Russian Central Bank Consolidating Control: More Visible Signs

As I had mentioned earlier, the Russian government is making a conscious effort to consolidate and centralize power. This is completely in line with the renewal of an autocratic period of Russian rule as per Russian historical norms. Putin is using the current financial crisis to consolidate power over the economy in specific ways and to consolidate the government’s control over the financial sector in particular. Fiscal independence is not as important in a controlled economy as it is in a fully open market, and so Russia is not as concerned with the drop in their own stock market, the closure of small banks or the drop in the ruble as other countries would be in similar situations (though a complete drop in the ruble would cause a public panic and become problematic, but still not on the level it would cause panic if the floor fell out of, say, the British pound).

A small news article on the closure of two smaller Russian banks, Uraikombank and Kauri bank, are the first indications of a conscious effort to follow previous historical norms for Russian consolidation of fiscal power. It is very important to note that the story includes not a reference to the banks’ lack of liquidity as a cause of collapse, but cites instead the banks’ closure by the order of the central bank for reasons including not only lack of liquidity but also a typical Russian-style “violation of regulations” without any citation of what regulations those were. In the end, it does not matter what regulations they were or if such regulations even exist. Russia closes and consolidates (their newspeak for nationalization) business enterprises, both foreign and domestic, when an autocratic government comes to power and wishes to remove power from the oligarchy. Now that it is happening openly in the banking system expect to see a sharp increase in the frequency of this specific type of closure. The global financial panic will not last forever and so Russia has a limited time to act on apparently solid grounds to establish control over its domestic financial world.

I am sorry to say that I do not have time to dig up more references to recent Russian nationalizations or cite a more complete article concerning this particular closure (Bloomberg may be a good place to farm for this) but this should be enough to get your engines turning if you’re interested. Unfortunately Yahoo! Asia is notorious for being overly brief on its news reports.

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