1 00:00:11,039 --> 00:00:15,480 Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast. 2 00:00:15,560 --> 00:00:20,200 Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. So, Tracy, our 3 00:00:20,320 --> 00:00:24,560 Speaker 1: last episode was of course with a Saltan postar, and 4 00:00:25,000 --> 00:00:29,040 Speaker 1: we talked quite a bit about the sanctions, the sort 5 00:00:29,040 --> 00:00:32,680 Speaker 1: of the economic pressure that the US and Europe are 6 00:00:32,680 --> 00:00:36,680 Speaker 1: putting on Russia over the war. However, it really seems 7 00:00:36,720 --> 00:00:39,760 Speaker 1: like there's a lot more to dive into with respect 8 00:00:39,760 --> 00:00:43,360 Speaker 1: to the mechanics and power of the sanctions themselves. Oh 9 00:00:43,400 --> 00:00:47,120 Speaker 1: my gosh, I'm getting I'm getting flashbacks to doing international 10 00:00:47,159 --> 00:00:51,159 Speaker 1: relations stuff at university. But yes, there's a lot to 11 00:00:51,280 --> 00:00:54,920 Speaker 1: do and say when it comes to sanctions, And of course, 12 00:00:55,240 --> 00:00:59,240 Speaker 1: the the overarching question has always been do they actually 13 00:00:59,360 --> 00:01:01,840 Speaker 1: make much of a difference. And on the one hand, 14 00:01:01,880 --> 00:01:05,160 Speaker 1: what we've seen in the past, um I guess week 15 00:01:05,400 --> 00:01:08,759 Speaker 1: or so is that they can be very dramatic and clearly, 16 00:01:09,319 --> 00:01:11,400 Speaker 1: you know, in the space of a few days, the 17 00:01:11,480 --> 00:01:14,680 Speaker 1: US and its allies has basically created a financial crisis 18 00:01:14,840 --> 00:01:17,720 Speaker 1: in Russia. But on the other hand, Russia is still 19 00:01:17,800 --> 00:01:21,440 Speaker 1: invading Ukraine, and there's the question of what happens next 20 00:01:21,640 --> 00:01:25,560 Speaker 1: now that you've ratcheted up this kind of financial pressure, right, 21 00:01:25,800 --> 00:01:29,000 Speaker 1: And there's the fact that even with the sanctions, Russia 22 00:01:29,200 --> 00:01:34,119 Speaker 1: is getting tons of cash every single day, largely from 23 00:01:34,120 --> 00:01:38,080 Speaker 1: a Germany and other Central European players who are deeply 24 00:01:38,120 --> 00:01:42,040 Speaker 1: reliant on Russian energy, in particular natural gas, but also 25 00:01:42,160 --> 00:01:45,959 Speaker 1: call which of course raises the question of ken European 26 00:01:45,959 --> 00:01:49,960 Speaker 1: countries can the U S impose effective sanctions that accomplish 27 00:01:50,040 --> 00:01:55,080 Speaker 1: something against Russia when at the same time particular Europe 28 00:01:55,160 --> 00:01:59,920 Speaker 1: is so dependent on Russian exports. Absolutely, I think having 29 00:02:00,040 --> 00:02:04,840 Speaker 1: a big commodities exporter involved here obviously complicates everything, especially 30 00:02:04,880 --> 00:02:07,280 Speaker 1: at a time when people are worried about inflation. But 31 00:02:07,360 --> 00:02:09,440 Speaker 1: the other thing I will say, and I think I 32 00:02:09,480 --> 00:02:12,079 Speaker 1: mentioned this on the episode with Sultan, but the other 33 00:02:12,160 --> 00:02:16,320 Speaker 1: interesting thing here is people have been reacting preemptively to 34 00:02:16,919 --> 00:02:23,520 Speaker 1: the threat of sanctions, so sort of voluntarily self sanctioning themselves. 35 00:02:23,520 --> 00:02:27,440 Speaker 1: And in fact, on on the day after the invasion 36 00:02:27,840 --> 00:02:31,400 Speaker 1: officially began, we saw a lot of people in the 37 00:02:31,440 --> 00:02:35,519 Speaker 1: market just step away from Russian assets altogether simply because 38 00:02:35,560 --> 00:02:38,440 Speaker 1: they didn't know what was and wasn't going to be impacted. 39 00:02:38,480 --> 00:02:41,160 Speaker 1: And to some extent that's continued today. So yes, we 40 00:02:41,200 --> 00:02:45,800 Speaker 1: still have Europe in particular Germany importing a lot of energy. 41 00:02:45,840 --> 00:02:48,640 Speaker 1: But we've seen some other players, you know, some commodities 42 00:02:48,639 --> 00:02:54,520 Speaker 1: traders in Singapore for instance, voluntarily step away from the market. Yeah. Absolutely. 43 00:02:54,600 --> 00:02:57,120 Speaker 1: And then there's another element which is also sort of 44 00:02:57,200 --> 00:03:01,799 Speaker 1: volunteer wish is just not necessarily fear sanctions, but companies 45 00:03:01,840 --> 00:03:03,960 Speaker 1: just deciding, you know what, we're going to wash our 46 00:03:04,000 --> 00:03:07,560 Speaker 1: hands of anything to do with Russia. And yeah, it's 47 00:03:07,600 --> 00:03:12,160 Speaker 1: pretty striking, this sort of like domino or cascading effect 48 00:03:12,200 --> 00:03:15,239 Speaker 1: of companies saying we just don't want to have any involvement, 49 00:03:15,520 --> 00:03:17,959 Speaker 1: we want to completely walk away. You know, I don't 50 00:03:18,000 --> 00:03:21,080 Speaker 1: think the Russian economy has boomed in recent years, so 51 00:03:21,120 --> 00:03:23,639 Speaker 1: it's not as though, you know, perhaps this is not 52 00:03:23,760 --> 00:03:25,960 Speaker 1: a huge source of revenue and profits for a lot 53 00:03:25,960 --> 00:03:28,520 Speaker 1: of these companies. But it is really striking to see 54 00:03:28,520 --> 00:03:32,720 Speaker 1: so many corporate interests abandoning the Russian economy right now, 55 00:03:32,960 --> 00:03:38,480 Speaker 1: even apart from like formal sanctions related activity. Absolutely, so 56 00:03:38,520 --> 00:03:41,400 Speaker 1: many different threads to pull here, that's key. And as 57 00:03:41,440 --> 00:03:45,040 Speaker 1: long as uh, the US and the rest of the 58 00:03:45,080 --> 00:03:47,440 Speaker 1: rest of NATO does not want to get involved directly 59 00:03:47,600 --> 00:03:52,119 Speaker 1: militarily for obvious reasons, then of course sanctions and other 60 00:03:52,880 --> 00:03:56,840 Speaker 1: related things become the primary means of putting pressure on Russia, 61 00:03:57,200 --> 00:04:00,600 Speaker 1: So we have to dive into the sanctions, how they work, 62 00:04:00,640 --> 00:04:03,760 Speaker 1: and what they accomplish. Further, we're going to be speaking 63 00:04:03,840 --> 00:04:07,240 Speaker 1: with a sanctions researcher a lot of background in this area. 64 00:04:07,280 --> 00:04:10,920 Speaker 1: We're gonna be speaking to Eduardo se Eduardo, thank you 65 00:04:11,000 --> 00:04:13,040 Speaker 1: so much for joining us, Thank you so much for 66 00:04:13,080 --> 00:04:18,839 Speaker 1: having So why don't we start off big picture? You know, what, 67 00:04:19,080 --> 00:04:21,640 Speaker 1: in your view are the key elements. There have been 68 00:04:21,720 --> 00:04:24,200 Speaker 1: tons of announcements really over the last week. What are 69 00:04:24,240 --> 00:04:26,800 Speaker 1: the key most important things in your view that have 70 00:04:26,800 --> 00:04:29,200 Speaker 1: been announced so far. I'd say there are a few 71 00:04:29,240 --> 00:04:31,240 Speaker 1: of them. I think the big one to start is 72 00:04:31,600 --> 00:04:35,400 Speaker 1: the action against the Russian Central Bank that was initially 73 00:04:35,839 --> 00:04:39,520 Speaker 1: discussed as kind of a final escalatory move, and the 74 00:04:39,520 --> 00:04:42,000 Speaker 1: fact that it came so early in the escalation is 75 00:04:42,040 --> 00:04:44,800 Speaker 1: a sign of how serious governments on both sides of 76 00:04:44,839 --> 00:04:47,880 Speaker 1: the Atlantic were about sanctioning Russia. But I think the 77 00:04:47,920 --> 00:04:51,120 Speaker 1: other big ones, the other biggest one, i'd say, are 78 00:04:51,640 --> 00:04:54,680 Speaker 1: the banking sanctions. Those are the ones that have the 79 00:04:54,760 --> 00:04:59,320 Speaker 1: most defeat immediate effect, and they have been quite aggressive, 80 00:04:59,360 --> 00:05:02,400 Speaker 1: and there's still room for escalation there, but the spur 81 00:05:02,480 --> 00:05:05,680 Speaker 1: Bank can VTB where the two biggest targets there, and 82 00:05:05,720 --> 00:05:09,040 Speaker 1: they were the kind of most extreme type of especially 83 00:05:09,040 --> 00:05:11,440 Speaker 1: in the VTP side, the most extreme type of sanction 84 00:05:11,720 --> 00:05:14,560 Speaker 1: that the United States can impose. I'd say there are 85 00:05:14,800 --> 00:05:18,120 Speaker 1: other ones that are very notable, but their effect is 86 00:05:18,160 --> 00:05:21,719 Speaker 1: in kind of the overnight panic that we're seeing, so 87 00:05:21,760 --> 00:05:24,080 Speaker 1: they're not the kind of em causing ones. But I 88 00:05:24,120 --> 00:05:27,800 Speaker 1: think there's other notable steps which are remarkable in terms 89 00:05:27,839 --> 00:05:30,560 Speaker 1: of how the United States thinks about sanctions. So, for example, 90 00:05:30,839 --> 00:05:34,599 Speaker 1: things like the United States is currently leading this global 91 00:05:34,800 --> 00:05:39,240 Speaker 1: export control initiative basically meant to cripple the arrival of 92 00:05:39,320 --> 00:05:41,960 Speaker 1: inputs for the Russian industry. Each country is doing them 93 00:05:42,000 --> 00:05:44,520 Speaker 1: slightly differently, but it's kind of a remarkable thing because 94 00:05:44,640 --> 00:05:48,359 Speaker 1: we tend to think of US sanctions as primarily focused 95 00:05:48,640 --> 00:05:52,720 Speaker 1: on financial mechanisms, but here from the start they've targeted 96 00:05:52,960 --> 00:05:56,440 Speaker 1: kind of physical inputs and supply chains as well. So 97 00:05:56,680 --> 00:05:58,760 Speaker 1: this actually brings me to the question that I want 98 00:05:58,839 --> 00:06:00,599 Speaker 1: to ask you, and I think it's kind of a 99 00:06:00,600 --> 00:06:03,240 Speaker 1: basic question, but one of those basic questions that probably 100 00:06:03,320 --> 00:06:08,920 Speaker 1: has an extremely long answer, But how does sanctions policy 101 00:06:09,000 --> 00:06:13,640 Speaker 1: making actually happen. So you know, someone sits in a room, 102 00:06:13,640 --> 00:06:17,479 Speaker 1: presumably there's a committee or something, and they look at 103 00:06:17,560 --> 00:06:23,039 Speaker 1: the available suite of previous sanctions actions that they've done 104 00:06:23,040 --> 00:06:26,680 Speaker 1: on regimes like Iran or Hong Kong or whatever, and 105 00:06:26,800 --> 00:06:30,560 Speaker 1: try to decide about what would be most effective or 106 00:06:30,640 --> 00:06:35,320 Speaker 1: most applicable to the Russian situation. How exactly does it work? Yeah, 107 00:06:35,600 --> 00:06:39,640 Speaker 1: I think that's accurate description. In the United States sanctions 108 00:06:39,800 --> 00:06:42,839 Speaker 1: the kind of two offices that the two agencies that 109 00:06:42,880 --> 00:06:46,320 Speaker 1: handle sanctions are the Treasury Department and the State Department. 110 00:06:46,560 --> 00:06:48,919 Speaker 1: The Treasury Department, i'd say, is the more in the 111 00:06:48,960 --> 00:06:52,599 Speaker 1: weeds technical department. So you probably heard in these days about, 112 00:06:52,640 --> 00:06:55,520 Speaker 1: oh fact, the Office of Foreign Asset Control that is 113 00:06:55,680 --> 00:07:00,040 Speaker 1: within the Treasury Department, whereas the State Department handles a 114 00:07:00,040 --> 00:07:03,159 Speaker 1: as sanctions, it's specifically handles So for example, the decision 115 00:07:03,160 --> 00:07:04,920 Speaker 1: to sanction ords from the other day, it was actually 116 00:07:04,960 --> 00:07:07,880 Speaker 1: taken by the State Department rather than Treasury Department. But 117 00:07:07,880 --> 00:07:10,560 Speaker 1: that's kind of a quirk of u S sanctions long 118 00:07:11,000 --> 00:07:13,600 Speaker 1: But I'd say it's a kind of trial and error 119 00:07:13,640 --> 00:07:17,680 Speaker 1: and discovery process. So people are describing the sanctions these 120 00:07:17,760 --> 00:07:21,440 Speaker 1: days as unprecedented. I wouldn't say they're unprecedented in the 121 00:07:21,480 --> 00:07:24,400 Speaker 1: sense that they have never done before. What's unprecedented, it's 122 00:07:24,640 --> 00:07:27,360 Speaker 1: kind of the speed and impact and kind of how 123 00:07:27,440 --> 00:07:30,440 Speaker 1: cooes together they've been and how much they've shaken the 124 00:07:30,520 --> 00:07:34,720 Speaker 1: Russian economy. There are precedents for what the United States 125 00:07:34,720 --> 00:07:37,040 Speaker 1: has done. So for example, the bank, the Central Bank 126 00:07:37,080 --> 00:07:39,680 Speaker 1: of Iran has previously been sanctioned, so this is the 127 00:07:39,720 --> 00:07:42,640 Speaker 1: first time a central bank is sanctions. So there are 128 00:07:42,800 --> 00:07:45,800 Speaker 1: in that sense, there are I would say there is 129 00:07:45,880 --> 00:07:49,040 Speaker 1: kind of a sense of escalatory measures you can take. 130 00:07:49,080 --> 00:07:52,640 Speaker 1: If you think of sanctions, the most traditional kind of 131 00:07:52,680 --> 00:07:57,160 Speaker 1: basic form of sanction is the individual, especially the so 132 00:07:57,280 --> 00:08:00,200 Speaker 1: called STN sanctions, So it's against an individual, and so 133 00:08:00,280 --> 00:08:03,120 Speaker 1: that basically means they don't have access to their assets. 134 00:08:03,120 --> 00:08:05,920 Speaker 1: Their assets are frozen. So in the basic sense, your 135 00:08:05,960 --> 00:08:08,560 Speaker 1: bank accounts are frozen and you probably can't come to 136 00:08:08,600 --> 00:08:11,360 Speaker 1: the United States. And that's for example, what they did 137 00:08:11,440 --> 00:08:14,119 Speaker 1: against the putin the other day. That's kind of the 138 00:08:14,160 --> 00:08:17,600 Speaker 1: most basic building block. Usually that's what you see when 139 00:08:17,600 --> 00:08:20,880 Speaker 1: you hear in the news sanctions are being posed in 140 00:08:21,000 --> 00:08:24,640 Speaker 1: response to a crisis. That's more likely than not what 141 00:08:24,720 --> 00:08:27,840 Speaker 1: people are talking about because they're pretty easy to impose 142 00:08:28,000 --> 00:08:31,280 Speaker 1: and they don't have massive macroeconomic effects, and then from 143 00:08:31,320 --> 00:08:33,320 Speaker 1: there you can kind of move up. You can put 144 00:08:33,360 --> 00:08:36,479 Speaker 1: these so called blocking sanctions where you block the assets 145 00:08:36,520 --> 00:08:40,040 Speaker 1: on corporations, and that can have a significant effect. So 146 00:08:40,120 --> 00:08:42,560 Speaker 1: for example, that kind of depends on the target. So 147 00:08:42,840 --> 00:08:45,600 Speaker 1: if you're sanctioning VTB, which is a major Russian bank, 148 00:08:45,760 --> 00:08:48,719 Speaker 1: it will clearly have a massive effect. If you're sanctioning 149 00:08:49,080 --> 00:08:51,800 Speaker 1: in the around case, it was often sanctioned small kind 150 00:08:51,800 --> 00:08:55,040 Speaker 1: of satellite entities that we're doing something in the nuclear 151 00:08:55,080 --> 00:08:58,880 Speaker 1: program that doesn't necessarily have a macroeconomicist location, and then 152 00:08:58,880 --> 00:09:01,400 Speaker 1: from there you can kind of move bond and people. 153 00:09:01,880 --> 00:09:05,600 Speaker 1: There is a lot of innovation in sanctions from program 154 00:09:05,600 --> 00:09:08,880 Speaker 1: to programs. So for example, the Russian sanctions that had 155 00:09:08,880 --> 00:09:13,320 Speaker 1: been imposed were an attempt to break out of the 156 00:09:13,440 --> 00:09:17,880 Speaker 1: normal escalation ladder. So the sense there was these blocking 157 00:09:17,920 --> 00:09:21,880 Speaker 1: sanctions were would be too too blunt and would have 158 00:09:21,920 --> 00:09:25,560 Speaker 1: too much of a backlash. And the idea there, for example, 159 00:09:25,559 --> 00:09:28,600 Speaker 1: as they impost sectoral sanctions, so rather than targeting an 160 00:09:28,720 --> 00:09:32,079 Speaker 1: entire company, they just imposed limitations on what those companies 161 00:09:32,120 --> 00:09:35,040 Speaker 1: could do. Americans couldn't buy certain forms of debt and 162 00:09:35,040 --> 00:09:38,319 Speaker 1: equity from those companies, or couldn't provide certain services, and 163 00:09:38,360 --> 00:09:40,440 Speaker 1: so that's just the way you can refine it. But 164 00:09:40,480 --> 00:09:42,760 Speaker 1: I would say more generally, there is a sense of 165 00:09:43,480 --> 00:09:46,520 Speaker 1: depending on the seriousness of the situation, you can kind 166 00:09:46,520 --> 00:09:49,160 Speaker 1: of move up the ladder and i'd say Central Bank, 167 00:09:49,240 --> 00:09:52,160 Speaker 1: and then the swift measure that has been in the 168 00:09:52,240 --> 00:09:54,280 Speaker 1: news would be towards the upper end, at least in 169 00:09:54,320 --> 00:09:59,200 Speaker 1: the financial sanctions side. So you know, obviously there perhaps 170 00:09:59,240 --> 00:10:01,960 Speaker 1: it was some whole that sanctions or the threat of 171 00:10:02,040 --> 00:10:06,040 Speaker 1: sanctions at least would have some sort of deterrent effect 172 00:10:06,160 --> 00:10:09,320 Speaker 1: against this war. It hasn't happened. The war has happened. 173 00:10:09,679 --> 00:10:14,079 Speaker 1: In general, it feels that those sanctions often get placed 174 00:10:14,320 --> 00:10:17,320 Speaker 1: and stay for a long time and often don't seem 175 00:10:17,360 --> 00:10:20,440 Speaker 1: to it's not obvious what the effect is, but what 176 00:10:20,679 --> 00:10:24,360 Speaker 1: is the theory of what the sanctions are supposed to 177 00:10:24,440 --> 00:10:29,800 Speaker 1: accomplish and how so The basic theory, especially now that 178 00:10:30,000 --> 00:10:33,400 Speaker 1: kind of the deterrent theory is off the table, is 179 00:10:33,440 --> 00:10:38,199 Speaker 1: that sanctions are a bargaining tool. You impose certain costs 180 00:10:38,240 --> 00:10:41,199 Speaker 1: and say, if you acceed to our demand, we will 181 00:10:41,200 --> 00:10:44,560 Speaker 1: stop imposing these costs. So it's the basic theory is 182 00:10:45,280 --> 00:10:50,640 Speaker 1: pretty simple, but it gets very complicated very fast because 183 00:10:51,080 --> 00:10:54,560 Speaker 1: the ask is not always clear, and I think the 184 00:10:54,640 --> 00:10:57,280 Speaker 1: off ramp is not always clear, so people will kind 185 00:10:57,280 --> 00:11:00,240 Speaker 1: of make up new new goals and new ass says 186 00:11:00,280 --> 00:11:03,960 Speaker 1: they go. So it's very hard, especially in kind of 187 00:11:04,000 --> 00:11:06,920 Speaker 1: a live conflict, to know what you're asking for. Some 188 00:11:07,000 --> 00:11:09,520 Speaker 1: of the Russia case, now, one of the big challenges 189 00:11:09,559 --> 00:11:13,080 Speaker 1: will be what would we consider enough for us to 190 00:11:13,120 --> 00:11:17,360 Speaker 1: impose the sanctions, And as of now, I truly don't know. 191 00:11:17,400 --> 00:11:20,800 Speaker 1: I feel like there isn't a unified transatlantic view on 192 00:11:21,000 --> 00:11:24,040 Speaker 1: what what would be enough for lifting the sanctions. And 193 00:11:24,320 --> 00:11:27,920 Speaker 1: the other thing which is sometimes ignored is that you 194 00:11:27,960 --> 00:11:30,000 Speaker 1: have to hold up your own end of the bargain. 195 00:11:30,120 --> 00:11:33,640 Speaker 1: So say say we said in order to lift sanctions 196 00:11:34,080 --> 00:11:37,040 Speaker 1: or you would need Russia would need to return to 197 00:11:37,080 --> 00:11:40,960 Speaker 1: the situation we had on Jan one, then the United 198 00:11:41,000 --> 00:11:43,560 Speaker 1: States and Europe will need to actually deliver the relief 199 00:11:43,600 --> 00:11:49,320 Speaker 1: from sanctions effectively and basically try to restore Russia's economy 200 00:11:49,360 --> 00:11:53,559 Speaker 1: to one. And that that that is very challenging because 201 00:11:53,920 --> 00:11:57,719 Speaker 1: sanctions the United States issues these regulations. But then it's 202 00:11:57,760 --> 00:12:01,560 Speaker 1: the businesses that decide how to react with them. So, 203 00:12:01,600 --> 00:12:06,840 Speaker 1: for example, BP has decided to exit Russia, the United 204 00:12:06,840 --> 00:12:12,439 Speaker 1: States can't necessarily make BP return to Russia if Russia complies, 205 00:12:12,679 --> 00:12:17,320 Speaker 1: So it's often can be very challenging. The private sector 206 00:12:17,360 --> 00:12:20,760 Speaker 1: is hyper challenging to do the carrot side of the sanctions, 207 00:12:20,760 --> 00:12:24,079 Speaker 1: whereas the stick is kind of is very quick. Companies 208 00:12:24,080 --> 00:12:27,840 Speaker 1: are much more responsive to the threat of US punishment 209 00:12:28,080 --> 00:12:31,240 Speaker 1: than they are too kind of requests by the United 210 00:12:31,280 --> 00:12:34,520 Speaker 1: States to rekindle relations during the Irround deal. When the 211 00:12:34,600 --> 00:12:37,480 Speaker 1: Around deal was passed, then Secretary of State carry would 212 00:12:37,640 --> 00:12:41,400 Speaker 1: actually go around Europe and speak to banks and say, 213 00:12:41,600 --> 00:12:46,000 Speaker 1: we've lifted the sanctions, please rekindle your business in Irun, 214 00:12:46,520 --> 00:12:49,480 Speaker 1: and the bank's kind of bulked at it for all 215 00:12:49,520 --> 00:12:52,720 Speaker 1: sorts of reasons, because it's very difficult to convince the 216 00:12:52,720 --> 00:12:55,000 Speaker 1: other side that you're doing your best, and then they 217 00:12:55,040 --> 00:12:57,120 Speaker 1: feel like they kind of got a raw deal because 218 00:12:57,160 --> 00:12:59,920 Speaker 1: they complied that they didn't necessarily get all the bend 219 00:13:00,040 --> 00:13:03,440 Speaker 1: as they were promised. So this is exactly what I 220 00:13:03,440 --> 00:13:06,760 Speaker 1: wanted to ask you, because again, even before a lot 221 00:13:06,800 --> 00:13:10,800 Speaker 1: of these sanctions were formally announced, we did see various 222 00:13:10,920 --> 00:13:15,880 Speaker 1: companies financial institutions start to step away from the market, 223 00:13:15,960 --> 00:13:19,880 Speaker 1: and you know, suddenly you have Russian companies, um you know, 224 00:13:19,920 --> 00:13:24,079 Speaker 1: whether they're logistics networks or commodities exporters, things like that, 225 00:13:24,520 --> 00:13:27,400 Speaker 1: unable to get credit from their banks even though technically 226 00:13:27,400 --> 00:13:31,320 Speaker 1: nothing has happened yet. How much of that friction is 227 00:13:31,840 --> 00:13:36,559 Speaker 1: I guess, beneficial to sanctions actually being implemented and enforced 228 00:13:37,160 --> 00:13:39,679 Speaker 1: versus how much of it is unhelpful in the sense 229 00:13:39,720 --> 00:13:44,840 Speaker 1: that it it sort of accidentally escalates the situation and may, 230 00:13:44,960 --> 00:13:48,079 Speaker 1: as you just pointed out, be difficult to reverse if 231 00:13:48,080 --> 00:13:52,520 Speaker 1: the deal is actually reached. I think it's a very 232 00:13:52,600 --> 00:13:56,800 Speaker 1: much a double edged sword. It's it's definitely helpful because 233 00:13:57,160 --> 00:14:01,600 Speaker 1: it's difficult to fully calibrate ones actions and in that 234 00:14:01,640 --> 00:14:04,520 Speaker 1: sense you can kind of maximize the shock and all 235 00:14:04,840 --> 00:14:07,560 Speaker 1: in that sense, and in that sense it's it's a 236 00:14:07,600 --> 00:14:10,959 Speaker 1: positive I guess. I mean, it's it's nice to know 237 00:14:11,040 --> 00:14:15,440 Speaker 1: that the United States doesn't necessary if everyone imposed the 238 00:14:15,559 --> 00:14:18,640 Speaker 1: sanctions followed the exact letter of the law of sanctions, 239 00:14:18,640 --> 00:14:21,680 Speaker 1: sanctions would be kind of an unwieldy measure because you 240 00:14:21,680 --> 00:14:24,440 Speaker 1: would actually have to think through every single thing you're 241 00:14:24,440 --> 00:14:27,080 Speaker 1: trying to block. So in that sense, it would be 242 00:14:27,120 --> 00:14:30,280 Speaker 1: impossible to administer a program where you did that. There 243 00:14:30,320 --> 00:14:33,840 Speaker 1: have been cases where companies are extremely forward leaning in 244 00:14:33,920 --> 00:14:37,520 Speaker 1: terms of interpreting things exactly, and that can be counterproductive. 