Angry Planet - Stephanie Baker on ‘Punishing Putin’

Episode Date: October 28, 2024

Listen to this episode commercial free at https://angryplanetpod.comHow’s that sanctions regime working out for the U.S. and Russia? This week on the show, we have Stephanie Baker, a senior writer at Bloomberg, to try to answer the question. She just published Punishing Putin, a book all about it.What’s a Russian oligarch like in person?How America’s sanction regime against Russia worksThe nuclear warfare of it allDo Putin’s “red lines” mean anything?The complex nature of the world’s oil economyWhat are the limits of economic power?Where are the semiconductors coming from?What western technology tell us about Russia’s war machinesRTWorshiping World War IIThis is the end of globalizationThe war doesn’t end without the end of PutinWhat to do with Russia’s bank reserves?Hungary?He Had 5 Followers on YouTube. It Landed Him in Jail, Where He Died.Go here to buy Punishing PutinSupport this show http://supporter.acast.com/warcollege. Hosted on Acast. See acast.com/privacy for more information.

Love this podcast. Support this show through the ACAST supporter feature. It's up to you how much you give, and there's no regular commitment. Just click the link in the show description to support now. Hello and welcome to another conversation about conflict on an angry planet. Today, we are talking about trying to use sanctions to change the world. With us is Stephanie Baker, who's written a fantastic new book called Punishing Putin. inside the global economic war to bring down Russia. And so thanks very much for coming on. Could you just like introduce yourself briefly so people know who you are? Sure, yeah. I am a senior writer at Bloomberg on the investigations team.

I got my start in the 1990s, first in Prague and then in Moscow as a reporter. So I've been at this for quite a while. And I left Moscow in 1998 right for the ruble crash, but went back periodically since then for stories, for big deep dive stories on everything from the Sochi Olympics to interviews with Russian billionaires. But also did a lot of reporting in Ukraine on Paul Manafort and Rudy Giuliani's antics there. So I would kind of, you know, spanned the gamut, so to speak. Well, at some point I want to ask you what it's like to talk to one of the Russian oligarchs. I mean, just... Well, why not now? Okay. So are they like people?

Do they seem like psychopaths? I mean, what's your experience? Well, I try to, you know, I think it's more interesting to get into them as characters with, you know, all their motivation. and they're not, I wouldn't put them all in one, one camp. They're all different in their own way. They all hate each other for one. I mean, most of them hate each other. They've all got bad blood from like bad deals, you know, deals that were stolen from under them years ago.

So it's a certain amount of rivalry between them. Look, I haven't spoken to all of them. There's certain ones that didn't want to speak to me. There's some that I spoke to years ago when they were trying to kind of position themselves as these global tycoons before Putin annexed Crimea. You know, there was one, there were a couple oligarchs billionaires that I did talk to for the book who were based in London and sanctioned and then, you know, who were faced with this dilemma of, you know, do we stay and try to fight the sanctions? do we leave? I go into that in the book in some degree of detail. And my goal was not to paint them as black and white characters. I wanted to get into the kind of the intricacies of the dilemmas and the challenges and the choices they faced. And, you know, in there, I do show how they chose not to side

with the West for the most part. Well, and I mean, these oligarchs are actually under individual sanctions, right? I mean, it's, all right, we should probably just talk about the U.S. sanctions regime. And how, when you're talking about against Russia, because we have lots of different sanctions regimes against different countries at this point, can you talk a little bit about what particular methods we're using and what we're trying to accomplish from the United States? Yeah, so, you know, there were some targeted pinprick sanctions that were rolled out in 2014 after the annexation of Crimea, but they were very limited. And I think there was concern about going too far. The Obama administration was very reluctant to go ahead with a hard economic response. Europe was very reluctant, very dependent on Russia, Russian energy supplies. And you saw that come to the fore in, after the full scale. invasion in 2022, there was a massive ramp up in the sanctions program against Russia after 2022. You know, obviously, Russia is a unique case. It is a nuclear power that invaded its neighbor,

and that forced the economic response to be primarily economic. Obviously, that was alongside the military aid that was very slowly rolled out to Ukraine. But they really, tried to push the economic restrictions, in particularly in the first couple of months that were quite hard hitting. In particular, the freezing of Russia's sovereign assets at central bank reserves in the West, which is something that Putin was not expecting. It had never been done on that level before. So I think initially there were some optimistic, perhaps naive belief that these

unprecedented actions would bring the Russian economy to its knees and force Putin to turn around. But very soon, it became clear that Putin was profiting, in particular from oil, because Russia is a major oil exporter. The oil prices spiked after the invasion amid global panic over Russian supplies and a reluctance to even touch Russian oil because of the nature of the tanks rolling towards Kiev. And so he managed to help the economy rebound on the back of these record oil export earnings that helped, you know, neuter the effects of some of the financial sanctions and the freezing of Russia's central bank reserves. And I think as that time went on, I think that the objective of the sanctions kind of changed, that it went from, okay, we're not going to be able to stop him with sanctions, but can we at least bleed a minimum of resources to make it harder for him to sustain the war? And that increasingly became, I think, the objective. And they just rolled out a flurry of sanctions against companies, major employers in Russia, in strategic sectors of the economy.

