Business

AMMAN — Arab Businessmen’s Federation Chairman Hamdi Tabbaa underscored the importance of the 4th India-Arab Partnership Conference, which concluded in New Delhi recently, Tabbaaa stressed the need to deal with the challenges hindering the development of Arab economic relations with India, noting that Arab investments in India are around $125 billion while India’s investments in Arab countries do not exceed $6 billion.

Some 25 garment factories owned by Indians have been established in the Qualifying Industrial Zones in Jordan, with an investment of over $60 million, providing jobs to more than 9,000 employees.

LONDON — European firms squeezed by low interest rates are having to consider new, riskier ways to manage trillions in corporate cash as they are snubbed by banks awash in new regulation that may also spell the demise of their go-to investment funds.

In order to protect and grow their companies' money and ensure it is easily accessible to pay wages, invoices and dividends, treasurers are being forced to look at less secure assets and deal with some of them directly.

"There is a tectonic shift in the cash management landscape," said Alastair Sewell, a managing director at Fitch rating agency. "One option is to take on more risk."

Corporate treasurers have been under pressure since the financial crisis of 2007-09 when the collapse of banks such as Britain's Northern Rock and Lehman Brothers in the United States — and the ensuing panicked withdrawals from money market funds — rattled confidence about where to stash firms' cash.

Determined not to be caught short in the next crisis should banks cut off their funding, company treasurers in the United States, Britain and the eurozone have more than doubled their cash holdings since 2000 to $5.3 trillion.

But now firms find the banks don't want their money.

A side-effect of new financial regulation aimed at making banks safer by forcing them to hold more capital and low-risk assets means lenders now have to classify some large corporate depositors, traditionally more flighty than small retail customers, as high risk.

That also means banks can only invest those corporate funds in very liquid assets that restrict them from making much in the way of commission.

"They won't say no to you, they will just quote you the worst rate they can," said one London-based treasurer.

Some major banks like Commerzbank and BNY Mellon are also charging some of their customers for euro deposits, passing on the cost of a decision by the European Central Bank (ECB) in June to charge banks for overnight deposits, a rule introduced to force banks to go out and lend.

It's another consequence of the record low interest rates that make it difficult for companies to make any return from deposits.

No more money markets?

Money market funds, which provide a deposit-like facility, would normally pick up the slack from the banks but plans to regulate that sector too could ruin its appeal for treasurers.

Europe wants to impose curbs on money market funds that offer investors a fixed price, accounting for around half the 1-trillion-euro industry in the region, because regulators believe they are more prone to investor runs.

Under proposals being considered by the European Parliament, corporate treasurers will no longer be able to buy into so-called constant net asset value (CNAV) funds unless the fund invests most of its assets in lower-yielding government bonds.

If the CNAV proposals are accepted, treasurers could switch to money market funds that offer variable returns but that would require them to track numerous tiny gains and losses and pay tax on any surplus.

Alternatively they may be forced to go back to the banks, negotiating terms for their cash deposits with lenders that have sufficiently strong credit ratings to be able to take them on.

"If the CNAVs are abolished then what we will see is greater concentration of cash with national champion banks and that is not a good thing for systemic risk or for practical operation of liquidity management for companies," said Richard Raeburn, chairman of the European Association of Corporate Treasurers.

From depo to repo to...

Already major companies are getting inventive with their cash. Rather than haggling over deposits, many are striking repurchase agreements — also known as repos — with banks.

From a trickle that started during the financial crisis, there is now a flood of companies switching from "depo to repo" and lending banks short-term money in return for collateral: International clearing house Clearstream has seen a 200 per cent increase in demand for this service this year.

For a large company which already manages foreign exchange exposures and short-term investments, setting up a repo desk could just mean an extra computer screen but for a smaller firm used to simply handing over cash to a bank or money market fund it would be a major investment and change of strategy.

"Some corporate treasurers are going into repos that's great for large companies, a serious alternative. But what about small- and medium-sized enterprises and charities who don't have the necessary technical ability?" said Raeburn.

