1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 3 00:00:13,280 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,840 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:31,159 Speaker 1: and of course, on the Bloomberg terminal. Daniel Jurgen is 6 00:00:31,200 --> 00:00:33,680 Speaker 1: known for oil. We have lots of questions on oil. 7 00:00:33,880 --> 00:00:37,360 Speaker 1: He has a title vice Chairman at I h S Market. 8 00:00:37,840 --> 00:00:40,080 Speaker 1: He also writes books, including my book of the Year 9 00:00:40,120 --> 00:00:43,120 Speaker 1: a few years ago, The New Map. We're thrilled at 10 00:00:43,159 --> 00:00:46,360 Speaker 1: Daniel Jorgan could join us today as we consider the 11 00:00:46,440 --> 00:00:50,280 Speaker 1: crushing commanding heights of the United States and in New 12 00:00:50,320 --> 00:00:54,920 Speaker 1: Europe and the collapse of the Russian Federation in some form. 13 00:00:55,200 --> 00:00:57,560 Speaker 1: Daniel gonna thank you so much for joining us today 14 00:00:57,960 --> 00:01:01,840 Speaker 1: and your commanding heights. You magi sterily talk about the 15 00:01:01,880 --> 00:01:05,320 Speaker 1: shift of Russia in the nineties, you say the marriage 16 00:01:05,319 --> 00:01:09,360 Speaker 1: of the hedgehog UH and onto the new Gorbachev era. 17 00:01:09,800 --> 00:01:12,720 Speaker 1: Are we seeing a shift now with Putin? Is there 18 00:01:12,760 --> 00:01:16,800 Speaker 1: an outcome that you can see absolutely what we're seeing 19 00:01:16,840 --> 00:01:20,120 Speaker 1: that that process that began in the nineties of Russia 20 00:01:20,160 --> 00:01:22,839 Speaker 1: connecting with the world economy, being integrated with the world 21 00:01:22,880 --> 00:01:27,240 Speaker 1: economy is very rapidly going in reverse now as these 22 00:01:27,280 --> 00:01:31,560 Speaker 1: crushing sanctions are being imposed. Russia is being disconnected from 23 00:01:31,560 --> 00:01:34,840 Speaker 1: the world economy. What does the new map for Vladimir 24 00:01:34,880 --> 00:01:40,959 Speaker 1: Putin look like? Uh, he grossly miscalculated. I think he 25 00:01:41,000 --> 00:01:45,160 Speaker 1: obviously thought this would be quick. I think he also overestimated, Uh, 26 00:01:46,520 --> 00:01:49,640 Speaker 1: Europe's dependence on Russian energy and that that would be 27 00:01:49,680 --> 00:01:53,040 Speaker 1: his high card. Turned out that, among other things, with 28 00:01:53,120 --> 00:01:56,320 Speaker 1: extraordinary growth in us l n G, which was nowhere 29 00:01:56,360 --> 00:01:59,880 Speaker 1: in twenty sixteen and this year will be the largest 30 00:02:00,240 --> 00:02:04,960 Speaker 1: llengy exporter in the world, as offset Russian gas in Europe. 31 00:02:05,360 --> 00:02:09,600 Speaker 1: And it may be tough depending what happens, but that 32 00:02:09,600 --> 00:02:12,360 Speaker 1: that it's manageable, and so he doesn't have that high 33 00:02:12,360 --> 00:02:15,639 Speaker 1: carn Let's talk about the word manageable and I'll take 34 00:02:15,680 --> 00:02:17,200 Speaker 1: it to one extreme and you can maybe run me 35 00:02:17,280 --> 00:02:20,240 Speaker 1: back in. Are we really thinking about a Europe without 36 00:02:20,320 --> 00:02:23,640 Speaker 1: Russian energy in our future? No? I don't think that 37 00:02:23,720 --> 00:02:27,240 Speaker 1: happens for a long time. And sometimes people overestimate. Russian 38 00:02:27,280 --> 00:02:32,280 Speaker 1: gas was twenty of Europe's gas last year, big number, 39 00:02:32,560 --> 00:02:36,639 Speaker 1: But that means that about came from other sources. So, 40 00:02:36,919 --> 00:02:41,040 Speaker 1: but I think it will uh when this crisis is over, 41 00:02:41,840 --> 00:02:45,360 Speaker 1: whatever form may and takes, Russia will be a supplier, 42 00:02:45,400 --> 00:02:48,840 Speaker 1: but will be changed is no longer will it be 43 00:02:49,000 --> 00:02:51,800 Speaker 1: seen as Russia is a reliable supplier, which they've been 44 00:02:51,800 --> 00:02:54,720 Speaker 1: saying for fifty years. And we heard it from the Germans. 45 00:02:54,760 --> 00:02:57,840 Speaker 1: They're going to build ellen Gy receiving terminals so that 46 00:02:57,919 --> 00:03:00,960 Speaker 1: they can have diversity and pen also in the world 47 00:03:01,000 --> 00:03:05,919 Speaker 1: market and not be held so much rigidly to Russian gas. 48 00:03:05,960 --> 00:03:09,239 Speaker 1: And nord Stream two is going to that pipeline is 49 00:03:09,280 --> 00:03:13,080 Speaker 1: going to lie and suspended animation beneath the Baltic Sea. Dan, 50 00:03:13,200 --> 00:03:17,280 Speaker 1: you mentioned the Germans. The legacy of Chancellor Merkele. The 51 00:03:17,440 --> 00:03:20,480 Speaker 1: history books don't look kind right now as we look 52 00:03:20,520 --> 00:03:22,840 Speaker 1: back on her, and I just wonder what happens when 53 00:03:22,880 --> 00:03:25,200 Speaker 1: nuclear from here down. And if you can take a moment, 54 00:03:25,200 --> 00:03:27,360 Speaker 1: because we have the time with you, just take a 55 00:03:27,400 --> 00:03:30,920 Speaker 1: moment to walk through what a monster change we've just 56 00:03:31,000 --> 00:03:36,280 Speaker 1: seen from a German chancellor in just a couple of days. Well, 57 00:03:36,320 --> 00:03:38,560 