1 00:00:03,240 --> 00:00:07,560 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:08,600 --> 00:00:11,040 Speaker 2: Hello, this is Stephanie Flanders. I just wanted to let 3 00:00:11,080 --> 00:00:13,440 Speaker 2: you know that we have edited this episode of Voter 4 00:00:13,560 --> 00:00:16,600 Speaker 2: Nomics since it went out on Monday night to spare 5 00:00:16,680 --> 00:00:19,120 Speaker 2: you a rather out of date conversation about the Indian 6 00:00:19,120 --> 00:00:22,840 Speaker 2: election results. Like most people, when we recorded the episode, 7 00:00:23,239 --> 00:00:26,560 Speaker 2: we thought, looking at exit polls, that Narinda Modi was 8 00:00:26,600 --> 00:00:29,480 Speaker 2: heading for a comfortable victory. It turns out the Indian 9 00:00:29,560 --> 00:00:32,760 Speaker 2: voters had other ideas. We will probably have something to 10 00:00:32,760 --> 00:00:35,240 Speaker 2: say about the actual results in the episode that airs 11 00:00:35,280 --> 00:00:41,000 Speaker 2: later this week, but in the meantime, enjoy this one. 12 00:00:45,280 --> 00:00:48,880 Speaker 3: If we can find a way to get an a 13 00:00:49,000 --> 00:00:51,960 Speaker 3: cessation of the conflict and a release of the hostages 14 00:00:52,320 --> 00:00:58,800 Speaker 3: and a political discussion emerges from it, There's look, this 15 00:00:58,840 --> 00:01:02,200 Speaker 3: is going to take years and years unfold, and we're 16 00:01:02,240 --> 00:01:04,640 Speaker 3: still the last best chance for the region to find 17 00:01:04,640 --> 00:01:05,240 Speaker 3: a way forward. 18 00:01:06,120 --> 00:01:10,280 Speaker 2: Welcome to voter Nomics, where politics and Markets collide. This year, 19 00:01:10,360 --> 00:01:13,880 Speaker 2: voters around the world have the ability to affect markets, countries, 20 00:01:13,920 --> 00:01:17,279 Speaker 2: and economies like never before, so we've created this series 21 00:01:17,640 --> 00:01:20,920 Speaker 2: to help you make sense of it all. I'm Stephanie Flanders. 22 00:01:20,680 --> 00:01:24,399 Speaker 1: And I'm alegra Stratton and Adrian Waldridge is normally with us, 23 00:01:24,640 --> 00:01:27,880 Speaker 1: but this week we think he's recuperating from anchoring Friday's 24 00:01:27,920 --> 00:01:29,080 Speaker 1: episode on his own. 25 00:01:29,000 --> 00:01:33,760 Speaker 2: And very good job he did too. At the top 26 00:01:33,760 --> 00:01:35,760 Speaker 2: of the show, you heard from our guest this week, 27 00:01:35,840 --> 00:01:39,560 Speaker 2: Dleepe Singh Deleep is the Deputy National Security Advisor for 28 00:01:39,640 --> 00:01:43,160 Speaker 2: International Economics in the White House. That's a role in 29 00:01:43,200 --> 00:01:46,080 Speaker 2: the Biden administration that he returned to earlier this year 30 00:01:46,480 --> 00:01:50,840 Speaker 2: after working for a shortish stint as Chief Global Economist 31 00:01:50,960 --> 00:01:53,520 Speaker 2: at p JIM. This is a guy who's been very 32 00:01:53,560 --> 00:01:59,160 Speaker 2: much associated with the geoeconomics, with the sort of bidernomics 33 00:01:59,720 --> 00:02:05,200 Speaker 2: pe pie of the US administration's international policy over the 34 00:02:05,280 --> 00:02:09,880 Speaker 2: last few years, carving out what economic state craft in 35 00:02:09,919 --> 00:02:13,119 Speaker 2: this new world means. And one area that I asked 36 00:02:13,200 --> 00:02:15,760 Speaker 2: him about was the Middle East, a place where you 37 00:02:15,760 --> 00:02:19,240 Speaker 2: would have said there was a positive argument for economic 38 00:02:19,280 --> 00:02:25,760 Speaker 2: diplomacy actually forging a more peaceful, sustainable outlook. You would 39 00:02:25,760 --> 00:02:28,160 Speaker 2: have said that anytime up to October seventh, but talking 40 00:02:28,160 --> 00:02:31,440 Speaker 2: about it now extremely difficult. So what he had to 41 00:02:31,480 --> 00:02:34,880 Speaker 2: say about that, what he had to say about the 42 00:02:34,919 --> 00:02:39,440 Speaker 2: sanctions against Russia that he was very much part of crafting, 43 00:02:39,880 --> 00:02:42,040 Speaker 2: and of course China was all pretty interesting. 44 00:02:42,240 --> 00:02:44,079 Speaker 1: It was really interesting, and you're completely right, it was 45 00:02:44,600 --> 00:02:48,919 Speaker 1: particularly interesting for his tone, and as somebody who used 46 00:02:48,919 --> 00:02:52,160 Speaker 1: to do interviews from government, I did sympathize quite a 47 00:02:52,160 --> 00:02:55,120 Speaker 1: few times with the tension because he's trying to choose 48 00:02:55,160 --> 00:02:59,680 Speaker 1: exactly the right word for somebody's who's actually crafting public 49 00:02:59,680 --> 00:03:02,799 Speaker 1: policy from government as you were speaking to him, Stephanie. 50 00:03:03,000 --> 00:03:05,520 Speaker 1: It's high stakes, and it was incredibly interesting for that 51 00:03:05,560 --> 00:03:06,000 Speaker 1: reason too. 52 00:03:06,080 --> 00:03:08,080 Speaker 2: And you know, he's an economist that is now in 53 00:03:08,120 --> 00:03:11,000 Speaker 2: the crosshairs of some of the biggest kind of geopolitical 54 00:03:11,000 --> 00:03:15,560 Speaker 2: and most sensitive issues facing the US right now, whether 55 00:03:15,639 --> 00:03:17,760 Speaker 2: it is the Middle East where we spoke. He'd also 56 00:03:18,040 --> 00:03:20,519 Speaker 2: just imposed or helped the administration just impose a load 57 00:03:20,560 --> 00:03:24,480 Speaker 2: of new tariffs on Chinese goods, so there was plenty 58 00:03:24,520 --> 00:03:26,160 Speaker 2: to talk about. It was a couple of weeks ago. 59 00:03:26,360 --> 00:03:28,720 Speaker 2: Nothing's happened to really outdate anything he said. But it's 60 00:03:28,720 --> 00:03:32,160 Speaker 2: always important to mention that we've got so many elections 61 00:03:32,200 --> 00:03:34,679 Speaker 2: to talk about in this episode, we're going to have 62 00:03:34,680 --> 00:03:36,600 Speaker 2: to talk about them pretty briefly before we get to 63 00:03:36,600 --> 00:03:40,760 Speaker 2: all that. I guess those who did listen to Adrian's episode. 64 00:03:41,000 --> 00:03:43,400 Speaker 2: At the end of last week, he spoke to our 65 00:03:43,440 --> 00:03:46,680 Speaker 2: economist yvon Maango about the state of play in the 66 00:03:46,720 --> 00:03:49,240 Speaker 2: South African election. We've obviously now had the results, and 67 00:03:49,280 --> 00:03:51,840 Speaker 2: I was pretty struck actually because Yvonne had put a 68 00:03:51,920 --> 00:03:54,800 Speaker 2: number in my mind, which was that anything under forty 69 00:03:54,840 --> 00:03:57,720 Speaker 2: five would be quite a bad result for the A 70 00:03:57,840 --> 00:04:00,000 Speaker 2: and C forty five percent of the vote, and actually 71 00:04:00,120 --> 00:04:01,920 Speaker 2: it looks like it's going to be closer to forty 72 00:04:02,120 --> 00:04:05,720 Speaker 2: and it does have some coalition building to do now. 73 00:04:05,880 --> 00:04:08,480 Speaker 1: They're can be scrabbling around similar Rather opposer is going 74 00:04:08,520 --> 00:04:11,880 Speaker 1: to have to contend with the return of a return 75 00:04:11,960 --> 00:04:16,719 Speaker 1: of his nemesis, Jake Zuma. I'm interested deaf in how voters, 76 00:04:17,680 --> 00:04:20,520 Speaker 1: what decisions they made in that central coal belt in 77 00:04:20,839 --> 00:04:25,239 Speaker 1: South Africa, the fact that they had constant shut downs 78 00:04:25,279 --> 00:04:28,720 Speaker 1: of electricity, how that impacted their decision and their view 79 00:04:28,800 --> 00:04:31,760 Speaker 1: of the A and C and the ruling government versus 80 00:04:32,040 --> 00:04:35,360 Speaker 1: the move that is afoot in the international community to 81 00:04:35,440 --> 00:04:38,839 Speaker 1: get South Africa to transition from these coal power plants 82 00:04:38,880 --> 00:04:39,800 Speaker 1: to renewable energy. 