Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane jay Ley.
Speaker 1: We bring you insight from the best in economics, finance,
Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com and of course on the Bloomberg. Now
Speaker 1: let's go straight to one of the newsmakers, of course,
Speaker 1: one of the main key of newsmakers on this a
Speaker 1: Democratic Unionist Party leader Earl Foster. Earlian Foster, thanks so
Speaker 1: much for joining Surveillance. What does the Prime Minister in
Speaker 1: your eyes need to do to win your support in
Speaker 1: the House of Commons vote on Braxay. Well, good morning,
Speaker 1: it's very good to be with you. Um. The deal
Speaker 1: that has come forward from Europe but not a deal
Speaker 1: that the Democratic Unions Party can support because it makes
Speaker 1: a difference between Northern Ireland and the rest of the
Speaker 1: United Kingdom by the backstop that has been inserted in
Speaker 1: the deal. There are many good parts in the deal,
Speaker 1: such as the recognition of European citizens rights um, the
Speaker 1: fact that we future recognition of professional qualifications, but the backstop,
Speaker 1: as far as we are concerned, cannot allow to support
Speaker 1: this seal and therefore the backstop must go. Okay, but
Speaker 1: there's a suggestion that the Prime Minister would agree to
Speaker 1: a common rule book between the UK and the EU
Speaker 1: are lean faster that might be enough to actually avoid
Speaker 1: barriers between Northern Ireland and the rest of the UK.
Speaker 1: Would such a unilateral declaration be enough for you? We'll
Speaker 1: see the difficulty for us in Northern Irelanders that this
Speaker 1: withdrawal agreement, if it's accepted by Parliament, and of course
Speaker 1: there's no evidence that it will be accepted by Parliament,
Speaker 1: would bring into place allegally buyinging international treaty which is
Speaker 1: then in law and is there in black and white
Speaker 1: and cannot be superseded. Our difficulty is that the political
Speaker 1: victory that are being talked about our aspirational they are
Speaker 1: not legally binding and therefore there is a real asymmetrical
Speaker 1: relationship between those two documents. Right, So I understand from
Speaker 1: what you're saying or I'm inferring, and correct me if
Speaker 1: I'm wrong, that a unilateral declaration would not be good
Speaker 1: enough for you. We want to hear what the Prime
Speaker 1: Minister has to say, and we welcome her to this
Speaker 1: part of the unedited Kingdom, but we will be saying
Speaker 1: very clearly to her that she needs to get rid
Speaker 1: of the back stub. You know, this is going to
Speaker 1: be a waste of time today if he doesn't listen
Speaker 1: to what people have to say to her. And as
Speaker 1: far as I can see, this is not going through Parliament.
Speaker 1: And therefore, instead of wasting time over this next two
Speaker 1: weeks going on a pr offensive around her deal, what
Speaker 1: she should be doing is to try and find a
Speaker 1: third way forward, a deal that find support in Parliament
Speaker 1: and a delible work. So we're saying to her, don't
Speaker 1: waste the time, use that time profitably and trying to
Speaker 1: find a better dat right. But the UK government is
Speaker 1: telling us that there's no point in real opening talks
Speaker 1: because they want Budge on the backstop. Well, you know
Speaker 1: they would say that wouldn't play. I mean, of course,
Speaker 1: people are going to hold to their line until something
Speaker 1: else has to be done, um, and they believe that
Speaker 1: this is the best way board. The Parliament is going
Speaker 1: to tell her something very different. Okay, the DUP has
Speaker 1: already abstained in important votes on government business. How likely
Speaker 1: is that to continue? Well, the the deal, as I understand,
Speaker 1: it's coming to Parliament next week for debate and then
Speaker 1: we'll be voted on on the Tuesday, the eleventh of September.