Speaker 1: I think that chacelor merkel it was. It was a 58 00:03:38,560 --> 00:03:41,600 Speaker 1: different circumstance. She had no illusions about Putin. I mean 59 00:03:41,680 --> 00:03:44,320 Speaker 1: she could speak Russian, and I mean from the beginning 60 00:03:44,360 --> 00:03:47,320 Speaker 1: when he's knowing that she had a fear of dogs, 61 00:03:47,320 --> 00:03:49,840 Speaker 1: brought his big dog into the room. So and I 62 00:03:49,880 --> 00:03:52,040 Speaker 1: remember being in St. Petersburg when the two of them 63 00:03:52,080 --> 00:03:54,920 Speaker 1: were on the stage together. The ice was palpable to 64 00:03:54,960 --> 00:03:59,080 Speaker 1: the audience, but the circumstances were different, and Putting at 65 00:03:59,120 --> 00:04:01,960 Speaker 1: that point up here to be a more rational. It's 66 00:04:02,040 --> 00:04:04,880 Speaker 1: tough actor. But I think now with the new Chancellor 67 00:04:04,880 --> 00:04:07,080 Speaker 1: of the statements, I think if she and power, she 68 00:04:07,120 --> 00:04:09,480 Speaker 1: probably would have said the same thing. But it is 69 00:04:09,560 --> 00:04:13,560 Speaker 1: a dramatic reversal. And Putin is one of his major 70 00:04:13,640 --> 00:04:17,360 Speaker 1: games was to welcome, to break NATO, to weaken NATO. 71 00:04:17,680 --> 00:04:20,719 Speaker 1: He's done just the opposite. He's brought it together and 72 00:04:20,800 --> 00:04:23,120 Speaker 1: Germany is going to go to two percent of GDP 73 00:04:23,240 --> 00:04:26,719 Speaker 1: for defense spending. We talk about the consequences for Russia 74 00:04:26,760 --> 00:04:29,279 Speaker 1: as they get locked out of the financial system, but 75 00:04:29,320 --> 00:04:32,599 Speaker 1: can you game out the financial consequences for Germany, for 76 00:04:32,680 --> 00:04:35,240 Speaker 1: the United States, for the rest of Europe as we 77 00:04:35,320 --> 00:04:37,919 Speaker 1: do get some sort of uncertainty, not only about the 78 00:04:37,920 --> 00:04:40,400 Speaker 1: carve outs for the energy sector. In all of these 79 00:04:40,400 --> 00:04:42,919 Speaker 1: sanctions which is how feasible the payment for any of 80 00:04:42,960 --> 00:04:46,720 Speaker 1: this will be. Well, I think that's the payment system 81 00:04:46,800 --> 00:04:49,320 Speaker 1: even you know, it's been said initially that the goal 82 00:04:50,279 --> 00:04:52,960 Speaker 1: was to carve out energy so would not hit Europe. 83 00:04:53,400 --> 00:04:56,680 Speaker 1: But risk officers are not going to are going to 84 00:04:56,760 --> 00:05:00,159 Speaker 1: be very cautious. They're gonna overcomply. You already see that 85 00:05:00,200 --> 00:05:03,479 Speaker 1: people are not doing letters of credit. Tanker owners are 86 00:05:03,520 --> 00:05:05,960 Speaker 1: going to think twice before sending their tankers. So the 87 00:05:06,120 --> 00:05:09,159 Speaker 1: energy trade is going to be disrupted. This is not 88 00:05:09,279 --> 00:05:12,640 Speaker 1: going to be a smooth thing. Uh. How bad it 89 00:05:12,680 --> 00:05:15,440 Speaker 1: gets depends on how the war goes, what the Russians do, 90 00:05:15,560 --> 00:05:18,360 Speaker 1: and so forth. But I think you're gonna see, uh, 91 00:05:19,040 --> 00:05:23,839 Speaker 1: in effect, a sanction in a sanction on Russian energy, 92 00:05:24,120 --> 00:05:27,360 Speaker 1: just by the behavior of market actors. And everybody today 93 00:05:27,440 --> 00:05:30,280 Speaker 1: I know is calling their lawyers. Can you understand what 94 00:05:30,320 --> 00:05:32,320 Speaker 1: the sanctions are. We don't want to make a mistake here, 95 00:05:32,480 --> 00:05:34,400 Speaker 1: We don't want to get a six billion dollar fine 96 00:05:34,600 --> 00:05:37,600 Speaker 1: a year from now. Meanwhile, we are getting news about 97 00:05:37,680 --> 00:05:41,440 Speaker 1: a possible oil release, a crude release from strategic petroleum 98 00:05:41,440 --> 00:05:44,400 Speaker 1: reserves of a number of major oil consuming nations, including 99 00:05:44,400 --> 00:05:47,120 Speaker 1: the U S. Somewhere of seventy million barrels. Do you 100 00:05:47,160 --> 00:05:49,360 Speaker 1: think this will move the dial at all? I think 101 00:05:49,360 --> 00:05:51,320 Speaker 1: it will. I think that if you add up what 102 00:05:51,440 --> 00:05:53,479 Speaker 1: is it, US production is going to increase a million 103 00:05:53,480 --> 00:05:55,800 Speaker 1: barrels a day. There could be more oil out of 104 00:05:55,800 --> 00:05:58,400 Speaker 1: the Gulf. If their sanctions are taken off Iran, you 105 00:05:58,440 --> 00:06:01,039 Speaker 1: get a million barrels a day. And I think it 106 00:06:01,040 --> 00:06:04,080 Speaker 1: was inevitable that they would use strategic stocks. After all, 107 00:06:04,120 --> 00:06:07,000 Speaker 1: this is what strategic stocks were built for. And so 108 00:06:07,120 --> 00:06:10,040 Speaker 1: I know the administration certainly is wants to go in 109 00:06:10,040 --> 00:06:12,640 Speaker 1: that direction. Be interesting to see what the Chinese do 110 00:06:12,800 --> 00:06:15,760 Speaker 1: this time. Dan, you're aging. As I mentioned, you're wonderful. 