245 00:14:37,760 --> 00:14:39,960 Speaker 1: On the other hand, I think it's a it's a 246 00:14:39,960 --> 00:14:44,560 Speaker 1: big concern the overcompliance concerned, as you said, first of all, 247 00:14:44,600 --> 00:14:48,000 Speaker 1: because things can very quickly spin out of control. I mean, 248 00:14:48,280 --> 00:14:50,240 Speaker 1: in a sense, it feels if there was all this 249 00:14:50,360 --> 00:14:54,000 Speaker 1: kind of excitement about how much was happening in Russia, 250 00:14:54,040 --> 00:14:56,640 Speaker 1: but and Russia kind of I would say, in this 251 00:14:56,720 --> 00:15:00,680 Speaker 1: situation made it warranted because it continued with it's uh, 252 00:15:00,880 --> 00:15:04,040 Speaker 1: it's advance. But in a situation where Russia had paused 253 00:15:04,280 --> 00:15:07,000 Speaker 1: and the bank runs had continued, you would have had 254 00:15:07,000 --> 00:15:10,280 Speaker 1: a difficult, difficult situation. And I think it's very hard 255 00:15:10,320 --> 00:15:13,520 Speaker 1: on the back end to incredibly deliver the relief. So 256 00:15:13,680 --> 00:15:16,960 Speaker 1: I think it's very difficult. I think the current situation 257 00:15:17,080 --> 00:15:19,840 Speaker 1: is kind of a unique one because at least not 258 00:15:20,080 --> 00:15:23,320 Speaker 1: for now, everyone is hoping that this confrontation will be 259 00:15:23,360 --> 00:15:27,120 Speaker 1: fairly short. People don't see this as necessarily an attrition 260 00:15:27,640 --> 00:15:31,840 Speaker 1: along like multi year Iran type situation, So I think 261 00:15:32,000 --> 00:15:34,760 Speaker 1: people are there is a concern over compliance can be 262 00:15:34,800 --> 00:15:37,600 Speaker 1: a good way to very quickly dial up and then 263 00:15:37,640 --> 00:15:40,560 Speaker 1: dial down. But if you're trying to be more calibrated 264 00:15:40,560 --> 00:15:43,080 Speaker 1: and negotiate, I think you would be concerned. So I 265 00:15:43,520 --> 00:15:46,680 Speaker 1: think it's a huge problem. And it's always easy to 266 00:15:46,720 --> 00:15:50,800 Speaker 1: welcome over compliance at the front and then forget that 267 00:15:50,880 --> 00:16:09,920 Speaker 1: you'll have to deal with on the back. So at 268 00:16:10,000 --> 00:16:15,360 Speaker 1: this point, because we discussed, obviously the deterrent element didn't work, 269 00:16:15,560 --> 00:16:18,400 Speaker 1: and so in theory, you know, you continue to apply 270 00:16:18,520 --> 00:16:23,320 Speaker 1: stress and continue to offer out the chance of okay. 271 00:16:23,680 --> 00:16:27,720 Speaker 1: Hopefully in theory this this gets reversed if Russia reverses 272 00:16:27,800 --> 00:16:32,920 Speaker 1: its actions. What about just the uh, the persistent damage. 273 00:16:33,000 --> 00:16:35,720 Speaker 1: I mean, yes, the Russia is going to continue to 274 00:16:35,760 --> 00:16:38,920 Speaker 1: have at least for now cash coming in through the 275 00:16:39,040 --> 00:16:42,520 Speaker 1: energy market. Could it be that the sanctions just imposed 276 00:16:42,560 --> 00:16:46,040 Speaker 1: such weakness that it has to it has to backtrack 277 00:16:46,160 --> 00:16:49,560 Speaker 1: in some way because the damage compounds to its economy, 278 00:16:49,840 --> 00:16:52,240 Speaker 1: compounds to its banking system and so forth. Could it 279 00:16:52,280 --> 00:16:55,440 Speaker 1: be that the penalty the sanctions weapon is so harsh 280 00:16:55,520 --> 00:16:59,160 Speaker 1: that it essentially forces Russia is forced into some sort 281 00:16:59,200 --> 00:17:01,800 Speaker 1: of reversal. It definitely could. I mean, I think that's 282 00:17:01,840 --> 00:17:04,640 Speaker 1: the hope that it forces some sort of reversal, And 283 00:17:04,880 --> 00:17:09,399 Speaker 1: as far as everything that's happened up to now, I'd say, 284 00:17:09,440 --> 00:17:11,960 Speaker 1: if you're trying to impose pain to force a reversal, 285 00:17:12,040 --> 00:17:16,120 Speaker 1: this you're getting what you wanted. And I mean, there's 286 00:17:16,160 --> 00:17:19,040 Speaker 1: still more one can do, but it has been very 287 00:17:19,080 --> 00:17:21,560 Speaker 1: successful the sanctions. I feels if it's kind of like 288 00:17:21,640 --> 00:17:24,520 Speaker 1: people talk about kind of the economy in general. Bad 289 00:17:24,600 --> 00:17:27,280 Speaker 1: things happened to economies all the time, but they don't 290 00:17:27,320 --> 00:17:30,800 Speaker 1: just stop existing. They kind of address and moddel along. 291 00:17:30,960 --> 00:17:35,280 Speaker 1: Like Russia defaulted, it kind of picked up the pieces 292 00:17:35,560 --> 00:17:38,520 Speaker 1: it was bad, and they keep going. So sometimes I 293 00:17:38,520 --> 00:17:42,200 Speaker 1: think during sanctions conversations, but in general there's the sense 294 00:17:42,240 --> 00:17:45,120 Speaker 1: that there's like a final blow you're gonna deal, or 295 00:17:45,280 --> 00:17:49,200 Speaker 1: some moments some point of no return. I read recently 296 00:17:49,359 --> 00:17:53,720 Speaker 1: some really interesting comparisons of the Russia sanctions to the 297 00:17:53,760 --> 00:17:57,919 Speaker 1: Iran and the Venezuela sanctions, and in that sense that 298 00:17:58,720 --> 00:18:02,679 Speaker 1: those are concerning precedents because in those cases the country 299 00:18:02,800 --> 00:18:06,320 Speaker 1: is kind of muddled along. So for example, Iran lost 300 00:18:06,400 --> 00:18:10,640 Speaker 1: access to its reserves and it's still kind of had 301 00:18:10,680 --> 00:18:14,959 Speaker 1: to consolidate. There was the economy shrank, but it kind 302 00:18:15,000 --> 00:18:18,040 Speaker 1: of muddled along. It really energy became a smaller part 303 00:18:18,080 --> 00:18:22,320 Speaker 1: of its economy, manufacturing mostly domestic focus became a bigger one, 304 00:18:22,720 --> 00:18:26,680 Speaker 1: and it was able to kind of build some semblance 305 00:18:26,680 --> 00:18:29,280 Speaker 1: of an economy that could work. In the Venezuela case, 306 00:18:29,800 --> 00:18:34,320 Speaker 1: there were aggressive oil sanctions and really harmed the Venezula 307 00:18:34,359 --> 00:18:37,520 Speaker 1: oil sector, but eventually the oil sector kind of came back. 308 00:18:37,560 --> 00:18:40,560 Speaker 1: So in that sense, it's hard to imagine a situation 309 00:18:41,000 --> 00:18:44,640 Speaker 1: where you kind of deal some final blow, in which 310 00:18:44,640 --> 00:18:48,000 Speaker 1: case you have the country has no chance or no 311 00:18:48,160 --> 00:18:50,960 Speaker 1: option but to negotiate. But at the same time you 312 00:18:51,000 --> 00:18:53,679 Speaker 1: can inflict a lot of pain, and at least in 313 00:18:53,720 --> 00:18:56,800 Speaker 1: the Iran case, the country has been willing to negotiate 314 00:18:56,840 --> 00:18:59,560 Speaker 1: to get outside of sanctions. So in that sense you 315 00:18:59,600 --> 00:19:02,240 Speaker 1: can define only use sanctions to get to do I 316 00:19:02,240 --> 00:19:04,840 Speaker 1: would just say that the economic pain itself is not 317 00:19:04,960 --> 00:19:08,680 Speaker 1: the only factor. That it ultimately comes down to politics. 318 00:19:08,720 --> 00:19:12,480 Speaker 1: So what are the kind of internal constituencies that are 319 00:19:12,520 --> 00:19:14,920 Speaker 1: willing to bargain and what can you Are you willing 320 00:19:14,920 --> 00:19:17,080 Speaker 1: to accept what they have to offer, and can you 321 00:19:17,800 --> 00:19:21,440 Speaker 1: give them what they want? So just on this note, 322 00:19:21,760 --> 00:19:25,679 Speaker 1: you mentioned the idea of the US actually targeting specific 323 00:19:25,760 --> 00:19:30,600 Speaker 1: sectors while trying to leave others, you know, relatively untouched, 324 00:19:30,640 --> 00:19:35,600 Speaker 1: such as energy or commodities. How does that change I 325 00:19:35,600 --> 00:19:39,640 Speaker 1: guess the efficacy of sanctions and what kind of impact 326 00:19:39,680 --> 00:19:42,520 Speaker 1: would you expect that to have on the Russian economy. 327 00:19:42,560 --> 00:19:45,119 Speaker 1: Would that be something like what we saw in Iran, 328 00:19:45,240 --> 00:19:48,159 Speaker 1: where energy starts to become well, I guess in this 329 00:19:48,240 --> 00:19:51,679 Speaker 1: case energy would become an even more important factor in 330 00:19:51,720 --> 00:19:54,840 Speaker 1: the economy, or would you start to see Russia try 331 00:19:54,880 --> 00:19:58,680 Speaker 1: to I don't know, offset some of the the impacts 332 00:19:58,680 --> 00:20:02,400 Speaker 1: of the sanctions. First of all, the United It's true 333 00:20:02,440 --> 00:20:06,879 Speaker 1: that the US and Europe stayed away from directly targeting energy, 334 00:20:07,119 --> 00:20:09,080 Speaker 1: and they've kind of they've tried to be pretty explicit 335 00:20:09,119 --> 00:20:11,320 Speaker 1: about it. So for example, in the United States case, 336 00:20:12,000 --> 00:20:16,640 Speaker 1: they've added licenses which are basically exceptions the sanctions saying 337 00:20:16,720 --> 00:20:20,320 Speaker 1: certain transactions are allowed. And for example, within the Russian 338 00:20:20,359 --> 00:20:24,320 Speaker 1: Central Bank sanctions, within VTB and spur Bank they've allowed 339 00:20:24,640 --> 00:20:28,800 Speaker 1: energy transactions. But I think in terms of kind of 340 00:20:28,800 --> 00:20:32,040 Speaker 1: the over compliance and all that, I think it's very 341 00:20:32,119 --> 00:20:35,000 Speaker 1: hard to say that the current sanctions aren't hitting energy. 342 00:20:35,040 --> 00:20:36,640 Speaker 1: I think I was just seeing right before the show 343 00:20:36,680 --> 00:20:40,160 Speaker 1: that Russian oil is trading at a discount. Financial institutions 344 00:20:40,200 --> 00:20:44,480 Speaker 1: deals with commodities aren't as a forthcoming with letters of credit, 345 00:20:44,720 --> 00:20:49,240 Speaker 1: and there was an announcement from shipping companies to that 346 00:20:49,320 --> 00:20:51,760 Speaker 1: they're not they might be peeling away from energy. So 347 00:20:51,800 --> 00:20:55,639 Speaker 1: in that sense, I think there will be an effect directly, 348 00:20:55,680 --> 00:20:59,440 Speaker 1: I mean, compared to Iran, Russia's about thirty or so 349 00:20:59,600 --> 00:21:03,680 Speaker 1: percent of it of its government budget comes from energy, 350 00:21:03,680 --> 00:21:06,200 Speaker 1: whereas in the around case that was in the six 351 00:21:06,240 --> 00:21:09,840 Speaker 1: piece of The interesting thing about thinking about the reliance 352 00:21:09,880 --> 00:21:12,159 Speaker 1: on energy is that I mentioned kind of the big, 353 00:21:12,240 --> 00:21:15,240 Speaker 1: big ticket sanctions, but some of the other ones that 354 00:21:15,240 --> 00:21:22,120 Speaker 1: have been imposed are meant to target long term energy production. Uh. 355 00:21:22,800 --> 00:21:27,480 Speaker 1: Some of these started actually, and the idea there was exactly, 356 00:21:27,640 --> 00:21:30,280 Speaker 1: let's not target energy right now because we would be 357 00:21:30,320 --> 00:21:32,879 Speaker 1: able to withstand it, but let's make it so Russia 358 00:21:32,920 --> 00:21:35,600 Speaker 1: has more trouble getting the technology it needs, getting the 359 00:21:35,640 --> 00:21:38,280 Speaker 1: funding it needs for its kind of frontier project. So 360 00:21:38,280 --> 00:21:42,639 Speaker 1: in that sense, Russia might struggle with replacing its reserves, 361 00:21:42,760 --> 00:21:45,920 Speaker 1: and in that sense energy might decline as a part 362 00:21:45,960 --> 00:21:48,160 Speaker 1: of its economy just because it's not able to put 363 00:21:48,320 --> 00:21:51,879 Speaker 1: put in the investment. In that context, the departure of 364 00:21:52,400 --> 00:21:56,720 Speaker 1: it's part of companies like Shell and Equino or n 365 00:21:56,800 --> 00:22:01,320 Speaker 1: VP might be potentially further law of kind of human 366 00:22:01,359 --> 00:22:04,760 Speaker 1: capital or expertise that could harm the energy prospects of 367 00:22:04,760 --> 00:22:07,520 Speaker 1: the Russian economy over the medium to long term. So 368 00:22:07,560 --> 00:22:09,040 Speaker 1: I want to talk a little bit more about that 369 00:22:09,080 --> 00:22:12,040 Speaker 1: because the introduction, you said, one of the things that 370 00:22:12,080 --> 00:22:15,159 Speaker 1: you found striking. It's like, Okay, we all expect the 371 00:22:15,200 --> 00:22:20,320 Speaker 1: financial sanctions, but this sort of export controls limiting Russia's 372 00:22:20,359 --> 00:22:24,880 Speaker 1: access to factors of production, perhaps some intermediate stage goods 373 00:22:24,920 --> 00:22:28,879 Speaker 1: that would really undermine Russian industry. What specifically has been 374 00:22:28,920 --> 00:22:32,080 Speaker 1: announced in that respect, What are the areas of sort 375 00:22:32,080 --> 00:22:34,920 Speaker 1: of our Russian economy, maybe be the energy or elsewhere 376 00:22:35,160 --> 00:22:38,560 Speaker 1: they will really be affected by some of these new limitations. 377 00:22:39,240 --> 00:22:43,320 Speaker 1: There's some differences between the US and the EU here. 378 00:22:43,560 --> 00:22:48,000 Speaker 1: The United States said it's mostly focused on defense and aerospace, 379 00:22:48,720 --> 00:22:51,720 Speaker 1: so it's specifically it mentioned so far that it planned 380 00:22:51,760 --> 00:22:55,560 Speaker 1: to kind of limit inputs like semi conductors and lasers 381 00:22:55,560 --> 00:22:59,800 Speaker 1: and other parts to the defense and aerospace. The European 382 00:23:00,040 --> 00:23:04,679 Speaker 1: and seems more focused on a broader variety of of 383 00:23:04,720 --> 00:23:08,960 Speaker 1: components targeting the energy sector as well. We've been coming 384 00:23:08,960 --> 00:23:12,000 Speaker 1: at this very much from I guess the sort of 385 00:23:12,800 --> 00:23:16,040 Speaker 1: external side, like from the perspective of the US and Europe. 386 00:23:16,040 --> 00:23:22,200 Speaker 1: But what can Russia actually do here to offset sanctions impact? 387 00:23:22,280 --> 00:23:24,480 Speaker 1: And of course there's been a lot of talk about 388 00:23:24,840 --> 00:23:28,280 Speaker 1: what role China could play, um if any, in all 389 00:23:28,320 --> 00:23:30,320 Speaker 1: of this, and the idea that maybe Russia can look 390 00:23:30,359 --> 00:23:33,960 Speaker 1: to China for for some type of credit. So what 391 00:23:34,040 --> 00:23:37,560 Speaker 1: sort of response might we expect here. The short term 392 00:23:37,560 --> 00:23:40,120 Speaker 1: response is kind of what we saw the other day 393 00:23:40,160 --> 00:23:44,640 Speaker 1: with the rays of raids and kind of the capital controls. 394 00:23:44,720 --> 00:23:49,120 Speaker 1: Over time, I think it will be primarily about turning inward, 395 00:23:49,600 --> 00:23:54,040 Speaker 1: kind of finding domestic sources of demand, and I mean 396 00:23:54,200 --> 00:23:57,240 Speaker 1: the energy aside of it may change, but kind of 397 00:23:57,400 --> 00:24:01,080 Speaker 1: encouraging capital to stay in. I think other sanctions we've 398 00:24:01,080 --> 00:24:03,520 Speaker 1: seen in these days has been the targeting of the 399 00:24:03,560 --> 00:24:06,760 Speaker 1: oligarchs and people close to Putin. The one potential scenario 400 00:24:06,840 --> 00:24:09,879 Speaker 1: would be kind of a full repatriation to the extent 401 00:24:09,920 --> 00:24:12,080 Speaker 1: that they're able to of their assets and kind of 402 00:24:12,119 --> 00:24:15,479 Speaker 1: like new sources of capital within the Russian economy, all 403 00:24:15,560 --> 00:24:19,360 Speaker 1: looking inward in terms of relationships with China. I think 404 00:24:19,600 --> 00:24:22,679 Speaker 1: something that was interesting in the context of the comparison 405 00:24:22,720 --> 00:24:26,200 Speaker 1: with Iran. That I saw was that Russia right now 406 00:24:26,320 --> 00:24:29,320 Speaker 1: is much less exposed to China, and then say Iran 407 00:24:29,520 --> 00:24:33,200 Speaker 1: was just because Russia, Russia historically has been very tied 408 00:24:33,240 --> 00:24:35,440 Speaker 1: to the West compared to Iran. So and that's that 409 00:24:35,800 --> 00:24:39,359 Speaker 1: there is like an opportunity to kind of reorient the 410 00:24:39,520 --> 00:24:44,040 Speaker 1: entire economy east rather than West, and so that could 411 00:24:44,040 --> 00:24:47,919 Speaker 1: be one way to kind of break the connection with Europe. 412 00:24:48,200 --> 00:24:51,520 Speaker 1: But at the same time, I think, well two things. 413 00:24:51,560 --> 00:24:54,480 Speaker 1: First of all, these things are take time, and right 414 00:24:54,560 --> 00:24:57,320 Speaker 1: now we're still in the adjustment phase. It seems like 415 00:24:57,760 --> 00:25:01,480 Speaker 1: Russia will have ways to stabilize as the rouble in 416 00:25:01,520 --> 00:25:04,359 Speaker 1: the short term. It seems difficult to me from a 417 00:25:04,400 --> 00:25:08,200 Speaker 1: sanctions perspective, what you don't want is the so called 418 00:25:08,240 --> 00:25:12,040 Speaker 1: Cuba scenario where sanctions stay in place wherever you kind 419 00:25:12,040 --> 00:25:15,000 Speaker 1: of you don't have right now. The United States has 420 00:25:15,040 --> 00:25:17,560 Speaker 1: been admirable in the fact that it's been able to 421 00:25:17,600 --> 00:25:21,080 Speaker 1: be extremely multilateral and so bring on the countries like 422 00:25:21,200 --> 00:25:24,960 Speaker 1: Switzerland that are historically neutral, for example. The risk is 423 00:25:25,160 --> 00:25:29,520 Speaker 1: the longer this goes on, the less multilateralism there is, 424 00:25:29,800 --> 00:25:32,639 Speaker 1: and more kind of countries start to break away, start 425 00:25:32,720 --> 00:25:35,040 Speaker 1: to re engage with Russia, and then you kind of 426 00:25:35,080 --> 00:25:38,240 Speaker 1: have this situation where there's a complete blockade against Russia 427 00:25:38,280 --> 00:25:41,120 Speaker 1: from one part of the world, but it's not enough 428 00:25:41,400 --> 00:25:45,639 Speaker 1: to completely undo kind of unmake Russia's economy bringing to 429 00:25:45,680 --> 00:25:49,239 Speaker 1: the bargaining table, and the economy kind of readjust like 430 00:25:49,320 --> 00:25:51,960 Speaker 1: Europeans go to Cuba all the time, it kind of 431 00:25:52,000 --> 00:25:56,080 Speaker 1: readjusts towards these So that's I think the thing everyone 432 00:25:56,200 --> 00:26:00,840 Speaker 1: is really wants to avoid. So my sense of the 433 00:26:00,960 --> 00:26:04,520 Speaker 1: goal right now is to try to impose so much 434 00:26:04,560 --> 00:26:08,679 Speaker 1: pain that there is in the ability to remake oneself 435 00:26:09,119 --> 00:26:13,480 Speaker 1: and kind of adjust, because otherwise the adjustment you could 436 00:26:13,560 --> 00:26:15,639 Speaker 1: kind of end up in this worst of both worlds 437 00:26:15,680 --> 00:26:18,080 Speaker 1: where you don't necessarily achieve your goal, you don't achieve 438 00:26:18,080 --> 00:26:21,320 Speaker 1: your goals, you're cutting off a major part of the economy, 439 00:26:21,480 --> 00:26:23,480 Speaker 1: and you're kind of re orienting a major part of 440 00:26:23,520 --> 00:26:26,199 Speaker 1: the economy away from you. So for me, I struggle 441 00:26:26,280 --> 00:26:29,160 Speaker 1: to imagine anyone wanting the current situation to be long term, 442 00:26:29,160 --> 00:26:30,920 Speaker 1: and I think the hope is to reach a deal. 443 00:26:31,280 --> 00:26:33,960 Speaker 1: So how as of right now, and we're you know, 444 00:26:34,040 --> 00:26:39,040 Speaker 1: we're barely a week into this war and the announcement 445 00:26:39,119 --> 00:26:42,879 Speaker 1: of sanctions. How surprised are you by the level of 446 00:26:43,440 --> 00:26:46,840 Speaker 1: unity and the completeness of the I mean, as you 447 00:26:46,880 --> 00:26:50,800 Speaker 1: mentioned even Switzerland neutral Switzerland is involved by this sort 448 00:26:50,840 --> 00:26:53,879 Speaker 1: of the unanimity on the part of European powers in 449 00:26:53,920 --> 00:26:56,399 Speaker 1: the US in the sanctions. And how does that compared 450 00:26:56,440 --> 00:26:59,320 Speaker 1: to other ones in terms of unanimity versus say when 451 00:26:59,600 --> 00:27:05,639 Speaker 1: a dealing with Iron and others. I think it's extremely impressive. 452 00:27:06,119 --> 00:27:08,920 Speaker 1: I think it was unexpected. I mean both the Switzer 453 00:27:09,000 --> 00:27:12,200 Speaker 1: and then Singapore's joining, which has kind of been kind 454 00:27:12,200 --> 00:27:14,680 Speaker 1: of unique cases. But in general, if you think about 455 00:27:14,720 --> 00:27:17,199 Speaker 1: the way sanctions work within the European Union is that 456 00:27:17,280 --> 00:27:20,000 Speaker 1: you need unonumity of all twenty seven countries. It's not 457 00:27:20,040 --> 00:27:23,239 Speaker 1: a majority decision. So even with getting the European on 458 00:27:23,280 --> 00:27:27,480 Speaker 1: board for anything really requires getting twenty seven members on board. 459 00:27:27,480 --> 00:27:29,480 Speaker 1: And you saw it over this weekend where it would 460 00:27:29,480 --> 00:27:32,760 Speaker 1: be kind of one off reports Italy okay with Swift 461 00:27:32,800 --> 00:27:36,280 Speaker 1: cut off. Hungary not opposed to Swift cut off. So 462 00:27:36,320 --> 00:27:40,040 Speaker 1: in that sense, it's a really challenging diplomatic struggle. And 463 00:27:40,080 --> 00:27:44,119 Speaker 1: I think it's been amazing to see how much that 464 00:27:44,240 --> 00:27:47,040 Speaker 1: the United States was able to get everyone on board 465 00:27:47,280 --> 00:27:49,680 Speaker 1: in terms of kind of looking at in precedent. First 466 00:27:49,680 --> 00:27:52,040 Speaker 1: of all, I would say there are small differences between 467 00:27:52,040 --> 00:27:55,239 Speaker 1: the sanctions. This isn't necessarily a bad thing, but I 468 00:27:55,240 --> 00:27:59,639 Speaker 1: think everyone does minor adjustments or my carve outs, I 469 00:27:59,640 --> 00:28:02,679 Speaker 1: think in some cases, and some of this is just 470 00:28:02,720 --> 00:28:04,880 Speaker 1: the way kind of the way these work is that 471 00:28:05,040 --> 00:28:07,960 Speaker 1: every country sits it in a room and kind of 472 00:28:08,080 --> 00:28:10,800 Speaker 1: writes out there the same press release and then releases it. 473 00:28:11,000 --> 00:28:12,840 Speaker 1: Everyone does it a bit at the same time, a 474 00:28:12,840 --> 00:28:16,200 Speaker 1: bit differently. The United States, say, released its central Bank sanctions, 475 00:28:16,359 --> 00:28:17,960 Speaker 1: they agreed to them over the weekend, but then the 476 00:28:18,000 --> 00:28:21,000 Speaker 1: United States rules came out before the European world, So 477 00:28:21,040 --> 00:28:23,120 Speaker 1: for temple of the the United States have a carve out 478 00:28:23,160 --> 00:28:25,600 Speaker 1: that Europe doesn't have, and I think that's to be expected. 479 00:28:25,640 --> 00:28:28,000 Speaker 1: But it's kind of a it's kind of a funny 480 00:28:28,000 --> 00:28:30,080 Speaker 1: process in that sense that it kind of all comes 481 00:28:30,080 --> 00:28:33,359 Speaker 1: together on the fly, and even more so now where 482 00:28:33,440 --> 00:28:37,520 Speaker 1: it's not multi month or multi year escalation process, but 483 00:28:37,640 --> 00:28:41,719 Speaker 1: it's a matter of hours everything changes. So in that sense, 484 00:28:42,640 --> 00:28:45,280 Speaker 1: I think it's been pretty amazing. I think it's kind 485 00:28:45,320 --> 00:28:48,920 Speaker 1: of a speed run of the Iran sanctions in that sense. 486 00:28:49,120 --> 00:28:52,280 Speaker 1: So the classic dynamic during the Iran sanctions tended to 487 00:28:52,360 --> 00:28:55,719 Speaker 1: be that someone wanted to escalate, some party within the 488 00:28:55,840 --> 00:28:59,640 Speaker 1: United States wanted to escalate Iran sanctions, that they would 489 00:28:59,640 --> 00:29:03,680 Speaker 1: push it, and usually it was something at that point unprecedented, 490 00:29:04,000 --> 00:29:06,920 Speaker 1: and so then the administration, which tended to be more 491 00:29:06,920 --> 00:29:10,600 Speaker 1: concerned about things like Dallar dominant or getting along with allies, 492 00:29:10,640 --> 00:29:13,760 Speaker 1: would push back. But eventually there would be enough momentum 493 00:29:13,800 --> 00:29:16,520 Speaker 1: for the kind of hawkish next step, so targeting the 494 00:29:16,560 --> 00:29:21,080 Speaker 1: around Central Bank or trying to target Iranian oil exports, 495 00:29:21,240 --> 00:29:24,840 Speaker 1: and so eventually the United States would kind of get 496 00:29:24,880 --> 00:29:27,480 Speaker 1: on board with it, and then it would there be 497 00:29:27,560 --> 00:29:31,400 Speaker 1: kind of friction with the EU that you would complain 498 00:29:31,440 --> 00:29:35,440 Speaker 1: about overreach by the United States or lack of engagement 499 00:29:35,520 --> 00:29:39,840 Speaker 1: with EU equities, etcetera. And then eventually the EU would 500 00:29:39,960 --> 00:29:44,360 Speaker 1: kind of either fully join or kind of make itself 501 00:29:44,440 --> 00:29:47,280 Speaker 1: comfortable with it, and so that's kind of how it 502 00:29:47,320 --> 00:29:49,520 Speaker 1: would go. And then the kind of final step was 503 00:29:49,920 --> 00:29:53,680 Speaker 1: the working with China. So China would not necessarily fully 504 00:29:53,920 --> 00:29:57,760 Speaker 1: agree with the sanctions, that definitely wouldn't say it was complying, 505 00:29:57,960 --> 00:30:00,960 Speaker 1: but China would maybe make some adjust mints and kind 506 00:30:01,000 --> 00:30:05,360 Speaker 1: of conform or not too overtly go against US schools. 