Plain English with Derek Thompson - SPECIAL DOUBLE EPISODE: What Putin Will Do Next and the West’s Unprecedented "Financial War" on Russia

Episode Date: March 2, 2022

There are two wars happening right now. There is a military conflict led by Vladimir Putin in Eastern Europe that we should all hope ends as soon as possible. And there is an economic and cultural war—the world vs. Russia—that we should also hope ends as soon as possible. In today’s episode, two guests discuss each theater of war. Paul Poast, a University of Chicago professor and expert on the economics of war, joins to discuss the latest from the war on the ground. And Robin Wigglesworth, a global finance correspondent with the Financial Times, joins to discuss the global “financial war” against Russia. Host: Derek Thompson Guests: Paul Poast and Robin Wigglesworth Producer: Devon Manze Learn more about your ad choices. Visit podcastchoices.com/adchoices

Head into the Ringerverse to stay up to date with all things superheroes and nerd culture entertainment. Hosted by a rotating lineup of superfans at The Ringer, including Mallory Rubin and Van Lathen, shows will provide instant reactions to blockbuster releases, insightful backstories on canon, and mind-bending theories, as well as fresh takes on the latest news and rumors. Check out the Ringerverse on Spotify or wherever you get your podcasts. There are two wars happening right now involving Russia, Ukraine, and the world. two battlefields, you could say. The first battlefield is geographic, it's physical,

it's Ukraine itself, the land, the sea, the air, the dirt that Russia is tearing up with tank treads and pounding with missiles. The second battlefield is made up not of land, but of relationships, contracts, promises between nations, banks, companies. This is the economic battlefield. And what we've seen in the last 72 hours,

is that while Russia does hold the military advantage over Ukraine on Battlefield 1, it is getting demolished by the West on Battlefield 2. In the past few days, as we've discussed in this show, the U.S. and several major European countries have declared a series of financial penalties and sanctions against Russia that are historic, unprecedented. We have excommunicated Russia from the global community. It's banks, its companies, its athletes, its investors, its oligarch, its currency is now plunging, the markets are now frozen, and so even as Russia is attempting

to besiege Ukraine, we are besieging the Russian economy. In this special two-part episode, we're going to talk about both theaters, both battlefields of this war, the military battlefield and the economic battlefield. On the military front, here is by summary of what matters most. the Russians seem discombobulated, discouraged, surprisingly depleted, their morale is low, tanks are being abandoned. The war is not being executed at a high level. But Russia is still Russia. The largest nuclear arsenal in the world, the fifth largest military, 11th largest economy, and a country that has shown repeatedly throughout history that it is willing to fight with volume

rather than with efficiency. It might be, as a past guest, called it one big gas station, but it's a gas station with a standing army and a bunch of nukes. And we cannot conflate our hope that Ukraine will persevere with the observation that Russia is still an overwhelming threat to win the war on Battlefield 1. On the economic front, here is my summary of what matters most. The West has responded to this war by suffocated to Russian economy.

We have made it impossible for Russia to do business with Europe and the U.S. other than sell gas. There is now a global cascade of punishment and outrage. The U.S. is hunting down oligarch assets. Europe has banned Russian flights. India's top lender has stopped handling Russian trades. Singapore's banks have halted Russian commodities trading. The Glasgow Film Festival in Scotland has banned Russian movies. So this is a kind of world war.

I'm not saying it's World War 3, because it's not the same lineage as World Wars 1 and 2. This isn't 1914, it's not 1939, that's not what I'm saying. What I'm saying is that the global suffocation of the Russian economy is a kind of financial war, a kind of economic war, and it is being waged not just by the U.S., but by much of the world. As a final note, what Vladimir Putin is doing is horrific.

What is happening in besiege cities like Kiev is horrific. The suffocation of the Russian economy might be morally justified, but we have never been here before. This is terra incognita. The goal cannot be the simultaneous destruction of Ukraine on Battlefield 1 and Russia on battlefield 2. The goal is peace. This was Putin's war to start.