111 00:06:15,839 --> 00:06:18,080 Speaker 1: The New Map was my book of the year a 112 00:06:18,120 --> 00:06:21,080 Speaker 1: few years ago. Not that long ago, was only a 113 00:06:21,160 --> 00:06:22,520 Speaker 1: year and a half. A year and a half ago, 114 00:06:22,560 --> 00:06:25,120 Speaker 1: I can't remember. The brain freezes. Farrell keeps me up 115 00:06:25,160 --> 00:06:27,560 Speaker 1: to speed. Is the only reason I keep going, Dan, 116 00:06:27,680 --> 00:06:31,600 Speaker 1: you're again. I'm reading Putin's World by Angelus Stent, and 117 00:06:31,640 --> 00:06:33,960 Speaker 1: i've in February. I've made it my book of the 118 00:06:34,040 --> 00:06:37,880 Speaker 1: year because of this war and what is so important, Dan, 119 00:06:37,920 --> 00:06:41,520 Speaker 1: and this folds right into Commanding Heights is two thousand 120 00:06:41,560 --> 00:06:45,719 Speaker 1: and eight, when NATO and buch Arest said we're gonna 121 00:06:45,760 --> 00:06:51,239 Speaker 1: push east, and Robert Gates and Condo Liza Rice said no, no, no, 122 00:06:51,480 --> 00:06:56,560 Speaker 1: and they were overruled. Yank this forward to now with 123 00:06:56,680 --> 00:07:01,600 Speaker 1: what you perceive NATO will do, given the oil economy, 124 00:07:01,880 --> 00:07:06,360 Speaker 1: given our new capitalism, and given America's true commanding heights, 125 00:07:06,839 --> 00:07:10,160 Speaker 1: what do you expect NATO to do in two thousand 126 00:07:10,280 --> 00:07:13,880 Speaker 1: twenty three. Well, first, let me say I'm very pleased 127 00:07:13,880 --> 00:07:16,080 Speaker 1: to see that that's your your book of the year. 128 00:07:16,120 --> 00:07:20,119 Speaker 1: Since I'm related to Angela, so uh, that's I'll pass 129 00:07:20,160 --> 00:07:23,360 Speaker 1: that on. But I think that in terms of what 130 00:07:23,760 --> 00:07:26,240 Speaker 1: NATO does, I think it's a strengthening of it. I 131 00:07:26,240 --> 00:07:28,880 Speaker 1: think it's particularly the change in Germany is the one 132 00:07:28,920 --> 00:07:31,000 Speaker 1: that's going to be most notable. It's going to be 133 00:07:31,000 --> 00:07:33,360 Speaker 1: a much more coordinated and it isn't you know, it 134 00:07:33,440 --> 00:07:36,200 Speaker 1: was kind of frame at the edges. It it isn't anymore. 135 00:07:36,560 --> 00:07:39,200 Speaker 1: And you may see Sweden being interested, you may see 136 00:07:39,200 --> 00:07:43,200 Speaker 1: Finland being interested in joining NATO. So it's completely achieved, 137 00:07:43,280 --> 00:07:46,760 Speaker 1: just the opposite of what Vladimir Putin wanted. Danie again, 138 00:07:47,040 --> 00:07:49,400 Speaker 1: fantastic to catch up with you, sir, as a white 139 00:07:49,600 --> 00:08:00,440 Speaker 1: on geopolitics, on this crude market of market right now 140 00:08:00,480 --> 00:08:03,040 Speaker 1: and foreign exchange Jane follow joins us how to foreign 141 00:08:03,080 --> 00:08:06,080 Speaker 1: exchange strategy at Rubble Bank with all of Rabble banks 142 00:08:06,320 --> 00:08:11,480 Speaker 1: commercial relationships across Europe. Jane Folly, from your strategy standpoint, 143 00:08:11,720 --> 00:08:18,520 Speaker 1: what is the state of liquidity within the European financial system? Well, 144 00:08:18,560 --> 00:08:21,800 Speaker 1: I think liquidity quite clearly there is none really inert 145 00:08:21,880 --> 00:08:23,880 Speaker 1: that the Russian ruble are very very little. But I 146 00:08:23,880 --> 00:08:26,040 Speaker 1: think if we move into the agricultural space, I think 147 00:08:26,080 --> 00:08:29,720 Speaker 1: that's where perhaps the spotlight is beginning to shine. Certainly 148 00:08:30,040 --> 00:08:32,760 Speaker 1: it can be a little bit more difficult. We're not 149 00:08:33,240 --> 00:08:36,400 Speaker 1: we're not used to having crisis at effects at agricultural 150 00:08:36,440 --> 00:08:39,520 Speaker 1: prices or commodity prices in this area. So we are 151 00:08:39,559 --> 00:08:43,079 Speaker 1: seeing signs of a little bit stress and really unfamiliar 152 00:08:43,080 --> 00:08:46,440 Speaker 1: conditions and those sorts of markets that really threw out. 153 00:08:46,920 --> 00:08:50,320 Speaker 1: We've been talking, Jane about how Ruble will open for 154 00:08:50,400 --> 00:08:54,760 Speaker 1: trading beginning last evening six seven pm whatever time that was. 155 00:08:54,960 --> 00:08:58,080 Speaker 1: Is Ruble fully open for trading? From where you sit, 156 00:09:00,440 --> 00:09:02,480 Speaker 1: I don't think it's going to be fully open really 157 00:09:02,520 --> 00:09:03,960 Speaker 1: for a long time. You've got to bear in mind 158 00:09:03,960 --> 00:09:06,960 Speaker 1: that because of the sanctions, so many banks are just 159 00:09:07,040 --> 00:09:11,719 Speaker 1: unable to trade with Russian counterpassing, and therefore automatically you 160 00:09:11,800 --> 00:09:14,960 Speaker 1: get a real crushing of of liquidity, so that the 161 00:09:15,000 --> 00:09:17,679 Speaker 1: prices that we see on the screen, you know, just 162 00:09:17,840 --> 00:09:20,480 Speaker 1: to seem what we've seen an enormous spread traded in 163 00:09:20,520 --> 00:09:23,080 Speaker 1: the course of today compared with where we would normally 164 00:09:23,480 --> 00:09:26,040 Speaker 1: see the Russian ruble. But again that's just a reflection 165 00:09:26,080 --> 00:09:28,400 Speaker 1: of the fact that very few people are are able 166 00:09:28,440 --> 00:09:31,480 Speaker 1: to trade it right now, so that really is is 167 00:09:31,520 --> 00:09:34,640 Speaker 1: not a proper market and it's probably going to be 168 00:09:35,240 --> 00:09:38,200 Speaker 1: like that for some time. Jane, taking a step back. 169 00:09:38,240 --> 00:09:41,959 Speaker 1: Over the weekend, the backdrop changed materially in a lot 170 00:09:41,960 --> 00:09:45,160 Speaker 1: of people calling the US's actions and Europe's actions a 171 00:09:45,200 --> 00:09:49,280 Speaker 1: weaponization of the hegemony of the dollar, basically saying that 172 00:09:49,320 --> 00:09:52,960 Speaker 1: they are using the dollars predominance here to push Russia 173 00:09:52,960 --> 00:09:55,560 Speaker 1: out of the financial system, that it would have ramifications 174 00:09:55,640 --> 00:09:58,679 Speaker 1: longer term for the dollar and it would weaken it. 175 00:09:58,800 --> 00:10:01,000 Speaker 1: We're not seeing that in the market. It's quite the opposite. 176 00:10:01,000 --> 00:10:03,440 Speaker 1: But do you think that there is validity to this argument? 177 00:10:05,720 --> 00:10:07,840 Speaker 1: That is an argument that is not new, you know, 178 00:10:07,840 --> 00:10:10,000 Speaker 1: that is an argument which has been going on really 179 00:10:10,040 --> 00:10:12,280 Speaker 1: at least eight or so years or you know, we 180 00:10:12,320 --> 00:10:14,839 Speaker 1: can take it back to the Crimea for instance, or 181 00:10:14,920 --> 00:10:17,480 Speaker 1: eight years ago, where and Russia really then tried to 182 00:10:17,760 --> 00:10:21,439 Speaker 1: protect itself against some Western sanctions, really ramping up those 183 00:10:21,600 --> 00:10:25,320 Speaker 1: from exchange reserves, increasing itself sufficiency in food also and 184 00:10:25,360 --> 00:10:28,680 Speaker 1: also trying to have more invoices that were not US 185 00:10:28,760 --> 00:10:31,679 Speaker 1: dollar denominated. Now the dollar is of course that that 186 00:10:31,880 --> 00:10:35,120 Speaker 1: the primary currency in the global payment system. That is 187 00:10:35,200 --> 00:10:38,880 Speaker 1: why sanctions have been used by the US government, you know, 188 00:10:39,040 --> 00:10:42,520 Speaker 1: to such an extent, think Iran, and certainly it is 189 00:10:42,880 --> 00:10:46,000 Speaker 1: a weapon if you like to try and force another 190 00:10:46,040 --> 00:10:48,920 Speaker 1: country to really back down on what they want to do. 191 00:10:48,960 --> 00:10:51,760 Speaker 1: And it's been used very powerful in this instance. And 192 00:10:51,960 --> 00:10:54,920 Speaker 1: and really you know, with the blessing of all of 193 00:10:54,920 --> 00:10:58,800 Speaker 1: the US is Western allies, Jane, there is a concern 194 00:10:58,960 --> 00:11:00,360 Speaker 1: that there will be a friction and so will be 195 00:11:00,400 --> 00:11:04,679 Speaker 1: huge liquidity issues within the major markets, money markets, dollar financing. 196 00:11:05,120 --> 00:11:08,000 Speaker 1: And there has been some speculation, including by the likes 197 00:11:08,040 --> 00:11:10,800 Speaker 1: of Credit Swee Result and Posar, that the Federal Reserve 198 00:11:10,840 --> 00:11:13,040 Speaker 1: will have to extend f X swap lines and do 199 00:11:13,160 --> 00:11:15,640 Speaker 1: other types of intervention. Do you see any signs that 200 00:11:15,800 --> 00:11:20,920 Speaker 1: will be required? I think sometimes that the fact that 201 00:11:20,960 --> 00:11:23,280 Speaker 1: the Central Bank is is willing to do it might 202 00:11:23,360 --> 00:11:27,360 Speaker 1: be enough, because often what creates that these liquidity shortages 203 00:11:27,559 --> 00:11:30,600 Speaker 1: it's just sheer panic um and and people trying to 204 00:11:30,600 --> 00:11:33,040 Speaker 1: get their hands on on dollar liquidity just in case, 205 00:11:33,120 --> 00:11:36,320 Speaker 1: not that they need it now or or even in 206 00:11:36,360 --> 00:11:39,120 Speaker 1: a few days time. So the fact often that the 207 00:11:39,440 --> 00:11:43,559 Speaker 1: Fed may promise that it's there that these liquidity lines 208 00:11:43,640 --> 00:11:46,960 Speaker 1: are possible if if needed, could be enough to see 209 00:11:47,440 --> 00:11:50,840 Speaker 1: the tension. So this is really about stopping market panic. 210 00:11:50,840 --> 00:11:53,200 Speaker 1: And we've got to remember that, yes and Friday we 211 00:11:53,240 --> 00:11:55,960 Speaker 1: did see some ports being shut down in the Black Sea, 212 00:11:56,040 --> 00:11:58,960 Speaker 1: but right now we don't have a huge amount of 213 00:11:58,960 --> 00:12:03,319 Speaker 1: disruption yet to you know, food certainly or energy, and 214 00:12:03,760 --> 00:12:05,840 Speaker 1: this is where the panic could come from. And this 215 00:12:05,920 --> 00:12:08,440 Speaker 1: is perhaps why some of the sanctions that have been 216 00:12:08,760 --> 00:12:12,520 Speaker 1: announced with respect to that the swift system haven't yet 217 00:12:12,559 --> 00:12:15,280 Speaker 1: been universal. I think Europe would like to know that 218 00:12:15,320 --> 00:12:17,439 Speaker 1: it can still get its hands on some Russian supplies 219 00:12:17,679 --> 00:12:20,920 Speaker 1: of energy. That's really necessary for a country like Germany, 220 00:12:20,920 --> 00:12:23,800 Speaker 1: which of course has a huge amount of industry which 221 00:12:23,840 --> 00:12:26,880 Speaker 1: will be using that Russian energy. So this is this 222 00:12:26,960 --> 00:12:30,800 Speaker 1: is it's really important how it's managed to stop that panic. 