When sanctions made the Russian fortress he helped build less impregnable, Maxim Oreshkin came up with a signature scheme to try to break the economic siege.

Russia’s war against Ukraine was not yet a month old and its blitzkrieg was already turning into a chore. The economic backlash was also harsh, as the government struggled to avoid a default and the ruble nosedived.

On March 23, Vladimir Putin retaliated, demanding that Russia’s adversaries in Europe pay their massive bills for its natural gas in rubles.

Oreshkin, the president’s 40-year-old economic aide, was the author of the gamble to tear up contracts and overturn decades of precedent, according to officials familiar with the matter.

Since the Feb. 24 invasion, he has become a key member of Putin’s inner circle on economic policy, one of several insiders with Western financial experience now helping to guide the Kremlin’s response.

“They are now busy finding a way around the sanctions and are doing it very successfully,” said Sergei Guriev, an economist who advised the government in the early years of Putin’s rule but later fled to Paris. , where he is now Rector of Science. Po. “But all the money earned goes to finance the war.”

Damage dodged

The defenses helped the Kremlin avoid the worst of the economic damage feared when the sanctions were first imposed. Forecasters now see a contraction half as deep this year. The ruble recouped its early losses to become one of the best performers as tens of billions of dollars and euros poured in for energy and other exports.

By taking advantage of Russia’s grip on Europe’s gas supply, Oreshkin’s demand for the ruble allowed Putin to appear to be fighting the initial sanctions onslaught. This eventually forced the EU to back down as most major consumers signed the new terms which included the requirement to open special accounts with Gazprombank JSC, keeping the lender free from sanctions.

“I consider the effect of using the rubles-for-gas system to be positive,” Oreshkin told Bloomberg, declining to comment on his role in its design.

He whispered rhetorical flourishes that later find their way into presidential speeches. He coined a phrase that Putin would soon repeat over and over again, describing the seizure of Russia’s international reserves as in fact “a genuine failure” by the United States and the European Union of their obligations to Russia.

He also helped draw up plans to limit the fallout as Russian banks are cut off from the SWIFT financial messaging service and pushed back against calls from other influential insiders for more state control as the Russian economy s isolated from the world. Oreshkin and his allies once sought to get closer. links with.

Putin brought it on a recent trip to Iran, which has decades of experience dealing with Western sanctions. Asked about the Islamic republic’s ideas for overcoming limitations, Oreshkin boasted, “Ours are much better.”

A former banker for the Russian subsidiary of Societe Generale SA, he now uses his Western experience to mitigate the impact of sanctions. Oreshkin is part of a group of officials who have long tried to balance crafting investor-friendly economic policy with Putin’s growing crackdown.

The war has made this balancing act virtually impossible, with Oreshkin and his colleagues being hit with sanctions as their economic policies serve the Kremlin’s war machine.

Not “arguable”

“I can see exactly how someone among the technocrats would say, ‘Here I’m doing this really important thing on payment systems, on banking, that’s my area of ​​responsibility. I maintain stability and I will continue to do so,” said Jacob Nell, who as a Russian economist at Morgan Stanley has taken investors to meet Oreshkin before.

“It was defensible before February 24, but it’s not after,” added Nell, who is now a member of an international task force advising the United States and Europe on how to design sanctions against Russia.

Oreshkin is part of a bridging generation that straddled the end of the Soviet era and spent its teenage years during what became known in Russia as the tumultuous 1990s, a time of hardship and economic audacity.

Thirty years Putin’s junior, he was the younger of two sons in a family of Moscow scholars, growing up in a world apart from the president’s rocky beginnings in post-war Leningrad.

Cohort of technocrats

Oreshkin’s cohort of technocrats includes Bank of Russia Deputy Governor Alexey Zabotkin, 44, and Deputy Finance Minister Vladimir Kolychev, 39. to the main roles of the state.

Renouncing the private sector, they devoted themselves to building Putin’s financial fortress. The tougher Putin was on critics and rivals abroad and at home, the more indispensable they became in building resilience to support the economy when big shocks came.

During his three-year tenure at the Ministry of Finance, Oreshkin was among officials who devised a mechanism to divert hundreds of billions of dollars in revenue from oil and gas exports to a sovereign wealth fund to help weather crises. of the Kremlin as the first waves of American and European sanctions against Crimea in 2014.

However, years of sanctions aimed at protecting the economy and building up reserves were not enough to protect the economy after the invasion. The United States and its allies froze much of the $600 billion in reserves that Oreshkin’s policies had helped build. Despite its best efforts to deflect blame, Russia failed to repay its debt and defaulted for the first time in a century. The economy is not doing as badly as feared following the invasion, but it is still on course for one of the deepest recessions in decades.

Considered a political lightweight not so long ago, Oreshkin in particular has established himself as the economic right-hand man of a warring president.

“Putin always trusts our economists,” Guriev said.

While some powerful Kremlin players have pushed to reassert state control over the economy, Oreshkin has fought back, so far successfully.

strident rhetoric

“Russia will not abandon the market economy,” Oreshkin said in response to questions from Bloomberg. “On the contrary, it is going in the opposite direction. Private initiative is now particularly encouraged. This is constantly noted by the president in his speeches.

Yet he and his allies are increasingly adopting the strident rhetoric of the once fringe Russian critics of Western capitalism.

Oreshkin likened the US currency to “a drug used to make the whole world addicted”. Aleksey Moiseev, 49-year-old deputy finance minister and another VTB Capital alumnus, said the intensity of the sanctions amounted to detonating a “financial nuclear bomb”.

Rhetoric aside, the anti-crisis measures taken so far remain largely close to the playbook that relies on mainstream economics, with policymakers already dismantling capital controls used to isolate Russia after the invasion.

That may not be enough to secure their legacy.

“What they did in the first years of their time at the Treasury and the central bank has already been undone,” said Konstantin Sonin, a Moscow-born economist at the University of Chicago who has long criticized Putin’s policy. “Now their job is no different from the job of highly paid clerks in a government that is waging a criminal war.”

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