It will be Putin's war to end. But it falls to the West to convince Russia's leader that he has the most to gain by bargaining and not by bombing. I'm Derek Thompson. This is plain English. My first guest is Paul Post. Paul is a professor at the University of Chicago. He is an expert on war, the history of war, economics of war, and political science.

And this is an interview we had on one. Wednesday afternoon. Professor Post, welcome back to the podcast. Glad to be back. Let's start with the latest. This is day seven of the war. Russia's surge to take key Ukrainian cities seems to have accelerated.

Russian forces claim they have full control of Kurson, a port near the Black Sea, in the south of Ukraine, and Russia is shelling Kharkiv, a city in the northeast of Ukraine and region in the northeast of Ukraine that borders Russia. It seems also to be converging

on the capital of Kiev from several directions. Professor, what do you consider the headline of the last 24 hours of this war? The main thing that I think people have to understand, at least from my read of the situation, is to borrow the Churchillian phrase, we unfortunately are not at the beginning of the end. We're at the end of the beginning.

There is a long way to go. We can get into why. there's a long way to go with this. It's important to remember we're only six days into this war. And this unfortunately is looking like a campaign, again, for reasons we can talk about, for a campaign that could become more of a war of attrition, escalation of violence. So again, we are at the end of the beginning, not the beginning of the end. You have watched and learned from Russia's previous military operations in Chechnya, in small region, just north of the nation of Georgia and Central Asia, and Crimea, which is in southern Ukraine.

Given your understanding of Putin's playbook, what's the next play that history tells us he's going to call? So part of the reason why I think that we're at the end of the beginning, instead of the beginning of the end, is because of exactly the point that you're raising, which is that we're starting to see a shift, based on the information that I've seen, I think many people are seeing, we're seeing a shift in Russian military strategy. I think this campaign started six days ago where Russia was hoping to apply what you could call the Crimea model, right? And what do I mean by that? I mean, if you go back to 2014, when Russia took the Crimea Peninsula, they did so without really firing a shot. They sent in their troops. They referred to them as little green men, and they just went in, took control. This was called a

Feta Complei, which means by the time anybody can react, the troops are already there, and so that's it. You have control of it. And my sense is that that was the playbook they were hoping to be able to use, but at scale for the entire country of Ukraine. Send in the forces very quickly. Of course, there was fighting, but not as intensive fighting as at least people expected to see from Russia initially. And I think that they were hoping to be able to accomplish something similar. However, because of the support that's been coming into Ukraine, because of their willingness to fight back, we're seeing that the Russian military got bogged down with that strategy. And now we're starting to see a shift, a shift to what you could call the Chechnya playbook or even the Syrian playbook.

If you look at the military operations that Russia has engaged in Syria over the past several years. And in this case, it becomes much more ruthless. You see an escalation of lethality. You see more use of air power in coordination with land forces. This is something that even folks have talked about. Some analysts have said, like, where's the Russian Air Force in all of this? Why isn't it being used as much? I think you're going to start to see more of that.

And so that is a big concern for me is as they start to adopt the Syrian or Chechnyaan playbook, and it becomes much more lethal in the fighting, you couple that with the assistance that's coming in from the West. And you have a recipe for kind of that Quagmire scenario, which we can come back to. You have a recipe for a protracted conflict breaking out in Ukraine. Let's talk specifically about Kiev, the capital of Ukraine. What is the status of Russia's attempt to besiege the city, surround it, and take that capital? So I'm watching this as closely as I think everybody else is watching this. They're trying to figure out what exactly is going to happen.

Of course, there's been talk about like the caravan trying to make it up to Kiev, which actually points to, I think, the shift in these models I'm talking about. Because when it came to adopting the Crimea model, they just took the roads. And indeed, that is what we were witnessing them doing. And that is what this caravan's trying to do is just use the roads to make its way to Kiev. We also hadn't yet seen sustained bombing, kind of in a siege campaign, but we're starting to see some of that. And that's where some analysts are now saying it's not a matter of if, it's just a matter of when