Other treasurers are depositing money with banks in Asia and the Middle East and are considering investing their excess cash in higher yielding, and riskier, assets such as company bonds.

"We have been... actively considering alternative asset classes," said Stephen Percival, group financial controller and treasurer at British insurer Standard Life. "We now deal with a far broader geographical range of banks." 

Anticipating more money on the move, particularly if CNAVs are restricted, some asset managers are creating new products for investors, including funds that are not rated by the rating agencies and funds that invest in riskier assets to ensure a higher rate of return.

"Money funds are the safe harbour," said Tony Carfang, partner at consultancy Treasury Strategies. "If that goes away you are cutting a lot of treasurers loose, a lot of money loose."

LONDON – Brent crude oil plunged as much as $6.50 a barrel on Thursday, and US crude fell by nearly as much, posting the steepest one-day falls since 2011, after  Organisation of the Petroleum Exporting Countries (OPEC) decided against cutting output despite a huge oversupply in world markets.

Asked whether the oil producer group had decided not to reduce production, Saudi Arabian Oil Minister Ali Al Naimi told reporters: “That is right.”

Oil prices have fallen by more than a third since June as increasing production in North America from shale oil has overwhelmed demand at a time of sluggish global economic growth.

Ministers from OPEC had been discussing at their meeting in Vienna whether to agree a production cut in an attempt to rebalance the global oil market.

Crude prices have been falling all week as traders and analysts scaled back expectations of an OPEC production cut, but the sharp dive after Thursday’s meeting showed the decision was not fully priced in.

Benchmark Brent futures settled at $72.58 a barrel, down $5.17, after hitting a four-year low of $71.25 earlier in the session. The contract was on track for its biggest monthly fall since 2008.

US crude was last down $4.64 at $69.05 a barrel. Prices fell rapidly in early US trade, before stabilising as market activity dropped off towards midday, with many traders away for the US Thanksgiving holiday.

At its lowest point on Thursday, US crude traded at $67.75, nearly $6.00 down on the day, its weakest since May 2010.

The cartel, whose largest producer and exporter is Saudi Arabia, will meet again in June next year, said an OPEC delegate.

Tariq Zahir, analyst at Tyche Capital Advisors in New York, said the slide in US crude could continue below $65 a barrel in coming weeks, a factor that may start to challenge the economics of North American shale oil production.

“I really think we will start getting into a price war,” Zahir said. “I think you would be a little crazy to try to pick a bottom here. I expect to see a bounce but any bounce will be sold into.”

Oil analysts said the OPEC decision left the oil market vulnerable to much bigger falls as abundant supply of high quality; light crude oil floods world markets, much of it from shale oil in North America.

“In the short term, given market skepticism that recent price levels are low enough to substantially slow US output growth, we expect price levels to drop below $70/bbl for Brent and even lower for WTI [US crude],” Barclays analysts said in a note.

VIENNA — Organisation of Petroleum Exporting Countries (OPEC) Gulf oil producers will not propose an output cut on Thursday, reducing the likelihood of joint action by OPEC to prop up prices that have sunk by a third since June and raising the prospect of a global oil price war.

"The GCC reached a consensus," Saudi Arabian Oil Minister Ali Al Naimi told reporters, referring to the Gulf Cooperation Council which includes Saudi Arabia, Kuwait, Qatar and the United Arab Emirates (UAE). "We are very confident that OPEC will have a unified position."

"The power of convincing will prevail tomorrow... I am confident that OPEC is capable of taking a very unified position," Naimi said.

A Gulf OPEC delegate told Reuters the GCC had reached a consensus not to cut oil output. Three OPEC delegates separately told Reuters they believed OPEC was unlikely to cut output when the 12-member organisation meets on Thursday.

The OPEC meeting will be one of its most crucial in recent years, with oil having tumbled to below $78 a barrel due to the US shale boom and slower economic growth in China and Europe.