83 00:04:39,960 --> 00:04:43,720 Speaker 2: One of our columnists, Justice Malala, who had spoken in 84 00:04:43,760 --> 00:04:47,200 Speaker 2: a lead up to the election as this being a 85 00:04:47,320 --> 00:04:50,080 Speaker 2: result that could in a sense mark them sort of 86 00:04:50,360 --> 00:04:55,280 Speaker 2: normalizing of South Africa's democracy. You know, it's not normal 87 00:04:55,480 --> 00:04:57,560 Speaker 2: for a country to get sixty to seventy percent of 88 00:04:57,560 --> 00:05:00,920 Speaker 2: the vote as A ANDC has in many years after 89 00:05:01,000 --> 00:05:04,400 Speaker 2: the end of Aparthei, you've had now this fracturing of 90 00:05:04,480 --> 00:05:09,560 Speaker 2: the party, far left elements breaking off, Jacob Zuma's party 91 00:05:10,160 --> 00:05:15,520 Speaker 2: breaking off, and at least, just as Malala says, you know, 92 00:05:15,640 --> 00:05:19,680 Speaker 2: the key thing now for many people would be avoiding 93 00:05:20,080 --> 00:05:24,320 Speaker 2: what's known as a doomsday coalition, so avoiding a coalition 94 00:05:24,640 --> 00:05:28,400 Speaker 2: with those more far left. What needs to happen, at 95 00:05:28,440 --> 00:05:32,480 Speaker 2: least according to him, is a coalition with the White 96 00:05:32,600 --> 00:05:35,560 Speaker 2: lad opposition Democratic Alliance, which is led by a woman 97 00:05:35,920 --> 00:05:40,000 Speaker 2: Helen Zilla, who he says is crotchety, pugilistic and controversial, 98 00:05:40,440 --> 00:05:43,360 Speaker 2: but a very effective political operator. And the important thing 99 00:05:43,360 --> 00:05:47,040 Speaker 2: about that would be again to cement the normalizing of 100 00:05:47,839 --> 00:05:53,200 Speaker 2: South Africa's democracy, hands across the racial aisle, however you 101 00:05:53,560 --> 00:05:56,279 Speaker 2: want to talk about it. That would be as force 102 00:05:56,480 --> 00:06:00,920 Speaker 2: for market reforms, potentially for a economic growth, would be 103 00:06:00,960 --> 00:06:04,120 Speaker 2: positive for investors worried about what's going to happen with 104 00:06:04,200 --> 00:06:07,440 Speaker 2: the budget. But I think it would also be a 105 00:06:07,560 --> 00:06:11,520 Speaker 2: rejection of very kind of race based dividing lines. 106 00:06:12,160 --> 00:06:14,760 Speaker 1: And it's interesting as well because it's pure votonomics, right, 107 00:06:14,960 --> 00:06:18,320 Speaker 1: what's going on in South Africa where you have people's 108 00:06:18,520 --> 00:06:21,760 Speaker 1: lived experience dealing with these energy shutdowns and then this 109 00:06:22,000 --> 00:06:25,280 Speaker 1: high level of unemployments as well as violence and so on, 110 00:06:25,839 --> 00:06:28,080 Speaker 1: and that expressing itself, as you say, stare for the 111 00:06:28,160 --> 00:06:30,680 Speaker 1: first time in the history of it as a democracy 112 00:06:31,080 --> 00:06:31,680 Speaker 1: at the polls. 113 00:06:32,279 --> 00:06:34,920 Speaker 2: So we are going to wait and see what happens. Then. 114 00:06:35,000 --> 00:06:39,240 Speaker 2: The other thing that's happened with the other major emerging 115 00:06:40,000 --> 00:06:43,640 Speaker 2: market democracy to have got a change of leadership is 116 00:06:43,640 --> 00:06:44,360 Speaker 2: of course Mexico. 117 00:06:44,880 --> 00:06:49,560 Speaker 1: Yeah, and its first female president in a landslide victory. 118 00:06:49,680 --> 00:06:52,760 Speaker 1: Though she does appear, you know, it's well known that 119 00:06:52,880 --> 00:06:58,520 Speaker 1: she is the anointed air to the incumbent, the previous leader, 120 00:06:59,320 --> 00:07:02,480 Speaker 1: and it seems like for her. The big issues in 121 00:07:02,560 --> 00:07:06,520 Speaker 1: her intrea the extreme violence in Mexico. Thirty eight candidates 122 00:07:06,560 --> 00:07:07,880 Speaker 1: were killed in this election. 123 00:07:08,320 --> 00:07:12,280 Speaker 2: The violence of the cartel violence, the control over different 124 00:07:12,320 --> 00:07:15,200 Speaker 2: parts of the country is extraordinary. I do find in 125 00:07:15,280 --> 00:07:18,480 Speaker 2: these conversations it's almost like a split screen conversation. On 126 00:07:18,560 --> 00:07:22,160 Speaker 2: the one hand, our reporters are reporting about this basic 127 00:07:22,320 --> 00:07:26,840 Speaker 2: level of lawlessness, particularly outside Mexico City, caused by the cartels, 128 00:07:26,880 --> 00:07:31,320 Speaker 2: caused by drug violence. You also have President Trump talking 129 00:07:31,520 --> 00:07:36,080 Speaker 2: very aggressively about sending people back to Mexico, potentially sending 130 00:07:36,600 --> 00:07:41,640 Speaker 2: Americans troops if he wins the election into Mexico to 131 00:07:41,760 --> 00:07:45,360 Speaker 2: prevent immigration, but also to tackle the drugs issue. And 132 00:07:45,480 --> 00:07:49,840 Speaker 2: yet almost in the same breath, we'll have investors, market 133 00:07:49,880 --> 00:07:52,600 Speaker 2: analysts talking about what a great bet Mexico is. You know, 134 00:07:52,760 --> 00:07:54,400 Speaker 2: Mexico is going to be one of these countries that 135 00:07:54,480 --> 00:07:59,880 Speaker 2: benefits enormously from a more regionalized global economy, people turning 136 00:08:00,080 --> 00:08:03,720 Speaker 2: away from China wanting to have a closer connection, be 137 00:08:03,840 --> 00:08:06,760 Speaker 2: closer to America. And I just find that extraordinary. And 138 00:08:06,840 --> 00:08:14,600 Speaker 2: she's inheriting that sort of two sided schizophrene legacy, and someone, 139 00:08:14,680 --> 00:08:18,480 Speaker 2: I mean, Andres Manuel Lopez Obrador Amlo, who's been the 140 00:08:18,560 --> 00:08:21,960 Speaker 2: president all this time, was an extraordinary figure. It's very 141 00:08:22,040 --> 00:08:26,040 Speaker 2: kind of seventy style populist. She's kind of inherited that 142 00:08:26,160 --> 00:08:31,480 Speaker 2: slightly populist tradition, yet she herself is a social scientist 143 00:08:31,880 --> 00:08:34,719 Speaker 2: apparently doesn't take a lot of risks. It's going to 144 00:08:34,760 --> 00:08:41,240 Speaker 2: be interesting to watch let's got on to my very 145 00:08:41,320 --> 00:08:45,160 Speaker 2: interesting conversation with Dleepe Singh, the United States Deputy National 146 00:08:45,240 --> 00:08:49,480 Speaker 2: Security Advisor for International Economics in the White House. Deleep, 147 00:08:49,800 --> 00:08:53,120 Speaker 2: among many other things, was a key architect of those 148 00:08:53,280 --> 00:08:57,400 Speaker 2: unprecedented sanctions that were imposed on Russia after its invasion 149 00:08:57,880 --> 00:09:00,800 Speaker 2: of Ukraine in twenty twenty two. Do a lot of 150 00:09:01,360 --> 00:09:08,280 Speaker 2: conversation about how effective those sanctions have been, given that 151 00:09:08,920 --> 00:09:10,959 Speaker 2: Russia has continued to make a lot of money from 152 00:09:11,000 --> 00:09:13,600 Speaker 2: selling its oil. So I started the conversation by asking 153 00:09:13,679 --> 00:09:16,320 Speaker 2: him whether he thinks the sanctions are working. 154 00:09:18,080 --> 00:09:20,679 Speaker 3: So the way I always think about policy is how 155 00:09:20,720 --> 00:09:23,760 Speaker 3: does it look relative to the counterfactuals. So relative to 156 00:09:23,840 --> 00:09:27,559 Speaker 3: the counterfactual of doing nothing, of allowing the redrawing of 157 00:09:27,640 --> 00:09:30,000 Speaker 3: borders by force in the heart of Europe, to go 158 00:09:30,160 --> 00:09:33,559 Speaker 3: and check, no doubt the sanctions are doing their job. Admittedly, 159 00:09:34,120 --> 00:09:36,360 Speaker 3: it's not the nosedive that I predicted two years ago, 160 00:09:36,440 --> 00:09:40,480 Speaker 3: but I would not mistake Russia's rebound for resilience. If 161 00:09:40,480 --> 00:09:43,120 Speaker 3: I had to classify, I'd say it's another potent in facade, 162 00:09:43,800 --> 00:09:47,320 Speaker 3: because what Putin has done is to prevent a collapse 163 00:09:47,360 --> 00:09:50,240 Speaker 3: of the economy in the short term by sacrificing Russia's 164 00:09:50,280 --> 00:09:53,760 Speaker 3: long run potential. That's what capital controls do. They limit 165 00:09:53,800 --> 00:09:56,079 Speaker 3: the flow up money getting out, and therefore they prevent 166 00:09:56,200 --> 00:09:58,480 Speaker 3: the freefall of the ruble and the collapse of the 167 00:09:58,520 --> 00:10:01,760 Speaker 3: financial system. But there's a cost, which is the isolation 168 00:10:01,880 --> 00:10:04,240 Speaker 3: of Russia from most of the advanced economies in the world. 169 00:10:04,280 --> 00:10:06,560 Speaker 3: If you look at the imports from the Western countries 170 00:10:06,600 --> 00:10:09,800 Speaker 3: to Russia, they've nosed dived by about seventy five percent 171 00:10:09,880 --> 00:10:12,280 Speaker 3: since the war. I would make the same point in 172 00:10:12,400 --> 00:10:16,400 Speaker 3: terms of the effect of Russia weaponizing its energy supply. Yes, 173 00:10:16,600 --> 00:10:18,640 Speaker 3: it led to a spike of oil and gas prices 174 00:10:19,280 --> 00:10:22,760 Speaker 3: that drove record trade surpluses. It's flattered GDP growth, but 175 00:10:23,320 --> 00:10:26,199 Speaker 3: at the cost of permanently losing well over half of 176 00:10:26,280 --> 00:10:29,280 Speaker 3: its global market share and energy exports. And then the 177 00:10:29,360 --> 00:10:31,880 Speaker 3: third step he took was to ramp up government spending 178 00:10:31,920 --> 00:10:34,920 Speaker 3: to fuel the war machine. And you know it's up 179 00:10:34,960 --> 00:10:36,840 Speaker 3: to eight percent of GDP. I think that's the post 180 00:10:36,880 --> 00:10:40,640 Speaker 3: Soviet record. Yes, that cushioned the contraction, but here again 181 00:10:40,840 --> 00:10:44,040 Speaker 3: at the cost of depleting Russia's national savings. It set 182 00:10:44,160 --> 00:10:47,679 Speaker 3: Russia on a course for the policy rates now sixteen percent. 183 00:10:47,800 --> 00:10:51,320 Speaker 3: I believe inflations close to eight percent, and they're going 184 00:10:51,400 --> 00:10:54,160 Speaker 3: to have chronic budget deficits. So look, Stephanie, I think 185 00:10:54,320 --> 00:10:57,959 Speaker 3: reasonable people can disagree about Russia's short term prospects, but 186 00:10:58,280 --> 00:11:00,839 Speaker 3: there's no doubt that Russia's long term outlook is bleak. 187 00:11:01,480 --> 00:11:04,000 Speaker 3: That's what those bleed interest rates and inflation do. They 188 00:11:04,080 --> 00:11:07,520 Speaker 3: choke growth. So will the exit from Russia of more 189 00:11:07,559 --> 00:11:10,880 Speaker 3: than a thousand multinationals. So will the flight of up 190 00:11:10,960 --> 00:11:13,040 Speaker 3: to a million of Russia's best and brightest, and so 191 00:11:13,200 --> 00:11:16,000 Speaker 3: all the loss of access to global capital markets and 192 00:11:16,760 --> 00:11:19,160 Speaker 3: leading edge technology. So I think this is still going 193 00:11:19,240 --> 00:11:23,000 Speaker 3: to be a smaller, weaker, more isolated, less sophisticated economy 194 00:11:23,040 --> 00:11:23,679 Speaker 3: for a generation. 195 00:11:24,360 --> 00:11:26,400 Speaker 2: Of course, it was never going to stop Russia from 196 00:11:26,440 --> 00:11:29,360 Speaker 2: being able to pursue the war, but that a lot 197 00:11:29,480 --> 00:11:32,319 Speaker 2: of goods are going over the border through Azerbaijan in 198 00:11:32,400 --> 00:11:34,760 Speaker 2: other places, and there's a lot of trade going there 199 00:11:34,880 --> 00:11:37,599 Speaker 2: from countries that are part of the sanctions resume. I 200 00:11:37,720 --> 00:11:41,400 Speaker 2: noticed in February UK sold twenty six pounds worth of 201 00:11:41,559 --> 00:11:44,839 Speaker 2: luxury cars to Azerbaijan, which as of a couple of 202 00:11:44,920 --> 00:11:48,160 Speaker 2: years ago we probably sold about two So how much 203 00:11:48,200 --> 00:11:51,960 Speaker 2: are you actively trying to plug those kind of entry 204 00:11:52,080 --> 00:11:54,480 Speaker 2: points or is that just impossible without making a lot 205 00:11:54,520 --> 00:11:55,240 Speaker 2: of enemies. 206 00:11:56,440 --> 00:11:59,840 Speaker 3: Now this is very much our focus because I mean, 207 00:12:00,080 --> 00:12:03,040 Speaker 3: Messani is the mother of invention, and we knew Russia 208 00:12:03,040 --> 00:12:07,200 Speaker 3: would try to evade sanctions by exploiting loopholes, and that's 209 00:12:07,240 --> 00:12:09,439 Speaker 3: what they're doing. And we have to prepare over the 210 00:12:09,559 --> 00:12:11,640 Speaker 3: medium and long run for a cat and mouse game 211 00:12:11,760 --> 00:12:13,720 Speaker 3: if we want to sustain the impact of the sanctions 212 00:12:13,720 --> 00:12:16,160 Speaker 3: that we put in place a couple of days after 213 00:12:16,240 --> 00:12:20,199 Speaker 3: the war began. You're pointing to where we have to focus, 214 00:12:20,440 --> 00:12:23,679 Speaker 3: and it's disarming the Russian war machine. That to me 215 00:12:23,840 --> 00:12:26,000 Speaker 3: is really a lot of supply chain analysis. What are 216 00:12:26,040 --> 00:12:28,800 Speaker 3: the components the inputs that are currently making the biggest 217 00:12:28,880 --> 00:12:32,640 Speaker 3: difference for Russia on the battlefield, So think of UAVs 218 00:12:32,880 --> 00:12:37,719 Speaker 3: or ammunition or heavy engineering equipment or armored vehicles, and 219 00:12:37,800 --> 00:12:42,720 Speaker 3: then if you take those battlefield advantages, we're mapping out 220 00:12:42,760 --> 00:12:45,800 Speaker 3: the supply chains that provide the advantage, including the raw 221 00:12:45,880 --> 00:12:50,040 Speaker 3: materials and the precursors. And look, China is very much 222 00:12:50,120 --> 00:12:53,120 Speaker 3: part of this conversation because it's been willing to serve 223 00:12:53,160 --> 00:12:56,400 Speaker 3: as the factory of the Russian war machine in a 224 00:12:56,520 --> 00:12:58,480 Speaker 3: very real sense. And if you look at the trade data, 225 00:12:59,080 --> 00:13:01,920 Speaker 3: Russia's imports in the G seven countries has collapsed by 226 00:13:01,960 --> 00:13:05,720 Speaker 3: about seventy five percent, but imports from China have more 227 00:13:05,800 --> 00:13:07,959 Speaker 3: than tripled. It's now more than half of all of 228 00:13:08,040 --> 00:13:14,840 Speaker 3: Russia's imports. And microchips, machine tools, optics, cruise, missile components, weapons, 229 00:13:14,920 --> 00:13:18,000 Speaker 3: propellants are all part of what's being bought by Russia 230 00:13:18,040 --> 00:13:21,680 Speaker 3: from China. Just to give you a stat in twenty 231 00:13:21,760 --> 00:13:24,680 Speaker 3: twenty three, ninety percent of Russia's microchips came from China, 232 00:13:25,520 --> 00:13:29,319 Speaker 3: and those microchips for use were used for missiles, tanks, aircraft, 233 00:13:29,480 --> 00:13:33,680 Speaker 3: many many battlefield advantages came from those chips. Seventy percent 234 00:13:33,720 --> 00:13:36,760 Speaker 3: of Russia's machine tool imports came from China in Q 235 00:13:36,960 --> 00:13:40,720 Speaker 3: four of twenty twenty three. So we have issued warnings, 236 00:13:41,480 --> 00:13:44,760 Speaker 3: we have written letters, and it may be time soon 237 00:13:44,840 --> 00:13:48,160 Speaker 3: for us to provide a demonstration effect of our seriousness. 238 00:13:49,720 --> 00:13:52,280 Speaker 2: I shouldn't laugh at the thought of sending letters, but 239 00:13:52,400 --> 00:13:54,720 Speaker 2: when you think of the sort of the full force 240 00:13:54,800 --> 00:13:57,440 Speaker 2: of the United States, you know, writing lots of letters, 241 00:13:57,559 --> 00:13:59,240 Speaker 2: I mean, what comes next? 242 00:13:59,400 --> 00:14:02,199 Speaker 3: Well, I mean I know it may sound funny to 243 00:14:02,400 --> 00:14:04,880 Speaker 3: issue letters. But I mean the best, the best sanctions 244 00:14:04,920 --> 00:14:06,160 Speaker 3: are those that never have to get used. 245 00:14:06,240 --> 00:14:08,280 Speaker 2: Who is it you're writing to when you write the letters? 246 00:14:09,440 --> 00:14:12,760 Speaker 3: Oh so? Uh? You know, so the relevant authorities in 247 00:14:12,840 --> 00:14:16,440 Speaker 3: the countries from which transhipment is occurring or these components 248 00:14:16,440 --> 00:14:22,040 Speaker 3: are originating, if they're diminishing returns to sending signals and 249 00:14:22,280 --> 00:14:25,920 Speaker 3: having conversations, then you you follow it up with action. Uh. 250 00:14:26,320 --> 00:14:29,160 Speaker 3: And and those actions can generate a chilling effect that's 251 00:14:29,200 --> 00:14:32,640 Speaker 3: many multiples larger than the direct impact. And that's where 252 00:14:32,640 --> 00:14:35,040 Speaker 3: we are in this in this conflict. We've we've got 253 00:14:35,120 --> 00:14:37,760 Speaker 3: to find ways to disarm the Russian war machine, and 254 00:14:37,840 --> 00:14:40,560 Speaker 3: then we've got to turn our attention in parallel really 255 00:14:40,680 --> 00:14:44,200 Speaker 3: to to defunding it. And that really points to where 256 00:14:44,240 --> 00:14:47,600 Speaker 3: his income is coming from, and that's energy, you know, Stephanie. 257 00:14:47,640 --> 00:14:51,440 Speaker 3: We implemented a price cap to exert leverage from our 258 00:14:51,560 --> 00:14:56,600 Speaker 3: dominant position in oil services, and the design was calibrated 259 00:14:56,640 --> 00:14:59,080 Speaker 3: to limit the price at which Putent could sell is 260 00:14:59,240 --> 00:15:02,680 Speaker 3: oil using those services, so that we could reduce his 261 00:15:02,800 --> 00:15:06,600 Speaker 3: revenues while keeping the keeping steady the supply of oil 262 00:15:07,000 --> 00:15:10,440 Speaker 3: to global markets. Well, everyone knows now he's adapted by 263 00:15:10,520 --> 00:15:13,840 Speaker 3: launching a shadow fleet that doesn't use G seven oil services, 264 00:15:14,640 --> 00:15:16,800 Speaker 3: and so now we've got to find ways to increase 265 00:15:17,200 --> 00:15:20,200 Speaker 3: the cost of using his shadow fleet, force him back 266 00:15:20,280 --> 00:15:23,680 Speaker 3: into the Price Cap Coalition's ecosystem, and that's where we 267 00:15:23,800 --> 00:15:26,840 Speaker 3: have the bargaining power to drive down his marginal revenues 268 00:15:26,960 --> 00:15:30,840 Speaker 3: relative to marginal cost. So disarm and defund the Russian 269 00:15:30,880 --> 00:15:34,920 Speaker 3: war machine. That's our focus now, is that G seven action. 270 00:15:35,280 --> 00:15:37,200 Speaker 2: You know, what kind of places are you looking to 271 00:15:37,400 --> 00:15:38,040 Speaker 2: act further on? 272 00:15:38,560 --> 00:15:42,800 Speaker 3: Well, I'm going to be vague because we're not in 273 00:15:42,840 --> 00:15:44,920 Speaker 3: the business of telegraphing exactly what we do, but in 274 00:15:45,000 --> 00:15:48,240 Speaker 3: a general sense, first we want to shift more of 275 00:15:48,320 --> 00:15:51,480 Speaker 3: the activity from the shadow fleet to within the price 276 00:15:51,560 --> 00:15:54,400 Speaker 3: cap coalition. Within the price Cap Coalition, we have a 277 00:15:54,520 --> 00:15:57,280 Speaker 3: number of levers that we can use again to reduce 278 00:15:57,360 --> 00:16:01,440 Speaker 3: his revenues while keeping supply steady. I think you're probably 279 00:16:01,480 --> 00:16:03,920 Speaker 3: familiar with what those levers are, but want I don't 280 00:16:03,920 --> 00:16:04,880 Speaker 3: want to be specific here. 281 00:16:05,520 --> 00:16:08,360 Speaker 2: And one of the positive side effects of sanctions that 282 00:16:08,680 --> 00:16:11,440 Speaker 2: sort of looked like it was potentially going to happen 283 00:16:11,720 --> 00:16:15,880 Speaker 2: over the last year was for the seized Russian assets 284 00:16:16,280 --> 00:16:20,800 Speaker 2: to provide in one way or another, provides financial support 285 00:16:21,200 --> 00:16:23,200 Speaker 2: for Ukraine. Where do we stand on that? 286 00:16:25,040 --> 00:16:28,600 Speaker 3: I think it's worth saying, Stephanie, why why we feel 287 00:16:28,800 --> 00:16:32,920 Speaker 3: justified in mobilizing Russia's assets for the benefit of Ukraine. 288 00:16:32,920 --> 00:16:36,080 Speaker 3: I mean, I started from the principle that Russia should 289 00:16:36,120 --> 00:16:38,440 Speaker 3: pay for the burden of rebuilding the country that it's 290 00:16:38,520 --> 00:16:42,480 Speaker 3: terrorized on a colossal scale. A second, I mean the 291 00:16:42,600 --> 00:16:47,160 Speaker 3: precedent of imposing compensation claims after a wrongful invasion that 292 00:16:47,320 --> 00:16:51,840 Speaker 3: was set long ago, most recently after Iraq's invasion of Kuwait. 293 00:16:52,600 --> 00:16:55,120 Speaker 3: The third point is Russia has profited to the tune 294 00:16:55,200 --> 00:16:58,080 Speaker 3: of hundreds of billions of dollars from higher energy prices 295 00:16:58,240 --> 00:17:01,120 Speaker 3: since the war began, in part is it weaponize its supply, 296 00:17:01,840 --> 00:17:06,000 Speaker 3: So any claim that Russia's weymar Germany is completely bogus 297 00:17:06,080 --> 00:17:09,520 Speaker 3: in my view. And for look, the goal of forcing 298 00:17:09,600 --> 00:17:12,200 Speaker 3: Russia to pay it's not to punish, it's to finance 299 00:17:12,480 --> 00:17:15,560 Speaker 3: or rebuild in Ukraine. That will likely cost more than 300 00:17:15,600 --> 00:17:18,200 Speaker 3: five hundred billion dollars, maybe multiples of that amount. So 301 00:17:18,440 --> 00:17:20,840 Speaker 3: the question really is how should that burden get financed? 302 00:17:21,440 --> 00:17:23,879 Speaker 3: Should it be solely on the back of Western taxpayers 303 00:17:24,080 --> 00:17:26,480 Speaker 3: or the people of Ukraine? I mean The answer is, 304 00:17:26,520 --> 00:17:29,680 Speaker 3: of course not. The Kremlin has to pay its fair share. 305 00:17:30,359 --> 00:17:33,080 Speaker 3: So you know, what are we doing. We have a 306 00:17:33,200 --> 00:17:36,000 Speaker 3: G seven, a leader's summit that to me is the 307 00:17:36,119 --> 00:17:38,960 Speaker 3: action forcing event in the near term. We all know 308 00:17:39,359 --> 00:17:42,280 Speaker 3: the situation on the battlefield remains very difficult right now. 309 00:17:42,800 --> 00:17:45,600 Speaker 3: By the time our leaders gather in Apulia make it worse. 310 00:17:47,560 --> 00:17:50,200 Speaker 3: There is still a large financing gap in Ukraine, even 311 00:17:50,280 --> 00:17:54,600 Speaker 3: after taking into account our sixty one billion supplemental package, 312 00:17:54,720 --> 00:17:58,720 Speaker 3: even after the EU's fifty billion euro facility. The external 313 00:17:58,760 --> 00:18:01,879 Speaker 3: financing gap, if you include military needs on top of 314 00:18:01,960 --> 00:18:04,400 Speaker 3: budget and balance of payment support, it could be close 315 00:18:04,400 --> 00:18:07,760 Speaker 3: to one hundred million dollars. So the G seventh summit 316 00:18:07,840 --> 00:18:11,720 Speaker 3: really is the best opportunity before November to close the gap. 317 00:18:13,600 --> 00:18:16,560 Speaker 3: And we know, I mean you alluded to this in 318 00:18:16,640 --> 00:18:19,639 Speaker 3: your question the seizure of principle. We know that's a 319 00:18:19,760 --> 00:18:23,960 Speaker 3: redline for certain G seven members. We also know that 320 00:18:24,119 --> 00:18:27,800 Speaker 3: loans to Ukraine that are backed by reparation claims is 321 00:18:28,040 --> 00:18:31,440 Speaker 3: a non attractive idea for at least a couple of 322 00:18:31,520 --> 00:18:34,960 Speaker 3: member states due to the messy history. And we know 323 00:18:35,320 --> 00:18:39,119 Speaker 3: fiscal space is scarce for every member state. So we 324 00:18:39,320 --> 00:18:42,480 Speaker 3: are working on a proposal that makes maximal use of 325 00:18:42,560 --> 00:18:45,359 Speaker 3: the present value of the interest income that you can 326 00:18:45,440 --> 00:18:47,800 Speaker 3: generate from the immobilized assets. And the way to really 327 00:18:47,840 --> 00:18:50,680 Speaker 3: get maximal use is to offer an upfront dispersement to 328 00:18:50,800 --> 00:18:54,040 Speaker 3: Ukraine on the basis of assurance is that the interest 329 00:18:54,080 --> 00:18:57,399 Speaker 3: income from the immobilized assets will be available to repay it, 330 00:18:58,040 --> 00:19:00,680 Speaker 3: and that upfront dispersement can be as large fifty billion 331 00:19:00,720 --> 00:19:03,879 Speaker 3: dollars or more depending on how many years of interest 332 00:19:03,920 --> 00:19:05,000 Speaker 3: income you bring forward. 333 00:19:05,920 --> 00:19:07,720 Speaker 2: It sounds like there might be movement on that at 334 00:19:07,760 --> 00:19:08,720 Speaker 2: the G seven summer. 335 00:19:09,080 --> 00:19:11,560 Speaker 3: I mean, I think so, because what we've done is 336 00:19:11,680 --> 00:19:14,480 Speaker 3: we've listened to our partners, We've understood their red lines, 337 00:19:14,720 --> 00:19:16,959 Speaker 3: and we're now making maximal use of what we can 338 00:19:17,000 --> 00:19:19,280 Speaker 3: do within those constraints. We want it to be done 339 00:19:19,280 --> 00:19:22,080 Speaker 3: with solidarity, but we also want to have the flexibility 340 00:19:22,160 --> 00:19:24,959 Speaker 3: to mobilize the rest of the assets that we froze 341 00:19:25,760 --> 00:19:28,119 Speaker 3: if we want to later. So that's what we're working towards. 342 00:19:28,440 --> 00:19:32,679 Speaker 2: We have finally managed to get the military support passed 343 00:19:32,920 --> 00:19:35,320 Speaker 2: through Congress. But do you if you look at what's 344 00:19:35,359 --> 00:19:38,240 Speaker 2: happening on the battlefield now, do you just worry? It's 345 00:19:38,240 --> 00:19:40,720 Speaker 2: sort of almost at a personal level that that has 346 00:19:40,800 --> 00:19:42,399 Speaker 2: come too late for Ukraine. 347 00:19:43,480 --> 00:19:46,120 Speaker 3: Well, I was just in Kiev a few weeks ago, 348 00:19:47,160 --> 00:19:51,040 Speaker 3: and I mean it is. It is a dire situation 349 00:19:51,200 --> 00:19:54,639 Speaker 3: in terms of air defense, in terms of manpower, and 350 00:19:54,720 --> 00:19:58,359 Speaker 3: you see what's happening in the northeast and to the 351 00:19:58,480 --> 00:20:01,639 Speaker 3: energy infrastructure more generally. But I think there's a chance 352 00:20:01,760 --> 00:20:04,880 Speaker 3: for a psychological inflection point, not just and I don't 353 00:20:04,920 --> 00:20:08,840 Speaker 3: mean to overemphasize psychology, but if you can connect the 354 00:20:08,920 --> 00:20:12,080 Speaker 3: dots and almost draw an arc between the EU's fifty 355 00:20:12,119 --> 00:20:16,040 Speaker 3: billion dollar facility, the US sixty one billion dollar facility, 356 00:20:16,600 --> 00:20:19,320 Speaker 3: the G seven summit, where if we mobilize fifty billion 357 00:20:19,400 --> 00:20:22,800 Speaker 3: dollars that adds to the sum that we've already raised 358 00:20:22,840 --> 00:20:25,080 Speaker 3: so far this year, and then you have the NATO summit. 359 00:20:26,520 --> 00:20:29,520 Speaker 3: You can create a positive inflection point if all of 360 00:20:29,560 --> 00:20:33,000 Speaker 3: those events go as we hope, and then you can 361 00:20:33,240 --> 00:20:36,159 Speaker 3: imagine the path for Ukraine in which it's able to 362 00:20:36,200 --> 00:20:40,280 Speaker 3: outlast Putin, regardless of what happens in the elections in 363 00:20:40,359 --> 00:20:42,920 Speaker 3: the US or anywhere else for the rest of the year, 364 00:20:43,480 --> 00:20:45,960 Speaker 3: and that really has the best chance of shaping Putin's 365 00:20:45,960 --> 00:20:50,040 Speaker 3: calculus and ultimately giving Ukraine leverage to pursue whatever path 366 00:20:50,080 --> 00:20:50,440 Speaker 3: it wants. 367 00:20:51,480 --> 00:20:53,760 Speaker 2: China, one of the big announcements which seems for the 368 00:20:53,800 --> 00:20:57,160 Speaker 2: administration recently is a lot of new tariffs on Chinese goods, 369 00:20:57,280 --> 00:21:00,760 Speaker 2: including an increase in the tariff on China these electrical 370 00:21:00,880 --> 00:21:05,040 Speaker 2: vehicles to over one hundred percent. And I guess to 371 00:21:05,119 --> 00:21:07,440 Speaker 2: remind listeners of tariff is just a tax which is 372 00:21:07,680 --> 00:21:09,880 Speaker 2: levied on goods important from in other countries. So you're 373 00:21:10,280 --> 00:21:14,840 Speaker 2: you're massively increasing what were the cost of what were 374 00:21:14,920 --> 00:21:19,640 Speaker 2: previously quite cheap evs. Why do you want to discourage 375 00:21:19,640 --> 00:21:23,560 Speaker 2: Americans from buying evs by making them so much more expensive? 376 00:21:25,000 --> 00:21:27,440 Speaker 3: Well, I think you have to start this conversation with 377 00:21:27,560 --> 00:21:31,360 Speaker 3: a diagnosis of the geoeconomic backdrop, Stephanie, because it's often 378 00:21:31,440 --> 00:21:34,320 Speaker 3: missing in these discussions around tariffs. And if you if 379 00:21:34,359 --> 00:21:37,200 Speaker 3: you start from a diagnosis that president She's ambition is 380 00:21:37,280 --> 00:21:40,400 Speaker 3: to restore China's tegebony at least in the endno Pacific. 381 00:21:40,480 --> 00:21:44,840 Speaker 3: But I would argue beyond, you know, I would say 382 00:21:44,880 --> 00:21:48,720 Speaker 3: he's seeking that dominance mostly through economic and technological primacy. 383 00:21:49,160 --> 00:21:51,480 Speaker 3: And you know, as a corollary, he sees the US 384 00:21:51,880 --> 00:21:55,760 Speaker 3: in particular. But democracies in general is being in structural decline, 385 00:21:56,119 --> 00:21:59,159 Speaker 3: and he's willing to take tactical risks to realize his 386 00:21:59,240 --> 00:22:02,280 Speaker 3: strategic And if you take that as a diagnosis, then 387 00:22:02,640 --> 00:22:06,080 Speaker 3: it follows that the China's economic model is going to 388 00:22:06,119 --> 00:22:09,560 Speaker 3: become increasingly state led and centralized, and the trend line 389 00:22:09,600 --> 00:22:13,320 Speaker 3: is not going to change because market oriented reforms require 390 00:22:13,359 --> 00:22:16,160 Speaker 3: a loss of control that president she is not willing 391 00:22:16,240 --> 00:22:19,560 Speaker 3: to accept. And that all means that China's growth strategy 392 00:22:19,640 --> 00:22:22,399 Speaker 3: is going to remain underpinned by stay on and enterprises 393 00:22:22,920 --> 00:22:27,520 Speaker 3: and national champions that rely on unrivaled levels of government subsidies, 394 00:22:27,640 --> 00:22:33,639 Speaker 3: discriminatory regulations, currency distortions, weak energy and labor standards, and 395 00:22:33,720 --> 00:22:37,119 Speaker 3: sometimes theft. That's all to say. The basis for our 396 00:22:37,200 --> 00:22:41,720 Speaker 3: strategy follows from that diagnosis, and it's not centered around tariffs. 397 00:22:41,760 --> 00:22:45,080 Speaker 3: It's centered around investments at home to strengthen and scale 398 00:22:45,280 --> 00:22:48,960 Speaker 3: our productive capacity. The second leg of it is partnerships 399 00:22:49,000 --> 00:22:51,720 Speaker 3: abroad with countries that are playing by the same rules, 400 00:22:52,240 --> 00:22:54,360 Speaker 3: so we can give each other access to our productive 401 00:22:54,400 --> 00:22:57,960 Speaker 3: capacity and our purchasing power. But yeah, I mean regrettably. 402 00:22:58,680 --> 00:23:02,080 Speaker 3: The third leg is the US restrictive tools when necessary 403 00:23:02,119 --> 00:23:04,480 Speaker 3: and tear ups are one of those tools, and we 404 00:23:04,600 --> 00:23:06,480 Speaker 3: use them with trading partners that are not playing by 405 00:23:06,520 --> 00:23:08,879 Speaker 3: the same rules, and we do so to prevent our 406 00:23:08,920 --> 00:23:13,640 Speaker 3: investments from getting undercut. You know, you asked about evs 407 00:23:13,720 --> 00:23:17,119 Speaker 3: in particular the question of shouldn't we just decarbonize as 408 00:23:17,160 --> 00:23:20,000 Speaker 3: fast as possible and let every Chinese ev into the US. 409 00:23:21,040 --> 00:23:23,440 Speaker 3: We all love low prices. I mean, in no doubt 410 00:23:23,520 --> 00:23:25,560 Speaker 3: we want to decarbonize as fast as we can. But 411 00:23:26,240 --> 00:23:29,440 Speaker 3: I would say risk management one oh one says we 412 00:23:29,480 --> 00:23:32,760 Speaker 3: shouldn't be dependent on a single supplier for a critical good. 413 00:23:33,280 --> 00:23:35,880 Speaker 3: That was the lesson we learned globally after the pandemic. 414 00:23:36,920 --> 00:23:39,639 Speaker 3: It was a lesson Europe was reminded of after Russia 415 00:23:39,680 --> 00:23:42,200 Speaker 3: weaponized it's gas flows. I mean, it was the lesson 416 00:23:42,240 --> 00:23:44,959 Speaker 3: we learned after the first China shock. So I mean 417 00:23:45,000 --> 00:23:48,320 Speaker 3: the point I'm making Stephanie's cost is not all that matters. 418 00:23:49,240 --> 00:23:52,600 Speaker 3: If you want to sustain decarbonization, clean energy has to 419 00:23:52,680 --> 00:23:56,280 Speaker 3: be reliably sourced. It has to be robust to geopolitical conflict. 420 00:23:56,960 --> 00:24:00,879 Speaker 3: Clean energy should be treated with clean inputs coal fired 421 00:24:00,960 --> 00:24:04,879 Speaker 3: power plants and I mean the polysilicon and solar wafers 422 00:24:04,920 --> 00:24:08,360 Speaker 3: can't be made with forced labor. So the last point 423 00:24:08,359 --> 00:24:10,320 Speaker 3: I'll make is if you want to make the transition 424 00:24:10,480 --> 00:24:14,120 Speaker 3: to clean energy sustainable, it does have to pass political muster. 425 00:24:15,480 --> 00:24:18,119 Speaker 3: I mean people equip and it's right climate change is 426 00:24:18,119 --> 00:24:20,680 Speaker 3: a global problem. But policy choices are made at the 427 00:24:20,760 --> 00:24:24,119 Speaker 3: national level, and so the economic benefits of making this 428 00:24:24,240 --> 00:24:27,560 Speaker 3: transition they have to outweigh the costs across political cycles, 429 00:24:28,359 --> 00:24:31,080 Speaker 3: and that does require attention to whether the strategy is 430 00:24:31,480 --> 00:24:35,560 Speaker 3: a net contributor to jobs and investment in growth and productivity. 431 00:24:36,600 --> 00:24:40,400 Speaker 2: You have I think a one exemption or potential exemption 432 00:24:40,640 --> 00:24:45,200 Speaker 2: in the solar sector to help solar domestic solar producers 433 00:24:45,320 --> 00:24:48,040 Speaker 2: not be affected by these But did you consider having 434 00:24:48,160 --> 00:24:51,920 Speaker 2: more exclusions or easing up on some of the Trump tariffs. 435 00:24:51,960 --> 00:24:54,440 Speaker 3: As part of this, Well, I think it's it's important 436 00:24:54,440 --> 00:24:57,679 Speaker 3: to know that that of the eighteen billion dollars in tariffs, 437 00:24:57,720 --> 00:24:59,960 Speaker 3: eleven billion of the tariffs don't go into effect until 438 00:25:00,080 --> 00:25:03,800 Speaker 3: twenty twenty six, and the remainder split in terms of 439 00:25:03,840 --> 00:25:06,960 Speaker 3: implementation dates across twenty twenty four and twenty twenty five. 440 00:25:08,280 --> 00:25:10,760 Speaker 3: And there will be exclusions if there are supply chain 441 00:25:10,840 --> 00:25:15,239 Speaker 3: disruptions that were unanticipated if the private sector needs more 442 00:25:15,280 --> 00:25:18,520 Speaker 3: time to adjust, will certainly be attendant to those concerns. 443 00:25:19,160 --> 00:25:22,879 Speaker 3: So this was really designed in order to allow us 444 00:25:23,160 --> 00:25:27,040 Speaker 3: to make a transition to domestic production, but also production 445 00:25:27,200 --> 00:25:30,879 Speaker 3: from partners who are again adhering to similar rules of competition, 446 00:25:31,880 --> 00:25:34,080 Speaker 3: to allow them to scale up and again not to 447 00:25:34,119 --> 00:25:37,680 Speaker 3: get flooded by a production trajectory in China. That's many 448 00:25:37,760 --> 00:25:40,240 Speaker 3: multiples of any plausible estimate of global demand. 449 00:25:40,720 --> 00:25:42,919 Speaker 2: If Chinese companies right now can just in fact, they 450 00:25:42,960 --> 00:25:45,680 Speaker 2: are going to Mexico to make electric vehicles there and 451 00:25:45,760 --> 00:25:48,760 Speaker 2: then those can just ship straight to the US, what 452 00:25:48,840 --> 00:25:50,480 Speaker 2: are you going to do about that? I mean, it 453 00:25:50,520 --> 00:25:51,800 Speaker 2: seems like a massive loophole. 454 00:25:53,480 --> 00:25:56,800 Speaker 3: Well, we're right. This is one tool of many in 455 00:25:56,880 --> 00:25:59,760 Speaker 3: the toolkit. So we also have an executive order that's 456 00:25:59,800 --> 00:26:04,040 Speaker 3: looking at national security risks from connected cars. That's an 457 00:26:04,080 --> 00:26:08,080 Speaker 3: ongoing investigation, but that's another tool that could be deployed 458 00:26:08,160 --> 00:26:11,840 Speaker 3: for the circumstance that you're describing. US MTA is set 459 00:26:11,920 --> 00:26:16,040 Speaker 3: for review in twenty twenty six, and part of that 460 00:26:16,119 --> 00:26:20,800 Speaker 3: discussion could involve, you know, greenfield factories that are being built. Yes, 461 00:26:20,920 --> 00:26:24,399 Speaker 3: that's the trade agreement between the US and Canada. We 462 00:26:24,520 --> 00:26:27,680 Speaker 3: can review the scope of the rules in USMCA and 463 00:26:27,760 --> 00:26:30,199 Speaker 3: apply it to the current future context. And there are 464 00:26:30,240 --> 00:26:32,560 Speaker 3: other trade tools that we can deploy as well that 465 00:26:32,640 --> 00:26:34,240 Speaker 3: have not been used in quite some time. 466 00:26:34,760 --> 00:26:37,440 Speaker 2: We've talked about sanctions and then we've talked about tariffs, 467 00:26:38,200 --> 00:26:41,320 Speaker 2: and which are both you know, sticks, But I know 468 00:26:41,480 --> 00:26:43,600 Speaker 2: that you in particular are sort of focused on also 469 00:26:43,760 --> 00:26:46,879 Speaker 2: thinking about how do we give people a more positive 470 00:26:47,359 --> 00:26:50,040 Speaker 2: vision of economic stakecraft. It's not all about being punished 471 00:26:50,080 --> 00:26:52,840 Speaker 2: that you actually have reason to want to be part 472 00:26:52,880 --> 00:26:55,640 Speaker 2: of the team, a part of the sort of multilateral 473 00:26:55,680 --> 00:26:58,760 Speaker 2: system that the US supports. So you know, how do 474 00:26:58,840 --> 00:27:01,360 Speaker 2: you see the Biden them in the stration actually proceeding 475 00:27:01,400 --> 00:27:03,040 Speaker 2: on that, because it sort of does feel like a 476 00:27:03,119 --> 00:27:06,280 Speaker 2: lot of the positive elements about reaching out to developing 477 00:27:06,320 --> 00:27:09,200 Speaker 2: countries and all of those things have not progressed as 478 00:27:09,960 --> 00:27:12,879 Speaker 2: fast as the more sort of stick based things that 479 00:27:12,960 --> 00:27:13,879 Speaker 2: we've been talking about. 480 00:27:15,920 --> 00:27:19,879 Speaker 3: It's harder because you know, when you're talking about executive 481 00:27:20,000 --> 00:27:23,920 Speaker 3: orders that put in place sanctions or export controls or 482 00:27:24,040 --> 00:27:28,000 Speaker 3: teriffs or price caps or investment restrictions, you know that 483 00:27:28,600 --> 00:27:32,280 Speaker 3: can flow through the executive branch and you can run 484 00:27:32,359 --> 00:27:36,320 Speaker 3: it relatively quickly. But when you're talking about developing or 485 00:27:36,400 --> 00:27:42,720 Speaker 3: reimagining or inventing positive tools of statecraft, that typically requires money, 486 00:27:43,320 --> 00:27:46,280 Speaker 3: and so that's a different kind of process that requires 487 00:27:46,320 --> 00:27:49,159 Speaker 3: Congress and engaging the broader public so that we can 488 00:27:49,200 --> 00:27:52,320 Speaker 3: boost our financial firepower. But you're right, I mean, I 489 00:27:52,440 --> 00:27:56,240 Speaker 3: am very focused on the question of whether we're striking 490 00:27:56,280 --> 00:27:58,720 Speaker 3: the right balance and the use of restrictive tools of 491 00:27:58,760 --> 00:28:01,480 Speaker 3: statecraft versus positive tools. I mean, we didn't choose this, 492 00:28:01,600 --> 00:28:05,040 Speaker 3: but we're in the most intense period of geopolitical competition, 493 00:28:05,200 --> 00:28:07,640 Speaker 3: arguably since the Cold War, maybe going all the way 494 00:28:07,640 --> 00:28:11,560 Speaker 3: back to World War Two, and you know, both Russia 495 00:28:11,560 --> 00:28:14,480 Speaker 3: and China are challenging the US led order. We're pushing back. 496 00:28:15,000 --> 00:28:17,159 Speaker 3: A number of countries are trying to figure out how 497 00:28:17,200 --> 00:28:19,560 Speaker 3: they want to align themselves, and that's going to be 498 00:28:19,840 --> 00:28:23,440 Speaker 3: a period of protracted uncertainty. And let's hope, because the 499 00:28:23,520 --> 00:28:26,359 Speaker 3: great powers that we're in competition with are also nuclear powers, 500 00:28:26,440 --> 00:28:30,680 Speaker 3: let's hope that the competition doesn't veer into conflict. And 501 00:28:31,160 --> 00:28:34,520 Speaker 3: the whole world knows that we have been using sanctions 502 00:28:34,600 --> 00:28:37,600 Speaker 3: and export controls with more frequency and potency than ever before, 503 00:28:38,120 --> 00:28:41,160 Speaker 3: but that doesn't win hearts and minds, you know, and 504 00:28:41,360 --> 00:28:43,960 Speaker 3: we would not want to have a narrative take hold 505 00:28:44,600 --> 00:28:47,120 Speaker 3: that we're simply focused and spending all of our time 506 00:28:47,200 --> 00:28:50,760 Speaker 3: and energy on developing the tools that impose economic pain, 507 00:28:50,840 --> 00:28:53,360 Speaker 3: that break linkages in the global economy, whether it's in 508 00:28:53,440 --> 00:28:57,760 Speaker 3: trade or capital flows or technological diffusion. I think we've 509 00:28:57,800 --> 00:29:00,880 Speaker 3: got to have a standing preference for the use of 510 00:29:00,960 --> 00:29:04,120 Speaker 3: tools that offer the prospect of mutual economic gain. And 511 00:29:04,200 --> 00:29:05,880 Speaker 3: we have a number of tools on the shelf that 512 00:29:06,000 --> 00:29:09,160 Speaker 3: we just haven't used with the same frequency and potency 513 00:29:09,200 --> 00:29:11,720 Speaker 3: as we have the more punitive tools. So think of 514 00:29:11,800 --> 00:29:15,760 Speaker 3: debt relief or concessional lending. We have sovereign loan guarantees, 515 00:29:15,840 --> 00:29:17,640 Speaker 3: but we've only used them six times in the past 516 00:29:17,720 --> 00:29:21,080 Speaker 3: thirty years. We have something akin to a sovereign wealth 517 00:29:21,120 --> 00:29:24,280 Speaker 3: fund in the Exchange Stabilization Fund at Treasury. Could we 518 00:29:24,360 --> 00:29:27,640 Speaker 3: reimagine it to make long term strategic investments in the 519 00:29:27,720 --> 00:29:32,520 Speaker 3: developing world. We have a strategic petroleum reserve, and it 520 00:29:32,680 --> 00:29:35,840 Speaker 3: was designed when we were net importers of petroleum. Well 521 00:29:35,880 --> 00:29:39,200 Speaker 3: now we're net exporters and what we really need are 522 00:29:39,240 --> 00:29:43,640 Speaker 3: critical minerals and refined products. Could this petroleum reserve be 523 00:29:43,760 --> 00:29:47,560 Speaker 3: refashioned as a strategic resilience reserve, and again make investments 524 00:29:47,680 --> 00:29:50,200 Speaker 3: at home and abroad, particularly in developing countries that have 525 00:29:51,200 --> 00:29:53,920 Speaker 3: essential clean energy inputs. I could go on and on, 526 00:29:54,280 --> 00:29:57,160 Speaker 3: but what I'm saying is, if we have a focus 527 00:29:57,720 --> 00:30:03,000 Speaker 3: over the next let's hope four plus years on developing, reimagining, 528 00:30:03,080 --> 00:30:05,920 Speaker 3: and refining the positive tools of economic statecraft, that gives 529 00:30:05,960 --> 00:30:10,160 Speaker 3: us our best chance of forging an enduring alignment with 530 00:30:10,840 --> 00:30:15,360 Speaker 3: those geopolitical swing states that right now want to do 531 00:30:15,520 --> 00:30:17,320 Speaker 3: more business with the US. They want to have a 532 00:30:17,400 --> 00:30:21,000 Speaker 3: deeper economic relationship, and they're looking for our value proposition 533 00:30:21,320 --> 00:30:21,800 Speaker 3: to improve. 