WEBVTT - Surveillance: Russian Energy with Yergin 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:31.159 and of course, on the Bloomberg terminal. Daniel Jurgen is 0:00:31.200 --> 0:00:33.680 known for oil. We have lots of questions on oil. 0:00:33.880 --> 0:00:37.360 He has a title vice Chairman at I h S Market. 0:00:37.840 --> 0:00:40.080 He also writes books, including my book of the Year 0:00:40.120 --> 0:00:43.120 a few years ago, The New Map. We're thrilled at 0:00:43.159 --> 0:00:46.360 Daniel Jorgan could join us today as we consider the 0:00:46.440 --> 0:00:50.280 crushing commanding heights of the United States and in New 0:00:50.320 --> 0:00:54.920 Europe and the collapse of the Russian Federation in some form. 0:00:55.200 --> 0:00:57.560 Daniel gonna thank you so much for joining us today 0:00:57.960 --> 0:01:01.840 and your commanding heights. You magi sterily talk about the 0:01:01.880 --> 0:01:05.320 shift of Russia in the nineties, you say the marriage 0:01:05.319 --> 0:01:09.360 of the hedgehog UH and onto the new Gorbachev era. 0:01:09.800 --> 0:01:12.720 Are we seeing a shift now with Putin? Is there 0:01:12.760 --> 0:01:16.800 an outcome that you can see absolutely what we're seeing 0:01:16.840 --> 0:01:20.120 that that process that began in the nineties of Russia 0:01:20.160 --> 0:01:22.839 connecting with the world economy, being integrated with the world 0:01:22.880 --> 0:01:27.240 economy is very rapidly going in reverse now as these 0:01:27.280 --> 0:01:31.560 crushing sanctions are being imposed. Russia is being disconnected from 0:01:31.560 --> 0:01:34.840 the world economy. What does the new map for Vladimir 0:01:34.880 --> 0:01:40.959 Putin look like? Uh, he grossly miscalculated. I think he 0:01:41.000 --> 0:01:45.160 obviously thought this would be quick. I think he also overestimated, Uh, 0:01:46.520 --> 0:01:49.640 Europe's dependence on Russian energy and that that would be 0:01:49.680 --> 0:01:53.040 his high card. Turned out that, among other things, with 0:01:53.120 --> 0:01:56.320 extraordinary growth in us l n G, which was nowhere 0:01:56.360 --> 0:01:59.880 in twenty sixteen and this year will be the largest 0:02:00.240 --> 0:02:04.960 llengy exporter in the world, as offset Russian gas in Europe. 0:02:05.360 --> 0:02:09.600 And it may be tough depending what happens, but that 0:02:09.600 --> 0:02:12.360 that it's manageable, and so he doesn't have that high 0:02:12.360 --> 0:02:15.639 carn Let's talk about the word manageable and I'll take 0:02:15.680 --> 0:02:17.200 it to one extreme and you can maybe run me 0:02:17.280 --> 0:02:20.240 back in. Are we really thinking about a Europe without 0:02:20.320 --> 0:02:23.640 Russian energy in our future? No? I don't think that 0:02:23.720 --> 0:02:27.240 happens for a long time. And sometimes people overestimate. Russian 0:02:27.280 --> 0:02:32.280 gas was twenty of Europe's gas last year, big number, 0:02:32.560 --> 0:02:36.639 But that means that about came from other sources. So, 0:02:36.919 --> 0:02:41.040 but I think it will uh when this crisis is over, 0:02:41.840 --> 0:02:45.360 whatever form may and takes, Russia will be a supplier, 0:02:45.400 --> 0:02:48.840 but will be changed is no longer will it be 0:02:49.000 --> 0:02:51.800 seen as Russia is a reliable supplier, which they've been 0:02:51.800 --> 0:02:54.720 saying for fifty years. And we heard it from the Germans. 0:02:54.760 --> 0:02:57.840 They're going to build ellen Gy receiving terminals so that 0:02:57.919 --> 0:03:00.960 they can have diversity and pen also in the world 0:03:01.000 --> 0:03:05.919 market and not be held so much rigidly to Russian gas. 0:03:05.960 --> 0:03:09.239 And nord Stream two is going to that pipeline is 0:03:09.280 --> 0:03:13.080 going to lie and suspended animation beneath the Baltic Sea. Dan, 0:03:13.200 --> 0:03:17.280 you mentioned the Germans. The legacy of Chancellor Merkele. The 0:03:17.440 --> 0:03:20.480 history books don't look kind right now as we look 0:03:20.520 --> 0:03:22.840 back on her, and I just wonder what happens when 0:03:22.880 --> 0:03:25.200 nuclear