Speaker 1: They are importing what would seem like harmless items washing machines, refrigerators,
Speaker 1: and then they're stripping those items down for parts basically
Speaker 1: and taking the microchips out of them. From Bloomberg News
Speaker 1: and iHeartRadio, it's the big take. I'm West Gasova today.
Speaker 1: How are American made chips winding up inside Russian weapons
Speaker 1: of war. We've talked before on this show about how
Speaker 1: the US and its European allies have imposed crushing economic
Speaker 1: sanctions on Russia that restrict its ability to buy and
Speaker 1: sell all kinds of products from other countries. Today, in
Speaker 1: concert with our allies, we would agree a massive package
Speaker 1: of economic sanctions designed in time to hobble the Russian economy.
Speaker 1: We will target strategic sectors of the Russian economy by
Speaker 1: blocking the excess to technologies and markets. The DAKI for
Speaker 1: Russia Today, I'm authorizing additional strong sanctions and new limitations
Speaker 1: on what can be exported to Russian This is going
Speaker 1: to impose severe cost on the Russian economy, both immediately
Speaker 1: and over time. One of the most stringent of these
Speaker 1: restrictions is on microchips, a critical component in drones and
Speaker 1: missiles and other weapons. The Russian military needs to wage
Speaker 1: its war in Ukraine. The sanctions explicitly prohibit the sale
Speaker 1: of microchips to Russia, and yet these chips, some of
Speaker 1: them US made, are finding their way into Russian arms
Speaker 1: used against Ukraine. The US has charged a Russian citizen
Speaker 1: and his alleged associates and what prosecutors say was an
Speaker 1: elaborate scheme to mislead chip makers into leaving they were
Speaker 1: selling to legitimate companies, when in fact, prosecutors alleged that
Speaker 1: chips were destined for the Russian military. Then Bartenstein is
Speaker 1: one of several Bloomberg journalists who worked on a deeply
Speaker 1: reported story unraveling how this alleged enterprise worked, and he
Speaker 1: joins me now from Dubai Ben, your story focuses around
Speaker 1: a man called artem Us. Can you tell us who
Speaker 1: he is? He's a forty year old son of prominent
Speaker 1: governor in Siberia. Flashy's one way you could describe him.
Speaker 1: I mean, anyone who is a regular reader of Russian
Speaker 1: media would see his name quite frequently. He owned a
Speaker 1: lot of fancy real estate, had a lot of luxury cars,
Speaker 1: was connected to a variety of Italian hotels. He spent
Speaker 1: a lot of time in Italy. He owned several hotels there,
Speaker 1: so he's a regular, in particular in the area around Milan.
Speaker 1: He was sort of a jetsetter type of frequently traveling
Speaker 1: across Europe is our understanding. Aside from all of his
Speaker 1: jet setting, he was also alleged to be involved in
Speaker 1: an international scheme I suppose to smuggle chips into Russia.
Speaker 1: How exactly did that work? As the chip industry has
Speaker 1: become so crucial, in particular when it comes to sort
Speaker 1: of the defense sector and Putin's war efforts. In the
Speaker 1: run up to the war, there were efforts by Moscow
Speaker 1: to try to tap up at stockpile to make sure
Speaker 1: that they had a lot of chips in supply, and
Speaker 1: there were a variety of sort of sophisticated networks that
Speaker 1: were put into place two route chips from the US
Speaker 1: to Russia. Because even before the invasion of Ukraine last year,
Speaker 1: the US Commerce Department had already started to clamp down
Speaker 1: a bit on this trade. They were more concerned about
Speaker 1: sensitive jurisdictions that might try to acquire more chips Russia
Speaker 1: and China in particular, So there are certain additional export
Speaker 1: controls that were put into place, and then on the
Speaker 1: Russia side, of course, there are efforts then to try
Speaker 1: to navigate around these controls to still be able to
Speaker 1: maintain that supply. And that's where artem Use comes into
Speaker 1: the picture. US prosecutors alleged that US set up this
Speaker 1: web of shell companies from the Middle East to Europe
Speaker 1: in Asia to help route chips from the US to
Speaker 1: Russia through these third jurisdictions. The chips trade has obviously
Speaker 1: become increasingly geopolitically significant, so even prior to the invasion,
Speaker 1: there was a bigger push by Moscow to make sure
Speaker 1: that they had adequate stockpiles. Of course, now as the
Speaker 1: war has dragged on those stockpiles, as we talk to
Speaker 1: certain experts who track this trade, those stockpiles are starting
Speaker 1: to dwindle, putting even greater urgency on the part of
Speaker 1: Moscow to try to reinforce the supply chain and keep
Speaker 1: this supply going and moving forward. Why did the authorities
Speaker 1: say that US allegedly set up these shell companies. The
Speaker 1: thing is that as these export controls have been ramped
Speaker 1: up by Washington, big US companies that are part of
Speaker 1: the chips trade have had to ramp up their own
Speaker 1: internal compliance efforts. However, there's still hurdles to get around that.
Speaker 1: So on the Russia side of the equation, the key
Speaker 1: component is establishing companies outside of Russia in jurisdictions that
Speaker 1: US chipmaker wouldn't teem as sensitive. So at least on
Speaker 1: the initial compliance check, it would pop up a company
Speaker 1: in the UAE or Malaysia or Germany that wouldn't necessarily
Speaker 1: sound any alarms and checks that box, and it chipped
Speaker 1: outside of the US. At that point, it's sort of
Speaker 1: outside of their oversight. Then you and our other Bloomberg
Speaker 1: colleagues report in this story that in court documents, the
Speaker 1: US prosecutors alleged the people involved in this operation went
Speaker 1: to all kinds of links to make themselves look legitimate.
Speaker 1: They allege that they used fake purchase orders and shipping
Speaker 1: documents that were supposed to fool the American chipmakers and
Speaker 1: hide where the products were headed. Exactly. Yeah, it's a
Speaker 1: classic layering technique that you see when you look at
Speaker 1: sanctions policies over the years. It's just sort of a
Speaker 1: constant cotton mouse game. If one shell company is recognized
Speaker 1: and shut down, another one is set up it's a
Speaker 1: constant game of obfuscation to try to continue this really
Speaker 1: important supply chain. Could you take a moment to explain
Speaker 1: what exactly is a shell company? How do you set
Speaker 1: one up? In some ways their companies on paper only.
Speaker 1: There isn't necessarily a big office. Perhaps there's a door
Speaker 1: with no employees inside. Perhaps there's a small office, or
Speaker 1: perhaps there is no office at all. But it's registered
Speaker 1: in a different domicile, and it allows the ultimate beneficial owner,
Speaker 1: who could be in a completely different country, to route
Speaker 1: goods in a way to circumvent sanctions, to circumvent export controls,
Speaker 1: or tax authorities, any range of reasons in which they
Speaker 1: might get set up. You know, ultimately, if the authorities
Speaker 1: on the ground don't clamp down, then it can sort
Speaker 1: of hide the ultimate business that a completely different company
Speaker 1: might be doing. Where does the case against us stand?
Speaker 1: He's in Milan, Italy. What is the US seeking and
Speaker 1: where does it go from here? Officials in the US
Speaker 1: want us extradited. You would, of course very valuable source
Speaker 1: of information about how this alleged chip smuggling network works.
Speaker 1: His lawyers certainly want to keep him in Italy. It's
Speaker 1: worth pointing out that it's not just the US that
Speaker 1: has clamped on its export controls, the EU has as well.
Speaker 1: That's where Italy comes into play, as well as the
Speaker 1: judicial system there. But US authorities certainly want to bring
Speaker 1: him to the US. A bit of geopolitics there as
Speaker 1: well as far as how much the US might be
Speaker 1: pushing Italy to hand him over. And the US is
Speaker 1: accusing him of sanctions violations, Yes, accusing and his associates
Speaker 1: of violating US sanctions And what does US say about
Speaker 1: all of this? US says that he didn't do anything wrong,
Speaker 1: that he's not responsible for what his associates did, and
Speaker 1: he argues that he shouldn't be extradited. He doesn't think
Speaker 1: he would be treated fairly in the US, in particular
Speaker 1: given all the geopolitics since the Russian invasion of Ukraine.
Speaker 1: We should note that those other dependants also deny wrongdoing.
Speaker 1: Our conversation continues after the break. What does it say
Speaker 1: about the state of Russia's military that they need to
Speaker 1: do all this? The experts we talk to who monitor
Speaker 1: this say that stockpiles of chips are running quite low
Speaker 1: in Russia, and of course chips are quite central to
Speaker 1: Moscow's efforts to continue the war, so they're making a
Speaker 1: real effort now to resolve those shortages. That's why this
Speaker 1: alleged chips smuggling has become so important for them. And
Speaker 1: what are these chips used for. They can be used
Speaker 1: in a range of different weaponry, whether it's drones, whether
Speaker 1: it's other aerial devices. Part of the effort on the
Speaker 1: Ukraine side has been that there are different investigators who
Speaker 1: are actually getting the weaponry from the battlefield and taking
Speaker 1: them apart in these different military facilities around Kiev to
Speaker 1: try to understand where these parts are originating from. So
Speaker 1: that's another part of this story is that as they're
Speaker 1: taking these military weapons apart, they're identifying the companies where
Speaker 1: they originated. And that's also where we're seeing some of
Speaker 1: these US companies come into play, that their parts are
Speaker 1: ending up in the battlefield. It's worth pointing out that
Speaker 1: some of these parts were acquired prior to the invasion
Speaker 1: and at that time there were different export controls put
Speaker 1: in place. So you have the US trying to prosecute
Speaker 1: our toe US, you have Ukraine forcefully demanding stop to
Speaker 1: the export of these chips that go to Russia. What
Speaker 1: is the US now trying to do to cut off
Speaker 1: these supply lines. The US has been focusing more on
Speaker 1: these so called third jurisdictions, So those are the jurisdictions
Speaker 1: that are initially receiving the parts from the US and
Speaker 1: then ultimately on shipping those parts to Russia. A lot
Speaker 1: of the attention has been fixated now on China and
Speaker 1: the UAE in particular. There have been several different trips
Speaker 1: from senior US officials to China to the UAE raising
Speaker 1: these concerns. The big question now comes again to these
Speaker 1: third jurisdictions. How forceful will the US Treasury be as
Speaker 1: far as enforcing potential secondary sanctions violations. That's something that
Speaker 1: we haven't seen too much of to date. But when
Speaker 1: we look at all these different entities that are popping
Speaker 1: up in China and the UAE in particular, how much
Speaker 1: will there be additional restrictions on these entities? How much
Speaker 1: will these governments potentially face s additional repercussions. That's a
Speaker 1: step that Washington hasn't necessarily taken so far. It's been
Speaker 1: something that we've heard in the rhetoric, but we haven't
Speaker 1: necessarily seen the action. You know, it's always a question
Speaker 1: of strategic priorities in the diplomatic relationship, the bilateral US
Speaker 1: China relationship, the bilateral USUE relationship. Where does sort of
Speaker 1: sanctions enforcement fall into the priority list. The fact that
Speaker 1: chips are national security concern though, could kind of bump
Speaker 1: it up the list. Ben Burtenstein, thanks for speaking with
Speaker 1: me today. Thank you. Clearly sanctions aren't entirely effective. So
Speaker 1: what can the US and its allies due to tighten
Speaker 1: the screws so they can't be evaded. Nick Wadham's leads
Speaker 1: Bloomberg's US National security coverage, and he knows more about
Speaker 1: how sanctions work and don't work than anyone I know.
Speaker 1: And he's here with me in our Washington studio. Nick,
Speaker 1: despite sanctions, Russia has managed to get micro chips, and
Speaker 1: the case Ben Bartenstein described is just one example of
Speaker 1: how Russia allegedly has done this. US authorities say Russia
Speaker 1: has found other ways too to sneak chips into the country.
Speaker 1: Can you start by telling us how the US sanctions
Speaker 1: are supposed to work, how they're supposed to stop that
Speaker 1: from happening. Well, there are a few things happening here.
Speaker 1: One is the export controls, So the US limits the
Speaker 1: type of technology, chiefly semiconductors that companies can export to Russia.
Speaker 1: So that's one thing they're not allowed to buy, the
Speaker 1: semiconductors that they would need to put into high tech armaments,
Speaker 1: hypersonic missiles, the kind of thing they've used in Ukraine.
Speaker 1: The other thing they've done is put severe limits on
Speaker 1: Russia's banks, so company's ability to get financing. Basically, if
Speaker 1: you're a Western bank, it's become all but impossible to
Speaker 1: do any sort of financial transaction with a Russian bank.
Speaker 1: And then the other thing they've done is put a
Speaker 1: ton of sanctions on individual Russian companies and people CEOs
Speaker 1: of companies, primarily in the defense sector. So if you're
Speaker 1: a Russian company, you can't really do any foreign trade.
Speaker 1: If you're a CEO of that company, you can't even
Speaker 1: have a bank account in the West, you can't travel
Speaker 1: to the West. So it's essentially on paper, designed to
Speaker 1: be a massive economic squeeze on every sector of the
Speaker 1: Russian economy, but primarily the defense sector. Sanctions come with
Speaker 1: heavy penalties if they're violated. What happens to companies or
Speaker 1: individuals who are found to be in violation of a
Speaker 1: US or EU sanction. Well, this is the sort of
Speaker 1: crazy thing about sanctions because enforcement is a huge question mark.
Speaker 1: So you impose these sanctions, you say, okay, you a
Speaker 1: Western bank can't do business with this Russian company, or
Speaker 1: you Russian company, you don't have access to the Western
Speaker 1: financial system, whatever it may be. When they start then
Speaker 1: doing transactions with companies or banks based in Turkey or
Speaker 1: the United Arab Emirates or ever it else it may be,
Speaker 1: there's a big question of who is actually on the
Speaker 1: lookout for, whether those transactions are actually happening, and then
Speaker 1: what you do in response. So we know that Treasury's
Speaker 1: department that handles sanctions is pretty understaffed, so they don't
Speaker 1: have a lot of the folks who are actually basically
Speaker 1: minding the store. The other thing is the system in
Speaker 1: the past has been designed to impose very very steep punishments,
Speaker 1: you know, potentially billions of dollars. If you're a Western
Speaker 1: bank that does business with a sanctioned entity. The likelihood
Speaker 1: that you're going to get caught is actually pretty low.
Speaker 1: If you do get caught, we're going to come after
Speaker 1: you really hard. How effective have those sanctions been, by
Speaker 1: and large, the way that you figure out how sanctions
Speaker 1: have worked is a matter of huge debate within the
Speaker 1: international community. What we can say is that they have
Speaker 1: had a very large effect, But whether they've actually been
Speaker 1: effective in constraining Rush's ability to wage war in Ukraine
Speaker 1: is an entirely different matter. So we can say, yes,
Speaker 1: there's definitely been a huge effect. These companies have not
Speaker 1: really been able to do business with any Western partners
Speaker 1: that they had remaining. Their cash flow has been severely restricted,
Speaker 1: but what we see is that they are finding other
Speaker 1: ways to get the material that they want. We are
Speaker 1: also seeing, obviously that Russia's ability to wage war in Ukraine,
Speaker 1: though it has been constrained, we're still seeing that Russia
Speaker 1: is able to wage that war, and for example, the
Speaker 1: fighting around buck Moot, Russia just went back on the
Speaker 1: counter offensive. You have not had the sort of devastating,
Speaker 1: crippling impact that Western policymakers said would be the result
Speaker 1: of these sanctions. How has Russia been able to get
Speaker 1: hold of technology that they're not supposed to have to
Speaker 1: use against Ukraine when there are these big sanctions in
Speaker 1: place and everyone is watching, Well, they have done so
Speaker 1: in a lot of pretty creative ways. So one example
Speaker 1: we learned about in the last couple of weeks is
Speaker 1: that via other countries around Russia's periphery, Central Asia, Turkey,
Speaker 1: the United Arab Emirates, what's happening is that they are
Speaker 1: importing what would seem like harmless items, washing machines, pumps
Speaker 1: so that women can express breast milk, refrigerators, and then
Speaker 1: they're stripping those items down four parts basically, and taking
Speaker 1: the microchips out of them and then using them for
Speaker 1: whatever ends it deems it needs to, whether that's in
Speaker 1: the defense sector or something else that it's lacking. So
Speaker 1: they're actually bringing in fairly you totally innocuous goods and
Speaker 1: stripping them down for parts. The thing that sanctions have
Speaker 1: not really been able to contend with is what happens
Speaker 1: when you have a country that's perfectly willing to ignore
Speaker 1: them but is basically too big to punish in any
Speaker 1: meaningful way, like China. China has been very willing to
Speaker 1: do business with Russia. The US has not found that
Speaker 1: it's directly supplying Russia's war effort through weapons and guns
Speaker 1: and bullets, but they are finding that China is perfectly
Speaker 1: willing to do business with Russia, and obviously you have
Speaker 1: countries like Iran as well, So they're able to get
Speaker 1: those chips in a surreptitious way by breaking down innocuous goods.
Speaker 1: They're also just able to get them from countries like
Speaker 1: China that are willing to provide them. Are they importing
Speaker 1: washing machines and other common appliances with the express intent
Speaker 1: of breaking them down for the chips, or are they
Speaker 1: just comman daring a lounge of washing machines and stealing
Speaker 1: the chips. It's early days still, but it looks like
Speaker 1: they are actually doing that. I mean, Secretary of State
Speaker 1: Tony B. Lincoln went to Kazakhstan and Uzbekistan a couple
Speaker 1: of weeks ago with the express message, Hey, we know
Speaker 1: your country is a transshipment point for items that Russia
Speaker 1: is taking and stripping for parts. So you guys need
Speaker 1: to do more to crack down on that practice because
Speaker 1: it's a big problem. So this is a big enough
Speaker 1: issue that the Secretary of State of the United States
Speaker 1: goes to the countries where the shipments are happening and
Speaker 1: tells them to knock it off. If they're able to
Speaker 1: get chips from countries like China, why do they have
Speaker 1: to go through these extraordinary measures to import appliances to
Speaker 1: get the chips inside them, because China, for one thing,
Speaker 1: has been very careful in testing the limits, So especially
Speaker 1: early on in the invasion, there was a real sense
Speaker 1: from US policymakers. I talked to several of them myself,
Speaker 1: who felt, listen, we are actually seeing China obey the sanctions.
Speaker 1: They are very interested in the letter of the law.
Speaker 1: They want to make sure they don't get on the
Speaker 1: wrong side of those sanctions. It was in that environment
Speaker 1: where you had China still trying to figure out which
Speaker 1: way it was going to go on this thing, where
Speaker 1: you really started to see those flows. Now though, what
Speaker 1: we're seeing particularly is the US and China get into
Speaker 1: a much bigger rhetorical battle in almost every sector. China
Speaker 1: has been increasingly willing to push those boundaries and not
Speaker 1: necessarily open the floodgates, but maybe look the other way
Speaker 1: as companies provide dual use items that Russia could use.
Speaker 1: Just to note here, an official from the UAE said
Speaker 1: in a statement to Bloomberg that the UAE adheres to
Speaker 1: and strictly enforces international laws and un mandated sanctions alongside
Speaker 1: agreements established with international partners, including the US. China's Foreign
Speaker 1: ministry said that it isn't aware of the details surrounding
Speaker 1: the chips issue and said the US has frequently spread
Speaker 1: false information on the subject of China's relations with Russia,
Speaker 1: and a Kremlin spokesman said that Russia doesn't consider the
Speaker 1: restrictions placed by the US quote legal from the point
Speaker 1: of view of international law. All that said, more with
Speaker 1: Nick Wadham's When We come Back, you mentioned Iran A
Speaker 1: moment ago, we had done an episode of the show
Speaker 1: talking about how Russia has turned to countries like Iran
Speaker 1: to create an entirely new supply chain in trade routes
Speaker 1: that are out of reach of US sanctions. Are there
Speaker 1: other avenues that Russia is using can use to essentially
Speaker 1: trade in technology that the US just can't see or
Speaker 1: even reach. That's one of the fascinating things that's happening
Speaker 1: with sanctions, where you now have so many countries that
Speaker 1: are sanctioned like Iran, mean, mar North Korea, Venezuela, that
Speaker 1: it's creating essentially an entirely alternate global economy. I mean,
Speaker 1: obviously much smaller, but it's almost like a shadow economy
Speaker 1: where the US is not able to do anything. But
Speaker 1: then on the other hand, you also have these sort
Speaker 1: of in between countries, the UAE, for example, where they say, hey,
Speaker 1: if you the United States come to us with a
Speaker 1: name of a company or a person and you say
Speaker 1: this person is violating sanctions, you got to do something
Speaker 1: about them. Will help you out. But otherwise all that
Speaker 1: enforcement stuff, the monitoring, that's not our job. We're not
Speaker 1: going to pay attention to those things. So you start
Speaker 1: to see situations where if Russia wants to do business
Speaker 1: with companies based in places like the UAE and others
Speaker 1: that are putatively US partners, they're able to do that
Speaker 1: because those countries essentially have no enforcement mechanism in place
Speaker 1: to go after sanctions on their own without explicit instruction
Speaker 1: from the United States, and that's basically then just open
Speaker 1: season for Russia. One other thing that we see sometimes
Speaker 1: is that legitimate companies who try very hard not to
Speaker 1: evade sanctions get caught up in a situation where the
Speaker 1: chain of custody of these illegal goods that do break
Speaker 1: sanctions is so long that they don't even know that
Speaker 1: they're part of a sanctions busting supply line right. That
Speaker 1: has happened with some frequency. And it's really interesting because
Speaker 1: in the past the US has said that's not an excuse,
Speaker 1: So that can't save you. If you're a US company
Speaker 1: and your products when their way through the supply chain
Speaker 1: and eventually enter into or come into contact with the
Speaker 1: sanctioned entity, they can still be punished. So that is
Speaker 1: one way that the US has tried to enforce these things.
Speaker 1: But again, when you're dealing with China, you know some
Speaker 1: company that's providing aerospace parts. I mean, the US just
Speaker 1: tried to sanction a Chinese company because supplying aerospace parts
Speaker 1: for an Iranian company that makes the drones that then
Speaker 1: go on and have been used by Russia in Ukraine.
Speaker 1: It's like they can impose sanctions and say, all right,
Speaker 1: you have no access to the US financial system, but
Speaker 1: those companies still have plenty of access to the Chinese
Speaker 1: financial system and they're able to do that trade basically unimpeded.
Speaker 1: Are sanctions then more effective at putting pressure on politicians,
Speaker 1: putting pressure on people in a country against the government
Speaker 1: to effect change than they are at actually stopping goods
Speaker 1: from moving around the world. You're getting into an area
Speaker 1: that is just so ripe and full of debate at
Speaker 1: the moment, and it's a bit of a hobby horse
Speaker 1: of mine, because what you see over the last many,
Speaker 1: many years is that successive administrations roll out these big
Speaker 1: sanctions packages and they say, Okay, we're going after Russia's
Speaker 1: Wagner Group, the paramilitary group that's basically fighting alongside Russian
Speaker 1: forces in Ukraine, or we're going after the junta in Myanmar,
Speaker 1: and they come out with these big, splashy announcements and
Speaker 1: they say like, Okay, this is it. This is going
Speaker 1: to be the thing that really nails these guys and
Speaker 1: gets them to cut it out, and it never does.
Speaker 1: I mean, you look at the Wagner Group. They are
Speaker 1: essentially operating unimpeded in Ukraine even though they've been under
Speaker 1: these crushing financial sanctions. It has worked in some cases.
Speaker 1: The US points to the Iran nuclear deal that sanctions
Speaker 1: on Iran were instrumental in pressing the Iranian government to
Speaker 1: come into that deal. But otherwise there's a real growing
Speaker 1: feeling amongst some skeptics about sanctions that they're basically a
Speaker 1: signaling move, a way to express disapproval about something that
Speaker 1: someone's doing. But the sense that there's actually a follow
Speaker 1: up and ability to bring about some sort of change
Speaker 1: or new calculus and how a policymaker makes a decision.
Speaker 1: People are a lot more skeptical about that. Is there
Speaker 1: a way that sanctions would be more effective, Is something
Speaker 1: that they're not doing that they could well. This is
Speaker 1: always the challenge because US policy makers, for example, they
Speaker 1: know a lot of things they could do that could
Speaker 1: truly devastate Russia's economy, but obviously then you have blowback
Speaker 1: on Western economies. So it's always finding that balance between
Speaker 1: what's the thing that is going to hurt Russia the most,
Speaker 1: that's not going to have blowback and tank the US
Speaker 1: financial systems. One example would be if you barred all
Speaker 1: sales of Russian oil and gas anywhere in the world.
