Glazyev's Dirigist Plan for Sanctions Response Grabs Attention in Russia
April 26, 2014 • 12:36PM

A proposal by Academician Sergei Glazyev, adviser to President Vladimir Putin, for measures to protect the Russian economy in the face of U.S.-EU sanctions was the subject of intense discussion in Russia on Friday. Glazyev's 15-point plan goes beyond short-term protective steps, to imply an escalation of Putin's announced "de-offshorization" plans for Russian finance and the possibility of new approaches to generating credit for real economic investment.

The proposal took the form of a letter from Glazyev to the Ministry of Finance, requesting deliberation on it at the National Financial Council. According to the financial daily Vedomosti, which reported on the plan, Minister of Finance Anton Siluanov has instructed departments of his ministry to prepare responses to its points.

Several of the proposals, as reported by Vedomosti, come under the heading of "dedollarization," which a broad array of Russian officials have called for in the weeks since Washington began to impose sanctions against individual Russian officials and financial institutions. These include the transfer of Russia's own assets and dollar-denominated accounts from NATO countries to banks in neutral countries; selling off government bonds of NATO countries; limiting the foreign currency operations of Russian banks, especially targeting non-trade-related transactions (i.e., speculative ones); rapid reduction of Russian reserves held in the currencies of countries party to sanctions against Russia; a public campaign on the disadvantages of holding funds in dollar accounts, which might be subject to freezing under sanctions. In addition, Glazyev proposes to shift the ownership jurisdiction of strategic companies from offshore zones into Russia; and to switch accounts within the Belarus-Kazakstan-Russia Customs Union and in other trade relations into national currencies. He proposes currency and credit swap arrangements with China, in order to ensure financing for critical categories of trade.

The most open-ended and potentially momentous element is that Glazyev proposes that the Russian Central Bank undertake a monetary issue, targeted through the large state-owned VEB Bank, to enable Russian companies to replace their foreign loans with ruble-denominated Russian loans. In recent weeks, Russian corporations have been unable to roll over their borrowings on foreign markets. Moskovsky Komsomolets, a Moscow daily, reported that on Thursday Glazyev addressed an expanded leadership meeting of the Business Russia group, an organization of entrepreneurs particularly promoted by Putin, with a "programmatic speech" in which he elaborated on this and other potential sources of "long-term and inexpensive internal credit." In this presentation, MK reported, he said that domestic credit availability should be doubled or tripled. The proposed mechanism is one Glazyev has promoted before: Central Bank refinancing of the banking system, earmarked for lending to real-sector companies.

Glazyev, MK author Konstantin Smirnov wrote, is properly termed a "dirigist." Such people "are not against the market, but they believe it must be strictly regulated, and the state comes first." Indeed, Sergei Glazyev has campaigned for a revival of a national economy approach for twenty years. In June 2001, he convened State Duma hearings on protecting the national economy under conditions of global financial crisis, at which American economist Lyndon LaRouche was the primary foreign guest witness.

First Deputy Prime Minister Igor Shuvalov was quick to tell Itar-TASS that "what Academician Glazyev set forth in his letter is not the agenda of the Russian government." (Shuvalov himself earlier this month advised Russian companies traded on the London exchange that they should consider shifting their listings to Moscow as "a question of economic security.") But Vedomosti, in addition to reporting Siluanov's instructions to Finance Ministry staff, cited a Kremlin source who said that "Glazyev's ideas are used to test whether the liberal bloc, like Siluanov, [German] Gref, or [Alexei] Kudrin, will be able to find convincing counterarguments, so one should not overestimate Glazyev's influence, but not underestimate it, either."