from here down. And if you can take a moment, 0:03:25.200 --> 0:03:27.360 because we have the time with you, just take a 0:03:27.400 --> 0:03:30.920 moment to walk through what a monster change we've just 0:03:31.000 --> 0:03:36.280 seen from a German chancellor in just a couple of days. Well, 0:03:36.320 --> 0:03:38.560 I think that chacelor merkel it was. It was a 0:03:38.560 --> 0:03:41.600 different circumstance. She had no illusions about Putin. I mean 0:03:41.680 --> 0:03:44.320 she could speak Russian, and I mean from the beginning 0:03:44.360 --> 0:03:47.320 when he's knowing that she had a fear of dogs, 0:03:47.320 --> 0:03:49.840 brought his big dog into the room. So and I 0:03:49.880 --> 0:03:52.040 remember being in St. Petersburg when the two of them 0:03:52.080 --> 0:03:54.920 were on the stage together. The ice was palpable to 0:03:54.960 --> 0:03:59.080 the audience, but the circumstances were different, and Putting at 0:03:59.120 --> 0:04:01.960 that point up here to be a more rational. It's 0:04:02.040 --> 0:04:04.880 tough actor. But I think now with the new Chancellor 0:04:04.880 --> 0:04:07.080 of the statements, I think if she and power, she 0:04:07.120 --> 0:04:09.480 probably would have said the same thing. But it is 0:04:09.560 --> 0:04:13.560 a dramatic reversal. And Putin is one of his major 0:04:13.640 --> 0:04:17.360 games was to welcome, to break NATO, to weaken NATO. 0:04:17.680 --> 0:04:20.719 He's done just the opposite. He's brought it together and 0:04:20.800 --> 0:04:23.120 Germany is going to go to two percent of GDP 0:04:23.240 --> 0:04:26.719 for defense spending. We talk about the consequences for Russia 0:04:26.760 --> 0:04:29.279 as they get locked out of the financial system, but 0:04:29.320 --> 0:04:32.599 can you game out the financial consequences for Germany, for 0:04:32.680 --> 0:04:35.240 the United States, for the rest of Europe as we 0:04:35.320 --> 0:04:37.919 do get some sort of uncertainty, not only about the 0:04:37.920 --> 0:04:40.400 carve outs for the energy sector. In all of these 0:04:40.400 --> 0:04:42.919 sanctions which is how feasible the payment for any of 0:04:42.960 --> 0:04:46.720 this will be. Well, I think that's the payment system 0:04:46.800 --> 0:04:49.320 even you know, it's been said initially that the goal 0:04:50.279 --> 0:04:52.960 was to carve out energy so would not hit Europe. 0:04:53.400 --> 0:04:56.680 But risk officers are not going to are going to 0:04:56.760 --> 0:05:00.159 be very cautious. They're gonna overcomply. You already see that 0:05:00.200 --> 0:05:03.479 people are not doing letters of credit. Tanker owners are 0:05:03.520 --> 0:05:05.960 going to think twice before sending their tankers. So the 0:05:06.120 --> 0:05:09.159 energy trade is going to be disrupted. This is not 0:05:09.279 --> 0:05:12.640 going to be a smooth thing. Uh. How bad it 0:05:12.680 --> 0:05:15.440 gets depends on how the war goes, what the Russians do, 0:05:15.560 --> 0:05:18.360 and so forth. But I think you're gonna see, uh, 0:05:19.040 --> 0:05:23.839 in effect, a sanction in a sanction on Russian energy, 0:05:24.120 --> 0:05:27.360 just by the behavior of market actors. And everybody today 0:05:27.440 --> 0:05:30.280 I know is calling their lawyers. Can you understand what 0:05:30.320 --> 0:05:32.320 the sanctions are. We don't want to make a mistake here, 0:05:32.480 --> 0:05:34.400 We don't want to get a six billion dollar fine 0:05:34.600 --> 0:05:37.600 a year from now. Meanwhile, we are getting news about 0:05:37.680 --> 0:05:41.440 a possible oil release, a crude release from strategic petroleum 0:05:41.440 --> 0:05:44.400 reserves of a number of major oil consuming nations, including 0:05:44.400 --> 0:05:47.120 the U S. Somewhere of seventy million barrels. Do you 0:05:47.160 --> 0:05:49.360 think this will move the dial at all? I think 0:05:49.360 --> 0:05:51.320 it will. I think that if you add up what 0:05:51.440 --> 0:05:53.479 is it, US production is going to increase a million 0:05:53.480 --> 0:05:55.800 barrels a day. There could be more oil out of 0:05:55.800 --> 0:05:58.400 the Gulf. If their sanctions are taken off Iran, you 0:05:58.440 --> 0:06:01.039 get a million barrels a day. And I think it 0:06:01.040 --> 0:06:04.080 was inevitable that they would use strategic stocks. After all, 0:06:04.120 --> 0:06:07.000 this is what strategic stocks were built for. And so 0:06:07.120 --> 0:06:10.040 I know the administration certainly is wants to go in 0:06:10.040 --> 0:06:12.640 that direction. Be interesting to see what the Chinese do 0:06:12.800 --> 0:06:15.760 this time. Dan, you're aging. As I mentioned, you're wonderful. 