Kiev starts to fall. Now, in terms of the exact status, that's hard to know. I mean, we're dealing with the fog of war. We're only six days in. There's a lot of uncertainty about what exactly's been bombed, how's been bombed. I mean, for example, even on the Russian side, reporters have shown where a building that really didn't make any sense to be bombed was bombed and the building that would make sense to bomb, that was maybe like an intelligence building of some sort was left untouched, indicating that they're also not, the Russian forces are also not clear. of exactly what they're supposed to be attacking. So, but again, I think that when it comes to Kyiv, it truly is a matter of when, not if. You said this on the first podcast, and honestly, it made me a little upset. Like, I don't want Kiev to be conquered. But you acknowledge that while you have been struck by the success of early Ukrainian forces, their bravery, the bravity of the Ukrainian people, the valor of Zelensky, their ability to hold off the Russians in early battles, we still have to see reality as it exists, not as we hope it exists. And reality is that Russia is nine times larger than Ukraine by GDP, and its military advantage goes beyond that.

So how would you characterize the Russian advantage over Ukraine? So a major reason why, if you just look at raw numbers, you have to sit there and say, this is everything favors Russia is first of all when it comes to like their military size Russia has a very large military one of the largest in the world I think only second to the United States in terms of size and that military is anywhere from four to five times larger than Ukrainian national forces depending on whether you count reservists or how you factor in active personnel now not obviously not all of those personnel it's over a million Russian military personnel, not all of them are a mass at the border with Ukraine.

Not all of them are involved, but that just gives you a sense of the potential size of the force that could be in play. So that's one reason why you look at it, and it is a bit of a David versus Goliath kind of situation, right? The other one is that when it comes to Russian military hardware, Russia is one of the major military exporters, military hardware exporters. military hardware exporters in the world, Russia and the United States. Why is that? Because their equipment is desirable. Their fighter jets are desirable. Countries want those fighter jets.

They want their weaponry. And that's the kind of weaponry that's being used against Ukraine. Now, this is why it's so important for the Western countries to supply arms to the Ukrainian military. But those two factors alone, the size of their military in terms of personnel, the nature of the equipment that they have and the nature and by which that equipment is more advanced than the equipment that the Ukrainian forces have. Those are two things that really tip the scales in Russia's favor, which goes back to then why it is that Russia feels like they can engage in more of a war of attrition of just simply putting everything out there and just wearing down the Ukrainians versus having to rely on optimal, efficient military tactics.

What happens practically if Russia takes Kiev? What does it mean for the war, for Zelensky, and for the Ukrainians who live there? So it can mean a couple things. First of all, when it comes to war fighting, one of the things that a lot of scholars who are in my field of study will say is that taking the capital is actually quite meaningful. I mean, sometimes people say, well, in modern warfare, it's not as meaningful. No, it is. It is quite meaningful from a symbolic standpoint. also from just to be honest, a practical standpoint in terms of being able to have control of the various assets of government. For me, the best thing to look at, the best analogy to look at is to go back to the Iraq War in 2003. So U.S. forces, of course, made it to Baghdad, made it there in about two weeks. And that's important to keep in mind. This is considered, that was considered a very quick campaign. It still took two weeks to get to Baghdad, about three weeks for the fall of Baghdad.

So we're still way far away from that in terms of a timeline. So I think it's important keep in mind. But anyhow, once they got to Baghdad, then that was kind of the end of the major military operations. And they hadn't yet captured Saddam Hussein. He was out somewhere. They didn't know where he was. But it didn't matter. They had the capital and they could then start their process of establishing what they wanted to establish

in terms of a government. And I think that that could be a similar scenario that plays out here. Once Russia gains control of Kiev, Zelensky will probably be gone. He might be fleeing. He could be in exile. We don't know where he'll be. But also, I don't think the Russians will care where he is. They will go ahead and start the process of establishing the kind of government, the regime that they want to see in place. I want to pause here and take the perspective that I might imagine some listeners are having, where they are seeing headlines and reading tweets. These are people outside of Ukraine, obviously, not living through it, thinking that the valor of the Ukrainian resistance, the fact that Russians were stymied in the days after they invaded Ukraine,

