonation of a “financial atomic bomb”.

Rhetoric aside, the anti-crisis measures taken so far are largely close to the playbook, which is based on mainstream economics, with policymakers already dismantling capital controls that have been used to seal off Russia after the invasion. is done for.

This may not be enough to secure his legacy.

“What he did in the first years of his stay in the finance ministry and the central bank has already been cancelled,” said Konstantin Sonin, a Moscow-born economist at the University of Chicago who has long been critical of policies under Putin. . “Now their job is no different than that of highly paid clerks in a government waging a criminal war.”

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