0:06:15.839 --> 0:06:18.080 The New Map was my book of the year a 0:06:18.120 --> 0:06:21.080 few years ago. Not that long ago, was only a 0:06:21.160 --> 0:06:22.520 year and a half. A year and a half ago, 0:06:22.560 --> 0:06:25.120 I can't remember. The brain freezes. Farrell keeps me up 0:06:25.160 --> 0:06:27.560 to speed. Is the only reason I keep going, Dan, 0:06:27.680 --> 0:06:31.600 you're again. I'm reading Putin's World by Angelus Stent, and 0:06:31.640 --> 0:06:33.960 i've in February. I've made it my book of the 0:06:34.040 --> 0:06:37.880 year because of this war and what is so important, Dan, 0:06:37.920 --> 0:06:41.520 and this folds right into Commanding Heights is two thousand 0:06:41.560 --> 0:06:45.719 and eight, when NATO and buch Arest said we're gonna 0:06:45.760 --> 0:06:51.239 push east, and Robert Gates and Condo Liza Rice said no, no, no, 0:06:51.480 --> 0:06:56.560 and they were overruled. Yank this forward to now with 0:06:56.680 --> 0:07:01.600 what you perceive NATO will do, given the oil economy, 0:07:01.880 --> 0:07:06.360 given our new capitalism, and given America's true commanding heights, 0:07:06.839 --> 0:07:10.160 what do you expect NATO to do in two thousand 0:07:10.280 --> 0:07:13.880 twenty three. Well, first, let me say I'm very pleased 0:07:13.880 --> 0:07:16.080 to see that that's your your book of the year. 0:07:16.120 --> 0:07:20.119 Since I'm related to Angela, so uh, that's I'll pass 0:07:20.160 --> 0:07:23.360 that on. But I think that in terms of what 0:07:23.760 --> 0:07:26.240 NATO does, I think it's a strengthening of it. I 0:07:26.240 --> 0:07:28.880 think it's particularly the change in Germany is the one 0:07:28.920 --> 0:07:31.000 that's going to be most notable. It's going to be 0:07:31.000 --> 0:07:33.360 a much more coordinated and it isn't you know, it 0:07:33.440 --> 0:07:36.200 was kind of frame at the edges. It it isn't anymore. 0:07:36.560 --> 0:07:39.200 And you may see Sweden being interested, you may see 0:07:39.200 --> 0:07:43.200 Finland being interested in joining NATO. So it's completely achieved, 0:07:43.280 --> 0:07:46.760 just the opposite of what Vladimir Putin wanted. Danie again, 0:07:47.040 --> 0:07:49.400 fantastic to catch up with you, sir, as a white 0:07:49.600 --> 0:08:00.440 on geopolitics, on this crude market of market right now 0:08:00.480 --> 0:08:03.040 and foreign exchange Jane follow joins us how to foreign 0:08:03.080 --> 0:08:06.080 exchange strategy at Rubble Bank with all of Rabble banks 0:08:06.320 --> 0:08:11.480 commercial relationships across Europe. Jane Folly, from your strategy standpoint, 0:08:11.720 --> 0:08:18.520 what is the state of liquidity within the European financial system? Well, 0:08:18.560 --> 0:08:21.800 I think liquidity quite clearly there is none really inert 0:08:21.880 --> 0:08:23.880 that the Russian ruble are very very little. But I 0:08:23.880 --> 0:08:26.040 think if we move into the agricultural space, I think 0:08:26.080 --> 0:08:29.720 that's where perhaps the spotlight is beginning to shine. Certainly 0:08:30.040 --> 0:08:32.760 it can be a little bit more difficult. We're not 0:08:33.240 --> 0:08:36.400 we're not used to having crisis at effects at agricultural 0:08:36.440 --> 0:08:39.520 prices or commodity prices in this area. So we are 0:08:39.559 --> 0:08:43.079 seeing signs of a little bit stress and really unfamiliar 0:08:43.080 --> 0:08:46.440 conditions and those sorts of markets that really threw out. 0:08:46.920 --> 0:08:50.320 We've been talking, Jane about how