Russian banker attacks Moscow's policies

Herman Gref, chief executive of state-run Sberbank.

Herman Gref, chief executive of state-run Sberbank.

Published Oct 2, 2014


Moscow - The head of Russia's largest bank delivered on Thursday a blistering attack on Moscow's economic policies, warning that Russia could repeat the fate of the Soviet Union.

Speaking at an investment conference in Moscow, Herman Gref, chief executive of state-run Sberbank, pilloried a state-led model of economic development, pointing to a lack of competition and poor governance.

“Why did the Soviet Union break up?” Gref, a former liberal economy minister, told foreign and Russian investors.

“There is one key reason which determined the rest: it's mind-boggling incompetence of the Soviet leadership. They did not respect the laws of economic development,” he said at the annual “Russia Calling” investment forum.

Citing a book by the key architect of Russia's market reforms, Yegor Gaidar, “Collapse of an Empire,” Gref said Russia must learn lessons from history.

“We cannot allow the same situation,” he said, noting that the Soviet Union also faced a combination of high oil prices and “huge structural problems.”

Russians officials are mulling how to mitigate the negative effects of Russia's confrontation with the West over Ukraine which include huge downward pressure on the ruble and intensified capital flight.

Washington and Brussels have introduced several rounds of sanctions against Moscow, and Russia responded by ordering a ban on EU and US food and threatened to ban other imports.

The sanctions tit-for-tat coupled with the prosecution of billionaire Vladimir Yevtushenkov have severely undermined investor confidence and delivered a heavy blow to economy, which is on the brink of recession.

Gref appeared to question the Kremlin's policies including the ban on imports.

“I beg your pardon but we import nearly everything,”said Gref, who has been widely praised for overhauling Russia's Soviet-era lender.

He also pointed to an increasingly weakening ruble, saying that even if the national currency bounces back somewhat, consumer prices would not go down.

“We don't have enough competition. Half of our economy is monopolised,” he added.

He appeared to target the state's increasingly repressive policies and what many analysts call the state's excessive role in the economy.

“You cannot motivate people through the Gulag - like in the Soviet Union,” he said.

“People cannot make creative products when they don't understand the current economic policies and business climate.”

Gred said that “we won't fix anything before we fix the environment,” and he lamented that his efforts to establish special economic zones while he served as economy minister did not bear much fruit.

“Zones have been created but there are no incentives,” he said.

“Zones are not something encircled by a fence, not always,” he added, alluding to prison camps.

Economy Minister Alexei Ulyukayev for his part said the current combination of 8.0 percent inflation and growth of gross domestic product below 1.0 percent was a “crass and explosive situation.” - Sapa-AFP

Related Topics: