WEBVTT - Economic Sanctions on Russia Could Be Blueprint for Future Conflicts

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<v Speaker 1>This is Bloomberg Business Week with Krol Messer and Tim

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<v Speaker 1>Steneveek on Bloomberg Radio.

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<v Speaker 2>Well, it's hard to believe it's been nearly two years

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<v Speaker 2>since Russia invaded Ukraine. The war, of course, still ongoing.

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<v Speaker 2>Ukraine's saying today that at least four people were killed

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<v Speaker 2>in another ninety two wounded in Russian missile strikes in

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<v Speaker 2>the early hours of this morning that mainly targeted the

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<v Speaker 2>country's largest cities, Kiev and Kharkiv. Again, this war still

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<v Speaker 2>going on, Carol's also a war that involves massive sanctions

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<v Speaker 2>on Russia. It's a land war, it's an air war,

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<v Speaker 2>it's a war of technology, and it's a war of sanctions.

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<v Speaker 1>No, it's a really good point. As of July, the

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<v Speaker 1>US had sanctions in place against more than thirty six

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<v Speaker 1>hundred individuals, entities, vessels, and aircraft. That's according to kestellum Ai.

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<v Speaker 1>It's a compliance screening company that maintains count targets of

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<v Speaker 1>US sanctions included the top ten Russian owned banks, military manufacturers,

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<v Speaker 1>and government leaders all the way up to President Vladimir Putin.

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<v Speaker 1>I feel like in the early days, remember we talked

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<v Speaker 1>about this in what people were doing to put pressure

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<v Speaker 1>on the oligarchs, and so the yacht exactly hit and

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<v Speaker 1>the property throughout the world.

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<v Speaker 2>Well nearly two years in. Have these sanctions actually worked?

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<v Speaker 2>Christine Abele is Assistant Professor in Contracts in International Business

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<v Speaker 2>at New England Law and she's got a new book

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<v Speaker 2>out all about this. It's called The Russia Sanctions, The

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<v Speaker 2>Economic Response to Russia's Invasion of Ukraine. She joins us

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<v Speaker 2>on zoom from Boston. Professor, congratulations on the book. Good

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<v Speaker 2>to have you with us this afternoon. Thank you for

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<v Speaker 2>joining us. Simple yes or no? Have the sanctions on

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<v Speaker 2>Russia worked?

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<v Speaker 3>I would say yes, to the extent that sanctions can

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<v Speaker 3>work and to the extent that they can be reasonably

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<v Speaker 3>expected to achieve results. Have they reduced the resources available

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<v Speaker 3>to Russia Russia available to Russia to wage war? Yes,

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<v Speaker 3>they certainly have.

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<v Speaker 1>Well.

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<v Speaker 2>Necessity is the mother of invention, as they say. And

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<v Speaker 2>if you can't get if you can't get energy, or

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<v Speaker 2>if you can't get money as a result of selling

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<v Speaker 2>energy to the European Union into the United States, then

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<v Speaker 2>perhaps you can go and sell energy to China and

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<v Speaker 2>North Korea or another country that's not imposing So in

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<v Speaker 2>your book, you argue that there's sort of this new

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<v Speaker 2>alliance forming, new axis forming in the world based on

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<v Speaker 2>necessity and where Russia has had to go in order

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<v Speaker 2>to buy and sell goods.

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<v Speaker 3>Certainly, and we've seen that as a result of the

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<v Speaker 3>oil the oil the ban on oil imports into the

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<v Speaker 3>US and the EU, Russia is selling its oil to

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<v Speaker 3>purchasers including India and China. And as a result this,

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<v Speaker 3>this coalition of sanctioning nations, which includes the EES, US,

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<v Speaker 3>the UK, and the EU, are going to have to

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<v Speaker 3>step up enforcement and implement new sanctioned strategies going forward.