Ruble will open for 0:08:50.400 --> 0:08:54.760 trading beginning last evening six seven pm whatever time that was. 0:08:54.960 --> 0:08:58.080 Is Ruble fully open for trading? From where you sit, 0:09:00.440 --> 0:09:02.480 I don't think it's going to be fully open really 0:09:02.520 --> 0:09:03.960 for a long time. You've got to bear in mind 0:09:03.960 --> 0:09:06.960 that because of the sanctions, so many banks are just 0:09:07.040 --> 0:09:11.719 unable to trade with Russian counterpassing, and therefore automatically you 0:09:11.800 --> 0:09:14.960 get a real crushing of of liquidity, so that the 0:09:15.000 --> 0:09:17.679 prices that we see on the screen, you know, just 0:09:17.840 --> 0:09:20.480 to seem what we've seen an enormous spread traded in 0:09:20.520 --> 0:09:23.080 the course of today compared with where we would normally 0:09:23.480 --> 0:09:26.040 see the Russian ruble. But again that's just a reflection 0:09:26.080 --> 0:09:28.400 of the fact that very few people are are able 0:09:28.440 --> 0:09:31.480 to trade it right now, so that really is is 0:09:31.520 --> 0:09:34.640 not a proper market and it's probably going to be 0:09:35.240 --> 0:09:38.200 like that for some time. Jane, taking a step back. 0:09:38.240 --> 0:09:41.959 Over the weekend, the backdrop changed materially in a lot 0:09:41.960 --> 0:09:45.160 of people calling the US's actions and Europe's actions a 0:09:45.200 --> 0:09:49.280 weaponization of the hegemony of the dollar, basically saying that 0:09:49.320 --> 0:09:52.960 they are using the dollars predominance here to push Russia 0:09:52.960 --> 0:09:55.560 out of the financial system, that it would have ramifications 0:09:55.640 --> 0:09:58.679 longer term for the dollar and it would weaken it. 0:09:58.800 --> 0:10:01.000 We're not seeing that in the market. It's quite the opposite. 0:10:01.000 --> 0:10:03.440 But do you think that there is validity to this argument? 0:10:05.720 --> 0:10:07.840 That is an argument that is not new, you know, 0:10:07.840 --> 0:10:10.000 that is an argument which has been going on really 0:10:10.040 --> 0:10:12.280 at least eight or so years or you know, we 0:10:12.320 --> 0:10:14.839 can take it back to the Crimea for instance, or 0:10:14.920 --> 0:10:17.480 eight years ago, where and Russia really then tried to 0:10:17.760 --> 0:10:21.439 protect itself against some Western sanctions, really ramping up those 0:10:21.600 --> 0:10:25.320 from exchange reserves, increasing itself sufficiency in food also and 0:10:25.360 --> 0:10:28.680 also trying to have more invoices that were not US 0:10:28.760 --> 0:10:31.679 dollar denominated. Now the dollar is of course that that 0:10:31.880 --> 0:10:35.120 the primary currency in the global payment system. That is 0:10:35.200 --> 0:10:38.880 why sanctions have been used by the US government, you know, 0:10:39.040 --> 0:10:42.520 to such an extent, think Iran, and certainly it is 0:10:42.880 --> 0:10:46.000 a weapon if you like to try and force another 0:10:46.040 --> 0:10:48.920 country to really back down on what they want to do. 0:10:48.960 --> 0:10:51.760 And it's been used very powerful in this instance. And 0:10:51.960 --> 0:10:54.920 and really you know, with the blessing of all of 0:10:54.920 --> 0:10:58.800 the US is Western allies, Jane, there is a concern 0:10:58.960 --> 0:11:00.360 that there will be a friction and so will be 0:11:00.400 --> 0:11:04.679 huge liquidity issues within the major markets, money markets, dollar financing. 0:11:05.120 --> 0:11:08.000 And there has been some speculation, including by the likes 0:11:08.040 --> 0:11:10.800 of Credit Swee Result and Posar, that the Federal Reserve 0:11:10.840 --> 0:11:13.040 will have to extend f X swap lines and do 0:11:13.160 --> 0:11:15.640 other types of intervention. Do you see any signs that 0:11:15.800 --> 0:11:20.920 will be required? I think sometimes that the fact that 0:11:20.960 --> 0:11:23.280 the Central Bank is is willing to do it might 0:11:23.360 --> 0:11:27.360 be enough, because often what creates that these liquidity shortages 0:11:27.559 --> 0:11:30.600 it's just sheer panic um and and people trying to 0:11:30.600 --> 0:11:33.040 get their hands on on dollar liquidity just in case, 0:11:33.120 --> 0:11:36.320 not that they need it now or or even in 0:11:36.360 --> 0:11:39.120 a few days time. So the fact often that the 0:11:39.440 --> 0:11:43.559 Fed may promise that it's there that these liquidity lines 0:11:43.640 --> 0:11:46.960 are possible if if needed, could be enough to see 0:11:47.440 --> 0:11:50.840 the tension. So this is really about stopping market panic. 