507 00:30:05,600 --> 00:30:10,040 Speaker 1: Now you're kind of seeing this extremely fast. So someone 508 00:30:10,080 --> 00:30:13,160 Speaker 1: floats an idea with the Russia thing last week, So 509 00:30:13,480 --> 00:30:16,280 Speaker 1: before the invasion fully started, you had all these ideas 510 00:30:16,440 --> 00:30:20,360 Speaker 1: central Bank and the correspondent banking targeting olive arts, and 511 00:30:20,360 --> 00:30:22,320 Speaker 1: they were kind of floating in the either and then 512 00:30:22,880 --> 00:30:25,840 Speaker 1: the United States does something. Europe bulks, but then it 513 00:30:26,160 --> 00:30:30,080 Speaker 1: moves faster than in the central Bank sanctions. Actually, initially 514 00:30:30,080 --> 00:30:31,720 Speaker 1: it seemed like the United States was going to take 515 00:30:31,720 --> 00:30:33,880 Speaker 1: a soft through approach, and in that case it was 516 00:30:33,920 --> 00:30:36,640 Speaker 1: actually vonder Ley and speech that seemed to be a 517 00:30:36,640 --> 00:30:39,680 Speaker 1: bit more forward leaning. So that sense, you're seeing everything 518 00:30:39,720 --> 00:30:42,640 Speaker 1: move very quickly. And I think the current, like the 519 00:30:42,760 --> 00:30:45,200 Speaker 1: final decision on Swift is kind of an example, this 520 00:30:45,480 --> 00:30:48,560 Speaker 1: gradual campaign all building up to kind of a big decision. 521 00:30:48,840 --> 00:30:52,640 Speaker 1: So I think it's been admirable. It's kind of interesting 522 00:30:52,880 --> 00:30:55,880 Speaker 1: you see how much diplomacy matters, but you also see 523 00:30:55,880 --> 00:30:59,479 Speaker 1: how much the technical questions matter because so much of 524 00:30:59,520 --> 00:31:02,880 Speaker 1: it is kind of getting it's making the details compatible 525 00:31:02,960 --> 00:31:06,000 Speaker 1: but also ensuring that domestic politics are feasible by carving 526 00:31:06,040 --> 00:31:09,360 Speaker 1: out what you need to come. You used a phrase 527 00:31:09,440 --> 00:31:12,920 Speaker 1: just then for the sake of dollar dominance. And this 528 00:31:13,000 --> 00:31:15,920 Speaker 1: is something that has come up in our episode with 529 00:31:15,960 --> 00:31:18,680 Speaker 1: Salton Poser, and I've also seen some comments from other 530 00:31:18,720 --> 00:31:22,360 Speaker 1: commentators about it. But on the one hand, you have 531 00:31:22,680 --> 00:31:27,080 Speaker 1: the US using its position in the global financial system 532 00:31:27,120 --> 00:31:30,680 Speaker 1: to heap enormous amounts of pressure on Russia to try 533 00:31:30,760 --> 00:31:33,400 Speaker 1: to get it to do something that it wants. On 534 00:31:33,440 --> 00:31:38,880 Speaker 1: the other hand, it seems to have given rise, I guess, 535 00:31:38,960 --> 00:31:42,840 Speaker 1: to a question of whether or not people are going 536 00:31:42,920 --> 00:31:45,800 Speaker 1: to want to either do business with the US or 537 00:31:46,000 --> 00:31:50,840 Speaker 1: maintain assets in dollars if they know that, you know, 538 00:31:50,880 --> 00:31:53,360 Speaker 1: if they get into a situation of tensions with the US, 539 00:31:53,480 --> 00:31:58,040 Speaker 1: that they could actually lose control or access to those 540 00:31:58,120 --> 00:32:01,680 Speaker 1: various assets. So I guess my question is what does 541 00:32:01,720 --> 00:32:05,800 Speaker 1: all of this mean for the long term position of 542 00:32:05,920 --> 00:32:09,360 Speaker 1: the United States and the dollar in the financial system. 543 00:32:09,400 --> 00:32:11,960 Speaker 1: This is kind of the million dollar question that has 544 00:32:12,000 --> 00:32:16,240 Speaker 1: been kind of one of the ongoing questions in sanctions 545 00:32:16,280 --> 00:32:19,400 Speaker 1: among sancts and practitioners. Two of the current people in 546 00:32:19,480 --> 00:32:22,000 Speaker 1: government working on the sanctions actually wrote a report on 547 00:32:22,520 --> 00:32:25,959 Speaker 1: will sanctions threatened the result of the dollar? So everyone 548 00:32:25,960 --> 00:32:28,400 Speaker 1: in the government is very much thinking about this issue. 549 00:32:28,640 --> 00:32:32,680 Speaker 1: I tend to be very skeptical about the sanctions threat 550 00:32:33,040 --> 00:32:35,520 Speaker 1: to dollar dominance. I mean, first of all, I will say, 551 00:32:35,720 --> 00:32:39,920 Speaker 1: like the way dollar dominance usually comes up in these 552 00:32:39,960 --> 00:32:44,280 Speaker 1: conversations isn't because of some empirical threat to the dollar, 553 00:32:44,520 --> 00:32:46,719 Speaker 1: but it's more of a way of kind of arguing 554 00:32:46,720 --> 00:32:49,840 Speaker 1: against the sanctions without arguing against the sanctions. So you're 555 00:32:49,880 --> 00:32:52,840 Speaker 1: not saying, I think this this measure is bad because 556 00:32:52,880 --> 00:32:54,800 Speaker 1: it won't achieve its goal. You kind of have this 557 00:32:54,960 --> 00:32:57,440 Speaker 1: banking shot argument where you say, actually, we shouldn't do 558 00:32:57,480 --> 00:33:02,680 Speaker 1: this measure because of dollar dominance. So that's kind of that. 559 00:33:02,920 --> 00:33:05,240 Speaker 1: I tend to kind of be skeptical of the argument 560 00:33:05,280 --> 00:33:08,840 Speaker 1: just because that's it's not often like very informed. I 561 00:33:08,840 --> 00:33:12,400 Speaker 1: think by it's most informed by kind of policy differences 562 00:33:12,400 --> 00:33:15,040 Speaker 1: within the sanctions community. I mean, it's been something people 563 00:33:15,080 --> 00:33:17,680 Speaker 1: have been worrying about for a long time. Like Jack 564 00:33:17,800 --> 00:33:20,239 Speaker 1: lou when he was secretary, gave a speech saying, if 565 00:33:20,320 --> 00:33:22,960 Speaker 1: we keep using this, it will be a threat. And 566 00:33:23,280 --> 00:33:27,200 Speaker 1: it's I mean the United States keeps it does keep 567 00:33:27,360 --> 00:33:29,240 Speaker 1: escalating and its use of it. I mean there have 568 00:33:29,320 --> 00:33:31,360 Speaker 1: been kind of all these things. There was one point 569 00:33:31,480 --> 00:33:34,760 Speaker 1: in the kind of tens they were all these massive 570 00:33:34,840 --> 00:33:38,600 Speaker 1: fines against foreign banks, and people would complain. At one point, 571 00:33:39,000 --> 00:33:43,000 Speaker 1: President Holland asked President Obama not define B and P 572 00:33:43,160 --> 00:33:46,640 Speaker 1: Perry BA too much. So like, in a sense like 573 00:33:46,800 --> 00:33:49,840 Speaker 1: it is like a big liability in a sense that 574 00:33:49,920 --> 00:33:54,560 Speaker 1: like the United States has this control and it almost 575 00:33:54,680 --> 00:33:57,120 Speaker 1: doesn't know what to do with it day to day. So, 576 00:33:57,160 --> 00:33:59,960 Speaker 1: for example, in the afghan you recently saw the United 577 00:34:00,040 --> 00:34:02,880 Speaker 1: States made that decision about the Afghanians assets held at 578 00:34:02,920 --> 00:34:05,760 Speaker 1: the New York FED. In a sense like dollar dominance 579 00:34:05,760 --> 00:34:08,839 Speaker 1: itself is kind of a huge imposition in the United 580 00:34:08,880 --> 00:34:11,600 Speaker 1: States because it needs to make these decisions that it's 581 00:34:11,640 --> 00:34:14,800 Speaker 1: not necessarily it might not want to make. So for example, 582 00:34:14,840 --> 00:34:18,759 Speaker 1: the buying administration having to choose between sending money aid 583 00:34:18,760 --> 00:34:23,080 Speaker 1: to Afghanistan and keeping in the United States because technically 584 00:34:23,160 --> 00:34:25,480 Speaker 1: the money is in the United States, and so nine 585 00:34:25,520 --> 00:34:28,960 Speaker 1: eleven victims families could sue and take the money from 586 00:34:29,000 --> 00:34:31,479 Speaker 1: the New York FED. I guess we're generally I would 587 00:34:31,520 --> 00:34:35,880 Speaker 1: say that dollar dominance has been people have been worrying 588 00:34:35,880 --> 00:34:37,880 Speaker 1: about it for a long time. I'd say the last 589 00:34:38,040 --> 00:34:41,759 Speaker 1: biggest worry was during the U s unilateral exit from 590 00:34:41,800 --> 00:34:44,960 Speaker 1: the Iran Deal, and that to me at the time, 591 00:34:45,000 --> 00:34:48,120 Speaker 1: there was all sorts of fears because the Iran Deal sanctions. 592 00:34:48,239 --> 00:34:52,000 Speaker 1: The Iran sanctions really leverage it. Like the biggest thing 593 00:34:52,040 --> 00:34:55,440 Speaker 1: they do is they force they don't allow Iran to 594 00:34:55,600 --> 00:34:58,880 Speaker 1: export oil, and so you really have to lean on 595 00:34:59,040 --> 00:35:02,960 Speaker 1: dollar dominance to pressure like third party countries not to 596 00:35:03,000 --> 00:35:05,399 Speaker 1: import Iranian oil. And so there was a sense that 597 00:35:05,400 --> 00:35:08,960 Speaker 1: that might be the breaking point, and it really wasn't 598 00:35:09,320 --> 00:35:13,400 Speaker 1: in that case. Swift Swift is like the Belgian payment 599 00:35:13,440 --> 00:35:16,959 Speaker 1: messaging service. They even complied with U S sanctions during 600 00:35:16,960 --> 00:35:20,319 Speaker 1: this whole escalation. People keep saying it's up to the 601 00:35:20,320 --> 00:35:23,440 Speaker 1: EU to decide on Swift, not to the United States. 602 00:35:23,560 --> 00:35:25,880 Speaker 1: In that case that you very much did not want 603 00:35:26,000 --> 00:35:29,160 Speaker 1: the Swift Swift to cut off during your banks but 604 00:35:29,360 --> 00:35:31,880 Speaker 1: they did it anyway. So in the short term, the 605 00:35:31,920 --> 00:35:34,360 Speaker 1: sanctions do not pose a threat to daughter dominants, I 606 00:35:34,400 --> 00:35:38,560 Speaker 1: would say, mostly because well, sanctions are a huge deal 607 00:35:38,640 --> 00:35:41,560 Speaker 1: and they can really remake economies as we're seeing right now. 608 00:35:41,840 --> 00:35:45,480 Speaker 1: That's not what dollar dominance means day today. It seems 609 00:35:45,840 --> 00:35:48,200 Speaker 1: it feels to me like the most important aspect of 610 00:35:48,280 --> 00:35:51,040 Speaker 1: daughter dominance isn't the fact that the United States can 611 00:35:51,200 --> 00:35:53,360 Speaker 1: kind of turn off the spigots of certain capital flows 612 00:35:53,360 --> 00:35:56,319 Speaker 1: when it's sanctions countries, the biggest thing is that the 613 00:35:56,360 --> 00:35:59,360 Speaker 1: FED can provide liquidity in a crisis. And in that sense, 614 00:35:59,640 --> 00:36:03,000 Speaker 1: if you think of that, there's this historic kind of 615 00:36:03,239 --> 00:36:06,839 Speaker 1: caused sanctions that geopolitical side of the dollar system, and 616 00:36:06,880 --> 00:36:11,240 Speaker 1: like the normal day to day side is coronavirus crisis 617 00:36:11,239 --> 00:36:13,879 Speaker 1: in the United States, doing swaplants or things like that. 618 00:36:14,120 --> 00:36:17,439 Speaker 1: And so a country that might not be interested in 619 00:36:17,960 --> 00:36:23,520 Speaker 1: or might want alternatives to sanctions also would need to 620 00:36:23,560 --> 00:36:26,600 Speaker 1: create a parallel world where there is one entity that 621 00:36:26,719 --> 00:36:29,040 Speaker 1: in a crisis can step up and keep the entire 622 00:36:29,040 --> 00:36:32,000 Speaker 1: financial system afloat. And so from that angle, it just 623 00:36:32,040 --> 00:36:36,000 Speaker 1: seems like the kind of benefits, or at least the 624 00:36:36,480 --> 00:36:40,520 Speaker 1: kind of security provided by a world of daughter dominance 625 00:36:40,560 --> 00:36:42,759 Speaker 1: and kind of the United States being able to singularly 626 00:36:42,840 --> 00:36:46,799 Speaker 1: prop up the global financial system outweigh for most countries. 627 00:36:46,920 --> 00:36:50,240 Speaker 1: The negatives. Yeah, I mean, I think like we've definitely 628 00:36:50,280 --> 00:36:52,839 Speaker 1: seen in the wake of the financial crisis, and then 629 00:36:52,880 --> 00:36:57,000 Speaker 1: more cutely, starting in March, the sort of benefits to 630 00:36:57,560 --> 00:37:00,520 Speaker 1: being in the club or being under the relat that 631 00:37:00,640 --> 00:37:04,800 Speaker 1: can get the benefit of fed liquidity is pretty powerful. 