There were, of course, carve-outs and some really, you know, unusual carve-outs for particular, you know, in particular metal supplies that are crucial for the global economy. Titanium, for instance, which, you know, we need for. to build airplanes. But I think it was, it was, it had never been attempted on this level before sanctions against an economy as big as Russia had never been attempted before. So this was, as I like to say, a grand experiment in how far you can take economic warfare. I argue in the book that really they didn't go hard enough or fast enough. Can you talk about the nuclear politics of this? That's interesting to me, that the idea that they've got nuclear weapons,

makes sense. Makes sanctions a more attractive. It makes economic warfare in general a more attractive strategy. Yeah, I mean, I think that's been the background to this whole economic policy response. And it's been the backdrop of the military response, too, right? I mean, from the get-go on the day Putin launched the full-scale invasion, he made a bailed nuclear threat that you know you'll see the west will see a response like they've never seen before is what he said um and you've seen him as well as all various um you know of his acolytes the demetri medvedev others on russian state television threatening nuclear war um and i think that has been the backdrop that um they didn't want to push either the military into ukraine or

even in some respects the economic response because of the threat of Russia's, you know, that Russia might use a tactical nuclear weapon. I think it's been more of a concern on the military aid front for sure, rather than the economic response. I think with the economic response, the concern has been how it would backfire in terms of people using the dollar and that there would be a flight away from the U.S. dollar. But you've seen, you know, again and again, Putin's red lines being crossed and he has not resorted to nuclear weapons, right? There was, you know, the F-16s and then the F-16s were deployed. There was, you have the incursion into Kursk, the first time that Russia has been occupied by a foreign military power since World War II, you would think that would be the ultimate red line that would force Putin to use nuclear weapon. that that didn't happen. So I do think there's been a lot of bluster on this front, but it remains, I think, a real concern in the Biden administration that they don't want to to push Putin into a corner that he might resort to nuclear weapons. I do think that China is the force that is restraining Putin on this. China does not want nuclear weapons to be deployed. And on one level, you have to think,

well, it makes no sense rationally, right? Why would you? deploy a nuclear weapon on territory you're trying to conquer. That makes very little sense. But there's a lot of things about this invasion that make very little sense. So I think that's why there's been this ongoing concern. Yeah, I mean, but the sanctions themselves seem to make not very much sense because they seem they're not, they can't. Maybe please describe it better than I am going to because they're not half-hearted. But on the other hand, I mean, they've seemed to have completely failed.

I mean, in terms of our strategic goals. I mean, tell me if I'm right about that. And then, I mean, yeah, what went wrong? Well, I think a lot of things went wrong. And I do kind of unpack that in the book. On one level, I've been trying to fight this whole notion that sanctions aren't working. are we bothering? Because I do feel like that is a page out of Putin's propaganda because he actually doesn't, he hates the sanctions and he wants them lifted. They have cost Russia hundreds of billions of

dollars. Let's be clear about that. They haven't been enough to stop him. That is partly because Putin fundamentally does not care about the health of the Russian economy long term. And that has always been the case, that his goal of conquering Ukraine has taken precedence over the health of the Russian economy. They have, I think they haven't gone far enough, and that is one of the reasons why they haven't worked. Just recently, you see them rolling out additional sanctions, and every time they come out with, you know, the Treasury comes out with these pressways, like, new defense enterprises in Russia that they're sanctioning. I don't think, why? are we only doing this now? I would have thought that they would have put a blanket ban on the entire

Russian military industrial complex from the get-go. So some of it is performative at this point. I think if they really want to hit them where it hurts, it would be to attack one of their principal sources of revenue, which is oil. And the reason why they don't want to do that is because of the costs that that would incur, that would inflict on both the, U.S. and the European economies. I think at various crucial turning points, there's been a reluctance to take Russian oil off the market because it would cause gas prices in the U.S. to spike. And I go into the book, I go into great detail in the book, the origins of the price cap on Russian oil, which sounds like this really wonky idea. But I try to tell it

through the people who were trying to think strategically about how do we deal with this problem. Russia is a major oil exporter. If we take all their oil off the market, that's going to cause a massive spike in oil prices and most likely a global recession. So how do we deal with that challenge? And they came up with this policy, which is, you know, was quite ingenious on one level that they would deny all Western services, namely insurance. And then, you know, these Western insurance companies account for like 90% of insurance, maritime shipping insurance, deny insurance to Russian oil if it was transported at above $60 a barrel. Now that worked for a while, and it really did lead Russia resources, but then Russia built this shadow fleet of oil tankers to transport

oil to new markets. And in particular, it started selling oil to India, which bought Russian oil like no one ever imagined at the beginning of the war. It went from importing something like 1% of oil from Russia to 40%. And they, you know, on one level, it was what U.S. policymakers in the Biden administration wanted. They wanted to keep oil flowing. They wanted to, uh, enable countries like India to get oil at a discount. Um, but keep Russian oil flowing.