0:11:50.840 --> 0:11:53.200 And we've got to remember that, yes and Friday we 0:11:53.240 --> 0:11:55.960 did see some ports being shut down in the Black Sea, 0:11:56.040 --> 0:11:58.960 but right now we don't have a huge amount of 0:11:58.960 --> 0:12:03.319 disruption yet to you know, food certainly or energy, and 0:12:03.760 --> 0:12:05.840 this is where the panic could come from. And this 0:12:05.920 --> 0:12:08.440 is perhaps why some of the sanctions that have been 0:12:08.760 --> 0:12:12.520 announced with respect to that the swift system haven't yet 0:12:12.559 --> 0:12:15.280 been universal. I think Europe would like to know that 0:12:15.320 --> 0:12:17.439 it can still get its hands on some Russian supplies 0:12:17.679 --> 0:12:20.920 of energy. That's really necessary for a country like Germany, 0:12:20.920 --> 0:12:23.800 which of course has a huge amount of industry which 0:12:23.840 --> 0:12:26.880 will be using that Russian energy. So this is this 0:12:26.960 --> 0:12:30.800 is it's really important how it's managed to stop that panic. 0:12:31.200 --> 0:12:34.480 That may then require some of those extra liquidity lines 0:12:34.520 --> 0:12:36.400 to change. Just to build on something you mentioned earlier. 0:12:36.520 --> 0:12:38.920 The rubles not a proper market, it's certainly not this morning, 0:12:38.920 --> 0:12:40.400 and to build it out just a little bit more 0:12:40.880 --> 0:12:43.280 when foreigners can actually sell their Russian assets when the 0:12:43.280 --> 0:12:45.760 market reopens again, what kind of pressure would you expect 0:12:45.840 --> 0:12:51.480 on this currency. A huge amount of pressure. We've seen 0:12:51.520 --> 0:12:53.800 for instance that that the that the news from BP, 0:12:54.000 --> 0:12:56.520 that's just one that you've mentioned a little bit earlier 0:12:56.600 --> 0:12:58.960 on you know, selling it's it's Russian stake. I think 0:12:59.000 --> 0:13:02.240 also that the WE Sovereign Wealth Fund at the biggest 0:13:02.240 --> 0:13:04.680 often wealth fund in the world, and and it wants 0:13:04.720 --> 0:13:08.600 to sell it's it's Russian assets. It ends um bonds 0:13:08.880 --> 0:13:12.120 as well as a lot of stocks in Russia. Those 0:13:12.160 --> 0:13:15.600 will be going now, even if it's delayed, not just 0:13:15.679 --> 0:13:18.320 today or another few days. At some point in that 0:13:18.400 --> 0:13:22.000 setting will come and and and therefore we we can 0:13:22.000 --> 0:13:24.520 expect a lot of dawnside pressure on the ruble. Jane, 0:13:24.559 --> 0:13:27.520 thank you as always wonderful work at Atlanta. Jane Foley 0:13:27.559 --> 0:13:35.280 there rather bank on the markets. Ross Casters joins us 0:13:35.280 --> 0:13:38.719 now with a Global Allocation Fund at black Rock Ross, 0:13:38.720 --> 0:13:41.120 good morning to you. What did you do over the weekend? 0:13:41.360 --> 0:13:43.520 What does the money guy? What does black Rock do 0:13:43.640 --> 0:13:48.439 an institutional investment over a weekend? As we've seen, we'll 0:13:48.480 --> 0:13:50.480 tell good morning. Look, I think we're all trying to 0:13:50.520 --> 0:13:53.080 figure out what's going on now, and it's very hard, 0:13:53.080 --> 0:13:56.040 if not impossible, to predict what Vladimir Prudence going to do. 0:13:56.080 --> 0:13:58.560 But I think we do know when something's have changed. 