and the fact that there is generally this global boycott of Russia's financial systems, economy, culture, athletes, that all of this suggests that Ukraine has an enormous amount of momentum in this war. And listening to you, they might think, well, wait, you sound very pessimistic still about Kiev's ability, Ukraine's ability to defend its capital. So one way that I think about a synthesis between your perspective and the perspective that I think some listeners might have is to remind people that this day is, this war is only six, seven days old, and it's already passed through what I see as three phases. Phase number one, an initial invasion, the road invasion, tanks going down the road. Number two, Russia being stymied, the pushback, the resistance

of Ukraine, the proud and internationally celebrated resistance of Ukraine. But now we're entering already a third chapter of this war, the Russian regrouping. And the Russian regrouping involves this Chechnya model that you're describing, this Syria model that you're describing, where Russia transitions from simply assuming that it can roll tanks down the street and take a region without firing a shot to a war where, oh no, they're really going to have to step up all sorts of aerial bombing and people are really going to suffer. Does that sound like a fair summary of what you're trying to say that we're moving into this third phase of Russian regrouping and maybe put a little bit of meat on the bones of that theory? Absolutely. I think you captured it perfectly in terms of

the phases over these first six days, which is quite a bit, right? I mean, again, this is only six days old and we've already seen this shift. And to me, that is part of the reason why I am not as optimistic because of the fact that we're already seeing the Russian military start to shift, despite the difficulties they're having, right, that they have been having difficulties with resistance. They've been having difficulty with morale. They've been having some people actually just leave their equipment, right? But nevertheless, we're seeing the Russian military start to regroup. So Russia is starting to regroup, but it's also facing surprisingly high casualties. I have seen estimates ranging from several hundred deaths to several thousand deaths. In any

case, it's clear that more Russians have died in the first week of the Ukrainian invasion, as Americans died in the first year of the Iraq war, or maybe the first few years. There are also reports I've seen from several places, the New York Times, Reuters, that sources from Russia are saying the army is dealing with low morale and outright confusion. Are these meaningful signals? Is it a meaningful consideration for Putin that his troops are demoralized and dying? The Russians have shown over time that that is just not as much of a consideration for them. And this is a long pattern. An example that I've been drawing on recently is quite a ways back, but it is near the beginning of World War II, and it's called

the Winter War. It was between Finland and Russia. It was a three-month war, and it's fascinating war to look at from the standpoint of how it ended. But the main thing to highlight is this was the Soviet Union attacking Finland, very small country, very small population. And yet from a pure military number standpoint, the Soviets were devastated by this war. They incurred so many losses. But it didn't matter from their standpoint because they just simply were going to overwhelm. They were just going to have the war machine just overwhelm the other side. And honestly, I'm starting to think that that is what they're expecting is going to happen here. That it doesn't matter about the morale. It doesn't matter if the equipment breaks down. They're just going to be able to overwhelm

eventually the Ukrainians because they don't expect direct military involvement by the West. So when you came on the show four days ago, we outlined several scenarios, five scenarios for the end of this war. Quick summary of those scenarios. Scenario one was quagmire, a total mess in Ukraine, and ultimately perhaps Russia's retreat. Scenario two was that Russia conquers Kiev, installs a puppet government, a Russian-friendly regime, but doesn't otherwise try to conquer

the country of Ukraine. Scenario three is that Russia conquers Ukraine, annexes Ukraine. Scenario four is that Russia doesn't just conquer Ukraine. It moves on to invade Moldova or Georgia to build a kind of new Russian empire. And scenario five, the most catastrophic

for the world, was a great power conflict between Russia, on the one hand, and the U.S. and NATO. on the other. You told me four days ago that you were expecting something between scenario two and three, something between regime change and full conquest. A hundred hours later, how have you updated from that? It's a great question. I've updated in a couple ways. I've updated in a couple ways. So first of all, there was this document that was leaked, and it was called the translation to it was the solution to the Ukrainian problem. This was leaked by Russian government sources got out there. They took it down. But apparently this laid out kind of the scenario three, if you will, the annexation bringing Ukraine into Russia, even creating like, perhaps even bringing Belarus into Russia, which we haven't even talked about yet, but kind of recreating. So that would suggest that at least an initial war aim for theirs was indeed that scenario three of trying to recreate, trying to annex Ukraine. However, I think that given what we're talking about, where I'm starting to update