Limit their revenues, but make sure that there wasn't a massive oil spike that would cause economic pain at home. And you've got an election year. I mean, this is, if I'm Biden or Kamala Harris, I'm not going to do this now or anywhere near now. Well, you see actually oil prices softening in part because of a slowdown, economic slowdown in China. And now, you know, it was that the Russian oil is being traded well above the price cap for many, many months. You now see Russian oil being traded at close to the price cap or just below because, oil prices have come down. And that's what I argue in the book is that oil is the linchpin

of this whole thing. That if you go back and look at Russia's economic health over the past few decades, it's all come down to the price of oil. And that in the 90s, the price of oil was relatively low. And that's why Yeltsin had such a hard time transitioning the Russian economy away from state planning. And Putin unfortunately benefited from a relative high price of oil that enabled him to expand the state's control over the economy in key sectors. And, you know, he built the state oil giant Rossneft by gobbling up assets of, you know, old and jailed oligarchs as well as other assets. He increased the state control over his cash cow, which is state-controlled gas prom. Obviously, that hasn't turned out very well.

because Gasprom used to rely on Europe as its main customer. There was, you know, in the August of 2022, he stopped, and he tried to weaponize gas and stopped supplies of gas to Europe, thinking that Europe would cave. Then there was the attack on the Nord Stream pipeline, which basically stopped most of the pipeline flow of gas. As a result is Cash Cow, Gasprom is now losing bucket loads of money. It's no longer. It can't, it can't, it doesn't have a pipeline big enough to pipe gas to China. So it's facing, it's facing a challenge. It's, you know, there, it's not all, I try to, to, to make people realize that the Russian economy isn't as healthy as Putin would like everyone to think it is. You know, he has put the economy on war footing. He's shot, he's pumped money, state money into defense production, showered, bonuses on Russians who sign up to fight on the front line. But it's facing labor shortages. It's facing high inflation. It has interest rates at like 19%. Everyone expects the Russian economy to slow by the

end of the year. So he's kind of running out of time. It's the attitude is fascinating to me. Is I remember the early days of the official ground invasion in 2022, I happened to be, I happened to to catch a video stream from Russia on a on a website called Twitch

and it was this guy that all he would do is he would light his burner in his home and just let it go and he would have a count

in the bottom right-hand corner saying this is how much money I've spent on the gas that I'm burning right now this is how much we don't care

about the economic sanctions and what you're doing to us, we will burn all of this gas. This is, I think, right before the Nord Stream pipeline attack. And then there's this quote in your book that I think is pretty interesting. I think it's from McFarquod. What we didn't anticipate was how little Putin seemed to care about the economy's decline. There's this attitude of just kind of like staring the West directly into the face and saying, none of this matters. We will eat, dirt and we'll just continue to push into this country. Can you talk about, is this, like, how much of this is a brave face?

Like, why does Putin seem to, like, project this air and the people seem to project this air of, like, not giving a shit about what's happening? Right. Well, they are able to not care at the moment because they're making so much money off of oil and the sale of certain metals. to key markets. But if you go back, it is part of Russian culture, right? They have survived incredibly harsh times.

I mean, compared to, you know, they're not, it's that, what they went through in World War II is nothing compared to, you know, what they are confronting now. This is, there has been no real economic hardship for Russians as a result of this war. On the contrary, what Putin has done is he's tried to buy off the population. You know, he's rolled out things like state subsidized mortgages. So, you know, even though interest rates are like 19%, you could get an interest, you could get a mortgage at like 8%. Well, they had to stop that policy this summer because they just couldn't afford to do it anymore. You know, really high, you know, payments upon death for soldiers who died in Ukraine.

And a lot of these people who signed up to fight in the war in Ukraine have gotten earned a lot of money much higher than the average salary. So that is how he's managed to maintain support for the war and why there is this we don't care attitude because it's all being financed by oil revenues. But once the oil party stops, then I think it's going to be a very different picture. And this is what I go into in the book is that this is this is this. central challenge facing Europe and the U.S. is how do you cap Putin's oil revenues and why they haven't gone after Russian oil revenues more aggressively. Like they have not really enforced this price cap aggressively. They've blacklisted something like 60, 65 of these oil tankers, which to some degree has been quite effective, but they haven't felt compelled to go after more

of these tankers, which they really could do to try to bleed Russia of oil revenues. And my guess is now that oil prices are coming down, they feel like there might be more room to do that without spiking prices. And I think after the election, there may be more room for them to just go full hog. And I would expect, I would expect and hope that they would go after more of these tankers, that they'd have the political breathing room to go and do that. Now, this means. that when you're talking about oil prices, if we can get them higher, which would be good, or sorry, if we start to lower them, that's good actually for all of Russia's allies, too. I mean, it's bad for Russia, but China should be thrilled.