223 00:12:31,200 --> 00:12:34,480 Speaker 1: That may then require some of those extra liquidity lines 224 00:12:34,520 --> 00:12:36,400 Speaker 1: to change. Just to build on something you mentioned earlier. 225 00:12:36,520 --> 00:12:38,920 Speaker 1: The rubles not a proper market, it's certainly not this morning, 226 00:12:38,920 --> 00:12:40,400 Speaker 1: and to build it out just a little bit more 227 00:12:40,880 --> 00:12:43,280 Speaker 1: when foreigners can actually sell their Russian assets when the 228 00:12:43,280 --> 00:12:45,760 Speaker 1: market reopens again, what kind of pressure would you expect 229 00:12:45,840 --> 00:12:51,480 Speaker 1: on this currency. A huge amount of pressure. We've seen 230 00:12:51,520 --> 00:12:53,800 Speaker 1: for instance that that the that the news from BP, 231 00:12:54,000 --> 00:12:56,520 Speaker 1: that's just one that you've mentioned a little bit earlier 232 00:12:56,600 --> 00:12:58,960 Speaker 1: on you know, selling it's it's Russian stake. I think 233 00:12:59,000 --> 00:13:02,240 Speaker 1: also that the WE Sovereign Wealth Fund at the biggest 234 00:13:02,240 --> 00:13:04,680 Speaker 1: often wealth fund in the world, and and it wants 235 00:13:04,720 --> 00:13:08,600 Speaker 1: to sell it's it's Russian assets. It ends um bonds 236 00:13:08,880 --> 00:13:12,120 Speaker 1: as well as a lot of stocks in Russia. Those 237 00:13:12,160 --> 00:13:15,600 Speaker 1: will be going now, even if it's delayed, not just 238 00:13:15,679 --> 00:13:18,320 Speaker 1: today or another few days. At some point in that 239 00:13:18,400 --> 00:13:22,000 Speaker 1: setting will come and and and therefore we we can 240 00:13:22,000 --> 00:13:24,520 Speaker 1: expect a lot of dawnside pressure on the ruble. Jane, 241 00:13:24,559 --> 00:13:27,520 Speaker 1: thank you as always wonderful work at Atlanta. Jane Foley 242 00:13:27,559 --> 00:13:35,280 Speaker 1: there rather bank on the markets. Ross Casters joins us 243 00:13:35,280 --> 00:13:38,719 Speaker 1: now with a Global Allocation Fund at black Rock Ross, 244 00:13:38,720 --> 00:13:41,120 Speaker 1: good morning to you. What did you do over the weekend? 245 00:13:41,360 --> 00:13:43,520 Speaker 1: What does the money guy? What does black Rock do 246 00:13:43,640 --> 00:13:48,439 Speaker 1: an institutional investment over a weekend? As we've seen, we'll 247 00:13:48,480 --> 00:13:50,480 Speaker 1: tell good morning. Look, I think we're all trying to 248 00:13:50,520 --> 00:13:53,080 Speaker 1: figure out what's going on now, and it's very hard, 249 00:13:53,080 --> 00:13:56,040 Speaker 1: if not impossible, to predict what Vladimir Prudence going to do. 250 00:13:56,080 --> 00:13:58,560 Speaker 1: But I think we do know when something's have changed. 251 00:13:58,800 --> 00:14:00,840 Speaker 1: And you've got a position the poor portfolio, so we 252 00:14:01,040 --> 00:14:04,040 Speaker 1: for months now we've been bringing down risk. We've been 253 00:14:04,400 --> 00:14:07,040 Speaker 1: controlling our equity data. We've been looking at some of 254 00:14:07,040 --> 00:14:09,600 Speaker 1: the early growth names that are really exposed given the 255 00:14:09,679 --> 00:14:13,600 Speaker 1: rate volatility, and thinking about the long term implications for Europe, 256 00:14:14,000 --> 00:14:18,360 Speaker 1: for energy, infrastructure, for macro volatility. Again, it's not a 257 00:14:18,400 --> 00:14:20,880 Speaker 1: bold statement to say that the world has changed fairly 258 00:14:20,960 --> 00:14:23,960 Speaker 1: dramatically over the last couple of weeks. Have you changed 259 00:14:23,960 --> 00:14:26,280 Speaker 1: your allocations yet, russ Are you still just thinking about 260 00:14:26,280 --> 00:14:30,880 Speaker 1: the ramifications? You know, thankfully we had been bringing down 261 00:14:31,000 --> 00:14:34,320 Speaker 1: risk for several months aheaded this, and again I won't 262 00:14:34,360 --> 00:14:36,520 Speaker 1: pretend that we had the foresight to see what's gonna 263 00:14:36,560 --> 00:14:40,160 Speaker 1: happen in Russia, but certainly as that became more evident, UH, 264 00:14:40,280 --> 00:14:42,880 Speaker 1: as you deal with a very tough balancing act for 265 00:14:42,920 --> 00:14:46,600 Speaker 1: the FED even before the invasion of Ukraine. UH, it 266 00:14:46,720 --> 00:14:50,720 Speaker 1: was prudent given tighter financial conditions, giving the uncertainty about 267 00:14:50,760 --> 00:14:54,000 Speaker 1: rates to bring down risk in the portfolio, and obviously 268 00:14:54,040 --> 00:14:56,400 Speaker 1: the events the last week or two when we support 269 00:14:56,440 --> 00:14:58,800 Speaker 1: that for us, there's an idea that the FED will 270 00:14:58,840 --> 00:15:01,960 Speaker 1: be forced to come in and actually support market liquidity, 271 00:15:01,960 --> 00:15:04,320 Speaker 1: be market makers in the next couple of days and 272 00:15:04,360 --> 00:15:07,440 Speaker 1: possibly even weeks, as some of these sanctions ripple through 273 00:15:07,480 --> 00:15:10,560 Speaker 1: the financial markets. What's your view on the FED moving 274 00:15:10,600 --> 00:15:13,800 Speaker 1: away from tightening financial conditions, moving away from the balance 275 00:15:13,840 --> 00:15:16,760 Speaker 1: sheet reduction, moving away from even rate hikes in response 276 00:15:16,800 --> 00:15:20,200 Speaker 1: to this conflict. You know, it's a great question, and 277 00:15:20,400 --> 00:15:22,960 Speaker 1: I certainly think the FIT has to take this into consideration. 