Speaker 1: As it currently stands, we will not be supporting the
Speaker 1: stale and not as the case for many across the Chamber,
Speaker 1: whether they are remain voters or lead voters, they are
Speaker 1: not going to support the stale and therefore Prime Minister
Speaker 1: is not going to get this steal through. So instead
Speaker 1: of wasting her time, she should actually be trying to
Speaker 1: find a way that is acceptible to everybody. Okay, I
Speaker 1: was talking to Nicki Morrigan at the Treasury Select Committee
Speaker 1: yesterday and she are saying it's a chance that actually
Speaker 1: we have a hard Brexit if this deal does not
Speaker 1: get through. What do you think are is a probability
Speaker 1: of a crashing out? Well, I think people are wanting
Speaker 1: to portray this as a binary choice between this stale
Speaker 1: and no deal, and of course the Prime Minister wants
Speaker 1: to portray it is that because that's the best chances
Speaker 1: are getting the deal through. We don't accept that that's
Speaker 1: the case. If we say that there is a third way,
Speaker 1: a better way, a way that we'll get the support
Speaker 1: of the British people through their parliamentarium and we should
Speaker 1: be looking for that way now instead of wasting time
Speaker 1: on the day that's not going to get support, Okay,
Speaker 1: Arlene Foster. A lot of people think that the DUP
Speaker 1: is bluffing, right, that you will end up, you know,
Speaker 1: supporting this deal because you fear fresh elections and Jeremy
Speaker 1: Corbyn coming in, or that you will support the deal
Speaker 1: in exchange for more money. Are you bluffing? That's quite
Speaker 1: offensive actually to say that we're going to uh not
Speaker 1: vote again, that we're going to support the steal and
Speaker 1: we were giving money for Northern Island of not what
Speaker 1: this is about. This is about the future of Northern
Speaker 1: in Ireland constitutionally and economically. Therefore, we will not be
Speaker 1: supporting the deal in its current format. And by the way,
Speaker 1: if it is voted down in Parliament, that does not
Speaker 1: mean a general election, because what we have at the
Speaker 1: moment is affect plim in Parliament back and it's only
Speaker 1: in Parliament of votes for a general action that it's happened.
Speaker 1: So that's a false thing to say, and it is
Speaker 1: quite offensive to say that we're bluffing and that we're
Speaker 1: only holy Night for money. Nothing could be further to
Speaker 1: the truth. M Arlene Foster, how do you see it?
Speaker 1: So if you think that this deal will be voted down,
Speaker 1: does then the Prime Minister go back to the EU
Speaker 1: and get a better deal and then it gets through
Speaker 1: Parliament a second time? Or you know what happens after
Speaker 1: December eleventh. Well, we would much prefer if she looked
Speaker 1: for a better day now instead of within the next
Speaker 1: two weeks. Our offenses. We think that would be much
Speaker 1: better spent trying to find a better way forward getting
Speaker 1: out of that Irish back stuff, because of course the
Speaker 1: only reason the Irish back stuff is any we are
Speaker 1: tooled is because to prevent a hard border on the
Speaker 1: island of Ireland. But Leo Broadcal, the Irish pig monster,
Speaker 1: has said he's not going to put up a hard
Speaker 1: border Europe, so they're not pretty slow hard border. She's
Speaker 1: very strange to know who's going to put this hard
Speaker 1: border up. I don't think I'd come to Ireland. Um,
Speaker 1: so we have over hundreds of pages dealing with an
Speaker 1: Arish back stop that Frank Day isn't needed. But have
Speaker 1: you heard any indication from the government or Theresa A
Speaker 1: that she is willing to go back to Brussels before
Speaker 1: December eleven, then if not what happens on December twelve, No,
Speaker 1: I haven't um and she is determined for Shade with
Speaker 1: her deal. She believes that her day is the best
Speaker 1: way forward. But clearly she's not listening because Parliament. I
Speaker 1: think that was very clear yesterday when she came at
Speaker 1: to the floor of the House of Common. But she
Speaker 1: doesn't have the support to get this deal through. Arling Foster,
Speaker 1: thanks so much for joining us for a very valuable conversation. She's,
Speaker 1: of course Arlene Foster. She is a UK Democratic Unionist
Speaker 1: Party leader. If you care about Lordstown, Ohio and the
Speaker 1: other places where time will march on according to General Motors,
Speaker 1: this is without question the interview of the day. Kevin
Speaker 1: Tynan is an auto guy. He is with Bloomberg Intelligence.
Speaker 1: But John, what is so important about Kevin Tynan? As
Speaker 1: he understands that a Chrysler Slant six a Dodge Slant six.
Speaker 1: If you drop the screw into the distributor cap area
Speaker 1: where the spark plugs used to wire into you know
Speaker 1: you will ruin your distributor and your father will not
Speaker 1: bail you out in your car won't move until you
Speaker 1: This would be a little bit of personal experience. Kevin,
Speaker 1: I have the clearest memory of walking along the chain
Speaker 1: link fence of Rochester, Delco. In the early eighties when
Speaker 1: it vapored. Is that what's going to happen to these geographies? Uh,
Speaker 1: there's a there's a distinct possibility that we go through
Speaker 1: that kind of uh you know, Flint, Michion again and
Speaker 1: and and Rochester. And But at the same time, I
Speaker 1: would say, you know this, this looks a lot like
Speaker 1: General Motors clearing the deck and saying, look this this
Speaker 1: advanced into technology. We've kind of half effort in it.
Speaker 1: So let's let's just let's draw this line here and
Speaker 1: say and and I think you see this by them
Speaker 1: uh ceasing production of Chevrolet Vault with a V yet
Speaker 1: continuing the bolt with a b um to say, look
Speaker 1: that the plug in hybrid electric probably isn't the way
Speaker 1: forward here. We have to go full commitment with the
Speaker 1: battery electric and still trucks obviously, right that's going to
Speaker 1: pay the bill and give them the opportunity to innovative
Speaker 1: or catch up on the e V side. Before John
Speaker 1: jumps into the nuts and bolts of this no pun intended.
Speaker 1: Kevin I had a good friend in Flint, Michigan in seventies.
Speaker 1: He said, come on, you got to hear this. And
Speaker 1: I remember sitting in a van hearing the rumble and
Speaker 1: the roar. Is those wooden doors opened up out of
Speaker 1: the nineteen thirties and forties and everybody ran across the
Speaker 1: street to the bars. Those people weren't retrained. Then Ted
Speaker 1: Alden told us some CFR this morning, we fail at retraining.
Speaker 1: Can we retrain these people? We can? And and I
Speaker 1: was listening to that that piece, and and I think
Speaker 1: it was right on the money. And I think that's
Speaker 1: what becomes important here is that, uh, those factories are
Speaker 1: now able to and and and again I think this
Speaker 1: was one of or this is one of the sort
Speaker 1: of uh, you know, points that I look at as
Speaker 1: the industry moves towards electric technology. Is you know, how
Speaker 1: many automakers have committed plants to battery electric vehicles. We've
Speaker 1: seen Volkswagen start to talk about it in Germany a
Speaker 1: little bit. Now. I think this is General Motors opportunity
Speaker 1: to say, where we're done with this half effort. We're
Speaker 1: going all in on this. I'm not sure how big
Speaker 1: that market is globally, but GM is saying, hey, if
Speaker 1: that's ten percent of the global market, we want our share,
Speaker 1: because it may be fift Like we see our friends
Speaker 1: at benf talk about this is half the market is
Speaker 1: electrification by UM And to Mary Barr's credit, I think
Speaker 1: previous administrations at General Motors might have dismissed this as
Speaker 1: money losing technology and we're not going to get involved,
Speaker 1: and maybe not even made the bolt in the first place.
Speaker 1: And I look at that as an engineering sort of
Speaker 1: and and design experiment that says, Okay, now we have
Speaker 1: this technology, let's just scale it up into other products
Speaker 1: that we can sell. So Kevin, for a lot of people,
Speaker 1: the last twenty four hours is really really significant, and
Speaker 1: that essentially what GM has done has said that here
Speaker 1: in the United States, if it's a sedan with an
Speaker 1: internal combustion engine, it's just not worth making here anymore. Now,
Speaker 1: if that's the conclusion, my next question will be who's next?
Speaker 1: And how big? What is the scale of what's about
Speaker 1: to happen? What is it right? Well, and and look
Speaker 1: Ford said this already, Uh Chrysler did it without you know,
Speaker 1: being so vocal about it. But you know, uh, they've
Speaker 1: gotten out of the car business. I mean they're truck now. Uh,
Speaker 1: just that LX platform is the only thing they have left.
Speaker 1: So the other two guys, General is actually laid on this.
Speaker 1: And if you look at GM's numbers, look at an
Speaker 1: eight percent drop on the car side in the full
Speaker 1: year seventeen another this year. So I think the idea
Speaker 1: is that, you know, do we lose money on these
Speaker 1: products that are seeing dramatically declining demand or do we
Speaker 1: lose money on the products that have this huge upside? Uh?
Speaker 1: Potentially because now you have governments in China behind them
Speaker 1: and Kevin, let me represent the president of the United
Speaker 1: States everything you're saying, Cent and I know John and
Speaker 1: I are on the same page on this. So you
Speaker 1: gotta build something new. What is holding you back from
Speaker 1: choosing a spot in Ohio to do it other than
Speaker 1: the the the scale, right, I think I don't think
Speaker 1: there there is any reason why you wouldn't choose that
Speaker 1: spot to do it, other than you have a whole
Speaker 1: lot of installed capacity and not a whole lot of
Speaker 1: demand for those products yet. Right, So that's one percent
Speaker 1: of the global market, it's one percent of the US market. Um,
Speaker 1: you know, So so you're gonna take the Chevrolet Cruz
Speaker 1: for example, that's hundreds of thousands of units per year,
Speaker 1: and you're gonna go in and you're gonna build tens
Speaker 1: of thousands of electric deals. So it's certainly possible. It's
Speaker 1: just you're gonna have capacity utilization that's going to be
Speaker 1: on the floor, Kevin, the repress releases that gets sent
Speaker 1: to Wall Street. One of the last twenty four hours
Speaker 1: from GM was a press release for Wall Street. What's
Speaker 1: the press release for the White House? What does the
Speaker 1: president say and what is the response of this company?
Speaker 1: And I did not think I'd be asking that in
Speaker 1: the home of capitalism, but I am what is the
Speaker 1: White House say back to this? And what is the
Speaker 1: GM board and the c suite say back to them? Well,
Speaker 1: and here's the interesting thing, Jonathan to and from my
Speaker 1: perspective is that you know, when you look at the
Speaker 1: White House, I think a lot of what you see
Speaker 1: is this really dramatic, UH move to spark a response? Right,
Speaker 1: If you want change, it's gonna have to be dramatic.
Speaker 1: If we go softly through this, nothing ever happens. And
Speaker 1: I'm speaking in very general terms, and I think that's
Speaker 1: general motors move here is to say, look, we need
Speaker 1: to be here in the future, we need to be
Speaker 1: growing in the future, and for us to do that,
Speaker 1: we have to draw this line right here, right now
Speaker 1: and make this transition. Is it painful, absolutely, But if
Speaker 1: we're going to exist and be relevant in the future,
Speaker 1: we have to do this now. Is this just a
Speaker 1: labor arbitrage? I'm talking like Steve Roach of Yale University.
Speaker 1: I mean, Union used to make a hundred fifty thousand
Speaker 1: year overtime, a hundred thirty whatever it was, and then
Speaker 1: Steve Rattner came in, as cars are and we remodeled labor.
Speaker 1: I get it. I don't know what they make now, Kevin,
Speaker 1: please tell me. But is it just still a labor
Speaker 1: arbitrage where the American auto worker makes too much for
Speaker 1: GM to make money on that next suv or pickup truck.
Speaker 1: I don't think so. But but look at pricing in
Speaker 1: the industry. Right We talked about transaction prices being at
Speaker 1: record highs. But if you look at the technology UM
Speaker 1: and everything, not only in vehicle but in terms of production,
Speaker 1: it's expensive to manufacture UM, you know. And then if
Speaker 1: you look at declining volumes, it makes it it makes
Speaker 1: the equation that much more on balanced. So UM, you know,
Speaker 1: I don't I don't think it's just the labor arbitrage.
Speaker 1: There's cost inflation all across the board there and you
Speaker 1: have to adjust for it. Um. At the same time,
Speaker 1: you know there there's pushed back against moving to lower
Speaker 1: costs to Mexico without production there, and to say, look,
Speaker 1: we we want this ten percent adjusted EBIT margin. The
Speaker 1: only way we're gonna do it is if that part
Speaker 1: of them, that component of the of the cost structure
Speaker 1: isn't as low as it can be. Hey, Kevin grant To,
Speaker 1: can't sell you really really smart. Thank you so much
Speaker 1: for dropping buying giving us a kill. Kevin Sainen, Bloomberg
Speaker 1: Intelligent Senior Automotive Analysis as GM announces some big job
Speaker 1: cuts and some big factory closures as well from the
Speaker 1: Bloomberg Interactive Broker Studios, John Farrell and Tom Keene, thank
Speaker 1: you for being with us. And now a definitive conversation
Speaker 1: on trade. Edward Alden wrote one of my books of
Speaker 1: the summer, Failure to Adjust. It is a deceptively wonderful, narrow,
Speaker 1: dense treatise on trade and what America needs to do.