I mean, and so should India for that matter. So it's kind of funny. Yeah, no, exactly. And, you know, with China's economy slowing down, you know, it's part of the reason why China has stepped up. China and India both have stepped up because they are still getting Russian oil at a discount, right? There's oil trades on the global benchmark Brent, but there's Russian Euroles crude. That's a specific Euroles crude.

And before the war, it traded at a small discount to Brent. Now it's trading at a deeper discount to Brent. There's a lot of shenanigans going on in the shipping market. There's a lot of padding of shipping costs. And there's undoubtedly a lot of Russians as well. as middlemen in Dubai who are making a fortune off of this trade by the gap between the two and padding these shipping costs. But I think, yeah, I think declining oil prices is the key to this. And if they can go after more of Russia's shadow fleet, I think that would do a lot. And remember,

let's remember, the shadow fleet is a danger to the environment, right? These are oil tankers that should have been decommissioned. They're 25 years old, most of them. If they run a ground and there's an oil spill on the coast, off the coast of Denmark or off the coast of the UK, that's a major environmental disaster. There's insurance backing these. We don't know what kind of insurance is backing these rusty shadow fleet tankers. There may be no real insurance standing behind these things, and taxpayers may end up, you know, with the bill. What would one Exxon Valdez-style disaster do to the Russian economy?

I think it would create enormous political pressure in the West to go after and get rid of all of these tankers. I think that would be the one thing that could change the game. You know, if, I think it doesn't take that much. I think if Russian oil gets down to $50 a barrel, $40 a barrel, they don't have much time in terms of the budget. They have burned through the liquid portion of this thing called the National Wealth Fund, which is the sort of where there's sort of savings kitty that they built up from oil revenue. And they've already burnt through half of the liquid portion of it. So I think our calculations was that if oil were at a $50 a barrel for more than a year, they'd run out of money. So I think it would really put Russia on the back foot and they would be, you know, forced to make some hard choices. Look, they've already had to make hard choices. They've had to hike taxes on a number of different fronts. So there have been real changes in the Russian economy. But it is a long term looks not to be a very healthy economy. It's bleak. It's cut off from Western technology.

it's being forced to pay higher prices for the semiconductors it needs for its precision-guided missiles. The sanctions regime is too leaky and they need to figure out a way to plug the holes. And part of that is getting more allies on side, whether that is countries on the periphery of Russia, Kazakhstan, you know, Armenia, where, you know, there have been transships. of sanctioned and sanctioned commodities semiconductors the like Turkey has been a major loophole

Hong Kong in particular has been a major one and that that's one that's very hard to tackle What do you think about the efficacy of sanctions in general? Can you, do you think of any situations where

you've really accomplished what the U.S. Because we seem to be the main sanctioner, you know, where they've really done what the, you know, what the U.S. or the West wanted to do. I mean, I seem to recall that, you know, Khomeini is still in charge of Iran. I'm pretty sure that, you know, the China still does what it wants. You know, I guess I'm just wondering, do you think this is a good idea to begin with? I mean, is this, is it worth doing even? I think that the situation with Russia's invasion of Ukraine was so extreme that we could not continue to do business as usual, that that was just an untenable situation.

There are, I think the lessons learned over the past two and a half years is that if you want to try to isolate an economy like Russia, there are costs to doing that. And we have to decide and weigh up those costs what we're willing to bear. I think you can point to a couple examples where they have. been successful. In Iran, the sanctions arguably brought the Iranians to the table to do the Iran nuclear deal. I mean, I think most people believe that without those sanctions, they would not have come to the table. Okay. Trump, of course, you know, reimpose those sanctions tore up the deal.

The other example that people cite is South Africa, and that was, you know, that was a combination of sanctions and corporate and consumer boycotts, and that was all. Also, it wasn't the only thing, but I think it brought considerable pressure to bear on the apartheid regime. The other one is perhaps Serbia against Labrana Milosevic in the 1990s. That's before sanctions really got going as a major policy tool, foreign policy tool. But look, yeah, you're right. There are plenty of examples of sanctions where they failed. Venezuela is a big one.

And obviously there are examples like Cuba and North Korea, longstanding sanctions regimes. But I think those examples are very different because they've been in place for so long. Those are also, I mean, Venezuela arguably different, but like Cuba and North Korea were not quite as integrated into the global economy, right? Exactly. In the ways that Russia and everyone else has been. exactly. It is pretty astonishing, though, when you talk about Cuba or North Korea, when Cuba in particular lost their patron, which I mean, the Soviet Union largely kept, from what I understand, kept Cuba afloat, so to speak. And they've managed to just keep going anyway. You know,

they lost that and their under sanction. And I mean, I guess, I guess it's impressive what you can do with repression. I mean, I don't, you know, we have to debate the efficacy of sanctions against Cuba at this point, right? I think it's a very different example than, you know, someone like Russia invading its neighbor and killing, we don't even know what is the ultimate death toll here. I mean, the latest count by the U.K. defense ministry is that Russia has lost 600,000 killed and wounded. We don't know how many of those are actual, you know, killed. We don't know how many have been killed in Ukraine. Like, we will never know because we don't know how many people died in Maripal.

So, but, I mean, the level of death and destruction is just beyond the pale. And I think it's important to not, it's not fair to compare the two regimes. I think, like I said, I think I viewed this as a grand experiment. What are the limits of economic power and how far can you take this? And I think the lesson learned over the past two and a half years is it is a limited tool unless you want to harm yourself. It can't be expected to do all the heavy lifting. And it needs to be used with very targeted, limited objectives. And I think in the case of trying to bleed Russia of the research.

sources to wage war. I think that is a, you know, a fair objective and, you know, one that, if properly enforced, could be effective. You know, in some ways you look at this and you think, God, this is just, this ought to be easier, right? Because, you know, the sanctions coalition, which is U.S., Europe, UK, Japan, those economies account for half of global GDP. right? And they ought to be able to muster the economic power to force Russia to its knees. But the problem is over the past 30 years, the world has become dependent on not only Russian oil, but metals, minerals, et cetera. So I think it's been harder than a lot of people thought to have an effect, especially faced with a guy with a dictator that doesn't seem to care if he drives the Russian economy.

into the doldrums. Well, you talk a little bit more about Russian reliance on Western electronics and semiconductors and how they are skirting the sanctions around that stuff. And I'm particularly interested in what you make of the recent Department of Justice indictments against Russia today in the accusation that Russia today is helping them get electronics. Yeah, so I've done a lot of reporting on this. actually, even since I finished the book. And it is all there for anyone who goes looking in Russian customs data, where they're getting all these semiconductors. And I think what's particularly

fascinating is the Ukrainians have done this work documenting what they find in the aftermath of these Russian missile strikes, which is given Western military analysts a look inside these missiles for the first time, really, they can see and unpack what they're using. And it shows how incredibly reliant the Russians are on Western technology and semiconductors. They need, you know, memory chips, GPS receivers, you know, the whole gamut. A lot of it is dual use. It can be used for everything from mobile phone networks to dishwashers. And that's why it's been hard to control is because the way the global semiconductor market operates is there are U.S. companies. They often have manufacturing in Southeast Asia, often in China.

They have their authorized distributors. Those distributors then sell it on to someone else who sells it on to someone else. And it's a sort of daisy chain of supply companies. But you see from Russian customs data, and I've spent hours going through Russian customs data for my sins, you see that they're all going through these front companies, mostly in Hong Kong, and we've gone to track down these companies. These companies are just sort of, they're not at the addresses where they're registered. These are just front companies that open up under one name, shut down, open up under another name with a new address. And it's really hard for the U.S. to control that, even though it's U.S. design technology, so it's covered under U.S. export controls.

a lot of this stuff is getting through. And the one way that the U.S. has been able to try to stop it is through financial threats, i.e. imposing sanctions on banks that facilitate the payments to Russia's military industry for this stuff. And as a result, you've seen some of these banks, and particularly in China, shy away from it because they don't want to be hit with U.S. sanctions that would cut them off from the U.S. dollar. China wants to do business with the world. The business with Russia is in the greater scheme of things globally, relatively small. So I think that is one of the key and most important ways to undermine Putin's ability to continue to wage war against Ukraine is to stop his ability to continue to build these missiles.

You see, and he is, he has kept going. but the fact that he's had to turn to North Korea and Iran for missiles shows that he doesn't have, he's not able to produce at the replacement rate for what he's using against Ukraine. The sanctions against RT are, you know, that was a fascinating case, obviously, right? Because what they're doing was they were trying to expose what RT was really up to. And unlike the 2016 meddling, that Russia carried out. They seem to have pivoted and adopted a new technique,

which is to hire influencers with established followings and fund them covertly. And I thought it was important that they exposed that. This is a long established Russian technique, the so-called KGB active measures, they're really good at it. They know what they're doing. They've been doing it for decades.

And the fact that they're using RT for a number of things, not just propaganda, but, you know, other fronts, you know, including, you know, imports and the like. Yeah, that was, I thought, one of the more fascinating bits of the stories that they'd said that RT was running these crowdfunding platforms on social media. and then the crowdfunding was being used to basically like buy military equipment from China and other countries and then ship it into Russia. It's just like a really bizarre roundabout way to supply your troops. Yeah, well, you see, and I go in the book, a lot of these, the Justice Department, instead of going after the big Western semiconductor manufacturers, what they've done is they've gone after these middlemen, which is a bit of a cat and mouse game. You know, they shut down one network and another one pops up and places like RT. I mean, we didn't get enough detail on exactly what RT was doing on that. So it's hard to kind of tell.

But I've looked at a lot of the middlemen that they've gone after. And it's fascinating, you know, the extent that they go through to try to get their hands on some of these, you know, Western components that they need for everything from avionics to, you know, various missile and even tank systems. So there are still people operating in places like Hong Kong, Turkey, who are trying to source that material through front networks. And, you know, I personally think that they need to come down harder on the U.S. companies. It's going to be a never-ending game if you're just going after these middlemen. And they need to force these companies to really vet their supply chains in a more aggressive way.

That that's really the only way to stop it. Yeah, it's been a wild week for supply chain problems. Yeah, I was going to say, because actually, I mean, if Russia would only source their stuff from Israel, I mean, this whole thing could change around very quickly. Right. Wow. It's a different episode. That's a different, yeah.

We can go a number of different directions on that one. One thing I was thinking about when we're talking about the Russian casualties, the Russian economy not doing very well. I just was thinking about how Russia talks about itself, thinks about itself. And again, I mean, you've spent lots of time in Russia. But, I mean, from what I know and from, you know, briefly being over there, there's still the worship of World War II that Putin has put in place. And the stories from people's grandparents that have been passed along.

I mean, talk about eating people's dogs and cats. I mean, that's, you know, really the stories that are passed along. And I just wonder if that doesn't change how Russia can put up with things. I mean, and what they're willing to put up with. I mean, the United States doesn't have any sort of ethic like that. no absolutely and you know that's kind of what I was alluding to is that they have the ability to put up with i mean forget world war two just what they put up with under Stalin and you know throughout the the aftermath of world war two under the communist system and it was really bleak right um but i think it's um that the key here is that Putin just has such a solid grip on the security services, and he has suppressed all dissent, that even if there was discontent with the war or perhaps, you know, ramping, raging inflation because of the war

sanctions, that there's no vehicle for expressing that. I mean, I just heard a case last night of someone I know whose mother was put in jail for a post that she made of a story that was like four years old. and they came after her and put her in jail for it. I mean, it's incredible what Russians are being jailed for at this point. And I don't think people quite realize how scary a place it is. You know, anyone, a lot of people have left, right? I mean, Russia has suffered this massive brain drain.

At least 700,000, probably more, probably more like a million Russians have left since the full-scale invasion. and how many hundreds, thousands of political prisoners, we don't really know the definitive number. But if you're operating under that kind of a society, I think the whole notion of how much economic pain they will withstand is kind of almost a moot question. Yeah, there was a really great story in the Times, I think, either today or yesterday, about a guy,

who played piano on YouTube he had five subscribers and that's it and it said something against the war Putin detention died 40 years old

so yeah I mean when you're living under those kinds of conditions who cares how good the McDonald's tastes exactly yeah well and I guess I mean Putin really

made no bones about killing Alexei Navalny. I mean, even if he didn't stand up and shout I killed him, Alexei Navalny, but I mean, I guess there's just, yeah, there's no restraints at all. I hadn't really thought about that. But I mean, he's acting very openly within society. And the sort of reign of terror that is, that Russians are living with right now. I mean, of course they've lived with, you know, Stalin's reign of terror. I'm not saying that Putin is on the same level. but, you know, he's using this sort of playbook, and you actually see in Russia, you see these cases, these stories of Russians ratting out other Russians like they did during the Soviet times, which is a very sad turn of events and I think goes very deep. I think let's even just look optimistically if this war ends in any way that would be acceptable to the Ukrainians. The Russians, you know, the Russian society has. really changed dramatically, certainly since I lived there in the 1990s during a period of, you know, what looks like, you know, incredible openness, you know, given how Putin has strangled, you know, the public square, so to speak, so to speak, in Russia over the past decade.

So long-term endgame, I'm thinking, this can't last. The Western sanction regime against Russia can't go on, right? Not just because it punishes Russia, but also because it cuts them off, it isolates them. We've over the past, however many decades, the world has really, all these economies have integrated, which is part of how we have. these levers of pressure against them. You can't, if they're completely cut off and completely isolated and become their own little fortress, that to a certain extent we lose those levers of pressure, right? Right.

But I think the key is that they're cut off from Western technology, which I think is going to hobble them for years to come. They have not been able to develop any kind of semiconductor industry of their own. And I think that is a long-term challenge for Russia. They can use these evasion networks to import the Western technology or copy it like they did during the Soviet period. But that's going to, you know, put them at a – give them a handicap for quite a while. I do feel like we're in a new Cold War. And I don't want to compare this standoff with China and Russia to the old Cold War. because it's very different. It's less ideological.

You know, there's a sort of state-led capitalism, nationalism, that unites the likes of China and Russia. But I think we're at the end of an era. I think this era of globalization and increasing integration of global economies is coming to an end because everyone's now woken up to the risks. I mean, first, there was the COVID pandemic. And then there was the Europeans realizing how dependent they were on Russia. energy supplies, and they're never going to do that again. I think they're going to be very reluctant to ever put themselves in a situation where they're dependent on Russia for anything because of what has happened over the past two and a half years. They're going to be looking for other sources of supply, and you will see an alliance between Russia and China. There'll be, you know, Russian natural resources going to China. But that is limited, that is limited in terms of what it

achieve. I'm not saying it's not a massive challenge, but I do think that the sanctions regime, if it was done in a smart way, could help drive a wedge between China and Russia. They could force China to pick sides. They could say, look, either you want to do business with us with the US dollar or you want to do business with Russia. And Russia is the size of the Italian economy. You know, it's like two trillion. It's not, you know, it's nothing. So, if they were able to really use sanctions as a lever as a lever to to drive a wedge between them. I think that could be quite effective. Iran and North Korea, not so easy.

I would say that's a harder one. But let's make no mistake that they, they, the sort of, I don't want to call them the axis of autocracies view their main challenge is American hegemony, right? and that's what unites them. And I don't think that's going to change, regardless of what sanctions policy is. And I think trying to do business with any of these countries, as usual, is a very dangerous proposition. I mean, I, you know, with Iran, I think that was mismanaged. I think that, you know, we should have kept them at the table and that Trump jettising

the JCPOA was a mistake. But I think, unfortunately, we're coming to the end of that 30-year period where there was this great peace dividend where no one had to spend money on defense. And there was this great openness. You know, we could, I could live in Russia. I could travel to China. You know, there was, we could travel all over the world. I think that's coming to an end, unfortunately. It's, it's, and it's not, I don't really think it's through the U.S. doing. I think there's a false notion. I mean, Putin had this, you know, obsession with his legacy was intent on, retaking Ukraine felt threatened by having Ukraine as a troubled but, you know, soldiering on democracy

at his doorstep. And, you know, he started this. We didn't. I don't think the U.S. wanted this fight. I don't think the U.S. wanted to start an economic war with Russia because it's not really in our interests. It is, it does impose costs. What are the costs? Well, namely there has been higher energy prices, you know, that we've seen that over the past two and a half years. There has been higher prices, you know, for everything. You know, initially, I think, I think actually there's a misconception that, you know, higher food prices was down to sanctions. The higher food prices was down to Putin bombing Ukrainian. grain ships or preventing Ukrainian grade from being exported onto world markets in the Black Sea

or stealing Ukrainian grain from farmers in occupied Donbass. So the war has cost a lot of people a lot of money. And there have been certain people within Russia that have made money off this war, as all wars do present these opportunities to make money. But no, I don't think it's a fight that the U.S. wanted or Europe wanted for that matter. And I think they were in denial for quite a while. I heard it described once as the U.S. philosophy, the Western philosophy was after the Cold War, that the world could all grow together. Globalization meant everyone would get rich. And Vladimir Putin and leaders of China looked at that and said, that's the most naive thing we've ever seen. and this is a zero-sum game.

And there are winners and losers. And so if you're playing by what the West thought the rules were versus what the other half of the world thought, I guess you're going to end up here. Yeah. I mean, I think there was a, there was a naive belief that this was sort of, as we, you know, many have talked about at the end of history. This would be. Right. And I don't mean to downplay. there were mistakes made along the way with, you know, the U.S. dangling NATO membership for Ukraine

without following through on it. I don't think that was not a smart strategy. I don't think that provoked Putin. I don't think that's that's not how I look at it, but that was not a smart move. And the weak response to both Russia's incursion in Georgia and to Abkhazia and South Ossetia, as well as the weak response in 2014, emboldened Putin to go ahead. So there were definitely mistakes made along the way that gave signals to Russia that they could move with impunity. Did anyone you spoke with have a vision for what happens after,

especially if this experiment fails? Yeah, I mean, the million dollar question. is what happens when Putin's gone or how does Putin go, right? Because I don't see this more ending in any way without him leaving the Kremlin. I think there's no face-saving way for him out. I think he would he would probably take a ceasefire where he, where he de facto gets Ukrainian territory, has some breathing room, some time to re-reacti. arm and regroup, which is exactly what he did in 2014 with the Minsk Accords in 2015. And that's why the Ukrainians are so worried.

But I do think there is a naive belief that whoever comes after Putin will necessarily be better than him. We don't know that. It's unclear. It could be worse. Or that figure could be a transitional figure. But I think you see even amongst Ukrainians, or sorry, Russians who are, against the war at the beginning and were in a state of shock and couldn't believe that Putin had done it.