Cutting output unilaterally would effectively mean for OPEC, which accounts for a third of global oil output, a further loss of market share to North American shale oil producers.

If OPEC decided against cutting and rolled over existing output levels on Thursday, that would effectively mean a price war that the Saudis and other Gulf producers could withstand due to their large foreign-exchange reserves. Other members, such as Venezuela or Iran, would find it much more difficult.

Brent crude was trading down 73 cents at $77.60 a barrel at 1919 GMT.

Naimi said earlier on Wednesday he expected the oil market "to stabilise itself eventually", after talks with non-OPEC member Russia on Tuesday yielded no pledge from Moscow to tackle a global oil glut jointly.

The UAE sided with Naimi, saying oil prices would soon stabilise, while ramping up pressure on non-OPEC nations.

"This is not a crisis that requires us to panic... we have seen [prices] way lower," UAE Oil Minister Suhail Bin Mohammed Al Mazroui told Reuters. "The oversupply came from the evolution of the unconventional oil production... I think everyone needs to play a role in balancing the market, not OPEC unilaterally." 

Iranian Oil Minister Bijan Zangeneh said some OPEC members, although not Iran, were now gearing up for a battle over market share.

"Some OPEC members believe that this is the time where we need to defend market share ... All the experts in the market believe we have oversupply in the market and next year we will have more oversupply," he added.

The group could opt to roll over output levels but stress the importance of better compliance, while also agreeing to hold an extraordinary meeting if prices keep falling, several OPEC watchers have suggested.

Price war

Among OPEC members, Venezuela and Iraq have called for output cuts. OPEC's traditional price hawk Iran said on Wednesday its views were now close to those of Saudi Arabia.

Zangeneh said there was unity inside OPEC to "monitor the market carefully" but made no mention of a cut.

"The onslaught of North American shale oil has drastically undermined OPEC's position and reduced its market share," said Gary Ross, chief executive of PIRA Energy Group.

Russia, which produces 10.5 million barrels per day (bpd) or 11 per cent of global oil, came to Tuesday's meeting amid hints it might agree to cut output as it suffers from oil's price fall and Western sanctions over Moscow's actions in Ukraine.

But as that meeting with Naimi and officials from Venezuela and non-OPEC member Mexico ended, Russia's most influential oil official, state firm Rosneft's head Igor Sechin, emerged with a surprise message — Russia will not reduce output even if oil falls to $60 per barrel.

Sechin said he expected low oil prices to do more damage to producing nations with higher costs, in a clear reference to the US shale boom. On Wednesday, Russian Energy Minister Alexander Novak said he expected the country's output to be flat next year.

Many at OPEC were surprised by Sechin's suggestion that Russia — in desperate need of oil prices above $100 per barrel to balance its budget — was ready for a price war.

"Gulf states are less bothered about a price drop compared to other OPEC members," an OPEC source close to Gulf thinking said.

OPEC publications have shown that global supply will exceed demand by more than 1 million bpd in the first half of next year.

While the statistics speak in favour of a cut, the buildup to the OPEC meeting has seen one of the most heated debates in years about the next policy step for the group.

"The idea of unleashing a price war against US shale oil seems strange to me. I doubt you can win this battle as most US oil producers are hedging a lot of their output," said a top oil executive visiting Vienna for talks with OPEC ministers.

AMMAN — The implementation rate of the JD55 million Aqaba liquefied gas terminal is around 65 per cent, Aqaba Development Corporation Chief Executive Officer  Ghassan Ghanem said Wednesday, noting  that the terminal will enable Jordan to diversify energy sources in terms of type and geographical destination. 

KUWAIT CITY — Gulf labour ministers Tuesday agreed on minimum terms in the contracts of domestic staff to improve the widely criticised working conditions of over 2.4 million foreign maids, an official said.  

The move comes as labour ministers of the six-nation Gulf Cooperation Council (GCC), home to 23 million foreigners, mostly unskilled workers, are to meet with their Asian counterparts in Kuwait City this week to discuss the conditions of foreign labour in the oil-rich region.