Speaker 1: You put a total embargo on Russian petroleum part of it.
Speaker 1: So you just said RUSSI is not allowed to sell
Speaker 1: any of its crewed anywhere in the world or natural gas.
Speaker 1: That would cause the price of oil to spike, and
Speaker 1: that would potentially have massive effects on the US economy.
Speaker 1: So what the US is doing in the case of
Speaker 1: Russia is saying, Okay, we're going to try to impose
Speaker 1: a price cap, so we don't want other countries to
Speaker 1: buy Russia's petroleum products above a certain price. So they
Speaker 1: still want Russia to be able to sell, they just
Speaker 1: don't want Russia to be able to profit as much
Speaker 1: for it. And you see, it's an enormous song and dance.
Speaker 1: They're really trying to put pressure on companies to buy
Speaker 1: below that cap. India is a big example. But again,
Speaker 1: what the result is is that Russia still gets a
Speaker 1: ton of revenue from those sales. Looking forward, where does
Speaker 1: all this head? Do you think sanctions continue to be
Speaker 1: a widely used tool. The political pressure for administrations to
Speaker 1: use sanctions is so high because they're very easy to impose.
Speaker 1: Congress can impose them, the administration can do so on
Speaker 1: its own without needing to get approval from anyone else.
Speaker 1: They have a strong signaling effect. That's a way to show, Okay,
Speaker 1: we disapprove of this person. If they can impose sanctions,
Speaker 1: it makes it look like they're doing something. That person
Speaker 1: also then no longer has access to the US financial system,
Speaker 1: so there's a ton of pressure to keep using this tool.
Speaker 1: The question arises, though, well does it actually work and
Speaker 1: does the US end up actually losing leverage. I mean,
Speaker 1: you look at a country like North Korea, probably the
Speaker 1: most sanctioned nation on the planet, but Kim Jong un
Speaker 1: is more entrenched in power than he's ever been. He
Speaker 1: shows no sign of going anywhere. His nuclear program is
Speaker 1: running basically unchecked. The US now has no leverage to
Speaker 1: try to get anything from that regime. So there's a
Speaker 1: real question of efficacy. Okay, you impose these sanctions, Well,
Speaker 1: does that actually help you get what you want? Or
Speaker 1: do you just end up shooting yourself in the foot?
Speaker 1: Looking more specifically at Russia's war in Ukraine, do you
Speaker 1: see the US imposing more sanctions? Is there anything left
Speaker 1: to sanction? Well, this brings us around to what you
Speaker 1: were saying at the beginning. So what they are saying
Speaker 1: now is the first year was about imposing the sanctions.
Speaker 1: The second year of the war is about enforcing them.
Speaker 1: And that's where you're really seeing the administration's attention turn.
Speaker 1: So they've maxed out a lot of what they can
Speaker 1: do without getting the blowback on Western economies. What they
Speaker 1: want to do now is really pushed to make sure
Speaker 1: that the sanctions they have in place are being followed.
Speaker 1: So the microchips, for example, restricting those flows of technology
Speaker 1: or whatever else it might be to Russia. And they
Speaker 1: continue to maintain that, Hey, this is a long term proposition.
Speaker 1: This is not something that we ever expected to work overnight.
Speaker 1: But what we want to be able to do is gradually,
Speaker 1: over time, tighten the screws to really restrict Vladimir Putin's
Speaker 1: ability to wage war. They're racing against his ability to
Speaker 1: adapt and find new sources of chips or whatever else.
Speaker 1: But that's the calculus that they're trying to make. They say, listen,
Speaker 1: don't judge us by what's happened in the first year.
Speaker 1: Judge by what happens three or four or five years.
Speaker 1: Nick Wadhams, thanks for being here, Thank you, thanks for
Speaker 1: listening to us here at The Big Take. It's a
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Speaker 1: I'm West Kasova. We'll be back tomorrow with another big take.