632 00:37:04,960 --> 00:37:07,880 Speaker 1: I want to go back to Swift for a second. 633 00:37:07,960 --> 00:37:10,799 Speaker 1: I feel like, you know, on Twitter, Swift gets talked 634 00:37:10,800 --> 00:37:13,240 Speaker 1: about in harsh tones like this should be this should 635 00:37:13,280 --> 00:37:15,680 Speaker 1: be like this is the thing that they can't touch, 636 00:37:15,719 --> 00:37:18,360 Speaker 1: and then of course they sort of did it, not entirely, 637 00:37:18,880 --> 00:37:22,520 Speaker 1: but it has been employed. How powerful is that? What 638 00:37:22,600 --> 00:37:25,720 Speaker 1: are the sort of misconceptions? What do people get wrong 639 00:37:25,840 --> 00:37:30,520 Speaker 1: about what it means to lose access to Swift? Yeah, 640 00:37:30,680 --> 00:37:33,640 Speaker 1: I definitely agree about the hushtones. I feel like on 641 00:37:33,680 --> 00:37:37,200 Speaker 1: Thursday or Friday, after a present by the game conference 642 00:37:37,200 --> 00:37:40,040 Speaker 1: called he was asked something like, are you really unwilling 643 00:37:40,080 --> 00:37:42,200 Speaker 1: to do the two most destructive things for the Russian 644 00:37:42,200 --> 00:37:45,960 Speaker 1: economy sanctioned potent and disconnects Swift and kind of both 645 00:37:45,960 --> 00:37:48,960 Speaker 1: of them were kind of beside the point, as has 646 00:37:49,000 --> 00:37:51,480 Speaker 1: been proven by the fact that all the damage hasn't 647 00:37:51,480 --> 00:37:55,880 Speaker 1: been caused by those two Swift the base is this 648 00:37:56,080 --> 00:38:00,160 Speaker 1: payment messaging service has eleven thousand banks. It's based in Belgium, 649 00:38:00,160 --> 00:38:04,360 Speaker 1: so technically it's not responsive to US US requests, although 650 00:38:04,400 --> 00:38:08,560 Speaker 1: in practice it tends to very much be responsive. In 651 00:38:08,600 --> 00:38:11,440 Speaker 1: part of it is responsive because it's board member banks 652 00:38:11,600 --> 00:38:15,800 Speaker 1: are they have extreme exposure to US jurisdictions. Its board 653 00:38:15,800 --> 00:38:20,000 Speaker 1: member banks would tend to kind of align themselves with 654 00:38:20,520 --> 00:38:23,279 Speaker 1: US goals. I mean, ultimately, the thing is Swift is 655 00:38:23,600 --> 00:38:27,399 Speaker 1: a messaging service. I mean, it's very well networked, it's 656 00:38:27,560 --> 00:38:30,840 Speaker 1: uh is secure, so in that end, it's standardized. So 657 00:38:30,880 --> 00:38:36,400 Speaker 1: in that sense it has the perks really good messaging service. 658 00:38:36,600 --> 00:38:39,200 Speaker 1: But if someone shut down WhatsApp, you could use something 659 00:38:39,239 --> 00:38:41,960 Speaker 1: else if you really wanted to communicate with people, And 660 00:38:42,000 --> 00:38:43,920 Speaker 1: it's kind of the same with Swift. There's nothing that 661 00:38:43,960 --> 00:38:47,440 Speaker 1: Swift does that itself couldn't be replicated. But I think 662 00:38:47,800 --> 00:38:53,160 Speaker 1: the reason Swift is such an appealing kind of example 663 00:38:53,400 --> 00:38:55,680 Speaker 1: is that it's kind of the embodiment. So much of 664 00:38:57,360 --> 00:38:59,640 Speaker 1: sanctions depend on kind of the concept of like inter 665 00:38:59,800 --> 00:39:02,640 Speaker 1: the end, and so like there's these few choke points 666 00:39:02,719 --> 00:39:05,319 Speaker 1: or places in the global economy that if you can, 667 00:39:05,960 --> 00:39:08,200 Speaker 1: if you can exert your pressure on them, you'll be 668 00:39:08,239 --> 00:39:11,080 Speaker 1: able to control all sorts of other things. So and 669 00:39:11,120 --> 00:39:14,560 Speaker 1: in that sense, Swift release is like a good symbol 670 00:39:14,600 --> 00:39:17,680 Speaker 1: of that, because it's like this, what if there were 671 00:39:17,680 --> 00:39:21,040 Speaker 1: one messaging service and every bank depends on them, and 672 00:39:21,280 --> 00:39:24,279 Speaker 1: with one stroke you could cut off these banks, and 673 00:39:24,360 --> 00:39:27,160 Speaker 1: they would lose their connection to the global economy. In practice, 674 00:39:27,400 --> 00:39:30,200 Speaker 1: that's not now what would happen. But I think in 675 00:39:30,239 --> 00:39:33,120 Speaker 1: that sense it's very symbolic, I think so. I think 676 00:39:33,160 --> 00:39:36,759 Speaker 1: that's why it became such a symbol, and there was 677 00:39:37,160 --> 00:39:39,480 Speaker 1: there was this talk about Europe can only be a 678 00:39:39,520 --> 00:39:42,520 Speaker 1: global player if it's willing to cut off Russia from swift. 679 00:39:42,800 --> 00:39:47,120 Speaker 1: I think more generally, though, it's the kind of infrastructures 680 00:39:47,120 --> 00:39:51,320 Speaker 1: that's makes swift possible. You swift that are more important, 681 00:39:51,360 --> 00:39:54,200 Speaker 1: So swift you're sending the messages. But what matters is 682 00:39:54,280 --> 00:39:56,920 Speaker 1: kind of because if there's been a bunch of analogies 683 00:39:56,920 --> 00:39:58,759 Speaker 1: people of use, the one I think of is like 684 00:39:59,280 --> 00:40:04,040 Speaker 1: what matters the train tracks between towns. You don't necessarily 685 00:40:04,160 --> 00:40:07,680 Speaker 1: need like a telegraph system communicating that the train arrives, 686 00:40:08,000 --> 00:40:11,799 Speaker 1: but without the communications and stuff, trains will probably have 687 00:40:11,840 --> 00:40:13,359 Speaker 1: to go a bit slower because you don't know who 688 00:40:13,400 --> 00:40:16,080 Speaker 1: else is on the track. So ultimately, what the United 689 00:40:16,120 --> 00:40:20,240 Speaker 1: States did with the spur Bank when it basic denied 690 00:40:20,239 --> 00:40:23,080 Speaker 1: the correspondent bank accounts, it just uprooted the chain tracks. 691 00:40:23,280 --> 00:40:44,840 Speaker 1: So no messaging service can make up for that. Just 692 00:40:44,920 --> 00:40:47,440 Speaker 1: when it comes to the oligarch. So we do have 693 00:40:47,560 --> 00:40:51,880 Speaker 1: sanctions in place now, you know, possibly belatedly when it 694 00:40:51,920 --> 00:40:54,960 Speaker 1: comes to the UK, and you pointed out earlier that 695 00:40:55,040 --> 00:40:58,560 Speaker 1: to some extent extensions on individuals are you know, almost 696 00:40:58,640 --> 00:41:02,279 Speaker 1: the the original like clean vanilla sanctions. So you say, 697 00:41:02,320 --> 00:41:04,800 Speaker 1: these people can't go to the US, they can't access 698 00:41:04,840 --> 00:41:07,480 Speaker 1: their US bank accounts and things like that. But what 699 00:41:07,600 --> 00:41:11,480 Speaker 1: exactly is it supposed to accomplish here, because there does 700 00:41:11,520 --> 00:41:13,360 Speaker 1: seem to be a thought process that, well, we're going 701 00:41:13,440 --> 00:41:15,200 Speaker 1: to sanction the oligarchs and then they're going to call 702 00:41:15,239 --> 00:41:19,799 Speaker 1: it Putin and complain about everything that's happening. But like, 703 00:41:20,719 --> 00:41:23,320 Speaker 1: how realistic is that? Like what is the thought process 704 00:41:23,360 --> 00:41:26,080 Speaker 1: behind this? I think that is the thought process in 705 00:41:26,120 --> 00:41:29,279 Speaker 1: a sense, like the basic one, which is these are 706 00:41:29,800 --> 00:41:35,040 Speaker 1: Russia is not kind of a fully traditional responsive electoral democracy, 707 00:41:35,200 --> 00:41:37,640 Speaker 1: and so what matters is convincing the elites who might 708 00:41:37,680 --> 00:41:40,759 Speaker 1: have access to Putin and that might change things that 709 00:41:40,800 --> 00:41:43,440 Speaker 1: I feel that that is the basic theory of the case. 710 00:41:43,719 --> 00:41:47,400 Speaker 1: I don't think necessarily it would work that way just 711 00:41:47,480 --> 00:41:50,800 Speaker 1: because these are oligarchs depend more on Putin that Putin 712 00:41:50,840 --> 00:41:53,160 Speaker 1: depends on them. These are some of the ones that 713 00:41:53,200 --> 00:41:55,600 Speaker 1: have recently been hit and the you are people who 714 00:41:55,600 --> 00:42:00,359 Speaker 1: were putin KGB mates in Germany, so they're not they're 715 00:42:00,400 --> 00:42:04,280 Speaker 1: not successful businessmen who placed put in an office. So 716 00:42:04,280 --> 00:42:07,200 Speaker 1: so in that sense, it might just drive them closer 717 00:42:08,120 --> 00:42:11,920 Speaker 1: to the government. In one sense, I read an interesting 718 00:42:11,960 --> 00:42:15,480 Speaker 1: comparison of the to the Venezuela sanctions, and in the 719 00:42:15,520 --> 00:42:19,200 Speaker 1: Venezuela sanctions going after Venezuelan corruption, especially given they have 720 00:42:19,480 --> 00:42:23,080 Speaker 1: all these kind of state owned businesses that pavesa There's 721 00:42:23,320 --> 00:42:25,920 Speaker 1: one of the things the United States did was really 722 00:42:26,000 --> 00:42:31,040 Speaker 1: target uh, these high profile corrupt individuals and for example 723 00:42:31,360 --> 00:42:34,239 Speaker 1: or say, take over their assets in the United States, 724 00:42:34,320 --> 00:42:38,319 Speaker 1: and that tended to push them closer to Maduro. So 725 00:42:38,360 --> 00:42:40,560 Speaker 1: in that sense, it could cut the other way. I mean, 726 00:42:40,920 --> 00:42:44,319 Speaker 1: at the same time, I think there is sanctions. We 727 00:42:44,400 --> 00:42:46,760 Speaker 1: think of them. Before the invasion, there was the whole 728 00:42:47,200 --> 00:42:50,080 Speaker 1: thinking of sanctions as deterrents, and then now we're talking 729 00:42:50,080 --> 00:42:52,719 Speaker 1: about sanctions as bargaining. But there's another theory, which is 730 00:42:52,840 --> 00:42:55,600 Speaker 1: sanctions as kind of a signaling message, and so you 731 00:42:55,680 --> 00:42:59,400 Speaker 1: do sanctions to say we disapprove of this in some cases, 732 00:42:59,440 --> 00:43:02,319 Speaker 1: so for example, the United States will sanction people who 733 00:43:02,680 --> 00:43:04,840 Speaker 1: have no assets to the United States never planned to 734 00:43:04,880 --> 00:43:07,080 Speaker 1: come to the United States, but the United States so 735 00:43:07,200 --> 00:43:10,480 Speaker 1: does it as a way of saying this won't fly 736 00:43:11,080 --> 00:43:13,960 Speaker 1: for us. And I mean, I think there is some 737 00:43:14,120 --> 00:43:17,879 Speaker 1: value in kind of signaling disapproval, so I will say that. 738 00:43:18,360 --> 00:43:21,160 Speaker 1: One thing I would note though, is that these oligarchs 739 00:43:21,520 --> 00:43:26,080 Speaker 1: do control often very large businesses, and different sanctions do 740 00:43:26,160 --> 00:43:28,840 Speaker 1: things differently, but sometimes it depending on how you do it. 741 00:43:28,920 --> 00:43:32,719 Speaker 1: Sometimes sanctioning the head of an individual can lead to 742 00:43:32,760 --> 00:43:36,319 Speaker 1: the sanctioning of a firm he owns or controls, and 743 00:43:36,360 --> 00:43:40,560 Speaker 1: in that sense it can have very large ripples. Just recently, 744 00:43:40,880 --> 00:43:44,719 Speaker 1: uh that you just released its own sanctions. It's on 745 00:43:44,840 --> 00:43:48,080 Speaker 1: oligar sanctions and those could lead to dislocations because it 746 00:43:48,080 --> 00:43:50,480 Speaker 1: has I mean, we'll see how it plays out, but 747 00:43:50,680 --> 00:43:54,239 Speaker 1: it seems to have a capacious definition of control, which 748 00:43:54,239 --> 00:43:58,160 Speaker 1: could mean major Russian companies get sanctioned as well companies 749 00:43:58,160 --> 00:44:00,400 Speaker 1: that haven't been sanctioned so far, So I could be 750 00:44:00,440 --> 00:44:03,800 Speaker 1: a thing. And sometimes they can have kind of crazy 751 00:44:03,960 --> 00:44:06,600 Speaker 1: knock on effects. And twenty Team the United States sanctioned 752 00:44:06,960 --> 00:44:11,200 Speaker 1: ole deir Pasca Big Medals Magnate. He could he controls 753 00:44:12,440 --> 00:44:14,960 Speaker 1: one of the top producers aluminum in the world, and 754 00:44:15,000 --> 00:44:17,840 Speaker 1: then that that was sanctioned, and then the London Medals 755 00:44:17,840 --> 00:44:20,960 Speaker 1: Exchange freaked out because that was a big player there, 756 