The new contract entitles domestic workers to a weekly day off, annual leave and the right to live outside their employer's house, the director general of Kuwait's Public Manpower Authority, Jamal Al Dossari, told AFP.

It also limits the working day to eight hours.

The GCC, comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, has repeatedly come under strong criticism by international rights groups for alleged maltreatment of foreign workers, particularly domestic helpers.

"The contract has been approved by the ministers, though some countries said they have laws that are better for workers. The ministers agreed that the contract should be the minimum granted to workers," Dossari said.

Under the contract, domestic helpers are also entitled to end of service indemnity and overtime pay for extra work for a maximum of two hours daily, in addition to banning employers from confiscating the workers' passports.

Ninety international rights and labour groups called in a joint statement Sunday for urgent action to protect migrant workers, especially maids in the Gulf.

The statement charged that millions of Asians and Africans are facing abuses including unpaid wages, confiscation of passports, physical violence and forced labour.

GCC countries have also come under fire for the "kafala" system of sponsorship which restricts most workers from moving to a new job before their contracts end unless their employers agree, trapping many workers.

Dossari said that GCC labour ministers and their counterparts from 12 Asian countries at their meeting on Wednesday-Thursday will discuss "ways to bridge the gap between the two groups and resolve problems facing workers".

India, the Philippines, Sri Lanka and Pakistan, which are the main sources of workers in the Gulf, are among the countries taking part.

WASHINGTON — The US economy grew at a much faster pace than initially thought in the third quarter, pointing to strengthening fundamentals that should help it weather slowing global demand.

The commerce department on Tuesday raised its estimate of gross domestic product (GDP) growth to a 3.9 per cent annual pace from the 3.5 per cent rate reported last month, reflecting upward revisions to business and consumer spending, as well as to inventories.

The rise in output followed a 4.6 per cent advance in the prior three months to mark the two strongest back-to-back quarters since the second half of 2003. It underscored the economy’s resilience against a backdrop of a Japanese recession, an anemic eurozone and a slowing China.

“This report will go some way in providing further confirmation about the sustainability of the current economic recovery,” said Millan Mulraine, deputy chief economist at TD Securities in New York.

Economists had expected growth would be trimmed to a 3.3 per cent pace. When measured from the income side, the economy grew at its fastest pace since the first quarter of 2012.

But the otherwise upbeat picture was marred somewhat by other data showing consumer confidence sliding to a five-month low and a further moderation in house price gains.

The ebb in consumer confidence in November was surprising given falling gasoline prices and a firming jobs market.

“Economic growth is strong and getting stronger by the day. The consumer gets it, even if they aren’t yet saying it,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

The third quarter was the fourth out of the past five that the economy has expanded above a 3.5 per cent pace, well above the level economists consider to be trend.

Some of the momentum appears to have carried over into the final three months of the year, with data from manufacturing to employment and retail sales suggesting continued strength.

But with inventories rising more than previously estimated in the third quarter, economists expect the pace of restocking to slow, holding growth below a 3 per cent pace in the fourth quarter.

Strong fundamentals

Highlighting the economy’s strong fundamentals, growth in domestic demand was raised to a 3.2 per cent pace from the previously reported 2.7 per cent rate.

“This is vindication for the Federal Reserve that they downplayed concerns overseas and it’s appropriate to speak about rate hikes next year,” said Christopher Low, chief economist at FTN Financial in New York.

The US central bank has kept benchmark borrowing costs near zero since December 2008, but is expected to start raising them around the middle of next year.

Consumer spending, which accounts for more than two-thirds of US economic activity, was revised up to a 2.2 per cent pace in the third quarter from the previously reported 1.8 per cent rate.

Business spending on equipment was raised to a 10.7 per cent rate from a 7.2 per cent. While exports grew, the pace was less brisk than previously reported, leaving trade contributing only 0.78 percentage point to GDP growth instead of 1.32 percentage points.