Speaker 1: Let's get an update at Alden. What does President Trump
Speaker 1: and what does America need to do on trade right now? Oh?
Speaker 1: Now that is that is a big question. I mean,
Speaker 1: you know, I I think the immediate challenge is to
Speaker 1: find some way to enter into serious negotiations with China.
Speaker 1: I mean, we are on potentially a very destructive road
Speaker 1: with China. That's not to say there are real problems
Speaker 1: in China. There are serious problems, but we need to
Speaker 1: find a way forward on it. And I mean the
Speaker 1: posit it. A thing with Trump is they were able
Speaker 1: to do a new NAFTA deal. There was a lot
Speaker 1: of storm and drawing, but at the end of the
Speaker 1: day they came out of with the deal. I hope
Speaker 1: the same thing as possible with China. And then we've
Speaker 1: really got to focus on what's going on here in
Speaker 1: the United States and how to boost our economic competitiveness
Speaker 1: in a whole range of ways that we're just not
Speaker 1: doing at the moment. Did the jobs GM Did they
Speaker 1: go to China? As the John Prine, the Great John
Speaker 1: Prine of Chicago would say, the jobs went to Mexico.
Speaker 1: I mean yes and no, I mean no in the
Speaker 1: sense that that you know, GM is not gonna be
Speaker 1: exporting it certainly anytimes in your future cars from China
Speaker 1: to the United States. It's not a Mexico type relationship.
Speaker 1: But China is obviously a much bigger future market for
Speaker 1: GM right now than the United States is. And GM
Speaker 1: is rationalizing in various ways in North America. They're not
Speaker 1: going to build these lower margin products in the United
Speaker 1: States or Canada anymore. They're going to focus on next
Speaker 1: generation vehicles. All that makes a lot of economic sense,
Speaker 1: but it doesn't create a whole lot of jobs for
Speaker 1: for auto workers. And and and that's been the story
Speaker 1: for a long time. And nothing that the President is
Speaker 1: under anybody else's done has changed that underlying economic reality. Said.
Speaker 1: There was a really interesting gonticle in the Washington Post
Speaker 1: yesterday following the GM layoffs that was titled GM layoffs
Speaker 1: or another victory for capital over labor? What do you
Speaker 1: think about that line? Said? You know, I think again,
Speaker 1: for better worse, that is true. I mean, you know, labor,
Speaker 1: even even the auto workers who have done better than
Speaker 1: most labor unions, have been losing for for decades now.
Speaker 1: The the owners, you know, the folks who run GM
Speaker 1: and other companies, have a lot of flexibility. They can
Speaker 1: produce anywhere they want in the world. They can decide
Speaker 1: to replace labor with technology, and at the end of
Speaker 1: the day, there's not a whole lot the unions can
Speaker 1: do to stand in the way of that. So I
Speaker 1: think this is the latest chapter in a very long story.
Speaker 1: I think that analysis is correct. Whether White House stands
Speaker 1: out head the lines of to come ready blood. Is
Speaker 1: this the White House for labor or for capital? Which
Speaker 1: one is it? That's a that is a really good question.
Speaker 1: It wants to be the White House for both. So
Speaker 1: you know, if you look at the new NAFTA, there
Speaker 1: are a bunch of provisions in there that organized labor
Speaker 1: is pretty happy with. I mean, unlike the Transpacific Partnership. Uh,
Speaker 1: the f l c i O is holding its fire
Speaker 1: on this agreement, saying, you know, the unions might be
Speaker 1: able to support it. But at the same time, obviously,
Speaker 1: so White has done a lot for capital, you know,
Speaker 1: particular at the big corporate packs cut that was signed
Speaker 1: by the President in December, and the presidents obviously very
Speaker 1: concerned about Wall Street. So so so far it's trying
Speaker 1: to be both. Um, there may come a point in
Speaker 1: which it has to make a decision. This, Uh, the
Speaker 1: GM example is a good one. President is obviously upset
Speaker 1: about this. He's upset about these factors closing. Whether he's
Speaker 1: going to do anything real to try to put pressure
Speaker 1: on GM, I kind of doubt it. Okay, Well, what's
Speaker 1: he do'ssure? Uh? You know, I mean, I suppose one
Speaker 1: source of pressure is these auto tariffs that everybody is
Speaker 1: talking about. I mean, this investigation on whether the US
Speaker 1: can can block auto imports on national security grounds is
Speaker 1: going to be delivered no later than February. And I
Speaker 1: suppose if you know, the United States puts in place
Speaker 1: steep carafs on auto imports, particularly from Europe and Korea
Speaker 1: in Japan, that could put some pressure on companies to
Speaker 1: expand production here in the United States just to serve
Speaker 1: this market, even though it isn't the fast growing market.