0:13:58.800 --> 0:14:00.840 And you've got a position the poor portfolio, so we 0:14:01.040 --> 0:14:04.040 for months now we've been bringing down risk. We've been 0:14:04.400 --> 0:14:07.040 controlling our equity data. We've been looking at some of 0:14:07.040 --> 0:14:09.600 the early growth names that are really exposed given the 0:14:09.679 --> 0:14:13.600 rate volatility, and thinking about the long term implications for Europe, 0:14:14.000 --> 0:14:18.360 for energy, infrastructure, for macro volatility. Again, it's not a 0:14:18.400 --> 0:14:20.880 bold statement to say that the world has changed fairly 0:14:20.960 --> 0:14:23.960 dramatically over the last couple of weeks. Have you changed 0:14:23.960 --> 0:14:26.280 your allocations yet, russ Are you still just thinking about 0:14:26.280 --> 0:14:30.880 the ramifications? You know, thankfully we had been bringing down 0:14:31.000 --> 0:14:34.320 risk for several months aheaded this, and again I won't 0:14:34.360 --> 0:14:36.520 pretend that we had the foresight to see what's gonna 0:14:36.560 --> 0:14:40.160 happen in Russia, but certainly as that became more evident, UH, 0:14:40.280 --> 0:14:42.880 as you deal with a very tough balancing act for 0:14:42.920 --> 0:14:46.600 the FED even before the invasion of Ukraine. UH, it 0:14:46.720 --> 0:14:50.720 was prudent given tighter financial conditions, giving the uncertainty about 0:14:50.760 --> 0:14:54.000 rates to bring down risk in the portfolio, and obviously 0:14:54.040 --> 0:14:56.400 the events the last week or two when we support 0:14:56.440 --> 0:14:58.800 that for us, there's an idea that the FED will 0:14:58.840 --> 0:15:01.960 be forced to come in and actually support market liquidity, 0:15:01.960 --> 0:15:04.320 be market makers in the next couple of days and 0:15:04.360 --> 0:15:07.440 possibly even weeks, as some of these sanctions ripple through 0:15:07.480 --> 0:15:10.560 the financial markets. What's your view on the FED moving 0:15:10.600 --> 0:15:13.800 away from tightening financial conditions, moving away from the balance 0:15:13.840 --> 0:15:16.760 sheet reduction, moving away from even rate hikes in response 0:15:16.800 --> 0:15:20.200 to this conflict. You know, it's a great question, and 0:15:20.400 --> 0:15:22.960 I certainly think the FIT has to take this into consideration. 0:15:23.000 --> 0:15:25.480 Where are now in a world where there is very 0:15:25.520 --> 0:15:30.200 significant two sided risk, the impact on confidence, the effect 0:15:30.280 --> 0:15:33.760 of higher oil prices. Having said that, UH, it's not 0:15:33.840 --> 0:15:36.920 obvious that the FED has to completely or or can 0:15:37.000 --> 0:15:39.760 completely rip up their game plan because you still have 0:15:39.800 --> 0:15:42.600 a world in which domestic inflation is at a forty 0:15:42.640 --> 0:15:46.360 year high. It's broad, it's sticky, which means the FED 0:15:46.480 --> 0:15:48.760 is probably still going to have to hike. Where I 0:15:48.800 --> 0:15:51.600 think this has an impact is how much do they 0:15:51.600 --> 0:15:53.760 go in March? How quickly did they start to change 0:15:53.760 --> 0:15:57.200 the balance sheet? But the direction of travel still has 0:15:57.240 --> 0:16:00.320 to be towards the removal of some accommodation. RUSS, where 0:16:00.360 --> 0:16:03.000 and what you focused on in this market at the 0:16:03.000 --> 0:16:05.400 moment through today? What will you be laser focused on? 0:16:06.480 --> 0:16:08.240 So I think there are a couple of things. You know, Jonathan, 0:16:08.240 --> 0:16:10.920 you were talking about the European banks. Obviously that is 0:16:10.920 --> 0:16:13.120 a big deal, as well as the impact on the 0:16:13.200 --> 0:16:17.120 overall European economy. You know, just given the geographic proximity, 0:16:17.840 --> 0:16:20.920 given the spike not just an oil but gas prices, 0:16:20.960 --> 0:16:24.080 you know, what is the economic effect in Europe? I 0:16:24.080 --> 0:16:26.680 think the seconds we're just talking about is the FED 0:16:27.160 --> 0:16:30.400 the third? Are we seeing any change in the behavior 0:16:30.440 --> 0:16:32.480 of US consumers so far? The answer that is no. 0:16:32.920 --> 0:16:36.080 We look at higher frequency data, there's still an underlying 0:16:36.120 --> 0:16:39.600 strength to U