Putin's billionaires increasingly vocal against the economic "trap"

Russian financial authorities have created a "trap" for the economy with their restrictive monetary policy, pushing it into stagnation, several sanctioned billionaires who are among the richest on Russia's Forbes list said today.

This was reported by Reuters, stating that it was the harshest public criticism of that level since the 2024 interest rate hike.

Economic growth is expected to slow to 0,4 percent this year, from 4,9 percent in 2024, due to high interest rates, an overvalued ruble and Western sanctions, while measures proposed by the government are not expected to significantly boost growth.

Most Russian billionaires have been supporting President Vladimir Putin's war in Ukraine since 2022, despite Western sanctions, which have denied them access to property and luxury yachts in Europe and North America.

However, as the war enters its fifth year, with no end in sight, with falling profits, rising taxes, continued denial of access to Western markets and the biggest wave of nationalization since the 1990s, the previous consensus among business people on the war's goals seems to be gradually collapsing, Reuters points out.

Roman Trotsenko, a billionaire in the transportation, fertilizer and real estate sectors, compared the central bank's monetary policy to the "Volker shock", alluding to the aggressive interest rate hikes of the US Federal Reserve from 1979 to 1982 under the leadership of Paul Volker.

"It was a great experiment and no one has repeated it since, except us," he told an audience of top officials, bankers and business people at a panel on growth organized by the country's largest bank, Sberbank, as part of Russia's largest economic conference in St. Petersburg.

Russia's key interest rate is now 14,5 percent, down from a record 22 percent, but still considered too high for businesses to invest, given that inflation has slowed to 5,6 percent from around 10 percent, according to Reuters.

Trotsenko said that economic history textbooks will describe the wartime interest rate policy as “Zabotkin’s trap, which Russia mistakenly fell into,” referring to the first deputy chairman of the central bank, Alexei Zabotkin, one of the architects of the current policy.

Zabotkin, who attended the discussion, applauded Trotsenko's speech, but later told reporters that the central bank was fully aware of the difficulties facing Russian businesspeople.

Dmitry Mazepin, owner of the fertilizer manufacturer Uralkem, compared the central bank's moves aimed at cooling the economy to the efforts of hostile Western powers.

“What is the external challenge doing? Apart from, as the president said, wanting to inflict a strategic defeat on us, they simply want to slow us down. What is happening inside the country? What is the central bank doing when it says it wants to cool the economy?” Mazepin said.

The richest Russian, according to Forbes, billionaire Alexei Mordashov, owner of steelmaker Severstal, said that domestic demand for steel has fallen by 30 percent in the last three years, causing the company to reduce its investment portfolio by 24 percent, while its cash flow has become negative.

"I'm sure almost everyone in this room is seriously reconsidering their investment programs. It's clear that, with this kind of instability and volatility, we will face an even greater decline in investment and an even greater decline in GDP."

Russian billionaires have typically refrained from public comment on the war in Ukraine. Reuters reports that many have formally relinquished control of their companies and are fighting in the courts to lift Western sanctions.

German Gref, CEO of Sberbank, who drafted Putin's first economic program in the early 2000s, which led to exceptionally high growth rates for several years, told reporters after the panel that Russia's modest growth rate in current conditions is "already a miracle."