Speaker 1: I mean, that would obviously be a very drastic step,
Speaker 1: but in the short run might actually bring some auto
Speaker 1: jobs back to the US. Ted Alton, thank you so much,
Speaker 1: greatly appreciate it. Failure to adjust just a wonderful thought
Speaker 1: provoking book. A trade with the counts on Foreign Relations,
Speaker 1: Edward Alden, particularly for our American audience, and to be
Speaker 1: honest for myself as well. We need to triangulate. We
Speaker 1: need to do that on Russia and on Ukraine. And
Speaker 1: there's no better person to triangulate with that Andrew Woods.
Speaker 1: Sir Andrew is of course the former British Ambassador to
Speaker 1: Yugoslavia and then served a substantial five years as British
Speaker 1: Ambassador to Russia and is with Chatham House, London Surrender.
Speaker 1: We are thrilled to have you with us today. It
Speaker 1: is nine and twenty miles from Belgrade to Kiev. It's
Speaker 1: fourteen hundred miles from Belgrade used Yugoslavia up to Moscow.
Speaker 1: And I bring up this triangulation because so many people
Speaker 1: say that Ukraine is a gateway to Europe. How do
Speaker 1: you translate that? How is Ukraine a gateway to Europe? Well,
Speaker 1: in the sense that it's her an oil and gas transit,
Speaker 1: her company country brother in the sense that it's got
Speaker 1: very strong roots in Russian culture, and therefore, in principle,
Speaker 1: those two countries should be in effective communication, which they
Speaker 1: absolutely not. They're not right now. And I believe martial
Speaker 1: law enforce in Ukraine or or or soon. But so
Speaker 1: much of this to use Joseph Nay is power and interdependence.
Speaker 1: Is this just about the power of Russia versus the
Speaker 1: power of Ukraine? Or can they find a common ground? Well,
Speaker 1: they could, um, but that would really be up to Russia.
Speaker 1: I think we ought to be. In general, it's the
Speaker 1: Russians who are trying their best to stop Ukraine becoming
Speaker 1: an independent country able to make its own uh Norse
Speaker 1: and pursue its own interests, because they believe they have
Speaker 1: an innate right two make Ukraine there. John John Mersheimer
Speaker 1: of Chicago, out with a new book, has been heated
Speaker 1: in Notorious about saying that the US and the West
Speaker 1: extended too far east towards Russia. Shah, did we do
Speaker 1: that with Ukraine? As John Musheimer onto something, that we
Speaker 1: extended too far to the adjacent geographies of Russia. I
Speaker 1: don't agree at all, but of course that is what
Speaker 1: the Russians themselves would say, because they regard the West
Speaker 1: as a threat. UM. If he's talking about the extension
Speaker 1: of NATO in the last century, which is essentially a
Speaker 1: space what he has in mind, then one shouldn't forget
Speaker 1: the um the fact that the country that did join
Speaker 1: NATO or wanted to, precisely because they were afraid and
Speaker 1: what Russia might do, and precisely because Russia was in
Speaker 1: a state of quite considerable confusion at the end of
Speaker 1: Gorbachev and through through the beginning of the Elsin. Is
Speaker 1: Russia in confusion now? It doesn't seem to be. It
Speaker 1: seems to have a plan. Are they in confusion or
Speaker 1: what is the Putin plan? I think for the things
Speaker 1: that the inhabitants of Russia would care about, he doesn't
Speaker 1: have a plan at all. That is, the economy is
Speaker 1: not doing well. He's not attending to their needs in health, education, infrastructure,
Speaker 1: and so on and so forth. He's spending a lot
Speaker 1: of money, however, on military expenditure, precisely because he believes
Speaker 1: that is necessary to establish Russia as a quote great
Speaker 1: power unquote. I think this will end in a much
Speaker 1: poorer Russia and one which will become most unstable as
Speaker 1: the years go ahead. If you're just joining us, Sir
Speaker 1: Anderwood with us, he's a former British Ambassador to Russia
Speaker 1: and also before that British ambassador to Yugoslavia with Chatham House.