as economy. But does that change given 0:16:39.680 --> 0:16:43.520 higher oil prices and these just very very significant events 0:16:43.520 --> 0:16:45.360 going on in Europe? RUSS, where would you look for 0:16:45.400 --> 0:16:49.080 stress and do you see any signs of that now? Well? 0:16:49.120 --> 0:16:51.120 I think the stress obviously is going to come in 0:16:51.160 --> 0:16:53.840 a couple of places. One the names that are most 0:16:53.880 --> 0:16:58.200 exposed to Russia. Uh. You know again, fortunately outside of energy, 0:16:58.280 --> 0:17:01.240 outside of particular commodity. You know, this is not an 0:17:01.240 --> 0:17:04.399 economy with tremendous links to the rest of the world. 0:17:05.119 --> 0:17:09.800 But the transmission mechanisms really are about banking, about the 0:17:09.880 --> 0:17:13.040 financial system, and of course energy. We keep coming back 0:17:13.040 --> 0:17:15.280 to energy, and the reason for that is, you know again, 0:17:15.280 --> 0:17:17.520 if this would have happened five or six years ago, 0:17:18.080 --> 0:17:21.040 when oil was a lot lower, it would have created 0:17:21.160 --> 0:17:24.199 less stress economically than obviously it's created a new moment 0:17:24.480 --> 0:17:27.400 when you already had very high inflation in the US, 0:17:27.440 --> 0:17:30.840 in Europe and already elevated oil prices US. Thanks for 0:17:30.920 --> 0:17:33.439 inflexible this morning to catch how the buddy as Ohites 0:17:33.560 --> 0:17:41.360 Russ constrict that of black Crow. When I woke up 0:17:41.359 --> 0:17:43.879 this morning early and I did not know what I 0:17:43.920 --> 0:17:47.800 would see, I really underestimated John Farrell, what you and 0:17:47.880 --> 0:17:50.639 Lisa have lead on this morning, which is I guess 0:17:50.640 --> 0:17:54.200 I'm gonna call them non sanctions sanctions That would be 0:17:54.320 --> 0:17:57.359 a good thing, John, to start with Oliver Wyman's Daniel 0:17:57.400 --> 0:17:59.760 Tannem I think we can kill them SOLF sanctions down 0:17:59.800 --> 0:18:01.800 town a while like that they had of America's anti 0:18:01.800 --> 0:18:04.480 financial crime Oliver Wie and not my term, Dan, But 0:18:04.560 --> 0:18:07.200 let's work through it. We've had the sanctions and down 0:18:07.240 --> 0:18:09.080 what we're all trying to work out is how it 0:18:09.119 --> 0:18:12.080 works in practice. How many companies, even if they don't 0:18:12.119 --> 0:18:16.560 have to abide by these sanctions, choose to pull back anyway? 0:18:17.960 --> 0:18:21.120 Thanks John. And obviously if you see oil companies walk 0:18:21.160 --> 0:18:22.760 out of the market, I think that's a pretty good 0:18:22.760 --> 0:18:24.879 indication that you're going to see other businesses and I 0:18:24.920 --> 0:18:27.880 do like that self sanctions point can begin to walk out. 0:18:27.920 --> 0:18:30.680 I'm hearing from clients of other businesses beginning to draw 0:18:30.760 --> 0:18:33.560 up which they had actually started looking at in December, 0:18:33.840 --> 0:18:36.320 those exit plans. If do we really want to remain 0:18:36.320 --> 0:18:39.440 in this market? Is it viable for our business? Especially 0:18:39.440 --> 0:18:42.760 you have to remember Russia hasn't really responded with their 0:18:42.920 --> 0:18:46.440 version of whatever sanctions. Maybe so if you're a non 0:18:46.520 --> 0:18:49.760 Russian business operating the market, depending on the positions you take, 0:18:49.800 --> 0:18:52.800 this might be an untenable position. Look to see more 0:18:52.840 --> 0:18:55.520 companies announce their exits from Russia in the coming days. 0:18:55.560 --> 0:18:58.000 That's for certain. Down what that's what they're choosing to do. 0:18:58.240 --> 0:19:00.639 What are you suggesting they should do. What's the advice 0:19:00.640 --> 0:19:03.600 you've given them? I think, you know, look the advice 0:19:03.640 --> 0:19:06.679 I'm giving right now, there's still a lot that's on 0:19:06.720 --> 0:19:10.320 the table. You know, this is a squeeze on the 0:19:10.359 --> 0:19:12.600 Russian economy, that's for