1 00:00:06,780 --> 00:00:10,219 Speaker 1: Welcome to Coffee Time, a podcast series on markets and 2 00:00:10,220 --> 00:00:14,340 Speaker 1: economies from dBS group research time, roommate, chief economist welcoming 3 00:00:14,340 --> 00:00:17,759 Speaker 1: you to our 90th episode, wow, I can't believe that 4 00:00:17,770 --> 00:00:21,320 Speaker 1: today we will talk about Ukraine and also a bit 5 00:00:21,320 --> 00:00:22,080 Speaker 1: about Russia. 6 00:00:22,390 --> 00:00:26,120 Speaker 1: Our guest is Dr Torben Becker, director of the Stockholm 7 00:00:26,120 --> 00:00:30,069 Speaker 1: Institute of Transition Economics site at the Stockholm School of 8 00:00:30,070 --> 00:00:35,589 Speaker 1: Economics in Sweden, a position that turbine has occupied since 2006. 9 00:00:35,600 --> 00:00:39,570 Speaker 1: Site is a leading research and policy center on Economic 10 00:00:39,580 --> 00:00:43,190 Speaker 1: development in low and middle income countries with an emphasis 11 00:00:43,200 --> 00:00:44,890 Speaker 1: on transition in the former. So 12 00:00:44,915 --> 00:00:48,534 Speaker 1: the union and central and eastern europe probation is also 13 00:00:48,534 --> 00:00:52,184 Speaker 1: a board member of several economics research institutes in eastern europe, 14 00:00:52,195 --> 00:00:56,175 Speaker 1: including the Kiev School of Economics. Prior to this, he 15 00:00:56,175 --> 00:00:59,145 Speaker 1: worked for nine years at the International monetary Fund where 16 00:00:59,145 --> 00:01:03,095 Speaker 1: his work focused on international macro economic crises and issues 17 00:01:03,095 --> 00:01:06,775 Speaker 1: related to the international financial system. And Becker welcome to 18 00:01:06,775 --> 00:01:07,440 Speaker 1: Kobe time. 19 00:01:08,410 --> 00:01:11,110 Speaker 2: Thank you. Thank you. Great to be here. Great 20 00:01:11,110 --> 00:01:15,530 Speaker 1: to have you. Let's talk about some of the context 21 00:01:15,540 --> 00:01:19,550 Speaker 1: associated with the Ukraine tribune. If you will help us 22 00:01:19,560 --> 00:01:22,569 Speaker 1: get a size sense of the size and relevance of 23 00:01:22,569 --> 00:01:25,260 Speaker 1: the economy and you can take as much time as 24 00:01:25,260 --> 00:01:27,030 Speaker 1: you want in terms of setting that context. 25 00:01:28,690 --> 00:01:31,400 Speaker 2: All right, Yeah. I mean, the first thing to note, 26 00:01:31,400 --> 00:01:34,780 Speaker 2: of course is that Ukraine is a very big country 27 00:01:34,780 --> 00:01:37,650 Speaker 2: with a lot of people living there, but in terms 28 00:01:37,650 --> 00:01:41,830 Speaker 2: of economic size, G. D. P. It's really not such 29 00:01:41,830 --> 00:01:46,080 Speaker 2: a great economy if we measure it in contrast to 30 00:01:46,090 --> 00:01:49,970 Speaker 2: countries in the european union. So before the war it 31 00:01:49,970 --> 00:01:54,100 Speaker 2: was less than $200 billion worth of G. D. P. 32 00:01:54,100 --> 00:01:55,030 Speaker 2: For one year. 33 00:01:55,440 --> 00:01:59,730 Speaker 2: Um and, you know, a country like I'm in Sweden 34 00:01:59,740 --> 00:02:04,390 Speaker 2: actually has a bigger GDP with only 10 million people 35 00:02:04,390 --> 00:02:07,450 Speaker 2: compared to 40 million people in Ukraine. And 36 00:02:08,160 --> 00:02:10,710 Speaker 1: The country that I'm in has five million people has 37 00:02:10,710 --> 00:02:11,889 Speaker 1: a bigger GDP. 38 00:02:11,900 --> 00:02:16,590 Speaker 2: Exactly. So, you know, in some sense this is is 39 00:02:16,590 --> 00:02:19,959 Speaker 2: actually good news where we are now because we're discussing 40 00:02:19,960 --> 00:02:22,650 Speaker 2: of course, how can we assist Ukraine? 41 00:02:22,880 --> 00:02:27,269 Speaker 2: So, so given this, you know, we can easily handle, 42 00:02:27,280 --> 00:02:31,109 Speaker 2: you know, the economic cost of Ukraine. And I think 43 00:02:31,110 --> 00:02:34,380 Speaker 2: this is something that we really need to remember now 44 00:02:34,380 --> 00:02:38,730 Speaker 2: when we're discussing different support packages to Ukraine. So compared 45 00:02:38,730 --> 00:02:41,959 Speaker 2: to our economies, the Ukrainian economy is relatively small. 46 00:02:42,590 --> 00:02:47,109 Speaker 1: And what about the performance over the last 1015 years? 47 00:02:47,110 --> 00:02:50,790 Speaker 1: Because this is not the only conflict Ukraine has dealt 48 00:02:50,790 --> 00:02:53,560 Speaker 1: with and there has been some political instability. So has 49 00:02:53,560 --> 00:02:57,320 Speaker 1: the economic performance also suffered in recent years and decades? 50 00:02:58,080 --> 00:03:00,190 Speaker 2: Well, I mean, as we all know, it has been 51 00:03:00,190 --> 00:03:04,090 Speaker 2: ups and downs and you have the Crimea invasion already 52 00:03:04,090 --> 00:03:08,760 Speaker 2: in 2014 and we have had political turmoil at at 53 00:03:08,760 --> 00:03:12,830 Speaker 2: different time periods. And you also had external shocks over 54 00:03:12,830 --> 00:03:16,250 Speaker 2: the history of of Ukraine since independence in back in 55 00:03:16,250 --> 00:03:21,340 Speaker 2: the early 90s. So it has been quite a challenging 56 00:03:21,350 --> 00:03:25,109 Speaker 2: economic road and and a lot of people compare of 57 00:03:25,110 --> 00:03:27,600 Speaker 2: course Ukraine to Poland for example, 58 00:03:27,820 --> 00:03:32,060 Speaker 2: they were at similar levels when transition started and now Pollan, 59 00:03:32,060 --> 00:03:35,540 Speaker 2: it's of course well ahead of Ukraine in terms of 60 00:03:35,550 --> 00:03:39,200 Speaker 2: economic developments. But I would say, you know, it has 61 00:03:39,200 --> 00:03:45,150 Speaker 2: underperformed similar countries in the region over over the last 62 00:03:45,160 --> 00:03:48,590 Speaker 2: couple of decades, but also when, when there are no 63 00:03:48,590 --> 00:03:52,750 Speaker 2: external shocks, when they are not subject to external aggressions, 64 00:03:52,980 --> 00:03:57,070 Speaker 2: they actually, Ukraine has shown sort of good growth rates 65 00:03:57,070 --> 00:04:01,260 Speaker 2: and progress in different reform areas. But it has been 66 00:04:01,260 --> 00:04:04,780 Speaker 2: a very complicated time quite often over the last couple 67 00:04:04,780 --> 00:04:05,470 Speaker 2: of decades. 68 00:04:05,640 --> 00:04:08,150 Speaker 1: But that's an interesting insight that there has been no 69 00:04:08,150 --> 00:04:10,730 Speaker 1: stability dividend, if you will the moment there have been 70 00:04:10,740 --> 00:04:14,100 Speaker 1: interludes of peace. What about the economic structure 71 00:04:14,115 --> 00:04:17,135 Speaker 1: share of Ukraine? You felt that mistaken? And this is 72 00:04:17,135 --> 00:04:19,665 Speaker 1: knowledge from two decades ago, is that under the soviet 73 00:04:19,665 --> 00:04:22,174 Speaker 1: Union there were certain countries that were sort of earmarked 74 00:04:22,175 --> 00:04:25,734 Speaker 1: for certain, you know, parts of the soviet Union republic 75 00:04:25,735 --> 00:04:29,215 Speaker 1: that were earmarked for technology and industry. And Ukraine was 76 00:04:29,214 --> 00:04:31,055 Speaker 1: one of those. So even after the break of the 77 00:04:31,055 --> 00:04:33,895 Speaker 1: soviet Union, it was one of the more industrialized part 78 00:04:33,904 --> 00:04:35,235 Speaker 1: of former soviet union. 79 00:04:36,730 --> 00:04:40,290 Speaker 2: Yes, absolutely. So we all know about sort of the 80 00:04:40,290 --> 00:04:43,960 Speaker 2: steel production and we saw the horrible pictures from a 81 00:04:43,960 --> 00:04:47,660 Speaker 2: soft style which was of course producing a lot of metals. 82 00:04:47,670 --> 00:04:50,360 Speaker 2: We also know that Ukraine has some of the most 83 00:04:50,360 --> 00:04:55,320 Speaker 2: fertile soils basically from all over the world and produces 84 00:04:55,320 --> 00:04:58,480 Speaker 2: a lot of grain and food that that can be 85 00:04:58,480 --> 00:05:02,680 Speaker 2: exported to other countries. But it's also now more recently 86 00:05:02,930 --> 00:05:06,320 Speaker 2: becoming a really an I. T. And tech hub. So 87 00:05:06,320 --> 00:05:09,960 Speaker 2: a lot of programmers and developers are down there. Foreign 88 00:05:09,960 --> 00:05:14,150 Speaker 2: companies also go there to find developers and then as 89 00:05:14,160 --> 00:05:19,260 Speaker 2: as we also know they were producing some high quality 90 00:05:19,260 --> 00:05:23,130 Speaker 2: sort of industrial products during the soviet times including things 91 00:05:23,130 --> 00:05:25,219 Speaker 2: that went into military production 92 00:05:26,270 --> 00:05:30,599 Speaker 1: and the export sector beyond agriculture. I mean I guess 93 00:05:30,600 --> 00:05:34,550 Speaker 1: you know there is the steel component but do we 94 00:05:34,550 --> 00:05:38,100 Speaker 1: see anything beyond that? Like electronics or so on coming 95 00:05:38,100 --> 00:05:39,620 Speaker 1: from Ukraine to the rest of the world? 96 00:05:40,220 --> 00:05:44,109 Speaker 2: Yeah I would say you know the quite significant thing 97 00:05:44,120 --> 00:05:47,440 Speaker 2: over the last couple of years since the I. T. Sector. 98 00:05:47,450 --> 00:05:53,599 Speaker 2: So basically having developers in Ukraine doing things that people 99 00:05:53,600 --> 00:05:57,360 Speaker 2: from around the world is demanding. That's an interesting sector 100 00:05:57,360 --> 00:05:58,339 Speaker 2: to look at. So 101 00:05:58,339 --> 00:06:01,359 Speaker 1: the services part has been sort of more dynamic part 102 00:06:01,360 --> 00:06:03,540 Speaker 1: than the manufacturing side. Yeah 103 00:06:03,550 --> 00:06:05,320 Speaker 2: I would say so. Yes. 104 00:06:05,520 --> 00:06:09,099 Speaker 1: So to be in your institute has been tracking the 105 00:06:09,110 --> 00:06:13,410 Speaker 1: economic damage inflicted by this conflict and uh I think 106 00:06:13,420 --> 00:06:15,409 Speaker 1: it is important for us you know just to go 107 00:06:15,410 --> 00:06:17,380 Speaker 1: beyond the newspaper headlines that we see on a regular 108 00:06:17,380 --> 00:06:20,659 Speaker 1: basis and to get some in depth assessment from you 109 00:06:20,660 --> 00:06:23,430 Speaker 1: from how deep the economic damage has been so far 110 00:06:23,440 --> 00:06:25,860 Speaker 1: and what's the outlook going forward. 111 00:06:26,920 --> 00:06:29,490 Speaker 2: Yes. So there are many dimensions to this, of course. 112 00:06:29,500 --> 00:06:32,810 Speaker 2: One thing that the key school of economics is keeping 113 00:06:32,810 --> 00:06:37,560 Speaker 2: track of is is just the damage to infrastructure. So 114 00:06:37,570 --> 00:06:42,240 Speaker 2: residential housing, airports, roads, bridges, etcetera. 115 00:06:42,420 --> 00:06:48,380 Speaker 2: Um and you know that count is already over $130 116 00:06:48,730 --> 00:06:53,919 Speaker 2: billion in damages to that infrastructure. And again remember that G. D. P. 117 00:06:53,920 --> 00:06:58,660 Speaker 2: Was less than $200 billion before the war started. So, 118 00:06:58,660 --> 00:07:01,130 Speaker 2: you know, that's a very significant amount. 119 00:07:01,740 --> 00:07:05,830 Speaker 2: But that's also sort of a very low benchmark for 120 00:07:05,830 --> 00:07:09,910 Speaker 2: the damages the World Bank in its estimates where they 121 00:07:09,910 --> 00:07:13,870 Speaker 2: have a bigger picture on on other types of losses. 122 00:07:13,880 --> 00:07:17,950 Speaker 2: They talk about $350 billion. 123 00:07:18,990 --> 00:07:22,140 Speaker 2: And then the Ukrainian government itself, when you start to 124 00:07:22,140 --> 00:07:27,680 Speaker 2: include losses of income, losses of exports, losses of investment, 125 00:07:27,690 --> 00:07:33,850 Speaker 2: they talk about $750 billion. So, you know, these estimates 126 00:07:33,860 --> 00:07:34,679 Speaker 2: really depend 127 00:07:34,690 --> 00:07:37,690 Speaker 2: And on where do we draw the limits on what 128 00:07:37,690 --> 00:07:40,170 Speaker 2: we want to include in them? So it goes from 129 00:07:40,180 --> 00:07:46,080 Speaker 2: basic infrastructure things 130 billion to have the whole economy 130 00:07:46,080 --> 00:07:49,869 Speaker 2: and suffering and all of that, that goes to 750 billion. 131 00:07:49,870 --> 00:07:55,510 Speaker 2: So quite the quite massive cost of this war already 132 00:07:55,510 --> 00:07:56,290 Speaker 2: for Ukraine. 133 00:07:56,870 --> 00:07:59,870 Speaker 2: And yeah, I mean, if you just look also maybe 134 00:07:59,880 --> 00:08:02,310 Speaker 2: in terms of flows, if we just look at GDP 135 00:08:02,310 --> 00:08:06,430 Speaker 2: numbers for this year, people are talking about a decline 136 00:08:06,430 --> 00:08:11,570 Speaker 2: of 35% of GDP in 2022. For Ukraine, 137 00:08:12,280 --> 00:08:16,369 Speaker 1: these numbers are so large problem, it's very hard to 138 00:08:16,370 --> 00:08:20,950 Speaker 1: sort of, you know, fathom it. Um in terms of macro, 139 00:08:20,950 --> 00:08:22,930 Speaker 1: I mean I'm sure, you know, measurement is becoming very, 140 00:08:22,930 --> 00:08:25,800 Speaker 1: very difficult. It's not just in the context of GDP 141 00:08:25,810 --> 00:08:30,030 Speaker 1: but any sense of, you know, inflation and jobs and 142 00:08:30,030 --> 00:08:31,930 Speaker 1: and overall activity how things are. 143 00:08:32,929 --> 00:08:36,100 Speaker 2: Yeah, I mean we have, we have seen inflation going 144 00:08:36,100 --> 00:08:39,329 Speaker 2: up of course and also a lot of industries have 145 00:08:39,330 --> 00:08:42,719 Speaker 2: been destroyed and and people have lost their jobs at 146 00:08:42,720 --> 00:08:44,930 Speaker 2: the same time. Of course a lot of people from 147 00:08:44,929 --> 00:08:48,209 Speaker 2: Ukraine have left the country because it was not possible 148 00:08:48,210 --> 00:08:52,940 Speaker 2: to stay there given what, what Russia is sending their way. 149 00:08:52,940 --> 00:08:53,420 Speaker 2: So 150 00:08:53,800 --> 00:08:57,420 Speaker 2: you have this boat supply and demand effect on the 151 00:08:57,420 --> 00:09:02,230 Speaker 2: labor market. But certainly if we think about employment, that's, 152 00:09:02,230 --> 00:09:05,329 Speaker 2: that's really taken a big hit in the war. And 153 00:09:05,330 --> 00:09:07,950 Speaker 2: sort of real incomes of people that stay in Ukraine 154 00:09:07,950 --> 00:09:11,860 Speaker 2: have been coming down. So a very challenging environment for 155 00:09:11,860 --> 00:09:12,340 Speaker 2: sure 156 00:09:12,960 --> 00:09:17,599 Speaker 1: any sense of, you know, this, this, you know, months 157 00:09:17,600 --> 00:09:21,479 Speaker 1: and now heading into a year worth of conflict, is 158 00:09:21,480 --> 00:09:24,130 Speaker 1: it causing an erosion of human capital? I mean, are 159 00:09:24,140 --> 00:09:28,390 Speaker 1: people able to go to school and colleges are degrees 160 00:09:28,390 --> 00:09:32,189 Speaker 1: being issued or or have those things come to a standstill? 161 00:09:33,059 --> 00:09:37,689 Speaker 2: Well this of course varies across the country, some schools 162 00:09:37,690 --> 00:09:42,020 Speaker 2: have been completely destroyed and people have left and and 163 00:09:42,020 --> 00:09:45,640 Speaker 2: you know, now with all of the people outside of Ukraine, 164 00:09:45,640 --> 00:09:49,430 Speaker 2: it's a question of how the recipient countries are dealing 165 00:09:49,429 --> 00:09:55,620 Speaker 2: with education and that varies too quite significantly between different countries. 166 00:09:55,630 --> 00:09:59,280 Speaker 2: But if you think about the situation in Ukraine, one 167 00:09:59,280 --> 00:10:00,840 Speaker 2: of the issues is that 168 00:10:01,020 --> 00:10:04,349 Speaker 2: a lot of the students cannot physically go to their schools, 169 00:10:04,350 --> 00:10:07,260 Speaker 2: because if you do that, you need to provide the 170 00:10:07,260 --> 00:10:12,130 Speaker 2: bomb shelter for the students. Otherwise you're not allowed to have, 171 00:10:12,240 --> 00:10:16,580 Speaker 2: you know, offline lectures. So the people at the key 172 00:10:16,580 --> 00:10:20,290 Speaker 2: school of Economics, they have first of all made a 173 00:10:20,290 --> 00:10:23,700 Speaker 2: bomb shelter in their own school, but they're also collecting 174 00:10:23,700 --> 00:10:28,230 Speaker 2: funds from donors to build bomb shelters at at schools 175 00:10:28,230 --> 00:10:30,260 Speaker 2: in different parts of the countries 176 00:10:30,650 --> 00:10:34,700 Speaker 2: to basically make it possible for the students and Children 177 00:10:34,700 --> 00:10:38,190 Speaker 2: to go back to the schools and have classes sort 178 00:10:38,190 --> 00:10:41,550 Speaker 2: of in person and not just online. So otherwise of 179 00:10:41,550 --> 00:10:45,970 Speaker 2: course teaching would be done online. And we know the 180 00:10:45,970 --> 00:10:49,230 Speaker 2: limitations of that after the covid pandemic. Of course. 181 00:10:49,870 --> 00:10:52,610 Speaker 1: Right? I want to talk to you a little bit 182 00:10:52,610 --> 00:10:56,540 Speaker 1: about the migration that you just touched upon. I want 183 00:10:56,540 --> 00:10:58,170 Speaker 1: to get a sense of, you know, which countries receiving 184 00:10:58,170 --> 00:11:01,130 Speaker 1: most of them and how that is going. But before that, um, 185 00:11:01,140 --> 00:11:05,680 Speaker 1: you know, unfortunately, this is not the first conflict that 186 00:11:05,679 --> 00:11:09,300 Speaker 1: we have seen um, in, in the in recent memory. 187 00:11:09,300 --> 00:11:13,490 Speaker 1: So we had in your own backyard, the Yugoslavia conflict 188 00:11:13,490 --> 00:11:16,530 Speaker 1: in the 1990s, which led to, you know, many, many 189 00:11:16,530 --> 00:11:18,280 Speaker 1: Republics being born out of that. But 190 00:11:18,440 --> 00:11:21,180 Speaker 1: deep damage and scarring out of that, and also from 191 00:11:21,190 --> 00:11:24,449 Speaker 1: various former soviet Union countries in recent years, we've seen 192 00:11:24,460 --> 00:11:29,170 Speaker 1: various acts of aggression and conflict. I'm sure you and 193 00:11:29,170 --> 00:11:32,290 Speaker 1: your institute have been trying to get lessons or take 194 00:11:32,290 --> 00:11:35,260 Speaker 1: lessons from those episodes, that what kind of scarring do 195 00:11:35,260 --> 00:11:38,630 Speaker 1: we have in an economy that is hit by conflict, 196 00:11:38,630 --> 00:11:40,900 Speaker 1: And how long does it take to come back? Can 197 00:11:40,900 --> 00:11:44,270 Speaker 1: you walk us through some perspective on these issues? 198 00:11:45,070 --> 00:11:48,150 Speaker 2: Yeah, I wouldn't say that, I'm an expert on these issues, 199 00:11:48,150 --> 00:11:51,150 Speaker 2: but I think, you know, the first thing as economies, 200 00:11:51,150 --> 00:11:56,470 Speaker 2: we of course understand that destroying, you know, lives affects 201 00:11:56,470 --> 00:12:01,520 Speaker 2: human capital. It also destroys the sense of security. It 202 00:12:01,520 --> 00:12:05,850 Speaker 2: then limits, you know, how institutions can develop, it limits 203 00:12:05,850 --> 00:12:09,380 Speaker 2: what kind of investments that you will get. And of course, 204 00:12:09,380 --> 00:12:14,819 Speaker 2: it's always associated with, you know, a great deal of uncertainty. 205 00:12:15,050 --> 00:12:18,160 Speaker 2: So, all of these factors are are things that we 206 00:12:18,220 --> 00:12:23,850 Speaker 2: we know effect growth negatively. And of course, then in 207 00:12:23,850 --> 00:12:27,810 Speaker 2: many cases, also many specific details on this. But I 208 00:12:27,809 --> 00:12:31,179 Speaker 2: think the most significant thing is really what we have 209 00:12:31,179 --> 00:12:35,110 Speaker 2: been talking about, which is what happens to human capital, 210 00:12:35,110 --> 00:12:37,100 Speaker 2: what happens to people's lives 211 00:12:37,309 --> 00:12:41,660 Speaker 2: and what happens to uncertainty in institutions and that's something 212 00:12:41,660 --> 00:12:46,010 Speaker 2: that we have seen across all of these countries, basically. 213 00:12:46,080 --> 00:12:49,949 Speaker 2: And the problem, I think, which is also quite sad 214 00:12:49,950 --> 00:12:52,520 Speaker 2: is that, you know, in many of these countries that 215 00:12:52,520 --> 00:12:54,310 Speaker 2: you mentioned, you have still 216 00:12:54,710 --> 00:12:58,150 Speaker 2: these conflicts between people that used to be neighbors and 217 00:12:58,150 --> 00:13:02,310 Speaker 2: getting on and now not being, you know, getting on 218 00:13:02,309 --> 00:13:05,630 Speaker 2: so well. So this is a very long lasting process 219 00:13:05,630 --> 00:13:07,340 Speaker 2: I think to deal with these issues. 