Growth in wages and salaries was revised lower for both the second and third quarters. Economists said that brought the GDP-based wages and salaries measures into line with earnings figures from the government’s survey of non-farm employers.

“This should ease concerns that the Federal Reserve was falling behind the curve due to mismeasured wage inflation data,” said Michael Feroli, an economist at JPMorgan in New York. 

AMMAN — Finance Minister  Umayya Toukan on Tuesday discussed with Japanese Ambassador to Jordan Shunichi Sakurai means to enhance economic and investment cooperation between the two countries.

The two sides also discussed Japan’s grants to support Jordan’s economic reform programme.

During the meeting, Toukan briefed the envoy about the financial burdens on the state budget resulting from the large number of Syrian refugees and the disruption in Egyptian gas supplies to Jordan in addition to the turbulent surroundings and their impact on investment flow to the Kingdom.

VIENNA — Impromptu talks between Saudi Arabia, fellow Organisation of Petroleum Exporting Countries (OPEC) member Venezuela and oil powers Russia and Mexico yielded no agreement on Tuesday on how to address a growing oil glut, ending without any plan to cut output despite a collapse in prices.

In a day of shuttle diplomacy before OPEC’s output meeting in Vienna on Thursday, energy officials from non-members Russia and Mexico rushed to the Austrian capital to push OPEC kingpin Saudi Arabia on the 30 per cent price fall since June.

Saudi Arabia has kept the market guessing about its response to crude’s fall amid rapidly rising US shale output, but Tuesday’s talks had led to speculation in some quarters that Riyadh might back a coordinated cut involving non-OPEC members.

Venezuelan Foreign Minister Rafael Ramirez told reporters after the talks that while all sides agreed current prices were “not good” for producing countries, no coordinated output cuts were arranged on Tuesday.

“We discussed the situation in the market, we shared our points of view, we need to keep in contact and we agreed to meet again in three months,” Ramirez, who until recently was oil minister and president of state oil company PDVSA, said.

Venezuela, a noted price hawk, would try for an output agreement within OPEC on Thursday instead, he added.

Oil prices turned lower after the talks, with international benchmark Brent falling more than $1 a barrel.

Igor Sechin, the head of Russian state oil company Rosneft  and a close ally of President Vladimir Putin, arrived in Vienna on Tuesday amid hints that Moscow could cut output or exports if the producer group did the same. Russian Energy Minister Alexander Novak also attended the four-country meeting.

“I’d like to highlight that current oil prices are not critical for us. We can postpone some capital-intensive projects,” Sechin told the meeting, according to a Rosneft statement.

“What is going to happen of course is that it [low prices] will have an impact on the global oil supply,” he said, apparently referring to a possible longer-term drop in output in countries where oil production is more expensive, including some projects in the United States.

Mexican Energy Minister Pedro Joaquin Coldwell left the meeting before the other participants, without giving a statement.

Eyes turn to Thursday 

Oil market watchers are divided on the outcome of OPEC’s Thursday meeting. Predictions range from a large production cut to revive prices, to a small reduction, or none at all.

Current prices are far below what most OPEC members and rival producers such as Russia need to balance their budgets, but the group has struggled to adapt to growing supplies from the US shale boom.

Some analysts say an OPEC cut of as much as 1.5 million barrels per day (bpd) is needed to support oil prices and avoid increasing a supply glut in the first half of 2015.

Algerian Energy Minister Youcef Yousfi told the official APS news agency on Tuesday that OPEC would seek a “consensual step” to try to bring stability to the oil market, without giving further details.

Diplomatic and market sources say Saudi officials told briefings in recent months that the kingdom, with its large currency reserves, was prepared to withstand oil prices as low as $70 — $80 per barrel for up to a year.

Saudi Oil Minister Ali Al Naimi said earlier this month that Riyadh’s desire for stable markets had not changed but gave no clue about his potential response.