00:44:21,000 --> 00:44:23,480 Speaker 1: and so they haulted trading and overnight the price of 757 00:44:23,520 --> 00:44:27,239 Speaker 1: aluminum went up. So even the individual ones can have 758 00:44:28,040 --> 00:44:32,279 Speaker 1: crazy knock on effects, but kind of the day to 759 00:44:32,360 --> 00:44:35,880 Speaker 1: day sanctioning, like the sun they sanctioned the son of 760 00:44:36,280 --> 00:44:39,160 Speaker 1: the Rose and f CEO that I would say is 761 00:44:39,160 --> 00:44:41,759 Speaker 1: primarily a way of seeing a hope that he might 762 00:44:42,239 --> 00:44:45,440 Speaker 1: intercede with Putin, but also more simply a signal that 763 00:44:45,480 --> 00:44:48,399 Speaker 1: this won't fly. And especially in the UK, but also 764 00:44:48,400 --> 00:44:50,760 Speaker 1: in the United States, there's the sense that the United 765 00:44:50,760 --> 00:44:53,800 Speaker 1: States has been turning a blind eye to Russian dirty 766 00:44:53,840 --> 00:44:56,480 Speaker 1: money that flows in, and so this is also a 767 00:44:56,480 --> 00:44:59,919 Speaker 1: way to kind of eliminate charges of hypocrisy, I would say, 768 00:45:00,360 --> 00:45:03,240 Speaker 1: which is kind of a signaling thing, but there's value 769 00:45:03,280 --> 00:45:07,040 Speaker 1: to it. So this next question is actually going to 770 00:45:07,080 --> 00:45:09,799 Speaker 1: be a subject of an entire It has, you know, 771 00:45:09,840 --> 00:45:14,279 Speaker 1: I'm sure multiple episodes, and certainly one imminently. But you know, 772 00:45:14,320 --> 00:45:17,200 Speaker 1: we talked about, Okay, the one area that's not going 773 00:45:17,239 --> 00:45:20,400 Speaker 1: to really be touched, at least directly, although maybe implicitly 774 00:45:20,719 --> 00:45:22,520 Speaker 1: is the energy sector, and of course we all know 775 00:45:22,680 --> 00:45:27,080 Speaker 1: that Europe, particularly Germany, highly dependent on Russian natural gas 776 00:45:27,320 --> 00:45:30,520 Speaker 1: and to some extent, call how did you know? What's 777 00:45:30,560 --> 00:45:35,239 Speaker 1: the short version of how in your view, Europe got 778 00:45:35,280 --> 00:45:38,319 Speaker 1: into this situation where it became so dependent. You know, 779 00:45:38,440 --> 00:45:43,120 Speaker 1: even after with the annexation of Crimea, which is sort 780 00:45:43,160 --> 00:45:46,160 Speaker 1: of well sort of telegraphed, what thought of Aprutin was 781 00:45:46,239 --> 00:45:49,560 Speaker 1: willing to do? How did it let itself get so 782 00:45:49,640 --> 00:45:52,480 Speaker 1: vulnerable on this front? Search that, at least with energy, 783 00:45:52,480 --> 00:45:56,480 Speaker 1: it has very little leverage. First of all, energy imports 784 00:45:56,560 --> 00:45:59,919 Speaker 1: in Europe have been kind of a long term source 785 00:46:00,040 --> 00:46:03,200 Speaker 1: of friction. Even in the eighties there was tension between 786 00:46:03,320 --> 00:46:07,960 Speaker 1: the Reagan administration and Europe because of a European pipeline 787 00:46:08,160 --> 00:46:10,960 Speaker 1: to Russia. So this has been very long I think, 788 00:46:11,200 --> 00:46:13,279 Speaker 1: if I'm not mistaken, Anthony B. Lincoln wrote a book 789 00:46:13,280 --> 00:46:16,320 Speaker 1: about this in n So this is kind of a 790 00:46:17,040 --> 00:46:22,000 Speaker 1: long term sorts of friction, and there's differences between gas 791 00:46:22,000 --> 00:46:25,320 Speaker 1: and oil. But the political economy of Europe and energy 792 00:46:25,640 --> 00:46:29,600 Speaker 1: is very challenging in terms of unwillingness to invest, has 793 00:46:29,640 --> 00:46:33,399 Speaker 1: made it very hard for Europe to diversify. I think 794 00:46:33,440 --> 00:46:35,120 Speaker 1: that kind of was one of the big things. Then 795 00:46:35,160 --> 00:46:38,640 Speaker 1: you kind of have the freak events like Fukushima and 796 00:46:39,320 --> 00:46:43,839 Speaker 1: harming getting rid of German nuclear in the German energy mix. 797 00:46:44,000 --> 00:46:46,960 Speaker 1: But I think the biggest thing I would say is, 798 00:46:47,080 --> 00:46:49,200 Speaker 1: and I think this kind of is goes to the 799 00:46:49,400 --> 00:46:52,359 Speaker 1: shortcoming of sanctions more generally, is that sanctions can only 800 00:46:52,600 --> 00:46:56,920 Speaker 1: shut off certain economic activity. They can do the opposite 801 00:46:57,080 --> 00:47:00,880 Speaker 1: and like foster it. So the United States they impose 802 00:47:00,960 --> 00:47:05,879 Speaker 1: these sanctions and there was a sense of geopolitical risk 803 00:47:06,200 --> 00:47:10,320 Speaker 1: attached to Russian gas, but it wasn't enough to creates 804 00:47:10,320 --> 00:47:12,600 Speaker 1: a an alternative to Norse stream, you know. So I 805 00:47:12,640 --> 00:47:15,600 Speaker 1: think that's kind of a big problem. You need more 806 00:47:15,680 --> 00:47:19,480 Speaker 1: active measures. Sanctions are relatively cheap in terms of imposing them. 807 00:47:19,480 --> 00:47:22,600 Speaker 1: They can have their costs, but they're not whereas building 808 00:47:22,880 --> 00:47:27,080 Speaker 1: interconnections in Europe, so gas from Spain can get to Germany, 809 00:47:27,160 --> 00:47:29,440 Speaker 1: which seems to be one of the concerns in terms 810 00:47:29,520 --> 00:47:34,280 Speaker 1: of like the geography of the gas interconnection in Europe. 811 00:47:35,280 --> 00:47:37,800 Speaker 1: That wasn't enough. So in that sense, I just don't 812 00:47:37,880 --> 00:47:41,680 Speaker 1: think there was enough forethought, and I think unwillingness to 813 00:47:41,760 --> 00:47:45,880 Speaker 1: invest in kind of think long term was able to diversify. 814 00:47:45,880 --> 00:47:47,879 Speaker 1: I mean, we'll see what happens now. I think there's 815 00:47:47,880 --> 00:47:52,160 Speaker 1: a bunch of enthusiasm about potentially the changing political economy 816 00:47:52,280 --> 00:47:54,560 Speaker 1: of Germany, or at least the greater willingness to invest 817 00:47:54,600 --> 00:47:57,920 Speaker 1: in spend. I mean, there's been talking about nuclear and 818 00:47:58,080 --> 00:48:00,160 Speaker 1: L and G, but those are long term thing. I 819 00:48:00,200 --> 00:48:03,160 Speaker 1: think in the short term without kind of an impetus 820 00:48:03,200 --> 00:48:07,080 Speaker 1: to invest and instead kind of I guess chronic consolidation, 821 00:48:07,320 --> 00:48:10,279 Speaker 1: and that's how you end up without other options. And 822 00:48:10,600 --> 00:48:12,520 Speaker 1: I don't know if people in fifteen, if they've been 823 00:48:12,520 --> 00:48:17,319 Speaker 1: told been in the most effective measure against Russia, would 824 00:48:17,360 --> 00:48:20,319 Speaker 1: have been off the table because we hadn't build the infrastructure. 825 00:48:20,440 --> 00:48:22,600 Speaker 1: It's hard for me to imagine that they would actually 826 00:48:22,640 --> 00:48:25,839 Speaker 1: have followed through and build the infrastructure, just because there's 827 00:48:25,840 --> 00:48:29,080 Speaker 1: all sorts of other domestic problems that have halted it. 828 00:48:30,360 --> 00:48:33,240 Speaker 1: So I'm very aware of the time, and it feels 829 00:48:33,280 --> 00:48:37,120 Speaker 1: like we could probably we could easily go on for 830 00:48:37,160 --> 00:48:39,400 Speaker 1: another hour. So I'm just gonna I'm gonna try to 831 00:48:39,400 --> 00:48:43,279 Speaker 1: squeeze in two very important questions in one, which is 832 00:48:43,920 --> 00:48:46,480 Speaker 1: one of the big criticisms of sanctions is obviously the 833 00:48:46,560 --> 00:48:51,520 Speaker 1: impact on the general population, who may not themselves have 834 00:48:51,680 --> 00:48:57,240 Speaker 1: decided or supported the invasion of Ukraine, So so what's 835 00:48:57,280 --> 00:49:01,800 Speaker 1: the impact there. And then secondly, you mentioned escalation earlier 836 00:49:01,840 --> 00:49:05,239 Speaker 1: in the conversation. How much more could the US and 837 00:49:05,320 --> 00:49:07,960 Speaker 1: Europe do on this front When it comes to sanctions 838 00:49:09,080 --> 00:49:11,040 Speaker 1: on the humanitarian front, I think it's a it's a 839 00:49:11,080 --> 00:49:13,520 Speaker 1: it's a huge problem. In the late nineties there was 840 00:49:13,800 --> 00:49:17,520 Speaker 1: a complete revulsion at sanctions uh and there was a 841 00:49:17,560 --> 00:49:19,960 Speaker 1: sense that it didn't work. They didn't work and the 842 00:49:20,000 --> 00:49:24,080 Speaker 1: main damage was inflicted on the population. Since then, there 843 00:49:24,120 --> 00:49:26,480 Speaker 1: kind of was this evolution in thinking of the creation 844 00:49:26,520 --> 00:49:29,760 Speaker 1: of smart sanctions and the idea there was like more targeting, 845 00:49:29,840 --> 00:49:32,239 Speaker 1: so for example, going off after the other guards and 846 00:49:32,360 --> 00:49:36,279 Speaker 1: other measures that type of measure and other ways to 847 00:49:36,440 --> 00:49:40,560 Speaker 1: kind of limit the humanitarian impact. Right now, I think 848 00:49:40,560 --> 00:49:43,440 Speaker 1: this conversation has continued. I think, for example, there was 849 00:49:43,600 --> 00:49:47,440 Speaker 1: frustration with say the way Iran sanctions limited the access 850 00:49:47,480 --> 00:49:50,839 Speaker 1: to healthcare in Iran during coronavirus, and so I think 851 00:49:50,840 --> 00:49:54,200 Speaker 1: there is a lot of willingness to think more about 852 00:49:54,239 --> 00:49:58,600 Speaker 1: the humanitarian impact. The Treasury Department uh in at the 853 00:49:58,680 --> 00:50:01,879 Speaker 1: end of last year actually issue this kind of comprehensive 854 00:50:01,920 --> 00:50:04,319 Speaker 1: sanctions reviews. So when by the administration came in, they said, 855 00:50:04,440 --> 00:50:07,120 Speaker 1: we're going to rethink how we do sanctions, and one 856 00:50:07,160 --> 00:50:10,759 Speaker 1: of the things that they did was much more focused 857 00:50:11,120 --> 00:50:14,080 Speaker 1: on limiting mean humanitarian impact, and I think you've seen 858 00:50:14,120 --> 00:50:17,000 Speaker 1: it in some way with a measure so far, they 859 00:50:17,080 --> 00:50:20,680 Speaker 1: could have carve outs, say related to COVID. At the 860 00:50:20,719 --> 00:50:24,719 Speaker 1: same time, ultimately, when you're causing these massive slides in 861 00:50:24,760 --> 00:50:28,359 Speaker 1: the country's currency, or targeting its biggest banks or even 862 00:50:28,360 --> 00:50:32,279 Speaker 1: as central bank and resulting in massive capital controls and 863 00:50:33,000 --> 00:50:36,600 Speaker 1: interest rates going off, there's no way to contain the 864 00:50:36,719 --> 00:50:41,080 Speaker 1: humanitarian impact. My hope is that these sanctions are short 865 00:50:41,200 --> 00:50:45,799 Speaker 1: enough that the humanitarian impact doesn't kind of ripple through 866 00:50:45,880 --> 00:50:48,759 Speaker 1: or set in it on. Doubted, they leave long term 867 00:50:48,840 --> 00:50:51,840 Speaker 1: scars on the Russian economy, which I think is very troubling. 868 00:50:51,880 --> 00:50:55,800 Speaker 1: I mean, even something like you can't undo these things overnight. 869 00:50:55,840 --> 00:50:59,040 Speaker 1: If there's there was some administration officials I've talked about 870 00:50:59,040 --> 00:51:00,800 Speaker 1: how one of the goals of the sanctions is to 871 00:51:01,280 --> 00:51:04,919 Speaker 1: is causing inflation, and so these things really do have 872 00:51:05,239 --> 00:51:08,160 Speaker 1: long term effects, and there's I guess it's kind of 873 00:51:08,200 --> 00:51:11,600 Speaker 1: like hystorys hystoricist or something where like it's it's very 874 00:51:11,600 --> 00:51:14,040 Speaker 1: hard to undo. So for example, if you cut off 875 00:51:14,040 --> 00:51:17,600 Speaker 1: the bank's corresponding bank accounts, the banks will cut them off, 876 00:51:17,600 --> 00:51:20,480 Speaker 1: but then re establishing them is like a one by 877 00:51:20,480 --> 00:51:23,120 Speaker 1: one resigning the deal. And so these things will have 878 00:51:23,600 --> 00:51:26,400 Speaker 1: long term effects and so people will feel them. Your 879 00:51:26,520 --> 00:51:29,759 Speaker 1: question un escalating, So I hope there will. There'd be 880 00:51:29,760 --> 00:51:34,160 Speaker 1: ways one could mitigate them, but unfortunately, especially I think 881 00:51:34,400 --> 00:51:38,560 Speaker 1: those have with the speed of escalation, so far, those 882 00:51:38,840 --> 00:51:42,399 Speaker 1: haven't been as top of mind. But we'll see it. 883 00:51:42,800 --> 00:51:45,120 Speaker 1: There's a lot that could be done. So far, the 884 00:51:45,200 --> 00:51:48,960 Speaker 1: United States has targeted banks, but it hasn't the banks 885 00:51:48,960 --> 00:51:51,760 Speaker 1: it has targeted, it hasn't necessary targeted with the fullest extent. 