EBRD’s new chief economist slams Russia reforms

EBRD’s new chief economist slams Russia reforms
Sergei Guriev: “Some political leaders don’t like people but love animals”.
By Jason Corcoran in London May 12, 2016

Sergei Guriev, the incoming chief economist of the EBRD, has dismissed Russia’s renewed push for reform and said the country will only return to “very small growth” next year.

“We had a reform agenda issued by Mr [Vladimir] Putin by decree on May 7, 2012, four years ago, and most of these reforms have not been undertaken,” Guriev, 44, told bne IntelliNews at the fringes of the EBRD Annual Meeting in London. “There is a broad agreement that Russia needs reform and Mr Putin has said that many times, but for some reason that has not happened.”

Despite his habitual candour, Guriev said he will be free to travel back to Russia without fear for his own personal security after he officially starts his new role in September.

“Mr Putin publicly said I am welcome and that I am a good economist and he has no problems with me,” Guriev told bne IntelliNews. “I guess that is as good as it gets.”

Guriev succeeds Erik Berglof, an expert on transition economies who served as the EBRD’s chief economist from 2006 to the end of last year and previously headed the Stockholm Institute of Transition Economics.

Putin on October 1 said he would welcome Guriev’s return to Russia and that the economist didn’t face any criminal proceedings. “He is a smart man and a very good expert,” the Russian leader said at a meeting of the presidential human rights body.

Guriev, a former economic adviser to Prime Minister Dmitry Medvedev’s cabinet and the author of Russia’s 2008 stillborn privatisation programme, is part of a liberal intelligentsia who have fled Russia following increased persecution from the government. Some protesters have been imprisoned while non-governmental organisations (NGOs) that get funding from abroad are being threatened with fines or possible closure unless they declare themselves foreign agents.

A former rector of the respected New Economic School (NES) in Moscow, Guriev said in 2013 that he wanted to escape pressure from a new criminal investigation of those around jailed tycoon Mikhail Khodorkovsky, once the country’s richest man before his oil group Yukos was broken up by the government. Guriev, who was questioned as a witness in the case, was targeted because he was working on an economic manifesto for Putin foe Alexei Navalny, who has been convicted on charges of embezzlement.

At the time, Guriev feared he could share the fate of witnesses in two previous investigations into Khodorkovsky who were later charged and died in prison. Khodorkovsky, who is now based in London, has been financing vote monitoring and civil society projects in Russia since he was set free in 2013 after a decade in prison, which he claims was revenge for his opposition to the Kremlin.

Guriev, who ran the NES from 2005 until fleeing to Paris, has long enjoyed a reputation as one of Russia’s top economists and something of a maverick. When Medvedev was president from 2008 to 2012, Guriev was an informal government adviser and was seen as a key figure encouraging Westerners to invest in Russia.

Guriev said his forecast for this year is negative growth for Russia, while “next year [GDP growth] will be positive but very small”.

Guriev declined to comment on the likelihood that the Russian economy could be stuck in a long-term period of zastoi, or stagnation.

Natalia Orlova, Alfa Bank’s respected chief economist, told bne IntelliNews in April that Russia has entered a period of stagnation that will last at least four years. There are many factors to blame for this stagnation, but at root is the government’s outdated economic model. It failed to respond to some very large changes that have occurred in the last few years and has in effect abandoned Adam Smith’s “invisible hand” mechanism for regulating a market.

“We don’t have an official view of what happens after 2017,” Guriev said. “Nobody is very optimistic, including the Russian government, which projects very slow growth rates even after next year.”

At an EBRD roundtable discussion on civil society at the Annual Meeting, Guriev said Russia is “not an easy place right now” for NGOs. “Some political leaders don’t like people but love animals,” said Guriev to laughter from EBRD delegates.

Guriev said the decision over whether the EBRD should renew investing in Russia “is well above my pay grade”.

The EBRD is poised to start winding down its operations in Russia if the EU in June renews its sanctions against the Kremlin over its involvement in the Ukrainian conflict, bne IntelliNews reported exclusively in April.

“Some senior figures at the bank want us to wind up,” an EBRD insider told bne IntelliNews. “There’s been some in-fighting about it because management on the ground in Moscow want to carry on. If the sanctions are renewed in June, we will have to cut down on our staff numbers in Russia.”