534 00:30:22,200 --> 00:30:24,040 Speaker 2: If one I was looking at a place a year 535 00:30:24,120 --> 00:30:28,680 Speaker 2: ago where economic diplomacy could have actually been a really 536 00:30:28,760 --> 00:30:33,800 Speaker 2: positive force in building a basis for peace, it would 537 00:30:33,840 --> 00:30:35,280 Speaker 2: have been the Middle East, and it would have been 538 00:30:35,360 --> 00:30:40,280 Speaker 2: that whole discussion around Saudi Arabia's normalization of relations with 539 00:30:41,720 --> 00:30:44,960 Speaker 2: Israel that we were so close to before October seventh. 540 00:30:45,120 --> 00:30:46,680 Speaker 2: I just wanted to I mean, do you feel that 541 00:30:46,840 --> 00:30:51,120 Speaker 2: that economic path to peace in the region is now 542 00:30:51,520 --> 00:30:52,280 Speaker 2: completely dead? 543 00:30:53,960 --> 00:30:56,239 Speaker 3: We can't let it be. I mean, we can't let 544 00:30:56,320 --> 00:31:02,960 Speaker 3: this remain a zero sum, intractable conflict over that takes 545 00:31:02,960 --> 00:31:05,280 Speaker 3: place over land. We have to transform it into a 546 00:31:05,440 --> 00:31:09,560 Speaker 3: positive thumb economic conversation. Ultimately, that's the only way for 547 00:31:09,680 --> 00:31:12,200 Speaker 3: a sustainable piece to emerge, and it has to start, 548 00:31:12,240 --> 00:31:15,000 Speaker 3: of course, with a ceasefire and a hostage deal, but 549 00:31:15,120 --> 00:31:19,040 Speaker 3: it has to lead to a normalization process that involves 550 00:31:19,600 --> 00:31:21,479 Speaker 3: a lot of the tools we've been talking about already 551 00:31:22,400 --> 00:31:25,320 Speaker 3: in the reconstruction of Gaza and the creation of a 552 00:31:25,440 --> 00:31:28,920 Speaker 3: more positive dynamics. That's the only way I can think 553 00:31:28,960 --> 00:31:34,200 Speaker 3: of to transform what has been just an outright tragedy 554 00:31:34,240 --> 00:31:35,840 Speaker 3: for everyone involved over the past eight months. 555 00:31:37,800 --> 00:31:39,240 Speaker 2: But there's a lot of people who will now what 556 00:31:39,480 --> 00:31:41,840 Speaker 2: not want to come to the table or consider the 557 00:31:41,960 --> 00:31:47,600 Speaker 2: US to be a good broker of that kind of deal, 558 00:31:48,040 --> 00:31:50,160 Speaker 2: given what's happened in Gaza. 559 00:31:50,760 --> 00:31:55,320 Speaker 3: I still think diplomacy is never dead. The deal space 560 00:31:55,680 --> 00:32:01,280 Speaker 3: with Saudi Arabia remains very wide. We have very senior 561 00:32:01,320 --> 00:32:06,640 Speaker 3: officials over there almost almost every other week. And if 562 00:32:06,680 --> 00:32:10,840 Speaker 3: we can find a way to get a cessation of 563 00:32:10,920 --> 00:32:14,000 Speaker 3: the conflict and a release of the hostages and a 564 00:32:14,080 --> 00:32:20,280 Speaker 3: political discussion emerges from it, there's Look, this is going 565 00:32:20,320 --> 00:32:23,680 Speaker 3: to take years and years to unfold, and we're still 566 00:32:23,840 --> 00:32:25,920 Speaker 3: the last best chance for the region to find a 567 00:32:25,960 --> 00:32:26,440 Speaker 3: way forward. 568 00:32:32,800 --> 00:32:35,560 Speaker 2: This is a guy who is clearly carrying a lot 569 00:32:35,600 --> 00:32:39,120 Speaker 2: on his shoulders, and I've got to know him a 570 00:32:39,120 --> 00:32:41,120 Speaker 2: little bit over the last couple of years because he 571 00:32:41,320 --> 00:32:43,320 Speaker 2: was so focused on some of the issues that I'm 572 00:32:43,360 --> 00:32:47,080 Speaker 2: interested in, that interplay between economics and politics. But you know, 573 00:32:47,120 --> 00:32:49,240 Speaker 2: he's the one who's actually living in day to day 574 00:32:49,960 --> 00:32:55,320 Speaker 2: some of those really difficult trade offs where what the 575 00:32:55,440 --> 00:32:59,040 Speaker 2: answer is from a national security perspective may be very 576 00:32:59,080 --> 00:33:00,720 Speaker 2: different from what would say. 577 00:33:01,000 --> 00:33:03,520 Speaker 1: And also very interesting to hear. You both discussed that 578 00:33:03,680 --> 00:33:05,880 Speaker 1: they use a lot of sticks, but they've got to 579 00:33:05,920 --> 00:33:09,320 Speaker 1: get better at what the carrots are. And he accepted 580 00:33:09,360 --> 00:33:11,320 Speaker 1: that as a point, but it wasn't obvious that they 581 00:33:11,400 --> 00:33:14,240 Speaker 1: actually had many carrots in the in the in the fridge. 582 00:33:14,720 --> 00:33:16,960 Speaker 2: Just before he went back into the administration, he'd written 583 00:33:17,000 --> 00:33:19,480 Speaker 2: an article that was very much along those lines, saying, 584 00:33:19,520 --> 00:33:22,520 Speaker 2: you need to have a more positive offer for the world. 585 00:33:23,960 --> 00:33:26,120 Speaker 1: That's tricky stuff, isn't it. Because we're at this point, 586 00:33:26,440 --> 00:33:29,200 Speaker 1: not only this point in the US electoral cycle, where 587 00:33:29,480 --> 00:33:35,120 Speaker 1: so much of their economic policy is protectionist. What do 588 00:33:35,200 --> 00:33:36,880 Speaker 1: they have to play with? Did you get did you 589 00:33:36,920 --> 00:33:38,920 Speaker 1: get that sense from talking to him that they had 590 00:33:40,000 --> 00:33:40,640 Speaker 1: nice offers. 591 00:33:40,840 --> 00:33:44,520 Speaker 2: Well, I think he would admit it's a challenge because 592 00:33:44,520 --> 00:33:46,640 Speaker 2: it's and as he said, it's easier to do the 593 00:33:46,680 --> 00:33:49,240 Speaker 2: sticks than the carrots, especially if you have a not 594 00:33:49,400 --> 00:33:51,560 Speaker 2: very supportive Congress. You know, look how hard it was 595 00:33:51,800 --> 00:33:58,160 Speaker 2: to get the Ukraine aid package through through Congress. But 596 00:33:58,640 --> 00:34:01,160 Speaker 2: to some extent, it's about still wanting to be in 597 00:34:01,280 --> 00:34:07,400 Speaker 2: the American club, in that circle of countries, and you 598 00:34:07,480 --> 00:34:09,719 Speaker 2: would think that lots of countries want to be part 599 00:34:09,800 --> 00:34:12,280 Speaker 2: of that. But as we've pointed out many times, actually 600 00:34:12,400 --> 00:34:15,439 Speaker 2: playing both sides, being in the middle can be quite 601 00:34:15,440 --> 00:34:18,400 Speaker 2: an attractive place for policymakers to be right now. And 602 00:34:18,440 --> 00:34:23,240 Speaker 2: I'm not sure that anyone can really address that sitting 603 00:34:23,280 --> 00:34:25,959 Speaker 2: in the White House or not anytime soon, especially looking 604 00:34:26,000 --> 00:34:28,000 Speaker 2: at what's happening in the Middle East, which I guess 605 00:34:28,239 --> 00:34:30,440 Speaker 2: which is where we ended that conversation. I mean, it 606 00:34:30,600 --> 00:34:33,120 Speaker 2: is just it does not so far as not making 607 00:34:33,200 --> 00:34:35,879 Speaker 2: the case for positive economic diplomacy, to say the least. 608 00:34:36,600 --> 00:34:39,400 Speaker 2: Thanks for listening to this week's Photonomics from Bloomberg. This 609 00:34:39,560 --> 00:34:43,320 Speaker 2: episode was hosted by me, Stephanie Flanders and Allegra Strap. 610 00:34:43,760 --> 00:34:46,120 Speaker 2: It was produced by summer Sadi with help from Chris 611 00:34:46,280 --> 00:34:49,640 Speaker 2: marklu Sound designed by Moses and dam and Blake Maples. 612 00:34:50,040 --> 00:34:54,080 Speaker 2: Brendan Francis Newnham is our executive producer, and Sage Bowman 613 00:34:54,280 --> 00:34:57,680 Speaker 2: is Head of Podcasts. Special thanks this week to Delete 614 00:34:57,760 --> 00:35:03,600 Speaker 2: Singh and Rushi Battia. Please, if you like the show, subscribe, rate, review, 615 00:35:03,840 --> 00:35:06,280 Speaker 2: tell your friends wherever you listen to podcasts.