is I think they are going to be content, if you will, if you want to use that phrase, use that word, I think they're going to be content with a regime change, maybe not actually annexing Ukraine because I think it's going to get too costly. I think that Russia is indeed surprised by the scale of the military and economic assistance as well as economic punishment that's being incurred by then that I think they are going to be more likely to settle for a scenario two as opposed to a scenario three. So that's a big way in which I've updated. But another way in which I've updated is I don't think the scenario of recreating the entire Russian Empire or Soviet Empire is on the table for them. I don't think that that scenario is still there. That was the scenario four. However, there are

some things that have happened that make me at least a little bit more nervous about scenario five, which is the major power war, right? Over the weekend where Putin raised the readiness level of his nuclear forces, that's, that is not a good sign. Now, we're still still dealing with a low probability event, but when you're talking about nuclear war, those low probabilities matter. So that's another way in which I've updated. I want to ask about off-rams in a second, but I need to ask you a question that comes from a place of, honestly, total bewilderment on my part. Putin might be crazy, but he can't be stupid. He has to see that a very likely outcome here is that Russia finds a way to take Kiev,

installs a puppet government, and faces years of angry insurgency. The city despises Putin. It doesn't want to be conquered by Russia. And meanwhile, as he's facing a disaster in Kiev over the long term, his economy has fallen apart. I mean, this to me is like draining your life. life savings to buy a tiger. Like, congrats. Now you have no money and your new toy wants to kill and eat you. Like, I don't expect you to have Paul, like a psychoanalyst's note on Putin's deep

psychology here, but as a military mind, what is he thinking? I think that the hope, and you could imagine maybe Putin's hope, was that this would be very quick and again, kind of similar to Crimea, that it's done so fast and with so little cost that there's not even really time for the West, for the international community, for NATO, whomever you want to talk about, to react to it, right? There wouldn't have been time for all these sanctions

to come into place. Or even if they did, they'd be like, well, you start to get people have cold feet and say, well, you know, the fighting's over. So, you know, why would we want to do this economic harm to ourselves? Because that's important, remember, with these sanctions, right? You're doing harm to yourself. So I think that the initial hope was that

that would play out. But since that hasn't played out, and now you're moving into this escalation, you have this tendency for it to start to feed on itself, right? That it's like, well, I can't back out because I've done all this harm to my economy, because I'm doing this harm to my military, the worst thing I could do is simply go back to what we would call the status quo, right? Go back to how the world looked last Wednesday, as opposed to Thursday, right? That would be the worst thing he could do. So now he's at a point where he has to get something out of this. And I think the thing that he wants to get out of this is at least regime change. We had to talk about the status of peace talks and ceasefire discussions

because the disaster scenario here is that Ukraine is a war zone for months and Russia is an economic basket case for months, that we just have the total military and economic financial. destruction of these two large countries in Eastern Europe. What do you see as the prospects for peace talks, ceasefire discussions? What is it that you think the West has to offer Putin to get him to end this war as soon as possible in a way that limits the damage? So I am honestly not optimistic about ceasefire talks or peace talks, short of Russia first

accomplishing its objective of regime change. And the reason why is because I think anything that would be attractive to Putin to make him feel like this has been worthwhile, that it's not just simply the status quo of last week, or what he could have easily have accomplished as of last week prior to this campaign, anything that would be of that kind of a package that you could offer to him, I don't think would be acceptable to either Ukraine or. or to the international community as a whole. So to put some flesh on this, what if a package that could be attractive to Putin would be,

we will let you have the eastern provinces, all right? You seem very keen on having those. And we will have Ukraine sign an agreement saying they will never join NATO. That will be part of the package. Or they'll declare themselves a neutral country. They'll never join NATO, never join the EU. How about that? How do you feel? And oh, by the way, you can also keep Crimea since you already had that, right? So that would be the package to be put forward. Could Putin like that package and find