220 00:13:07,770 --> 00:13:13,100 Speaker 1: That's that's absolutely spot on tribune. Uh the let's talk 221 00:13:13,100 --> 00:13:15,370 Speaker 1: a little bit about the people who have been forced 222 00:13:15,370 --> 00:13:19,340 Speaker 1: to leave the country. Again, the numbers are large. Give 223 00:13:19,340 --> 00:13:23,030 Speaker 1: us a sense of the response of the global community, 224 00:13:23,030 --> 00:13:25,850 Speaker 1: if you will, whether it is in europe or us 225 00:13:25,850 --> 00:13:29,000 Speaker 1: or elsewhere who is taking on the refugees and what's 226 00:13:29,000 --> 00:13:30,920 Speaker 1: your sense of, you know, how they are being dealt with. 227 00:13:32,530 --> 00:13:35,040 Speaker 2: Well, first of all, we all know that sort of 228 00:13:35,040 --> 00:13:39,040 Speaker 2: the neighbors to Ukraine in europe have been receiving a 229 00:13:39,040 --> 00:13:42,900 Speaker 2: lot of people, you know, Poland really stands out as 230 00:13:42,910 --> 00:13:47,430 Speaker 2: being a country that opened up and and really welcomed 231 00:13:47,429 --> 00:13:52,000 Speaker 2: people from Ukraine to provide them a safe space. But 232 00:13:52,000 --> 00:13:56,570 Speaker 2: also all over europe, we have seen quite significant flows 233 00:13:56,570 --> 00:14:00,000 Speaker 2: of people coming from Ukraine. Um 234 00:14:00,240 --> 00:14:03,330 Speaker 2: and and we should also remember of course that these 235 00:14:03,330 --> 00:14:07,209 Speaker 2: things are not static. So they may start, they of 236 00:14:07,210 --> 00:14:10,350 Speaker 2: course come to, you know, the neighbor country first and 237 00:14:10,350 --> 00:14:13,780 Speaker 2: then they may travel on. But then also people have 238 00:14:13,780 --> 00:14:19,040 Speaker 2: returned to Ukraine at quite significant numbers. But now with 239 00:14:19,040 --> 00:14:22,310 Speaker 2: the recent attacks, we again see people leaving places like 240 00:14:22,310 --> 00:14:26,220 Speaker 2: Carson because it's it's not safe to be there. 241 00:14:26,450 --> 00:14:30,620 Speaker 2: So it's a very dynamic situation. I would say that 242 00:14:30,630 --> 00:14:34,650 Speaker 2: the neighboring countries in europe have really had an an 243 00:14:34,650 --> 00:14:40,110 Speaker 2: open arms policy. What I think is maybe we could 244 00:14:40,110 --> 00:14:44,229 Speaker 2: do better is to think about what kind of education 245 00:14:44,230 --> 00:14:47,210 Speaker 2: do we provide to the younger people that come to 246 00:14:47,210 --> 00:14:50,150 Speaker 2: our countries From Ukraine. Like we said, human capital is 247 00:14:50,150 --> 00:14:52,370 Speaker 2: going to be critical looking forward. 248 00:14:52,790 --> 00:14:57,300 Speaker 2: But also basic things like what kind of income support 249 00:14:57,300 --> 00:14:59,900 Speaker 2: can we provide them when they come to our countries? 250 00:14:59,900 --> 00:15:03,860 Speaker 2: Because it's not not easy to be refugee and live 251 00:15:03,860 --> 00:15:07,570 Speaker 2: on very small incomes. It can lead to a lot 252 00:15:07,570 --> 00:15:11,240 Speaker 2: of different problems in these countries and for these people. 253 00:15:11,580 --> 00:15:14,640 Speaker 1: Right. Just to give our listeners some context, I just 254 00:15:14,640 --> 00:15:18,040 Speaker 1: looked up some numbers about close to 20% of Ukrainians 255 00:15:18,050 --> 00:15:20,880 Speaker 1: are right now estimated to have left the country since 256 00:15:20,880 --> 00:15:24,210 Speaker 1: the conflict began. So that's about 7.5 million people of 257 00:15:24,210 --> 00:15:27,210 Speaker 1: which about 1/5 are registered in Poland. So of course 258 00:15:27,210 --> 00:15:30,800 Speaker 1: Poland has taken on most of the burden. Um, a 259 00:15:30,800 --> 00:15:35,800 Speaker 1: trophy in uh, let's talk about funding. How is Ukraine 260 00:15:35,800 --> 00:15:37,610 Speaker 1: funding itself presently? 261 00:15:38,690 --> 00:15:42,840 Speaker 2: Well, you have, you have really a different couple of 262 00:15:42,840 --> 00:15:45,870 Speaker 2: different time perspectives. So the first thing to think about 263 00:15:45,870 --> 00:15:49,000 Speaker 2: is how is the government now funding all of the 264 00:15:49,000 --> 00:15:54,010 Speaker 2: things it's doing in Ukraine because at this time military 265 00:15:54,010 --> 00:15:58,400 Speaker 2: expenditure is running at something like 20% of GDP. 266 00:15:59,120 --> 00:16:02,040 Speaker 2: you know, so it's more than half of the government's budget, 267 00:16:02,040 --> 00:16:05,310 Speaker 2: probably at this stage at the same time, the government 268 00:16:05,310 --> 00:16:09,700 Speaker 2: needs to pay out pensions and salaries and take care of, 269 00:16:09,700 --> 00:16:13,380 Speaker 2: of people that really need their support. So the government 270 00:16:13,380 --> 00:16:15,800 Speaker 2: is under a lot of strain in the sense that 271 00:16:16,000 --> 00:16:20,900 Speaker 2: The tax base and income levels have fallen by maybe 35% 272 00:16:20,910 --> 00:16:25,560 Speaker 2: at the same time, as, as the cost expenditures have 273 00:16:25,560 --> 00:16:30,240 Speaker 2: increased tremendously. So there was a period when Ukraine was 274 00:16:30,250 --> 00:16:34,340 Speaker 2: using too much of the central banks printing press to 275 00:16:34,340 --> 00:16:40,060 Speaker 2: finance the government's budget, fortunately, now we see more support 276 00:16:40,060 --> 00:16:44,500 Speaker 2: coming in from the outside and we're talking about maybe 277 00:16:44,950 --> 00:16:48,600 Speaker 2: In need of something in the neighborhood of $50 billion 278 00:16:48,600 --> 00:16:52,370 Speaker 2: 2023 that they need in support. 279 00:16:52,910 --> 00:16:58,500 Speaker 2: We are getting there slowly. Um I think what is 280 00:16:58,510 --> 00:17:02,240 Speaker 2: really important is that this needs to be predictable and 281 00:17:02,240 --> 00:17:05,949 Speaker 2: it's need to be coming at sort of a regular, 282 00:17:05,960 --> 00:17:09,390 Speaker 2: regular and predictable intervals. So this has been an issue 283 00:17:09,390 --> 00:17:12,310 Speaker 2: in the past and and, you know, the EU is 284 00:17:12,310 --> 00:17:15,750 Speaker 2: making progress, but it's it's also not quick enough, I 285 00:17:15,750 --> 00:17:16,400 Speaker 2: would say. 286 00:17:17,080 --> 00:17:20,280 Speaker 2: And maybe another dimension just to mention it is of 287 00:17:20,280 --> 00:17:25,060 Speaker 2: course that Ukraine really needs grants at this time. It 288 00:17:25,060 --> 00:17:28,170 Speaker 2: doesn't need to get a lot of more borrowing on 289 00:17:28,170 --> 00:17:31,980 Speaker 2: the government's balance sheet. But, but, you know, the EU 290 00:17:31,990 --> 00:17:36,060 Speaker 2: is now providing very long term loans, very low interest rates. 291 00:17:36,070 --> 00:17:39,619 Speaker 2: But I think, you know, it's really just asking for 292 00:17:39,619 --> 00:17:43,030 Speaker 2: debt restructuring discussion coming up but at some stage in 293 00:17:43,030 --> 00:17:44,230 Speaker 2: the future 294 00:17:44,780 --> 00:17:47,920 Speaker 1: I I want to get into that whole multilateral approach 295 00:17:47,920 --> 00:17:52,450 Speaker 1: to you know, addressing a country that is in conflict. 296 00:17:52,460 --> 00:17:54,700 Speaker 1: I think we've done a lot of or have had 297 00:17:54,700 --> 00:17:57,880 Speaker 1: many cases of you know post conflict reconstruction under the 298 00:17:57,880 --> 00:17:58,810 Speaker 1: aegis of the 299 00:17:58,970 --> 00:18:01,659 Speaker 1: United Nations and the World Bank and the BRD etcetera. 