certain. And I said it on 0:19:12.640 --> 0:19:15.919 this show on Friday, and sadly it keeps coming true. 0:19:16.840 --> 0:19:20.320 Russia is well on its way to being treated like Iran, 0:19:20.640 --> 0:19:23.800 like Cuba in terms of being a truly isolated economy 0:19:23.840 --> 0:19:27.000 from humanity. So I think as I look to what 0:19:27.119 --> 0:19:30.440 businesses need to do, it's actually getting simpler the more 0:19:30.480 --> 0:19:33.560 significant the sanctions get, because there's less of a needle 0:19:33.600 --> 0:19:36.640 to threat and more just an exit that the business 0:19:36.680 --> 0:19:39.359 is too untenable to take on the risk. More broadly, so, 0:19:39.480 --> 0:19:41.840 going a little further dan is the risk for a 0:19:41.880 --> 0:19:44.639 lot of these companies that the US will remove the 0:19:44.720 --> 0:19:46.919 carve out for oil companies that the EU will do 0:19:46.960 --> 0:19:49.080 the same. Or is it just that it will be 0:19:49.119 --> 0:19:53.080 too complicated financially in order to execute some of these 0:19:53.080 --> 0:19:55.919 transactions with all of the numbers of sanctioned players, And 0:19:55.960 --> 0:19:58.159 it doesn't even make financial sense at this point to 0:19:58.240 --> 0:20:00.840 keep going. So I think that is a question to watch. 0:20:00.880 --> 0:20:02.560 And as you look at some of the sanctions, and 0:20:02.560 --> 0:20:05.480 the Treasury Department just put out the US Central Bank sanctions, 0:20:05.520 --> 0:20:07.400 I think as I was walking on here about ten 0:20:07.440 --> 0:20:09.920 minutes ago, we've still not seen what banks are being 0:20:10.040 --> 0:20:12.919 de swifted. And it was very clearly stated over the 0:20:12.960 --> 0:20:15.120 weekend that only some banks are going to be taken 0:20:15.119 --> 0:20:19.639 off swift. That's largely to facilitate that continued legal transactions. 0:20:20.000 --> 0:20:22.119 I think energy, you know, there was talk that the 0:20:22.160 --> 0:20:25.320 Central Bank is the nuclear option. Energy restrictions are the 0:20:25.400 --> 0:20:29.159 nuclear option with respect to Russia, and I would be 0:20:29.160 --> 0:20:32.159 surprised if you didn't see programs start leaking out that 0:20:32.240 --> 0:20:35.119 begin to shrink the amount of Russian energy that's allowed 0:20:35.160 --> 0:20:37.399 to be traded. You can't ban it. You have certain 0:20:37.440 --> 0:20:41.240 countries that are on reliant on Russian oil, Russian l 0:20:41.320 --> 0:20:43.879 n G. There's there's a whole sort of statistics that 0:20:44.000 --> 0:20:46.800 say this is a frontier economy in e M economy, 0:20:46.920 --> 0:20:51.600 and yet every statistic says it's the eleventh largest economy 0:20:51.640 --> 0:20:54.840 in the world. What is the power of Saudi Arabia 0:20:54.960 --> 0:20:59.120 right now to make Russia fifte largest economy in the world. 0:20:59.160 --> 0:21:01.919 I mean, Russia may fall out of the G twenty 0:21:02.000 --> 0:21:04.280 by the numbers this week at the rate things are going. 0:21:04.680 --> 0:21:08.439 I think Russia's position and how its allies or what 0:21:08.600 --> 0:21:13.359 few allies remain holding their line um is a really 0:21:13.400 --> 0:21:16.560 important point to see. I mean, this economy is in crisis. 0:21:16.680 --> 0:21:20.320 I mean you're seeing it's essentially being cut off from 0:21:20.400 --> 0:21:23.159 most of the West through these sanctions that have been imposed, 0:21:23.359 --> 0:21:26.359 which does create a broader opportunity for some other nations 0:21:26.359 --> 0:21:29.760 to increase their standing potentially. Well, that's exactly where I 0:21:29.760 --> 0:21:32.640 wanted to go. Who who can be I don't see 0:21:32.680 --> 0:21:37.000 how someone's advantaged by this war and by the economics 0:21:37.040 --> 0:21:41.639 and capitalism of this war. Your suggesting someone could be advantaged, 0:21:41.680 --> 0:21:44.720 I think possibly. I mean, frankly, this is the global 0:21:44.840 --> 0:21:47.520 response to this situation. With a few exceptions, we didn't 0:21:47.560 --> 0:21:50.440