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. Last Updated: 07/27/2016

Sergei Dubinin Gentle Giant Of the Central Bank

At first view, the most striking trait of Central Bank head Sergei Dubinin is his massive physique -- a virtual clich? of the giant Russian Cossack from the Siberian steppes.


"He looks like a huge Russian guy coming from an old Russian fairy tale," said Andreas Gummich, vice president of research at Deutsche Bank in Frankfurt. "He looks like a Russian bear."


But contrary to the image, the 44-year-old Dubinin is known as a steady, somewhat plodding academic capable of traversing the political tightrope better than most of the newly departed reformers from President Boris Yeltsin's inner circle.


And if election-year prognostications are correct and a communist ascends to the presidency, Dubinin's position as an independent, four-year appointee could put his political acumen to the test -- the former professor from Moscow State University alone amid the apparatchiks of the state apparatus.


"He plays a really important role," said Pavel Teplukhin, an expert with the Russian-European Center for Economic Reform. "He's like insurance against any communist-type policy ... If things go wrong in the presidential elections, he's going to be a major stabilizer."


Stable is one term used by bankers and economists to describe the new administrator. Calm and serious are others. But most often, those who gave their views paid Dubinin the highest of compliments in a nascent, inexperienced market.


"Dubinin is a professional," said Anatoly Barkovsky, an adviser to the president of Tokobank. "In the banking business he is a relatively new person. He is more a political and economic figure. But he is learning fast."


The descriptions are in stark contrast to the often combative approach of Dubinin's predecessor.


Despised by conservative Duma members from the outset, Tatyana Paramonova did little to endear herself to the banking community, her most controversial mandate being that high volumes of cash be kept on reserve at the Central Bank.


Although the reserves requirement -- much higher than in the West -- helped rein in the wild young market's penchant for currency speculation by soaking up available cash, bankers and many Western economists claim it also starved institutions of capital that might have been wisely invested.


At the same time, the bank under Paramonova maintained extremely low charter capital requirements, allowing many small, dangerously weak institutions to stay open for business.


The next step toward stabilizing the ruble was the government's currency corridor, a move which rang the death knell not only for the glory days of interbank currency trading and several hundred of Russia's 2,500 banks, but quite possibly for Paramonova.


Twice denied confirmation as bank governor by the State Duma, or lower house of parliament, she was sacked by Yeltsin on Nov. 8.


Two weeks later, the same body gave near-unanimous approval of Dubinin for the post, and three months after that, a banking community that was outright hostile to Paramonova now appears almost supportive of her replacement.


"There is less bureaucracy at the Central Bank now," said Inna Goryacheva, department head at Zerikh bank. "Under Paramonova, there was too much fuss, too much publicity."


"We've been happy with him, although it's too early to judge him," said Barkovsky of Tokobank.


"If conflicts arise between us and the Central Bank, they are more easily resolved than before. The Central Bank's style became more business-like."


An associate professor at MGU since the 1970s, Dubinin's roots in the current administration date back to the early days of former acting prime minister Yegor Gaidar, under whom he was a deputy finance minister.


After Gaidar was replaced by Prime Minister Viktor Chernomyrdin, Dubinin moved up to the acting minister's position until his ouster following the October 1994 "Black Tuesday" ruble crisis.


Most observers view his expulsion as a knee-jerk reaction by a president in search of a scapegoat, noting that the Finance Ministry has nothing to do with managing currency exchange rates -- a job, ironically, for the Central Bank. After Dubinin's ejection, the Central Bank chairman at the time, Viktor Gerashchenko, tendered his resignation.


Dubinin rebounded in the private sector, becoming a board member of Bank Imperial and, within months, a top official with Gazprom -- his status when Deutsche Bank's Gummich met him in Frankfurt while negotiating overdue gas payments owed by Ukraine.


There, the former academic knew how to apply the pressure, according to the Western banker.


"He was quite clear and demanding with the Ukrainians," Gummich said, noting an implied threat leveled at Russia's smaller Slavic neighbor. "He said clearly, without raising his voice ... that Ukraine should pay its debt on natural gas, and that Russia would be interested in getting paid in equity in Ukraine."


Dubinin's sudden re-appearance on the government's economic stage came as no surprise to Moscow-based economists, given Russia's dearth of candidates who fit the bill -- namely, a political neutral with expertise in public finance and who enjoyed support from the banking community.