300 00:18:01,660 --> 00:18:06,619 Speaker 1: But in conflict situation doing debt restructuring or program I 301 00:18:06,619 --> 00:18:10,490 Speaker 1: think is as many many more factors of difficulty. And 302 00:18:10,490 --> 00:18:12,980 Speaker 1: sometimes like you said, you know, I mean loans versus 303 00:18:12,980 --> 00:18:17,540 Speaker 1: grants these issues uh probably are not focused upon and 304 00:18:17,540 --> 00:18:20,570 Speaker 1: then they create problems down the road. Um So you 305 00:18:20,570 --> 00:18:22,959 Speaker 1: give us a sense of the funding gap both for 306 00:18:22,960 --> 00:18:24,220 Speaker 1: the immediate term. 307 00:18:24,230 --> 00:18:26,650 Speaker 1: Uh and and of course, you know, as you said 308 00:18:26,650 --> 00:18:32,149 Speaker 1: earlier that the large infrastructure destruction, you know, hundreds of 309 00:18:32,150 --> 00:18:35,340 Speaker 1: billions of dollars worth of needs down the road, would 310 00:18:35,350 --> 00:18:38,310 Speaker 1: it be the european union that would take the lead? 311 00:18:38,310 --> 00:18:40,879 Speaker 1: I mean is that the thinking or we are seeing 312 00:18:40,880 --> 00:18:44,190 Speaker 1: efforts to make it a little more multilateral with the U. S. 313 00:18:44,190 --> 00:18:48,050 Speaker 1: And other multilateral organizations becoming a pretty prominent contributor to 314 00:18:48,050 --> 00:18:49,490 Speaker 1: the reconstruction of Ukraine. 315 00:18:50,700 --> 00:18:52,949 Speaker 2: Yeah, I mean so we should remember that now in 316 00:18:52,950 --> 00:18:54,910 Speaker 2: the short run. It really is the U. S. That 317 00:18:54,910 --> 00:18:57,699 Speaker 2: has provided most of the funding and also in terms 318 00:18:57,700 --> 00:19:01,609 Speaker 2: of grants. So in terms of macroeconomic stability, I think 319 00:19:01,609 --> 00:19:04,640 Speaker 2: really the U. S. Has taken a lot of responsibility 320 00:19:04,640 --> 00:19:07,510 Speaker 2: in this process. If we then look at the next 321 00:19:07,510 --> 00:19:14,869 Speaker 2: step rebuilding and and you know, creating a competitive Ukraine 322 00:19:14,869 --> 00:19:16,940 Speaker 2: that can enter the european union. 323 00:19:17,130 --> 00:19:20,820 Speaker 2: Of course the european union needs to take a leading 324 00:19:20,820 --> 00:19:25,460 Speaker 2: role in that reconstruction process at the same time, I 325 00:19:25,460 --> 00:19:26,860 Speaker 2: think most people outside 326 00:19:26,859 --> 00:19:31,050 Speaker 1: we saw a precedence of this last year after the 327 00:19:31,050 --> 00:19:33,290 Speaker 1: US withdrawal from Afghanistan 328 00:19:33,470 --> 00:19:35,650 Speaker 1: That some of the central bank of Afghanistan assets were 329 00:19:35,650 --> 00:19:40,990 Speaker 1: frozen in various, you know, accounts and federal reserve of 330 00:19:40,990 --> 00:19:43,660 Speaker 1: New York and Bank of England and so on. And 331 00:19:43,660 --> 00:19:47,270 Speaker 1: some of that has already been earmarked for 9-11 victims 332 00:19:47,270 --> 00:19:51,040 Speaker 1: and so on. I wasn't aware that similar conversations were 333 00:19:51,040 --> 00:19:53,210 Speaker 1: in place. But of course, yeah, it makes sense given 334 00:19:53,210 --> 00:19:54,740 Speaker 1: what we've seen elsewhere. 335 00:19:55,060 --> 00:20:00,359 Speaker 1: Um you recently published a paper with a several other 336 00:20:00,369 --> 00:20:03,150 Speaker 1: co authors. It was in the website of Center for 337 00:20:03,150 --> 00:20:08,909 Speaker 1: Economic Policy Research Cpr And you talked about various dimensions 338 00:20:08,910 --> 00:20:11,139 Speaker 1: of funding and I like the way you broke up 339 00:20:11,140 --> 00:20:14,870 Speaker 1: the paper, you had it in sections like credibility consequences, 340 00:20:14,869 --> 00:20:18,490 Speaker 1: efficiency and tipping point to those who have not read 341 00:20:18,490 --> 00:20:20,560 Speaker 1: the paper or will not be reading the paper if 342 00:20:20,560 --> 00:20:21,730 Speaker 1: you could elaborate a bit. 343 00:20:23,420 --> 00:20:27,880 Speaker 2: Well, I mean, as you said, there are several dimensions 344 00:20:27,880 --> 00:20:31,560 Speaker 2: of doing something like this. So first of all, we 345 00:20:31,560 --> 00:20:36,980 Speaker 2: need to get significant funding lined up. That's the obvious 346 00:20:36,980 --> 00:20:42,060 Speaker 2: first step to avoid, you know, having macroeconomic difficulties? The 347 00:20:42,060 --> 00:20:44,550 Speaker 2: second part of it is really about how do we 348 00:20:44,550 --> 00:20:48,110 Speaker 2: organize things? What is the governance structure around this? 349 00:20:48,300 --> 00:20:52,950 Speaker 2: How do we make sure that the Ukrainian government has 350 00:20:52,950 --> 00:20:55,570 Speaker 2: sort of the ownership of how it wants to rebuild 351 00:20:55,580 --> 00:21:00,410 Speaker 2: its country and at the same time provide donors with 352 00:21:00,420 --> 00:21:05,920 Speaker 2: enough sort of part of this discussion and also monitoring 353 00:21:05,920 --> 00:21:09,159 Speaker 2: and oversight to make sure that projects are implemented the 354 00:21:09,160 --> 00:21:12,320 Speaker 2: way they are they should be. So, you know, that 355 00:21:12,320 --> 00:21:16,600 Speaker 2: that whole discussion I think is quite crucial. And this 356 00:21:16,600 --> 00:21:17,460 Speaker 2: is something 357 00:21:17,640 --> 00:21:21,240 Speaker 2: a lot of people. It's often the first question, can 358 00:21:21,240 --> 00:21:24,150 Speaker 2: we send money to Ukraine? We know that it had 359 00:21:24,150 --> 00:21:27,629 Speaker 2: problems with corruption in the past? What is going to change? 360 00:21:27,650 --> 00:21:32,060 Speaker 2: We have also seen similar discussions in other reconstruction efforts. 361 00:21:32,070 --> 00:21:35,930 Speaker 2: So we just think that, you know, setting that that 362 00:21:36,780 --> 00:21:40,530 Speaker 2: some some type of independent agency with close links to 363 00:21:40,530 --> 00:21:45,130 Speaker 2: the EU but where the Ukrainian government is really putting 364 00:21:45,130 --> 00:21:48,409 Speaker 2: forward a list of priorities that can then be discussed 365 00:21:48,410 --> 00:21:53,320 Speaker 2: with the international donor community together. So we don't get, 366 00:21:53,330 --> 00:21:57,340 Speaker 2: you know, bilateral discussions with 20 different donors asking for 367 00:21:57,340 --> 00:22:00,830 Speaker 2: different things. That would be sort of the most efficient 368 00:22:00,830 --> 00:22:04,050 Speaker 2: way of organizing support to Ukraine. We think 369 00:22:04,730 --> 00:22:07,710 Speaker 2: so that's sort of the key of this. And then 370 00:22:07,710 --> 00:22:12,250 Speaker 2: of course thinking about how do we make it predictable. 371 00:22:12,250 --> 00:22:15,129 Speaker 2: So we get the funds there and then you disperse 372 00:22:15,130 --> 00:22:18,920 Speaker 2: funds at a certain time schedule and have a reasonable 373 00:22:18,920 --> 00:22:22,109 Speaker 2: plan of of you know, when can we do different 374 00:22:22,109 --> 00:22:23,890 Speaker 2: kind of rebuilding efforts? 