Speaker 1: I guess there's been sanctions. One sanction, d I can
Speaker 1: go French and you, Sir Andrew, sanctions TOI. Are we
Speaker 1: going to get another set of sanctions here as a
Speaker 1: result of this, this immediate incident, Yes, um, I wouldn't
Speaker 1: think so. What we are going to get is it
Speaker 1: to be much more difficult for Putin to persuade other
Speaker 1: countries two uh to lift sanctions which he badly needs
Speaker 1: in that in that sense Athing going to be back
Speaker 1: in his face. But it does depend on what he
Speaker 1: really wishes to make of this, what his purpose was
Speaker 1: in in doing it. It was only in September that
Speaker 1: similar Ukrainian ships passed through the Kirch straight, as they
Speaker 1: have every right to do under an agreement between Ukraine
Speaker 1: and Russia, that this is their common territory of waters,
Speaker 1: and his reference to Russian frontiers and rights is, by
Speaker 1: implication at least a claim to his control of the
Speaker 1: whole of the as of Sea, Sir Andrew. My colleague
Speaker 1: Pim Fox points out that within the Brexit battle you
Speaker 1: have a Gibraltar in view. I think a lot of
Speaker 1: Americans understand where Gibraltar is in the Mediterranean. Gibraltar is
Speaker 1: not Scotland. It's not Ireland or Northern Ireland. It's Gibraltar.
Speaker 1: Can Gibraltar in the smaller geographies of the United Kingdom,
Speaker 1: can they play a real part in this immediate Brexit debate? Well, yes,
Speaker 1: I should declare an interest because I was born in
Speaker 1: Gibraltar and spent much of my boyhood there, so I
Speaker 1: have an interest. Um. Actually, Gibraltar has been in British
Speaker 1: or English hands for considering longer than it ever was
Speaker 1: in Spanish. Secondly, it's been an important base to your
Speaker 1: country and mine and others during wartime, so I think
Speaker 1: it is a memory of loyalty from us to it
Speaker 1: in that sense. There's also the fact that the last
Speaker 1: time the population of Gibraltar were consulted about whether they
Speaker 1: wished or did not wish to have a co dominion
Speaker 1: with Spain, now to nine percent of the voted YEA. Well,
Speaker 1: within this debate of Braxit, and I'm going to ask you,
Speaker 1: I guess a more general question with your esteem work
Speaker 1: and diplomacy, what is the diplomacy the Prime Minister needs
Speaker 1: now to assist Tories to some form of decision and
Speaker 1: may maybe drag your labor party into the decision as well.
Speaker 1: You served under Tony Blair and uh and John major
Speaker 1: is as well. There has to come to a conclusion
Speaker 1: here what would diplomacy is necessary right now for your
Speaker 1: United Kingdom. Well, uh, the Brexit problem is a problem
Speaker 1: which has shared with other countries still in the European Union.
Speaker 1: It's a clash between the Wish buoyed up by the
Speaker 1: creation of the Euro as a currency to increase the
Speaker 1: amount of centralized control in Brussels with the help of
Speaker 1: the cir called Franco German Motor. A lot of countries
Speaker 1: have found the pressure of that on them to change
Speaker 1: their policies here and mostly in economic terms that there
Speaker 1: are policies considerable and we are now as we're facing that.
Speaker 1: I don't know how the Parliament will vote on the
Speaker 1: arrangement that our prime ministers negotiated, but the chances are
Speaker 1: pretty highly they're going to refuse it. After that we
Speaker 1: will be back at square one in one way, but
Speaker 1: in another week we should be faced with a difficult
Speaker 1: choice depending how the EU reacts exactly, Sir Andward, thank
Speaker 1: you so much. We have to leave it there this morning.
Speaker 1: Greatly appreciated the former British Ambassador to Russia, Sir Andrew Wood,
Speaker 1: thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keene before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg
Speaker 1: Radio