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<v Speaker 1>Yeah, it's interesting. I was just checking out a story

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<v Speaker 1>that we did earlier in December, early December and then

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<v Speaker 1>basically talking about Moscow's monthly income from oil exports greater

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<v Speaker 1>now than before the invasion of Ukraine, highlighting the failure

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<v Speaker 1>of measures to curb its war chest. I feel like,

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<v Speaker 1>you know, it gets complicated. We say this about so

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<v Speaker 1>many any of the geopolitical issues. How do we you know,

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<v Speaker 1>is there the will if you will, I guess, among

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<v Speaker 1>allies to kind of punish Russia even further, and so

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<v Speaker 1>we kind of prevent these go arounds, if you will.

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<v Speaker 3>I think so, And I think that what we might

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<v Speaker 3>see going forward is more of an emphasis on secondary sanctions,

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<v Speaker 3>where parties who are from nations that aren't haven't imposed

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<v Speaker 3>their own sanctions. Right, parties from third party country nations

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<v Speaker 3>like China and India, they might themselves be made subject

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<v Speaker 3>to sanctions in the future based on their supporting Russian

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<v Speaker 3>companies and individuals.

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<v Speaker 1>Do you think, really China though, I mean, they need oil,

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<v Speaker 1>you know, I think about right. It's like I said,

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<v Speaker 1>I'm being silly, but I mean, you know, they're looking

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<v Speaker 1>at what they need. I feel like there's kind of

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<v Speaker 1>a rewriting almost of geopolitical allies starting to unfold here

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<v Speaker 1>as we say see kind of pressures and stress points

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<v Speaker 1>around the world. But I do do you think something

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<v Speaker 1>like China will consider its allegiance or allies with the

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<v Speaker 1>United States and others in the Western world more important

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<v Speaker 1>than its need for oil?

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<v Speaker 3>No, And I don't think that sanctions are ever going

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<v Speaker 3>to be one hundred percent effective, right. Russia is always

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<v Speaker 3>going to be able to sell its oil to parties

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<v Speaker 3>in India or parties in China, But sometimes those parties

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<v Speaker 3>will have to make a choice right as to whether

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<v Speaker 3>they want to maintain economic relationships with Russian companies or

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<v Speaker 3>with EU or US ones, and there may be more

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<v Speaker 3>of a cost to those parties in supporting especially Russian

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<v Speaker 3>military linked companies, right, and parties that are more crucial

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<v Speaker 3>and more directly linked to the Russian war effort.

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<v Speaker 2>How do you differentiate between sanctions that a government puts

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<v Speaker 2>on a country versus a disas decision. And we've spoken

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<v Speaker 2>to Professor Jeffrey Sun and felt quite a bit over

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<v Speaker 2>the last couple of years. Ever at Yale, a company

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<v Speaker 2>that makes a decision to withdraw from Russia, how do

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<v Speaker 2>you distinguish between those two actions.

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<v Speaker 3>Yeah, so sometimes they're really interlinked, and a decision of

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<v Speaker 3>a private company to withdraw can be a result of sanctions,

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<v Speaker 3>even if those sanctions don't necessitate the company to take

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<v Speaker 3>that action, Because when there are so many sanctions, even

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<v Speaker 3>if they're individual targeted sanctions that are imposed with respect

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<v Speaker 3>to a certain region, it may be in a company's

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<v Speaker 3>own interest, right, and they may not want to take

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<v Speaker 3>on those compliance costs of determining what exactly it is

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<v Speaker 3>they can and cannot do, And so the business decision

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<v Speaker 3>for them maybe just to withdraw from newing business in

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<v Speaker 3>that region entirely. So definitely those two those two phenomena

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<v Speaker 3>are very very interlinked.

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<v Speaker 1>With the stress points that we were seeing, whether it's

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<v Speaker 1>Russia Ukraine and then the allies lining up on either side,

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<v Speaker 1>or what's going on in the Middle East. How are

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<v Speaker 1>you thinking about foreign policy evolving right now?