375 00:22:24,010 --> 00:22:28,040 Speaker 1: Would the BRD be the right vehicle in your view? 376 00:22:29,400 --> 00:22:31,640 Speaker 2: No, I mean what we argue in this report is 377 00:22:31,640 --> 00:22:36,260 Speaker 2: actually to set up an independent EU agency focused only 378 00:22:36,260 --> 00:22:40,250 Speaker 2: on the reconstruction of Ukraine but where we it's a 379 00:22:40,250 --> 00:22:43,429 Speaker 2: bit like the marshall fund after the Second World War. 380 00:22:43,470 --> 00:22:48,950 Speaker 2: So really something with some amount of autonomy but you 381 00:22:48,950 --> 00:22:52,110 Speaker 2: know with the governance structure so that the Ukrainian side 382 00:22:52,109 --> 00:22:54,750 Speaker 2: and the donor sides are all represented 383 00:22:55,050 --> 00:22:59,900 Speaker 2: In in some type of supervisory board. But you know 384 00:22:59,900 --> 00:23:04,050 Speaker 2: it would then gather the European Union, it could be 385 00:23:04,060 --> 00:23:08,050 Speaker 2: the US it could be all the other G7 countries 386 00:23:08,050 --> 00:23:11,639 Speaker 2: that have been part of helping Ukrainian and also of 387 00:23:11,640 --> 00:23:14,400 Speaker 2: course Singapore and other countries around the world. 388 00:23:14,990 --> 00:23:20,320 Speaker 2: And then you would add the usual multi laterals like 389 00:23:20,320 --> 00:23:23,570 Speaker 2: the World Bank, the I. M. F. The BRD all 390 00:23:23,570 --> 00:23:26,900 Speaker 2: of these guys so that there is one place where 391 00:23:26,900 --> 00:23:30,810 Speaker 2: all of these discussions can be coordinated. So it doesn't 392 00:23:30,810 --> 00:23:34,970 Speaker 2: become to piece mail and there's too much, you know, 393 00:23:34,980 --> 00:23:38,440 Speaker 2: double work on on both sides of the table basically. 394 00:23:38,740 --> 00:23:41,540 Speaker 1: So you don't think that we have in the global 395 00:23:41,540 --> 00:23:46,790 Speaker 1: financial architecture right now, a multilateral body that is neutral 396 00:23:46,790 --> 00:23:52,500 Speaker 1: enough and autonomous enough to address Ukraine's post reconstruction post 397 00:23:52,500 --> 00:23:56,170 Speaker 1: conflict reconstruction needs that a new organization should be in place. 398 00:23:57,000 --> 00:24:01,960 Speaker 2: Well, we think this is such a significant undertaking. So, 399 00:24:01,960 --> 00:24:06,320 Speaker 2: you know, just saying that a place like the european 400 00:24:06,320 --> 00:24:09,060 Speaker 2: investment bank or E B R D or or any 401 00:24:09,060 --> 00:24:11,970 Speaker 2: other organization would be able to deal with this 402 00:24:12,310 --> 00:24:17,119 Speaker 2: without sort of significant additions to their capacities. And also, 403 00:24:17,119 --> 00:24:21,780 Speaker 2: I think a dedicated governance structure because you know, some 404 00:24:21,780 --> 00:24:24,750 Speaker 2: of the multi laterals would obviously have countries in their 405 00:24:24,750 --> 00:24:29,480 Speaker 2: membership that are not really supporting Ukraine at this stage. 406 00:24:29,490 --> 00:24:32,260 Speaker 2: And we really need this to be 407 00:24:32,440 --> 00:24:35,870 Speaker 2: sort of efficient streamlined and it should also have this 408 00:24:35,869 --> 00:24:40,030 Speaker 2: focus on the long term goal of Ukraine being EU accession. 409 00:24:40,030 --> 00:24:43,360 Speaker 2: So that's why we think it should also be connected 410 00:24:43,359 --> 00:24:47,110 Speaker 2: to to the EU in some way or another? 411 00:24:47,800 --> 00:24:52,639 Speaker 1: I see. Okay. Uh, and from your institute's perspective, what 412 00:24:52,640 --> 00:24:55,580 Speaker 1: is your sort of day to day engagement with the 413 00:24:55,580 --> 00:24:59,780 Speaker 1: Ukrainian authorities or through your institution, Kiev? You know, what 414 00:24:59,780 --> 00:25:01,300 Speaker 1: are your day to day work? 415 00:25:02,359 --> 00:25:05,960 Speaker 2: Well, a lot of it is about of course supporting 416 00:25:05,960 --> 00:25:09,350 Speaker 2: our colleagues at the school of Economics and they are 417 00:25:09,350 --> 00:25:14,580 Speaker 2: very much engaged with the Ukrainian government and international community 418 00:25:14,580 --> 00:25:17,919 Speaker 2: at large talking about exactly the issues that we have 419 00:25:17,920 --> 00:25:18,890 Speaker 2: been discussing here. 420 00:25:18,910 --> 00:25:23,300 Speaker 2: So how what are the costs of destruction at this stage? 421 00:25:23,310 --> 00:25:28,480 Speaker 2: How can we organize reconstruction looking forward, What are what 422 00:25:28,480 --> 00:25:31,040 Speaker 2: what is sort of the macro financial support that is 423 00:25:31,040 --> 00:25:33,520 Speaker 2: needed now. So a lot of this and of course 424 00:25:33,520 --> 00:25:38,580 Speaker 2: also they are still doing online, both offline and online 425 00:25:38,580 --> 00:25:41,720 Speaker 2: teaching with their students that are, are still at the school. 426 00:25:41,720 --> 00:25:44,740 Speaker 2: So I would say that's that's the main 427 00:25:44,940 --> 00:25:48,500 Speaker 2: the main part of our work in this and then 428 00:25:48,500 --> 00:25:54,910 Speaker 2: of course being out discussing this issue in different media seminars, etcetera, 429 00:25:54,910 --> 00:25:59,010 Speaker 2: just to make sure that policymakers and and people at 430 00:25:59,010 --> 00:26:02,440 Speaker 2: large understand what is actually going on in Ukraine at 431 00:26:02,440 --> 00:26:03,729 Speaker 2: this stage. 432 00:26:04,380 --> 00:26:10,080 Speaker 1: Um we have spent most of this conversation talking about Ukraine. 433 00:26:10,090 --> 00:26:12,510 Speaker 1: I'd like to talk a little bit about Russia, but 434 00:26:12,510 --> 00:26:13,800 Speaker 1: before I do that, I want to ask you one 435 00:26:13,800 --> 00:26:18,650 Speaker 1: specific question on this ongoing talk about the price cap 436 00:26:18,660 --> 00:26:23,530 Speaker 1: on Russian soil. Um how do you see being a 437 00:26:23,540 --> 00:26:27,620 Speaker 1: effective tool of putting pressure on Russia and and what's 438 00:26:27,619 --> 00:26:29,780 Speaker 1: your sort of, you know own sense of the mechanism 439 00:26:29,780 --> 00:26:30,950 Speaker 1: that is being put in place? 440 00:26:32,040 --> 00:26:35,160 Speaker 2: Yeah, I think, you know, for the people not so 441 00:26:35,160 --> 00:26:38,830 Speaker 2: familiar with Russia, we should remind people that oil and 442 00:26:38,830 --> 00:26:42,390 Speaker 2: gas revenues, the export revenues from that is really the 443 00:26:42,390 --> 00:26:46,120 Speaker 2: crucial factor both on the external side and to the 444 00:26:46,119 --> 00:26:47,810 Speaker 2: government's budget in Russia. 445 00:26:48,130 --> 00:26:50,940 Speaker 2: So, I mean, I've done models in the past of, 446 00:26:50,940 --> 00:26:56,689 Speaker 2: of Russia growth rates and you can basically explain 75% 447 00:26:56,690 --> 00:26:59,869 Speaker 2: of Russia's growth with one variable, which is the changes 448 00:26:59,869 --> 00:27:02,080 Speaker 2: in international oil prices. So that's 449 00:27:02,440 --> 00:27:06,950 Speaker 2: a unique, very simple macro model, but it also tells 450 00:27:06,950 --> 00:27:11,090 Speaker 2: you the importance of, of oil and and other exports 451 00:27:11,090 --> 00:27:14,280 Speaker 2: like this. But so the price cap is very, very 452 00:27:14,280 --> 00:27:19,040 Speaker 2: critical in terms of limiting the resources to the government's budget. 453 00:27:19,050 --> 00:27:23,310 Speaker 2: And it's also going to affect the Russian economy more general. 