Oversupply

In Vienna on Monday and Tuesday, Naimi brushed off reporters’ questions about oil prices and surplus supplies.  “This is not the first time the market is oversupplied,” he said.

Naimi did not speak to reporters after Tuesday’s meeting.

Russia’s Kommersant newspaper cited sources on Monday as saying Russia might suggest cutting its oil production by around 300,000 bpd from next year and that Moscow expected OPEC to limit its output by another 1.4 million bpd.

Moscow’s relations with OPEC were soured by the country’s pledge to cut output in tandem with the group in the early 2000s. Russia failed to follow through, and raised exports instead.

Iranian news agency Shana said Putin and Iranian President Hassan Rouhani spoke by telephone on Monday evening and agreed “on necessary cooperation in favour of oil markets”.

The agency did not say where it acquired the information. On Monday, the Kremlin said the presidents discussed Iranian nuclear talks and bilateral issues and made no mention of oil.

On Monday, Iran and six world powers agreed to yet another extension in the talks aimed at resolving a 12-year-old dispute over Tehran’s nuclear programme until June 30, 2015.

That makes any quick revival in Iran’s oil exports very unlikely and removes a potential layer of complication to this week’s OPEC meeting. 

MOSCOW — Lower oil prices and Western financial sanctions imposed over the Ukraine crisis will cost Russia around $130-140 billion a year — equivalent to around 7 per cent of its economy — Finance Minister Anton Siluanov said on Monday.

His comments are the latest acknowledgement by Russian policy makers that sanctions restricting borrowing abroad by major Russian companies are imposing heavy economic costs. But in Siluanov’s view, the fall in oil prices is the bigger worry.

“We’re losing around $40 billion a year because of geopolitical sanctions, and about $90 billion to $100 billion from oil prices falling by 30 per cent,” he told a news conference.

“The main issue that affects the budget and economy and financial system, this is the price of oil and the fall in monetary flows from the sale of energy resources,” the minister added.

Official forecasts suggest Russia’s gross domestic product is likely to be around $1.9-2 trillion this year, at average exchange rates.

Siluanov’s estimate of the cost of lower oil prices is in line with analysts’ rule of thumb that each $1 fall in the oil price lops around $3 billion off export earnings. The oil price has slumped from nearly $115 per barrel in June to around $80 now.

Oil and gas account for around two-thirds of Russia’s exports, making the balance of payments highly vulnerable to oil price falls.

Natalia Orlova, chief economist at Alfa Bank, said the $90-100 billion estimate did not take into account the effect of the weakness of the ruble, partly caused by the fall in the oil price, which would help to compensate the loss by boosting exports and curtailing imports.

The ruble has lost 25 per cent of its value against the dollar since June, and Orlova indicated that the net impact of lower oil prices on the economy would be around $40 billion.

But when it comes to the cost of sanctions, Siluanov’s estimate of $40 billion may be conservative, based on the direct cost to companies unable to borrow abroad rather than the overall impact on investor behaviour.

Other analysts have arrived at gloomier estimates, taking into account the indirect cost of sanctions and overall East-West tensions linked to Ukraine.

In its latest monetary strategy, the central bank forecast that net capital outflow this year would be $128 billion, more than double the $61 billion seen in 2013, as a result of “the events in Ukraine and the introduction of sanctions”.

Last week, influential former finance minister Alexei Kudrin said the impact of “formal and informal” sanctions on the ruble — and by implication the wider economy — was comparable to the impact of lower oil prices, and that foreign investor confidence would take 7 to 10 years to recover. 

Separately, President Vladimir Putin has allowed the central bank to administer strong medicine, sharply raising interest rates even as it freed the ruble to float.

Such tough measures may well help push the country deeper into recession next year, but have so far staved off financial panic, runaway inflation or a currency meltdown like the one that helped catapult Putin into power in the 1990s.

Those who follow the central bank say the hawkish moves are a result of Putin, known for closely managing Russia’s machinery of power, giving the bank’s technocrats free rein.