that acceptable? I'm not sure because I feel like he would have said, well, I could have had all that without doing what I just did, right? I could have just sent troops into the eastern provinces and it would have been fine, right? So he could have done that without launching this whole campaign. So that's one problem. The other problem is, would Ukraine actually find that acceptable? Would they want that to be on the table. That's the thing. You have to put agency on the part of the Ukrainian government. I don't know if they would find that to be an acceptable offer to make. But the reality is I think some offer like that would have to be in play for Putin to decide, yes, we're done here. And I just don't see that being offered. I think that there's first going to be, this is going to

play out to where they're going to establish regime change. And then at that point, there may be a settling down, if you will, of the conflict, the possibility of a ceasefire. But it won't happen, at least from my view, prior to that because I just can't see an offer that would be acceptable both sides. We're talking to a reporter from the Financial Times on this episode about how the West's financial war against Russia is intersecting with the military operation. You are an expert on the economics of war. You wrote a textbook called The Economics of War. What is your outlook on how these western sanctions of Russia will affect either Putin's ability to execute this war or affect the people around Putin such that they encourage him to go to the negotiating table

before he otherwise would want to. So I think you would just put your finger on a potential wild card, if you will, right? And it's not the damage to the Russian economy. I think that he's willing to incur that damage. I think also, given that there are these carve-outs for the Russian oil industry, I think that that's something that still gives them some leniency. There's a lot of good research by scholars in my field showing that countries that are rich in oil tend to be more risk-accepting. Jeff Colgan at Brown University, someone who's written quite a bit on this. And so in that standpoint, I don't think the overarching sanctions are what's going to put the pressure on. I think what could happen, though, are sanctions that potentially make members of Putin's inner circle either wanting to convince him or I think what would have to instead happen is some sort of like palace coup, if you will, right?

That is always a scenario. How likely is that? I don't think it's extremely likely. But that would be the wild card, right? If suddenly he lost the ability to govern, he was removed from office, then you, you know, you would see the negotiation of peace talks. So I don't want to get high on hopium here, but I do want to make sure that I ask you about the most hopeful outcomes.

Maybe the pressure that we put on oligarchs and Putin's inner circle forces them to go to Putin and say, we need to dramatically re-envision the outcome of this war. Maybe riots throughout Russia achieve that effect. Maybe Ukraine wins. Maybe there is extraordinary depletion of morale for Russian military forces and all sorts of attacks that we're supposed to go forward simply don't. I know these are optimistic and hopeful outcomes. Which of them do you find remotely plausible? So I would begin this by saying, I think all of those scenarios are low probability events in terms of shifting the course of the war.

You know, so for example, low morale, defections, desertions by the military. I actually think that's very likely to be, we will see that because we already have evidence of that happening. But will that happen at scale? Will that happen to the level that it would actually have a material impact on the course of the war? No, I don't think so. But that is what I would view as the most likely of possible scenarios. Though, again, unlikely, I think, to shape the war. In terms of palace coup, as I already said, there is the possibility for it.

But I think that it's a low likelihood event, again, because autocratic leaders are very good at coup proofing. This is something a lot of scholars have looked at time and time again. Caitlin Talmadge at Georgetown University has written a book, literally called The Dictators Army, where she talks about how this is what dictators do. They're very good at this strategy. And so that's another reason why I'm just very, I'm not optimistic about that scenario. And I would make it even lower probability than a desertion scenario. Finally, Paul, tell me what you're looking for in the next week.

If we're going to be savvy readers of the news, savvy watchers of the news in the next seven days, what should we look for? So the thing that I'm going to be following over the next week, right? So we're now a week into this. So let's say the next six days, the next week is first and foremost, we're going to see we have to pay attention to what's happening with Keefe. That is so important, especially for the scenarios that we've been laying out. Does it start to become a siege, right? And if you see that, does that start to now filter into this or feed into this war of attrition that we're talking about, this quagmire? but a quagmire from a position where honestly the Russian forces feel like they can just wait it out does that start to happen and if that happens how does the West respond if Keeve is under siege do you start to see efforts such as going back to the Cold War era of like a Berlin airlift right trying to bring resources into that city if Keeve holds then they're going to have to say well is this good enough right and maybe it holds maybe that's maybe it holds and then they have to to direct their efforts elsewhere. That leads to the second thing that I want to pay attention to

is what does Zelensky do? Where is Zelensky? Does he stay in the country? Does he have to flee? Does he have to go into exile? Because if he goes into exile, the Russians might say, we don't have to keep. He's already gone. We can go ahead and just declare victory, right? He is now out of the country and we can set up whatever kind of government we want to do at this point. So those are two key things, says, what happens to Keeve and what does Zelensky do? My second guest of this episode is Robin Wigglesworth. Robin is a global finance correspondent with the Financial Times, and he joined the podcast to talk about the financial war against Russia.