886 00:51:51,960 --> 00:51:54,600 Speaker 1: So for a kind of burbank, the biggest bank, it's 887 00:51:54,640 --> 00:51:58,800 Speaker 1: only that correspondent bank account hasn't done the full blocking sanctions, 888 00:51:58,880 --> 00:52:02,000 Speaker 1: and other banks just hasn't targeted. So for example, gas 889 00:52:02,000 --> 00:52:07,080 Speaker 1: from bank hasn't been targeted with any measures so far, 890 00:52:07,320 --> 00:52:10,000 Speaker 1: So in that sense, you can target those more banks, 891 00:52:10,320 --> 00:52:15,040 Speaker 1: and there's potentially space for on the Central Bank, they 892 00:52:15,080 --> 00:52:18,400 Speaker 1: actually haven't done the full blocking sanctions, so potentially they 893 00:52:18,440 --> 00:52:21,360 Speaker 1: could do a full blocking sanction, but on the market, 894 00:52:21,440 --> 00:52:23,120 Speaker 1: so that could be a way to kind of tighten 895 00:52:23,120 --> 00:52:25,720 Speaker 1: the screws. And there's the energy sanctions as we talked about, 896 00:52:26,120 --> 00:52:28,120 Speaker 1: so those like you could just say you can't buy 897 00:52:28,200 --> 00:52:31,440 Speaker 1: Russian oil and practice, you probably couldn't do that and practice. 898 00:52:31,480 --> 00:52:33,399 Speaker 1: What they did there their on deal is they kind 899 00:52:33,400 --> 00:52:37,640 Speaker 1: of said they required every country to gradually decrease its 900 00:52:37,640 --> 00:52:41,160 Speaker 1: purchases in Iran, you know, in Iranian oil. So you 901 00:52:41,200 --> 00:52:43,920 Speaker 1: would probably have to do something like that because otherwise 902 00:52:43,920 --> 00:52:47,239 Speaker 1: it would be kind of I don't think any economy 903 00:52:47,480 --> 00:52:50,320 Speaker 1: or kind of the global oil market could necessarily react 904 00:52:50,520 --> 00:52:53,799 Speaker 1: that easily to a complete cut off. There's also other 905 00:52:53,920 --> 00:52:57,720 Speaker 1: sectors you could target or other companies right now, because 906 00:52:57,800 --> 00:53:01,279 Speaker 1: finance is so pervasive, you kind of like you can 907 00:53:01,360 --> 00:53:03,400 Speaker 1: hit that you're hitting out the targets. So for example, 908 00:53:03,400 --> 00:53:05,160 Speaker 1: I so the swift cut off and some of these 909 00:53:05,160 --> 00:53:07,960 Speaker 1: finance kind of are making it harder for Russian airlines 910 00:53:08,160 --> 00:53:11,560 Speaker 1: to pay for the leases of their aircraft. But so 911 00:53:11,600 --> 00:53:16,000 Speaker 1: that's harming the Russian Russian airlines. But I'm not necessarily 912 00:53:16,040 --> 00:53:18,200 Speaker 1: advocating a target in Russian airlines. But you could also 913 00:53:18,239 --> 00:53:21,720 Speaker 1: just target Russian airlines directly, you know, like there's like ways, 914 00:53:21,920 --> 00:53:25,440 Speaker 1: right now because of the effect of the financial sanctions, 915 00:53:25,440 --> 00:53:28,080 Speaker 1: there's a sense that the entire Russian economies in turmoil. 916 00:53:28,160 --> 00:53:30,640 Speaker 1: But you could also just target direct sectors, and there's 917 00:53:30,680 --> 00:53:33,600 Speaker 1: other sectors that kind of have this ripple effect through 918 00:53:33,640 --> 00:53:36,520 Speaker 1: the economy. For example, insurance is one of them. So 919 00:53:36,560 --> 00:53:39,160 Speaker 1: as for example, targeting Russian insurance companies could make it 920 00:53:39,200 --> 00:53:43,080 Speaker 1: harder for companies that need insurance to carry on their business. 921 00:53:43,320 --> 00:53:45,799 Speaker 1: For example, like in the around case, the United States 922 00:53:45,840 --> 00:53:48,920 Speaker 1: made it harder for oil tankers to get insured. But 923 00:53:48,960 --> 00:53:52,040 Speaker 1: you need insurance to kind of dock in places in 924 00:53:52,080 --> 00:53:54,960 Speaker 1: case something happens, and so then the Iranian government had 925 00:53:55,000 --> 00:53:56,920 Speaker 1: to insure its own boats, and so you kind of 926 00:53:57,040 --> 00:53:59,760 Speaker 1: there are ways you can kind of escalate by targeting 927 00:54:00,080 --> 00:54:03,759 Speaker 1: more and more subsectors of the economy. So I'd say 928 00:54:03,760 --> 00:54:06,600 Speaker 1: those are some of the main areas that you could 929 00:54:06,600 --> 00:54:11,080 Speaker 1: talk well, Uh, Eduardo is Tracy noted. I feel like 930 00:54:11,160 --> 00:54:13,040 Speaker 1: that went by the blink of an eye and we 931 00:54:13,040 --> 00:54:15,839 Speaker 1: could talk for hours. But that was fantastic. I learned 932 00:54:15,880 --> 00:54:18,719 Speaker 1: a lot. I really really appreciate you coming out on 933 00:54:18,719 --> 00:54:22,560 Speaker 1: a lot. Thank you so much for having that was fantastic. 934 00:54:22,560 --> 00:54:25,680 Speaker 1: Thanks good, Thanks that was really good. Yeah, thank you. 935 00:54:36,480 --> 00:54:39,880 Speaker 1: That was extremely informative, and you know, we just said it. 936 00:54:39,880 --> 00:54:41,520 Speaker 1: I feel like we could have talked like two more 937 00:54:41,560 --> 00:54:46,839 Speaker 1: hours very easily on this topic. Absolutely. I mean there 938 00:54:46,840 --> 00:54:49,799 Speaker 1: are a number of things to pick out there, but 939 00:54:50,200 --> 00:54:52,920 Speaker 1: I mean one, I thought it was really interesting what 940 00:54:53,080 --> 00:54:55,800 Speaker 1: Edwardos said about the idea that even if you throw 941 00:54:55,880 --> 00:54:58,840 Speaker 1: all this stuff at an economy, you can't you can't 942 00:54:58,880 --> 00:55:01,920 Speaker 1: just turn it off. And of course, I mean there's 943 00:55:02,160 --> 00:55:06,400 Speaker 1: the original sanctions question when it comes to dictators, which is, 944 00:55:06,640 --> 00:55:09,320 Speaker 1: if they're not answering to a population which is actually 945 00:55:09,320 --> 00:55:12,640 Speaker 1: feeling the economic pain, do they even care? And will 946 00:55:12,680 --> 00:55:16,040 Speaker 1: sanctions have any policy impact? Um, that's there as well. 947 00:55:16,080 --> 00:55:19,439 Speaker 1: And then the other thing was this idea that it's 948 00:55:19,520 --> 00:55:23,280 Speaker 1: difficult to turn these things off once you get them going. 949 00:55:23,360 --> 00:55:26,080 Speaker 1: I thought that was really interesting. I think that is 950 00:55:26,120 --> 00:55:30,719 Speaker 1: a really important dimension to all of this because you know, 951 00:55:30,800 --> 00:55:34,920 Speaker 1: obviously what we've seen over the last week. Like in theory, 952 00:55:35,280 --> 00:55:38,960 Speaker 1: the hope is that okay, this imposes significant pain in 953 00:55:39,040 --> 00:55:42,840 Speaker 1: it UH, that at some point Putin decides to turn around, 954 00:55:43,080 --> 00:55:46,560 Speaker 1: Goes removes forces from Ukraine. That's the hope that there's 955 00:55:46,560 --> 00:55:49,839 Speaker 1: some sort of peace and end of UH fighting, even 956 00:55:49,880 --> 00:55:52,239 Speaker 1: if you're start to turn these off. However, we've seen 957 00:55:52,360 --> 00:55:55,080 Speaker 1: such a dramatic move over the last several days. If 958 00:55:55,120 --> 00:55:57,040 Speaker 1: companies just saying, you know we talked about in the beginning, 959 00:55:57,200 --> 00:56:00,440 Speaker 1: washing their hands, not wanting to do business, it seems 960 00:56:00,640 --> 00:56:04,640 Speaker 1: very hard to imagine what restoring the status, you know, 961 00:56:04,840 --> 00:56:07,200 Speaker 1: getting back to ten days ago, not just of the 962 00:56:07,280 --> 00:56:09,640 Speaker 1: legal regime, but of the various corporate activity that was 963 00:56:09,680 --> 00:56:14,000 Speaker 1: taking place in Russia. It seems essentially unfathomable almost at 964 00:56:14,040 --> 00:56:16,839 Speaker 1: this point to go back. So then the question is like, well, 965 00:56:16,840 --> 00:56:19,240 Speaker 1: how much of a carrot is there still to offer 966 00:56:19,520 --> 00:56:21,799 Speaker 1: if it's going to be such a long haul just 967 00:56:21,880 --> 00:56:23,560 Speaker 1: to get back to you know what the middle of 968 00:56:23,560 --> 00:56:27,319 Speaker 1: February look like. Absolutely, And I mean we haven't even 969 00:56:27,400 --> 00:56:32,360 Speaker 1: touched on E s G considerations, but it does feel like, Okay, 970 00:56:32,400 --> 00:56:35,160 Speaker 1: you can't necessarily turn sanctions on and off with the 971 00:56:35,200 --> 00:56:38,399 Speaker 1: switch of a button because people have compliance departments, and 972 00:56:38,520 --> 00:56:41,160 Speaker 1: you know they tend the people who work in compliance 973 00:56:41,160 --> 00:56:45,000 Speaker 1: tend to be cautious people. Uh. And then secondly, what 974 00:56:45,080 --> 00:56:46,879 Speaker 1: does this actually mean for E s G? Because even 975 00:56:46,960 --> 00:56:50,560 Speaker 1: if you remove sanctions, there could be plenty of investors 976 00:56:50,560 --> 00:56:53,480 Speaker 1: and companies out there who still don't want to invest 977 00:56:53,600 --> 00:56:56,640 Speaker 1: in Russia because of previous behavior, and we're already seeing 978 00:56:57,000 --> 00:56:59,799 Speaker 1: some inklings of that in the market. Yeah, companies have 979 00:57:00,080 --> 00:57:04,040 Speaker 1: plants departments, they also have PR departments, and I think 980 00:57:04,120 --> 00:57:06,080 Speaker 1: that's going to be now for real. That's going to 981 00:57:06,160 --> 00:57:08,600 Speaker 1: be another big factor of like, well, do we want 982 00:57:08,680 --> 00:57:12,720 Speaker 1: to go back in after this for PR reasons alone, 983 00:57:12,800 --> 00:57:14,680 Speaker 1: or is it better to just not have anything to 984 00:57:14,680 --> 00:57:17,640 Speaker 1: do with the country. Number of companies maybe having tasked 985 00:57:17,640 --> 00:57:19,880 Speaker 1: themselves that question. I also thought it was interesting like 986 00:57:19,960 --> 00:57:22,960 Speaker 1: even on like um, this sort of like the technical 987 00:57:23,160 --> 00:57:27,280 Speaker 1: aspects of financial sanctions, the loss of correspondent banking for 988 00:57:27,400 --> 00:57:29,800 Speaker 1: spur Bank, as you know that it's like easy to 989 00:57:29,800 --> 00:57:32,480 Speaker 1: turn them off, but then you need to write new 990 00:57:32,560 --> 00:57:35,960 Speaker 1: deals to bring them back on. And so to the 991 00:57:36,040 --> 00:57:39,880 Speaker 1: extent that the sanctions the removal of sanctions is hopefully 992 00:57:40,400 --> 00:57:44,720 Speaker 1: carrot to end the war in a short period of time, 993 00:57:45,280 --> 00:57:48,960 Speaker 1: there's gonna be something that you know, can realistically be 994 00:57:49,080 --> 00:57:53,400 Speaker 1: regained for them to have that effect. Yeah, exactly. Um well, 995 00:57:53,440 --> 00:57:55,040 Speaker 1: I mean either way, I feel like we're going to 996 00:57:55,120 --> 00:57:58,880 Speaker 1: have a lot more episodes on this topic. Um yeah, 997 00:57:58,920 --> 00:58:01,480 Speaker 1: it definitely feels like, Okay, shall we leave it there. 998 00:58:01,800 --> 00:58:04,760 Speaker 1: Let's leave it there, all right. This has been another 999 00:58:04,800 --> 00:58:07,880 Speaker 1: episode of the All Thoughts podcast. I'm Tracy Alloway. You 1000 00:58:07,880 --> 00:58:10,960 Speaker 1: can follow me on Twitter at Tracy Alloway and I'm 1001 00:58:11,080 --> 00:58:13,520 Speaker 1: Joe Why Isn't All? You can follow me on Twitter 1002 00:58:13,800 --> 00:58:16,360 Speaker 1: at The Stalwart. Follow our guests on Twitter at Ward 1003 00:58:16,520 --> 00:58:20,280 Speaker 1: Sara Vale He's at E s V. Follow our producer 1004 00:58:20,400 --> 00:58:24,040 Speaker 1: Laura Carlson. She's at Laura M. Carlson. Follow the Bloomberg 1005 00:58:24,040 --> 00:58:27,680 Speaker 1: head of podcast Francesco Levi at Francesca Today, and check 1006 00:58:27,720 --> 00:58:30,440 Speaker 1: out all of our podcasts at Bloomberg under the handle 1007 00:58:30,840 --> 00:59:00,360 Speaker 1: at podcasts. Thanks for listening, O