Stabilizing Russia’s Finances

Abstract

The 2000s were boom years for energy, as prices skyrocketed and oil producers reaped windfall profits. Vladimir Putin’s Russia had its fair share of excess, yet what is more remarkable is how much Russia saved. Over the course of the 2000s, over half a trillion dollars were put in in long-terms savings funds. Putin had seen the tumult of the 1991 and 1998 crises, and knew that hard times would come again. He wanted a large stock of financial firepower to deal with any contingency. He also took steps to restructure the country’s banking system. High inflation had plagued Russia since 1991, but Putin assembled a talented team of managers at the Finance Ministry and Central Bank who managed to get inflation down and keep it fairly low. Though Putin’s government is often rightly noted to include many former KGB agents and judo buddies, it is also notable the extent to which the economic ministries recruited talented—and economically orthodox—managers. By the mid-2000s, Russia had the most stable financial environment it had ever known.