278 00:15:23,000 --> 00:15:25,480 Speaker 1: Where are now in a world where there is very 279 00:15:25,520 --> 00:15:30,200 Speaker 1: significant two sided risk, the impact on confidence, the effect 280 00:15:30,280 --> 00:15:33,760 Speaker 1: of higher oil prices. Having said that, UH, it's not 281 00:15:33,840 --> 00:15:36,920 Speaker 1: obvious that the FED has to completely or or can 282 00:15:37,000 --> 00:15:39,760 Speaker 1: completely rip up their game plan because you still have 283 00:15:39,800 --> 00:15:42,600 Speaker 1: a world in which domestic inflation is at a forty 284 00:15:42,640 --> 00:15:46,360 Speaker 1: year high. It's broad, it's sticky, which means the FED 285 00:15:46,480 --> 00:15:48,760 Speaker 1: is probably still going to have to hike. Where I 286 00:15:48,800 --> 00:15:51,600 Speaker 1: think this has an impact is how much do they 287 00:15:51,600 --> 00:15:53,760 Speaker 1: go in March? How quickly did they start to change 288 00:15:53,760 --> 00:15:57,200 Speaker 1: the balance sheet? But the direction of travel still has 289 00:15:57,240 --> 00:16:00,320 Speaker 1: to be towards the removal of some accommodation. RUSS, where 290 00:16:00,360 --> 00:16:03,000 Speaker 1: and what you focused on in this market at the 291 00:16:03,000 --> 00:16:05,400 Speaker 1: moment through today? What will you be laser focused on? 292 00:16:06,480 --> 00:16:08,240 Speaker 1: So I think there are a couple of things. You know, Jonathan, 293 00:16:08,240 --> 00:16:10,920 Speaker 1: you were talking about the European banks. Obviously that is 294 00:16:10,920 --> 00:16:13,120 Speaker 1: a big deal, as well as the impact on the 295 00:16:13,200 --> 00:16:17,120 Speaker 1: overall European economy. You know, just given the geographic proximity, 296 00:16:17,840 --> 00:16:20,920 Speaker 1: given the spike not just an oil but gas prices, 297 00:16:20,960 --> 00:16:24,080 Speaker 1: you know, what is the economic effect in Europe? I 298 00:16:24,080 --> 00:16:26,680 Speaker 1: think the seconds we're just talking about is the FED 299 00:16:27,160 --> 00:16:30,400 Speaker 1: the third? Are we seeing any change in the behavior 300 00:16:30,440 --> 00:16:32,480 Speaker 1: of US consumers so far? The answer that is no. 301 00:16:32,920 --> 00:16:36,080 Speaker 1: We look at higher frequency data, there's still an underlying 302 00:16:36,120 --> 00:16:39,600 Speaker 1: strength to U as economy. But does that change given 303 00:16:39,680 --> 00:16:43,520 Speaker 1: higher oil prices and these just very very significant events 304 00:16:43,520 --> 00:16:45,360 Speaker 1: going on in Europe? RUSS, where would you look for 305 00:16:45,400 --> 00:16:49,080 Speaker 1: stress and do you see any signs of that now? Well? 306 00:16:49,120 --> 00:16:51,120 Speaker 1: I think the stress obviously is going to come in 307 00:16:51,160 --> 00:16:53,840 Speaker 1: a couple of places. One the names that are most 308 00:16:53,880 --> 00:16:58,200 Speaker 1: exposed to Russia. Uh. You know again, fortunately outside of energy, 309 00:16:58,280 --> 00:17:01,240 Speaker 1: outside of particular commodity. You know, this is not an 310 00:17:01,240 --> 00:17:04,399 Speaker 1: economy with tremendous links to the rest of the world. 311 00:17:05,119 --> 00:17:09,800 Speaker 1: But the transmission mechanisms really are about banking, about the 312 00:17:09,880 --> 00:17:13,040 Speaker 1: financial system, and of course energy. We keep coming back 313 00:17:13,040 --> 00:17:15,280 Speaker 1: to energy, and the reason for that is, you know again, 314 00:17:15,280 --> 00:17:17,520 Speaker 1: if this would have happened five or six years ago, 315 00:17:18,080 --> 00:17:21,040 Speaker 1: when oil was a lot lower, it would have created 316 00:17:21,160 --> 00:17:24,199 Speaker 1: less stress economically than obviously it's created a new moment 317 00:17:24,480 --> 00:17:27,400 Speaker 1: when you already had very high inflation in the US, 318 00:17:27,440 --> 00:17:30,840 Speaker 1: in Europe and already elevated oil prices US. Thanks for 319 00:17:30,920 --> 00:17:33,439 Speaker 1: inflexible this morning to catch how the buddy as Ohites 320 00:17:33,560 --> 00:17:41,360 Speaker 1: Russ constrict that of black Crow. When I woke up 321 00:17:41,359 --> 00:17:43,879 Speaker 1: this morning early and I did not know what I 322 00:17:43,920 --> 00:17:47,800 Speaker 1: would see, I really underestimated John Farrell, what you and 323 00:17:47,880 --> 00:17:50,639 Speaker 1: Lisa have lead on this morning, which is I guess 324 00:17:50,640 --> 00:17:54,200 Speaker 1: I'm gonna call them non sanctions sanctions That would be 325 00:17:54,320 --> 00:17:57,359 Speaker 1: a good thing, John, to start with Oliver Wyman's Daniel 326 00:17:57,400 --> 00:17:59,760 Speaker 1: Tannem I think we can kill them SOLF sanctions down 327 00:17:59,800 --> 00:18:01,800 Speaker 1: town a while like that they had of America's anti 328 00:18:01,800 --> 00:18:04,480 Speaker 1: financial crime Oliver Wie and not my term, Dan, But 329 00:18:04,560 --> 00:18:07,200 Speaker 1: let's work through it. We've had the sanctions and down 330 00:18:07,240 --> 00:18:09,080 Speaker 1: what we're all trying to work out is how it 331 00:18:09,119 --> 00:18:12,080 Speaker 1: works in practice. How many companies, even if they don't 332 00:18:12,119 --> 00:18:16,560 Speaker 1: have to abide by these sanctions, choose to pull back anyway? 