“There is ongoing criticism of the central bank and of the whole government being Putin’s lap dog,” said a high-ranked government source. “But all things considered, the central bank is now much more autonomous than it is broadly perceived.”

The high interest rates will hurt. The European Bank for Reconstruction and Development says recession is certain, predicting 0.2 per cent contraction for the full year of 2015.

Politicians have grumbled. Economy Minister Alexei Ulyukayev sent a letter to the Kremlin in the summer urging greater “cooperation” between the bank and the government, viewed as a plea for looser policy.

“There is a tension between the government and the central bank as regards growth. The effect of these stabilisation policies is going to be to deepen the recession,” said Christopher Granville, managing director of London-based consultancy Trusted Sources.

Putin himself has complained about high borrowing costs. But so far, he seems to trust the hawkish instincts at the bank.

“What the central bank is doing is in line with what the leadership wants, in a strategic way,” said Granville. “Stability is the absolute top priority, rather than avoiding negative growth at all costs.”

Still, there is always a chance that Putin can change his approach. Remarks he made on Tuesday hinted as much. Speaking to Siluanov, he called for “teamwork between the central bank and the government”.

Obsession 

Exchange rates are an obsession for Russians since the 1990s, when hyperinflation after the fall of the Soviet Union wiped out the financial system, destroyed savings and brought the economy to its knees.

A second currency collapse and default in 1998 propelled Putin into power the following year, and a stable ruble has been one of the most prized achievements of his rule ever since.

Putin himself makes much of the central bank’s independence.

“We — from the executive power level — do not meddle in the policy of the central bank,” he said this month when meeting International Monetary Fund (IMF) head Christine Lagarde. “The central bank, in accordance with the law, conducts an independent policy. But of course we look carefully at what is happening.”

In an e-mailed comment, the bank said its independence, “one of the fundamental principles in understanding of monetary policy”, was enshrined in the constitution.

Some of Putin’s critics say he keeps out of monetary policy because he feels insecure about an area outside his expertise.

“The central bank of Russia is the most independent institution in modern Russia,” said Sergei Aleksashenko, a former deputy central bank governor and critic of the president.

“That originates from Mr Putin’s inability to understand how monetary authorities operate. He understands the importance and influence of the central bank but is afraid to influence it in a strong manner,” he added.

Geeks in glasses 

Unlike at some ministries and top companies, the bank’s management does not include any of Putin’s powerful old friends.

“It’s just a bunch of glasses-wearing geeks; you can argue more or less competent, but geeks,” said the high-ranked government source.

Putin has put his trust in the bank’s governor Elvira Nabiullina, 51, at the bank’s helm for 17 months after serving Putin for years as economic adviser and Cabinet minister.

“She has turned out to be stronger than expected as the central bank governor,” said Anders Aslund, senior fellow at the Peterson Institute for International Economics in Washington.

Nabiullina, in turn, has put monetary policy in the hands of Ksenia Yudayeva, a US trained economist regarded as one of the brightest in the country.

The ruble stability of the Putin years has been underwritten by vast currency reserves earned from selling oil and gas. But when oil prices fell and sanctions were imposed over the Ukraine crisis this year, even Russia’s $420 billion war chest showed its limits.

After spending $30 billion supporting the currency in a single month, Nabiullina brought forward long-awaited plans to float the ruble, abandoning efforts to keep the exchange rate within an official band.

On the morning of November 10, when it was announced, even the heads of the bank’s departments were taken by surprise, sources said, emphasising Nabiullina’s ability to prevent leaks.

Before she cut the ruble loose, Nabiullina sharply hiked interest rates to ensure that savers would hold rubles and prevent a panicked flight, like the one that hit in 1998.

The ruble is still some 29 per cent down against the dollar, but has rallied in recent days. Earlier this week, Nabiullina stoically defended the decision to float the currency.

“It is absolutely impossible to control the exchange rate... in the current economic conditions that the Russian economy is now in, by keeping its dependency on the price of oil,” she told lawmakers in parliament.