They're now, a lot of them are now believing that Russia needs to win, that it can't be seen to lose and suffer a humiliation. And I think that is a very dangerous proposition and it does not bode well for the future. Russia needs to pay Ukraine war reparations. There's just no way around it. every legal scholar I've spoken to says there's that is that's an accepted widely accepted you know given all the the damage and the violation of the UN charter there's no question that they are obligated to pay Ukraine war reparations and so what leader in Russia will agree to do that yeah and that's why I go in the book I go into the book into this you know somewhat wonky but I try to make it interesting and personalize it this big fight over what to do with Russia

Central Bank reserves, which is this $300 billion pot of money that they immobilized in Western financial institutions just two days after the war began. I try to tell the backstory about how they made that decision. Past two and a half years has been this big back and forth fight over, okay, can we go the next step and seize that money? No one thinks that money is going to go back to Russia unless Russia agrees to pay war reparations. Why should Western taxpayers be paying for Ukraine when we have this Russian money at our disposal? And the problem is, unfortunately, the U.S. has come along. The Biden administration finally, after a lot of hemming and hawing and consulting with lawyers, finally backed going the next step and seizing it. Congress passed an act, authorizing the president to do that. But the problem is there's only $5 billion in the United States because Putin knew that this was a weakness. And he moved a lot of Russia's assets into euros in Europe, thinking Europe would be too divided to act. And he was right. Europe agreed. to immobilize it, but they're very divided over whether or not to go the next step to seize it.

But I think they're going to have to because it doesn't look like Russia is going to be willing to pay war reparations anytime soon. Ukraine desperately needs the money. The Russians have destroyed half their energy infrastructure. The winter in Ukraine is going to be incredibly bleak and they need the money. And I think there's going to be less patience and less appetite in the West for Western taxpayers, the bill when there's this rushing money that we could be using. Who in Europe is against this? Victor Orban of Hungary.

Of course. Oh, I've heard of him. So shocked. Shocked. But, you know, surprisingly, even Germany has been opposed. Even though Germany itself is now facing, you know, its own self-imposed budget constraints that is making it very hard for it to continue providing aid to to Ukraine. But I think

when push comes to shove, they'll probably turn around and realize that they have to use this money. There's been concern, just like there was concern about overuse of sanctions and the impact on the U.S. dollar, I think there's concern that if they go ahead and seize that money, that there'll be a flight away from the euro,

that people won't want to keep assets and euros. But, you know, you've got the typical split in Europe, which is the Baltic states and Poland pushing hard in a hawkish way, to seize the assets be very strong on Russia, be very supportive of Ukraine, and you've got Hungary in particular as the troublemaker, the one who slows down everything, tries to, you know,

design carve-outs for sanctions, and they're opposed to some of these measures. And, you know, to some degree, Germany and France also being somewhat reluctant to go too far in a way that would threaten the euro. What they're doing now is they're trying to raise a loan of something like $50 billion that's backed by this pot of money. This pot of money is earning interest. It's throwing off like billions of dollars in interest every year. So why not just raise a loan, pay it off using the interest from these assets. So you don't have to seize the underlying amount.

But even that, Victor Orban has gotten in the way of. And because he holds the presidency of the European of the EU at the moment, he's able to. do that and they're trying to find workarounds. So I would say as we get to the end here that we now have three separate episodes that we have to do, one on why the U.S. dollar is so important and why we care so much about it being important. There's some great stories to try to understand about that. We have to do a What's the Matter with Germany episode.

I mean, we probably should have been doing that all the time. And then, of course, there's the, what do you do with a problem like Victor Orban episode? So thanks very much for putting so much more work in front of us. Yeah, shockingly, we really appreciate it. We've never done an episode about Hungary. We never have. We never have. You really should.

That's a good one. It would be a good one. I'd listen to that one for sure. Who's the weirdo, um, American intellectual from a Louisiana that goes over there. Not Ross Dauphett. It's Rod, Rod Dreher. There's lots of really fascinating.

Like, use Rod Dreher's work to like view Hungary. Now I'm getting like in the weeds. Yeah, yeah. No, but there's there's, hey, look, my, my former boss also has attended CPAC conferences in Hungary. I mean, it, it's very weird. It's a very strange, strange and interesting story in Hungary. Yes. And we'll do it.

it. We'll do it. We promise. Stephanie Baker, thank you so much for taking us through all of this. I mean, there's a lot to go through. And really recommend punishing Putin to people all around the world. You got a fantastic review in foreign policy. Yeah, that was great. Yeah. I mean, boy, they really love the book. So I think that's wonderful. I tried to make the stuff that's kind of wonky, really accessible and readable and understandable to a wide audience. So don't be scared by the subject. I think if they're scared by the subject, they're not listening to us. Yeah. Okay. Anyway, again, thank you. Thank you. Thank you so much. Thank you for having me. Thanks.

That's all for this week. Angry Planet listeners. As always, Angry Planet is me, Matthew Galt, Jason Fields and Kevin Nadel. AngryPlanetpod.com is the substack. We will be back again soon with another conversation about conflict on an angry planet. Stay safe until then.