And despite his stint at Gazprom, his previous advancement to acting finance minister under Chernomyrdin and now his position heading the bank -- all of which should place him squarely in the prime minister's camp -- many observers allow Dubinin the role of a political enigma.


"Dubinin probably has his own agenda," said Zerikh's Goryacheva. "Like anybody in his post he certainly has his political affiliations, but ... nobody knows about them yet."


Judging by the State Duma's near-unanimous approval of Dubinin's nomination to bank chief, many politicians are also unsure where the banker's affiliations lie.


Once baptized with the Duma's blessings in November, Dubinin found himself setting bank policy in an economy that was finally witnessing some signs of stability; record-low monthly inflation, a relatively stable currency and predictions of growth in the coming year's gross domestic product.


There was also a $10.2 billion loan pending from the International Monetary Fund, a tidy sum of money on which the future of Russian reforms may very well rest. But with the deal apparently all but signed, Yeltsin slipped Dubinin a curveball.


Anatoly Chubais, first deputy prime minister in charge of the economy and the government's lead negotiator with the fund, quit amid condemnation from his president.


Negotiations which days earlier had been nearly complete suddenly were put on ice, and Dubinin took over as Russia's point man. After buying time to review the altered landscape, the IMF is scheduled to approve the loan next month.


"He's taken up a strong role in dealing with the IMF," said a senior Western economist close to the talks. "The agreement with the IMF was very important to the Central Bank and its ability to conduct monetary policy, and I think it's fair to say from my point of view he's got most of the reins in hand."


In addition to winning Russia vital international funding, Dubinin has moved on such issues as altering the ruble corridor, reducing mandatory reserve requirements for banks, and lowering the Central Bank's refinancing rate -- a largely symbolic gesture symbolizing the bank's support for cheaper loans to business.


If there is an area in which Dubinin may err, one economist said it could be succumbing to government pressure to buy treasury bills from the Finance Ministry -- currently the best investment in Russia, but the equivalent of funding the federal budget from the bank's hard currency reserves.


"The weak point in his potential policy may be that he will be too active on the [T-bill] securities market," said Vladimir Mau, deputy chief of Gaidar's Institute for the Economy in Transition. But he added: "I think he will not push this too actively."


Although the bank chairman's actions may lack the glitz of trade policy and the drama of reform under Chubais, in the mundane world of bank policy Dubinin's critics acknowledge his steps to be sound, considering him neither a raging bull nor an administrative puppet.


But the very narrowness of his duties at the Central Bank renders him unlikely to assume Chubais' leadership role in economic reform, experts say.


Indeed, the banker's characteristics would preclude a Chubais frame of mind -- where the latter enjoyed the thrill of political battle, observers predict Dubinin will tread carefully.


And where Chubais is an internationalist who tried to squeeze Russia into Western economic models, Dubinin is seen as a nationalist interested in shaping reforms to fit the Russian mold.


But despite a less-than-rebellious demeanor, Dubinin may yet play the dramatist in Russia's unfolding economic saga; the last of Yeltsin's appointees to hold office should a communist win the presidency in June.


"He could be compelled to resign. Not kicked out, but just compelled," the Gaidar Institute's Mau said cryptically. "And don't forget that the communists can approve another budget law, including financing or covering the budget deficit" with Central Bank credits, a move that would force Dubinin to adhere to inflationary policies.


Under the present constitution, removal of a Central Bank head by the Duma is a precarious, time-consuming affair. Appointed for four years by Yeltsin and confirmed by the previous Duma, Dubinin's removal can only be brought on by ill health, resignation, conviction of a criminal offense or a violation of a federal law applicable to the Central Bank.


Also, it remains unclear whether a communist administration would even seek to eject Dubinin, given the party's support for him during the Duma's appointment process.


Some Western economists view Dubinin's removal by the Duma as next to impossible, considering the constitutional protections of his independent role.


However, in an article published Nov. 23, the newspaper Nezavisimaya Gazeta reported overhearing Communist Party leader Zyuganov telling his followers that they would "drive [Dubinin] out" after taking control.


Teplukhin argues that it would take a new administration at least six months after the Duma convenes in September to kick the bank head out of office.


Since winning a victory in parliament, the communists have taken no action. But a cynicism persists among Russian economists.