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<v Speaker 3>Yeah, so I think that since the invasion of Ukraine, right,

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<v Speaker 3>and the sanctions responds to Russia, this is very much

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<v Speaker 3>the use of economic tools, right, These sanctions tools as

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<v Speaker 3>a means to achieve foreign policy. So these economic sanctions

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<v Speaker 3>all have these foreign policy but they affect private parties

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<v Speaker 3>and entities in their quest to do so.

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<v Speaker 2>So when you think about the actual effects on Russia,

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<v Speaker 2>I think we're I think a lot of people are

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<v Speaker 2>really surprised today, professor, to see that this war is

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<v Speaker 2>still going on to the extent that well, Russia hasn't

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<v Speaker 2>clearly won. I mean almost two years ago, so many

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<v Speaker 2>people were sitting here saying this is going to be

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<v Speaker 2>a matter of days, not weeks, when Russia is success

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<v Speaker 2>in its campaign. And then as the war started playing

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<v Speaker 2>out and you started seeing companies and countries sever ties

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<v Speaker 2>with Russia, a lot of people thought wait a second, now,

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<v Speaker 2>maybe we will start to see the Russian people push

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<v Speaker 2>back against the government. That hasn't happened to the extent

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<v Speaker 2>that actually weakens the government and says, okay, you know

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<v Speaker 2>the Russian government is pulling out and is no longer

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<v Speaker 2>invading Ukraine. Are you surprised by that?

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<v Speaker 3>No, because I think that so much of what affects

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<v Speaker 3>these issues is the military aspect as well, right, And

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<v Speaker 3>so I think that in the coming months and perhaps years,

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<v Speaker 3>what we'll see is pressure on Putin as a result

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<v Speaker 3>of lack of military gains in the battlefield, as a

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<v Speaker 3>result of Russians being conscripted. I think that that certainly

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<v Speaker 3>will cause domestic pressure. And I think that in the

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<v Speaker 3>long run, economic sanctions do have significant power, but rarely

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<v Speaker 3>do economic sanctions themselves affects change. It's these other factors

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<v Speaker 3>that help spark those sorts of things as well.

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<v Speaker 2>I'm not trying to be glib, but what about people

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<v Speaker 2>going from being able to buy iPhones and you know,

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<v Speaker 2>a McDonald's burger to not being able to do that

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<v Speaker 2>in a matter of days.

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<v Speaker 3>Well, I think that's that's really interesting because China has

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<v Speaker 3>become more economically intertwined with Russians, so they're able to

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<v Speaker 3>to replace many of the products that are no longer

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<v Speaker 3>available to Russians because of the sanctions. Right, So they're

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<v Speaker 3>not always a perfect substitute, but oftentimes certain consumer products

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<v Speaker 3>are available. That's not to say that that's always the case,

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<v Speaker 3>but certainly in the long run, I think that some

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<v Speaker 3>of the most notable economics effects we'll see are as

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<v Speaker 3>a result of export controls, where maybe higher tech items

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<v Speaker 3>are provided to Russia because of the sanctions.

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<v Speaker 1>Professor, we only have about thirty forty second here. In

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<v Speaker 1>his New Year's Address, President j talked about China's reunification

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<v Speaker 1>with Taiwan. Would you anticipate a coordinated action effort by

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<v Speaker 1>global allies if we start to see you know, you

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<v Speaker 1>talk about the principle of territorial integrity in your book.

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<v Speaker 1>Would you expect to see a global coordinated effort in

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<v Speaker 1>terms of sanctions or other efforts against China if that

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<v Speaker 1>was to happen just very quickly.

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<v Speaker 3>I think it's different from the Russian situation because of

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<v Speaker 3>the extent of economic interdependence between the US and China

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<v Speaker 3>in a way that US and Russia are not so

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<v Speaker 3>heavily linked.

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<v Speaker 1>All right, certainly a lot to think about in this

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<v Speaker 1>year that is going to be probably once again jimp

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<v Speaker 1>pac geopolitically. Thank you so much, Christine Able. She is

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<v Speaker 1>Assistant Professor in Contracts and International Business at New England

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<v Speaker 1>Law on Zoom from Boston. Her new book, The Russian

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<v Speaker 1>Sanctions