333 00:18:17,960 --> 00:18:21,120 Speaker 1: Thanks John. And obviously if you see oil companies walk 334 00:18:21,160 --> 00:18:22,760 Speaker 1: out of the market, I think that's a pretty good 335 00:18:22,760 --> 00:18:24,879 Speaker 1: indication that you're going to see other businesses and I 336 00:18:24,920 --> 00:18:27,880 Speaker 1: do like that self sanctions point can begin to walk out. 337 00:18:27,920 --> 00:18:30,680 Speaker 1: I'm hearing from clients of other businesses beginning to draw 338 00:18:30,760 --> 00:18:33,560 Speaker 1: up which they had actually started looking at in December, 339 00:18:33,840 --> 00:18:36,320 Speaker 1: those exit plans. If do we really want to remain 340 00:18:36,320 --> 00:18:39,440 Speaker 1: in this market? Is it viable for our business? Especially 341 00:18:39,440 --> 00:18:42,760 Speaker 1: you have to remember Russia hasn't really responded with their 342 00:18:42,920 --> 00:18:46,440 Speaker 1: version of whatever sanctions. Maybe so if you're a non 343 00:18:46,520 --> 00:18:49,760 Speaker 1: Russian business operating the market, depending on the positions you take, 344 00:18:49,800 --> 00:18:52,800 Speaker 1: this might be an untenable position. Look to see more 345 00:18:52,840 --> 00:18:55,520 Speaker 1: companies announce their exits from Russia in the coming days. 346 00:18:55,560 --> 00:18:58,000 Speaker 1: That's for certain. Down what that's what they're choosing to do. 347 00:18:58,240 --> 00:19:00,639 Speaker 1: What are you suggesting they should do. What's the advice 348 00:19:00,640 --> 00:19:03,600 Speaker 1: you've given them? I think, you know, look the advice 349 00:19:03,640 --> 00:19:06,679 Speaker 1: I'm giving right now, there's still a lot that's on 350 00:19:06,720 --> 00:19:10,320 Speaker 1: the table. You know, this is a squeeze on the 351 00:19:10,359 --> 00:19:12,600 Speaker 1: Russian economy, that's for certain. And I said it on 352 00:19:12,640 --> 00:19:15,919 Speaker 1: this show on Friday, and sadly it keeps coming true. 353 00:19:16,840 --> 00:19:20,320 Speaker 1: Russia is well on its way to being treated like Iran, 354 00:19:20,640 --> 00:19:23,800 Speaker 1: like Cuba in terms of being a truly isolated economy 355 00:19:23,840 --> 00:19:27,000 Speaker 1: from humanity. So I think as I look to what 356 00:19:27,119 --> 00:19:30,440 Speaker 1: businesses need to do, it's actually getting simpler the more 357 00:19:30,480 --> 00:19:33,560 Speaker 1: significant the sanctions get, because there's less of a needle 358 00:19:33,600 --> 00:19:36,640 Speaker 1: to threat and more just an exit that the business 359 00:19:36,680 --> 00:19:39,359 Speaker 1: is too untenable to take on the risk. More broadly, so, 360 00:19:39,480 --> 00:19:41,840 Speaker 1: going a little further dan is the risk for a 361 00:19:41,880 --> 00:19:44,639 Speaker 1: lot of these companies that the US will remove the 362 00:19:44,720 --> 00:19:46,919 Speaker 1: carve out for oil companies that the EU will do 363 00:19:46,960 --> 00:19:49,080 Speaker 1: the same. Or is it just that it will be 364 00:19:49,119 --> 00:19:53,080 Speaker 1: too complicated financially in order to execute some of these 365 00:19:53,080 --> 00:19:55,919 Speaker 1: transactions with all of the numbers of sanctioned players, And 366 00:19:55,960 --> 00:19:58,159 Speaker 1: it doesn't even make financial sense at this point to 367 00:19:58,240 --> 00:20:00,840 Speaker 1: keep going. So I think that is a question to watch. 368 00:20:00,880 --> 00:20:02,560 Speaker 1: And as you look at some of the sanctions, and 369 00:20:02,560 --> 00:20:05,480 Speaker 1: the Treasury Department just put out the US Central Bank sanctions, 370 00:20:05,520 --> 00:20:07,400 Speaker 1: I think as I was walking on here about ten 371 00:20:07,440 --> 00:20:09,920 Speaker 1: minutes ago, we've still not seen what banks are being 372 00:20:10,040 --> 00:20:12,919 Speaker 1: de swifted. And it was very clearly stated over the 373 00:20:12,960 --> 00:20:15,120 Speaker 1: weekend that only some banks are going to be taken 374 00:20:15,119 --> 00:20:19,639 Speaker 1: off swift. That's largely to facilitate that continued legal transactions. 375 00:20:20,000 --> 00:20:22,119 Speaker 1: I think energy, you know, there was talk that the 376 00:20:22,160 --> 00:20:25,320 Speaker 1: Central Bank is the nuclear option. Energy restrictions are the 377 00:20:25,400 --> 00:20:29,159 Speaker 1: nuclear option with respect to Russia, and I would be 378 00:20:29,160 --> 00:20:32,159 Speaker 1: surprised if you didn't see programs start leaking out that 379 00:20:32,240 --> 00:20:35,119 Speaker 1: begin to shrink the amount of Russian energy that's allowed 380 00:20:35,160 --> 00:20:37,399 Speaker 1: to be traded. You can't ban it. You have certain 381 00:20:37,440 --> 00:20:41,240 Speaker 1: countries that are on reliant on Russian oil, Russian l 382 00:20:41,320 --> 00:20:43,879 Speaker 1: n G. There's there's a whole sort of statistics that 383 00:20:44,000 --> 00:20:46,800 Speaker 1: say this is a frontier economy in e M economy, 384 00:20:46,920 --> 00:20:51,600 Speaker 1: and yet every statistic says it's the eleventh largest economy 385 00:20:51,640 --> 00:20:54,840 Speaker 1: in the world. What is the power of Saudi Arabia 386 00:20:54,960 --> 00:20:59,120 Speaker 1: right now to make Russia fifte largest economy in the world. 387 00:20:59,160 --> 00:21:01,919 Speaker 1: I mean, Russia may fall out of the G twenty 388 00:21:02,000 --> 00:21:04,280 Speaker 1: by the numbers this week at the rate things are going. 389 00:21:04,680 --> 00:21:08,439 Speaker 1: I think Russia's position and how its allies or what 390 00:21:08,600 --> 00:21:13,359 Speaker 1: few allies remain holding their line um is a really 391 00:21:13,400 --> 00:21:16,560 Speaker 1: important point to see. I mean, this economy is in crisis. 392 00:21:16,680 --> 00:21:20,320 Speaker 1: I mean you're seeing it's essentially being cut off from 393 00:21:20,400 --> 00:21:23,159 Speaker 1: most of the West through these sanctions that have been imposed, 394 00:21:23,359 --> 00:21:26,359 Speaker 1: which does create a broader opportunity for some other nations 395 00:21:26,359 --> 00:21:29,760 Speaker 1: to increase their standing potentially. Well, that's exactly where I 396 00:21:29,760 --> 00:21:32,640 Speaker 1: wanted to go. Who who can be I don't see 397 00:21:32,680 --> 00:21:37,000 Speaker 1: how someone's advantaged by this war and by the economics 398 00:21:37,040 --> 00:21:41,639 Speaker 1: and capitalism of this war. Your suggesting someone could be advantaged, 399 00:21:41,680 --> 00:21:44,720 Speaker 1: I think possibly. I mean, frankly, this is the global 400 00:21:44,840 --> 00:21:47,520 Speaker 1: response to this situation. With a few exceptions, we didn't 401 00:21:47,560 --> 00:21:50,440 Speaker 1: see this much of a rallying around the flag globally 402 00:21:50,560 --> 00:21:53,240 Speaker 1: with respect to COVID that we've seen with how Ukraine 403 00:21:53,280 --> 00:21:55,399 Speaker 1: is being handled. So I don't think anyone's looking for 404 00:21:55,440 --> 00:21:58,960 Speaker 1: this necessarily as an opportunity to leap frog other countries. 405 00:21:58,960 --> 00:22:01,520 Speaker 1: From an economic stan point, I think right now there 406 00:22:01,560 --> 00:22:03,879 Speaker 1: seems to be a pretty uniform focus on how to 407 00:22:04,240 --> 00:22:07,520 Speaker 1: diffuse the situation and get Russia to pull back its 408 00:22:07,520 --> 00:22:09,879 Speaker 1: troops and just getting some headlines from Boris Johnson in 409 00:22:09,920 --> 00:22:14,879 Speaker 1: the UK pushing for Russia to be excluded fully from Swift, Dan, 410 00:22:14,960 --> 00:22:18,359 Speaker 1: do you get the feeling this is an over so 411 00:22:18,480 --> 00:22:21,240 Speaker 1: that the Swift comment, and this has been constantly used 412 00:22:21,240 --> 00:22:23,920 Speaker 1: as some sort of silver bullet. If you take everyone 413 00:22:24,000 --> 00:22:27,360 Speaker 1: off of Swift, any Western business is still performing, any 414 00:22:27,440 --> 00:22:30,320 Speaker 1: legal trade, including energy trade, would have a very difficult 415 00:22:30,359 --> 00:22:33,840 Speaker 1: time facilitating getting paid. So I really do think the 416 00:22:33,840 --> 00:22:37,000 Speaker 1: complete Swift band is an overblown comment that's been made 417 00:22:37,000 --> 00:22:40,040 Speaker 1: by a lot of politicians around the world. It's definitely 418 00:22:40,080 --> 00:22:43,280 Speaker 1: not over. There's more companies that can be restricted, there's 419 00:22:43,320 --> 00:22:45,680 Speaker 1: more sanctions that can be levied. You can drip out 420 00:22:45,680 --> 00:22:48,200 Speaker 1: oligarch sanctions. And even over the weekend it was announced 421 00:22:48,400 --> 00:22:51,879 Speaker 1: the US will begin potentially seizing physical assets. And who 422 00:22:51,960 --> 00:22:54,679 Speaker 1: doesn't love to see a yacht seizure coming up? That 423 00:22:54,720 --> 00:22:57,320 Speaker 1: could be what we say, d'antana bam if Oliver Wyman, 424 00:22:57,440 --> 00:23:00,760 Speaker 1: thank you. This is the Bloomberg Surveillance podcast. Asked thanks 425 00:23:00,760 --> 00:23:04,080 Speaker 1: for listening. Join us live weekdays from seven to ten 426 00:23:04,160 --> 00:23:08,639 Speaker 1: am Eastern on Bloomberg Radio and on Bloomberg Television each 427 00:23:08,720 --> 00:23:12,480 Speaker 1: day from six to nine am for insight from the 428 00:23:12,480 --> 00:23:17,720 Speaker 1: best in economics, finance, investment, and international relations. And subscribe 429 00:23:17,760 --> 00:23:22,680 Speaker 1: to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, 430 00:23:22,760 --> 00:23:26,000 Speaker 1: and of course, on the terminal. I'm Tom keene In. 431 00:23:26,119 --> 00:23:27,960 Speaker 1: This is Bloomberg.