454 00:27:23,500 --> 00:27:25,260 Speaker 2: And I would say that, 455 00:27:25,830 --> 00:27:29,930 Speaker 2: You know, it's as always in the details, so what 456 00:27:29,930 --> 00:27:32,720 Speaker 2: is the price cap going to be, is it going 457 00:27:32,720 --> 00:27:36,860 Speaker 2: to be $60, per barrel, or is it going to 458 00:27:36,859 --> 00:27:41,419 Speaker 2: be $30 per barrel? And that makes a huge difference 459 00:27:41,420 --> 00:27:45,060 Speaker 2: in terms of the macroeconomic impact on Russia. 460 00:27:45,550 --> 00:27:49,600 Speaker 2: And from my point of view, if it's 60, 70, 461 00:27:49,600 --> 00:27:52,710 Speaker 2: it's not really going to be so painful for Russia. 462 00:27:52,720 --> 00:27:55,780 Speaker 2: So we really need to think about a much lower 463 00:27:55,780 --> 00:27:59,750 Speaker 2: price if it's really going to make a difference. But 464 00:27:59,750 --> 00:28:02,450 Speaker 2: of course, you know, all all all these things are 465 00:28:02,450 --> 00:28:05,560 Speaker 2: some steps in the right direction, but I just think 466 00:28:05,790 --> 00:28:10,520 Speaker 2: We cannot again hesitate in terms of what types of 467 00:28:10,530 --> 00:28:14,590 Speaker 2: restrictions we imposed on the Russian economy. This this really 468 00:28:14,590 --> 00:28:19,950 Speaker 2: needs to be a seriously binding price cap, otherwise, you know, 469 00:28:19,950 --> 00:28:24,090 Speaker 2: we're spending way too much energy on, on implementing something 470 00:28:24,090 --> 00:28:27,750 Speaker 2: that that may not be so critical, but but of course, 471 00:28:27,750 --> 00:28:31,740 Speaker 2: you know, it's better to make a price cap at 70. 472 00:28:31,910 --> 00:28:35,030 Speaker 2: But I think, you know, already today, Russia is getting 473 00:28:35,030 --> 00:28:37,320 Speaker 2: less for the oil is selling. So to me it 474 00:28:37,330 --> 00:28:39,600 Speaker 2: wouldn't really be a binding constraint 475 00:28:40,380 --> 00:28:44,010 Speaker 1: earlier this year when the conflict broke out, we saw 476 00:28:44,020 --> 00:28:46,810 Speaker 1: fairly strong resolve on the part of europe and the 477 00:28:46,810 --> 00:28:50,650 Speaker 1: US in terms of putting on, you know, series of sanctions. 478 00:28:50,660 --> 00:28:55,750 Speaker 1: And we had all these headline grabbing uh, news items about, 479 00:28:55,750 --> 00:28:58,850 Speaker 1: you know, yachts of oligarchs being seized here, or, as 480 00:28:58,850 --> 00:29:01,200 Speaker 1: you pointed out earlier, the central bank assets being frozen 481 00:29:01,200 --> 00:29:05,950 Speaker 1: in the West. Are you surprised by the lack of 482 00:29:05,990 --> 00:29:09,410 Speaker 1: impact of those sanctions on Russia? 483 00:29:10,690 --> 00:29:13,390 Speaker 2: Well, first of all, I think the most serious sanctions 484 00:29:13,390 --> 00:29:16,440 Speaker 2: are the ones connected to oil and gas and they 485 00:29:16,440 --> 00:29:19,940 Speaker 2: haven't really been implemented. So, you know, once they are 486 00:29:19,940 --> 00:29:24,100 Speaker 2: in effect, we can maybe discuss a bit more. But 487 00:29:24,100 --> 00:29:26,680 Speaker 2: I also think that most of these types of sanctions 488 00:29:26,680 --> 00:29:30,520 Speaker 2: would take time. The only thing that where I think, 489 00:29:30,530 --> 00:29:33,660 Speaker 2: you know, we could have caused a much more immediate 490 00:29:33,660 --> 00:29:37,640 Speaker 2: effect is if we had had full scale sanctions on 491 00:29:37,640 --> 00:29:38,970 Speaker 2: the financial sector. 492 00:29:39,670 --> 00:29:43,530 Speaker 2: Now, this was taken in steps, you know, kicking Russian 493 00:29:43,530 --> 00:29:49,810 Speaker 2: banks out of swift and prohibiting transactions, etcetera. So, if 494 00:29:49,810 --> 00:29:53,910 Speaker 2: that had been done on, on the larger banks immediately, 495 00:29:53,920 --> 00:29:57,220 Speaker 2: I think that could have triggered actually a financial crisis 496 00:29:57,220 --> 00:30:01,400 Speaker 2: in Russia. But the way it was implemented step by step, 497 00:30:01,410 --> 00:30:06,090 Speaker 2: I think we basically left the Russian side have a 498 00:30:06,090 --> 00:30:09,610 Speaker 2: lot of time to adjust to these sanctions. So that 499 00:30:09,760 --> 00:30:12,560 Speaker 2: with, with the central bank, that is used to dealing 500 00:30:12,560 --> 00:30:16,610 Speaker 2: with the crisis, which the Russian central bank is, it 501 00:30:16,610 --> 00:30:20,560 Speaker 2: just means that they adopt they put in measures to 502 00:30:20,560 --> 00:30:26,560 Speaker 2: to counter these sanctions and that makes the immediate impact 503 00:30:26,570 --> 00:30:30,120 Speaker 2: smaller than it would have been otherwise. But I think, 504 00:30:30,120 --> 00:30:30,660 Speaker 2: you know, 505 00:30:31,220 --> 00:30:34,830 Speaker 2: Again, we should remember that this is this is just 506 00:30:34,830 --> 00:30:38,150 Speaker 2: the start of this process for the Russian economy. So 507 00:30:38,220 --> 00:30:42,370 Speaker 2: the longer-term outlook is much more severe than just, you know, 508 00:30:42,380 --> 00:30:45,680 Speaker 2: having four or 5% drop of GDP this year. 509 00:30:46,680 --> 00:30:49,930 Speaker 1: Yeah, I won't actually touch on that issue. So the 510 00:30:49,940 --> 00:30:53,650 Speaker 1: financial or economic growth costs in the short term may 511 00:30:53,650 --> 00:30:55,990 Speaker 1: be absorbed given how large Russia is. And it is 512 00:30:55,990 --> 00:30:58,200 Speaker 1: sort of self sufficient in food and energy and so on. 513 00:30:58,200 --> 00:31:01,470 Speaker 1: And it has a few allies with which its trade continues, 514 00:31:01,480 --> 00:31:04,500 Speaker 1: but it seems to me probably maybe we can shift 515 00:31:04,500 --> 00:31:08,510 Speaker 1: a little bit about the discussion to technology access. I mean, 516 00:31:08,520 --> 00:31:09,210 Speaker 1: Russia 517 00:31:09,420 --> 00:31:13,630 Speaker 1: is a country that has had a tradition of technology prowess, 518 00:31:13,630 --> 00:31:16,930 Speaker 1: but at the same time, some of the modern technologies, 519 00:31:16,930 --> 00:31:20,320 Speaker 1: if you will, whether it is chips or the the 520 00:31:20,320 --> 00:31:23,790 Speaker 1: cloud servers and so on. It seems to me that 521 00:31:23,790 --> 00:31:27,070 Speaker 1: those things getting frozen out and particularly the support of 522 00:31:27,070 --> 00:31:30,370 Speaker 1: Western tech companies that could be fairly damaging for Russia 523 00:31:30,370 --> 00:31:32,520 Speaker 1: in the long term. Your thoughts. 524 00:31:33,470 --> 00:31:37,490 Speaker 2: Yes, absolutely. And and we know also more generally what 525 00:31:37,490 --> 00:31:42,220 Speaker 2: is building a modern economy, it's not digging up stuff 526 00:31:42,220 --> 00:31:44,930 Speaker 2: from the ground oil or gas, but it's really to 527 00:31:44,930 --> 00:31:50,530 Speaker 2: make sure that people's inventions and ideas and and etcetera, 528 00:31:50,530 --> 00:31:55,060 Speaker 2: technologies as we talk about those are the sustainable forces 529 00:31:55,060 --> 00:31:56,240 Speaker 2: of long term growth 530 00:31:56,570 --> 00:32:00,200 Speaker 2: and and that's definitely not going to be looking good 531 00:32:00,200 --> 00:32:02,540 Speaker 2: for Russia. Of course they can substitute some of the 532 00:32:02,540 --> 00:32:06,960 Speaker 2: Western technologies with things from china and other places, but 533 00:32:06,960 --> 00:32:10,440 Speaker 2: not all of it, but again, it it doesn't lead 534 00:32:10,440 --> 00:32:14,790 Speaker 2: to an immediate collapse. It's just that the growth outlook 535 00:32:14,800 --> 00:32:19,200 Speaker 2: is also clouded by by this particular thing. And of 536 00:32:19,200 --> 00:32:21,250 Speaker 2: course we also know that some of the 537 00:32:21,520 --> 00:32:25,800 Speaker 2: the high tech military equipment really needs chips from from 538 00:32:25,810 --> 00:32:28,180 Speaker 2: the west. And then it's a question of 539 00:32:28,360 --> 00:32:32,620 Speaker 2: how much circumvention of sanctions do we get from these 540 00:32:32,620 --> 00:32:34,010 Speaker 2: types of restrictions? 541 00:32:34,060 --> 00:32:38,300 Speaker 1: Right. Um now this is a question not regarding Russia 542 00:32:38,310 --> 00:32:41,390 Speaker 1: or Ukraine, but rather generally in europe, you're sitting in 543 00:32:41,390 --> 00:32:44,800 Speaker 1: Sweden whenever I travel to europe, you know, the last 544 00:32:44,800 --> 00:32:46,560 Speaker 1: few months have been all about, you know, how tough 545 00:32:46,560 --> 00:32:49,380 Speaker 1: this winter is going to be, whether it is with 546 00:32:49,380 --> 00:32:51,550 Speaker 1: respect to energy inflation or might be even, you know, 547 00:32:51,550 --> 00:32:56,100 Speaker 1: some blackout. What's your sense of europe's preparedness to deal 548 00:32:56,100 --> 00:32:56,950 Speaker 1: with this winter? 549 00:32:58,460 --> 00:33:01,920 Speaker 2: I think we have come a long way from the initial, 550 00:33:01,920 --> 00:33:05,950 Speaker 2: you know, total panic mode, we have seen that gas 551 00:33:05,950 --> 00:33:11,150 Speaker 2: storages have actually been filled in Germany to basically 100%. 552 00:33:11,280 --> 00:33:13,780 Speaker 2: There's a lot of discussions of course saying that everything 553 00:33:13,780 --> 00:33:17,660 Speaker 2: would collapse tomorrow. It didn't really do that of course, 554 00:33:17,660 --> 00:33:20,219 Speaker 2: then it's about the weather, how cold is it getting, 555 00:33:20,220 --> 00:33:22,820 Speaker 2: how much gas do we need to heat homes and 556 00:33:23,370 --> 00:33:25,770 Speaker 2: etcetera, but but I think, you know, there are a 557 00:33:25,770 --> 00:33:28,870 Speaker 2: lot of things going on now that is making us 558 00:33:28,870 --> 00:33:34,340 Speaker 2: less dependent on the Russian energy imports. It does cost 559 00:33:34,350 --> 00:33:39,900 Speaker 2: the european economies in terms of, you know, financial supports etcetera. 560 00:33:40,130 --> 00:33:44,830 Speaker 2: But I really think that compared to the suffering going 561 00:33:44,830 --> 00:33:49,090 Speaker 2: on in Ukraine, what we experienced in europe is really 562 00:33:49,090 --> 00:33:53,340 Speaker 2: just a matter of how how much solidarity can we 563 00:33:53,340 --> 00:33:56,510 Speaker 2: show each other in europe and and how can we 564 00:33:56,510 --> 00:34:00,260 Speaker 2: just be organized and and help each other out through 565 00:34:00,260 --> 00:34:04,340 Speaker 2: this winter? I think that's yeah, it's it's really something 566 00:34:04,340 --> 00:34:08,569 Speaker 2: that we can manage, but it will require political leadership basically. 567 00:34:08,950 --> 00:34:11,910 Speaker 2: And if I may just as a comparison, you know, 568 00:34:11,920 --> 00:34:17,370 Speaker 2: europe has spent over €600 billion or is going to 569 00:34:17,370 --> 00:34:22,930 Speaker 2: spend over €600 billion to support consumers and companies in 570 00:34:22,930 --> 00:34:27,900 Speaker 2: europe for the higher energy prices. Okay, so that's 600 billion. 571 00:34:27,910 --> 00:34:32,219 Speaker 2: We're talking about macro economic support to Ukraine for the 572 00:34:32,219 --> 00:34:35,219 Speaker 2: whole year of 2023 is 50 573 00:34:35,980 --> 00:34:39,840 Speaker 2: so it's not even 10% of what responding in terms 574 00:34:39,840 --> 00:34:45,489 Speaker 2: of subsidies on energy to consumers and households. So, you know, again, yeah, 575 00:34:45,500 --> 00:34:50,260 Speaker 2: it's it's complicated here, but, you know, compared to Ukraine, 576 00:34:50,270 --> 00:34:53,400 Speaker 2: we can both afford it and we can do something 577 00:34:53,400 --> 00:34:56,920 Speaker 2: about it if we're just, you know, cooperating in europe, 578 00:34:56,920 --> 00:34:57,850 Speaker 2: I think, 579 00:34:57,930 --> 00:35:01,740 Speaker 1: Okay, I've saved the hardest question for the end Korean, 580 00:35:01,750 --> 00:35:05,259 Speaker 1: what will 20, bring for Ukraine and Russia? 581 00:35:06,800 --> 00:35:09,170 Speaker 2: Well, of course, I hope an end to the war 582 00:35:09,180 --> 00:35:14,870 Speaker 2: that's in everyone's interest. If there was ever a win win, 583 00:35:14,880 --> 00:35:18,520 Speaker 2: ending the war is clearly a win win. Maybe it's 584 00:35:18,520 --> 00:35:22,100 Speaker 2: not a win for Mr Putin himself. But you know, 585 00:35:22,100 --> 00:35:25,740 Speaker 2: two people in Russia to people in Ukraine, two people 586 00:35:25,739 --> 00:35:28,430 Speaker 2: in europe and all over the world, that would be 587 00:35:28,480 --> 00:35:31,610 Speaker 2: the obvious win win solution to this. 588 00:35:31,870 --> 00:35:36,410 Speaker 2: Will it actually happen? Well, it really comes down to 589 00:35:36,420 --> 00:35:42,420 Speaker 2: how much sacrifices or Russian people willing to put up 590 00:35:42,420 --> 00:35:45,530 Speaker 2: with to keep the fighting going on in Ukraine. It's 591 00:35:45,530 --> 00:35:49,620 Speaker 2: obvious that Ukrainians are going to put up with this 592 00:35:49,620 --> 00:35:52,100 Speaker 2: for as long as needed. So it's really up to 593 00:35:52,100 --> 00:35:55,600 Speaker 2: Russia when they want to end this war. So I'm 594 00:35:55,600 --> 00:35:59,620 Speaker 2: hoping that this insight will dawn on them sooner rather 595 00:35:59,620 --> 00:36:00,850 Speaker 2: than later, basically. 596 00:36:01,760 --> 00:36:04,330 Speaker 1: I think that's as good a note to end this 597 00:36:04,330 --> 00:36:07,620 Speaker 1: podcast as anything Trovan Becker. Thank you so much for 598 00:36:07,620 --> 00:36:08,650 Speaker 1: your time and insights. 599 00:36:09,590 --> 00:36:10,610 Speaker 2: Thank you timer. 600 00:36:11,200 --> 00:36:13,950 Speaker 1: I would like to also thank our listeners Kobe time 601 00:36:13,960 --> 00:36:17,350 Speaker 1: was produced by ken Delbert from Spy Studios daisy Sharma 602 00:36:17,350 --> 00:36:20,799 Speaker 1: and violently provided additional production assistance, Kobe time is for 603 00:36:20,810 --> 00:36:24,310 Speaker 1: information only and does not represent any trade recommendations. All 604 00:36:24,310 --> 00:36:27,470 Speaker 1: 90 episodes of the podcast are available on youtube and 605 00:36:27,469 --> 00:36:31,230 Speaker 1: all major podcast platforms including apple google and Spotify. As 606 00:36:31,230 --> 00:36:34,370 Speaker 1: for our research publications, webinars and live streams, you can 607 00:36:34,370 --> 00:36:38,330 Speaker 1: find them all by googling devious Research Library Have a 608 00:36:38,340 --> 00:36:39,009 Speaker 1: great Day.