This is our second interview of the day. Robin, welcome to the podcast. Thanks for having me, Derek. Robin, in the last episode, I had Noah Smith and the economist Nicholas Faron on the show, and they talked about the weekend's announcements to cut Russian banks from Swift, the trading messaging platform, and to freeze foreign reserves held by the Russian central bank.

I'd like you to start with your own summary headline. How significant, how historic have the last five days been? But this genuinely is earth-shattering. I mean, this is, I think, the first case of full-on financial warfare. The US and Europe, as its partner, have essentially weaponized their control of the international financial system and used it for a foreign policy purpose.

And that is wild. I mean, it really is wild. It has enormous implications. Swift, that's like a financial nuclear weapon, potentially. And then sectioning a central bank. I mean, seizing foreign currency reserves, that's the kind of stuff that I think pretty much has only happened a few times outside of war

and has been only deployed very carefully in very niche situations, specifically, most recently Afghanistan, after the Taliban took over the central bank, Iran to kill its nuclear weapons program, and Venezuela, where, you know, the West decided that the Maduro government was illegitimate and recognize the opposition. I appreciate your historical summary. And I think it's important to point out that, you know, Afghanistan, Iran, Venezuela, these are countries. There are millions of people

who live across those countries, but none of them is the 11th largest economy in the world, which Russia is. And that, I think, goes to the historic nature of these announcements. I think that to a certain extent,

you know, Swift is important. It's important that certain banks are kicked off a messaging platform that allows them to execute these trades at volume, execute critical trades at volume. But everyone that I talk to says that the real web

is freezing the foreign reserves of the Russian Central Bank. Can you just tell us, remind us, in 30, 60 seconds, what it means that Russia's Central Bank has its foreign reserves frozen in the U.S. and European banks? Well, broadly speaking, there is agreement between countries that certain things are sacrosanct. For example, embassies. We understand that embassies are inherently a foreign country's soil in that country. Different laws apply there. And most countries, their property of those sovereign states are considered immune. In the U.S., you have the Foreign Sovereign Immunities Act. And every country has variance of that. And central bank's money, the money that are sometimes gold bars or just digital ledges they keep at the New York Federal Reserve

or the Bank of England or the Bank for International Settlement in Switzerland, you know, they are a core part of a country's reserves and, you know, not seizing them, though I'm sure the Russians will see it this way, but just freezing them is a major, major step. I think we're still going to be grappling with the implications of this for years to come, but I can bet you that the people in Beijing are grappling with this question right now. I want to ask about the most significant headlines that you're seeing out of the Russian economy itself. We've seen news that the ruble is crashing, that the value of major Russian banks listed in the London Stock Exchange have fallen by more than 50%. In that arena, in the arena of economic and financial news,

what is the most shocking stuff that you've seen in the last few days? Well, the one thing that always scares me when I cover some crises in a lot of developing countries. I've done that for quite a while now, and I was, you know, in Benghazi during the Civil War, a Libyan Civil War, is, you know, the sight of people queuing outside ATMs and banks, because it's such a sort of kind of primal sign of fear that you fear that the system is about to collapse. And it's one of those types of fears that can become self-realizing, that by people queuing, its spread sphere, and the local financial system collapses. And Russia's obviously been through this in a horrific, ruinous way in the 90s after the fall of the Soviet Union. And it is one of the

reasons why we saw the rise of somebody like Putin. Russians wanted a strong man. But if you want just a clean line chart showing something horrific, I think the ruble, which has done what, you know, the technical term for is crapped out quite badly over the past just few days, right? It's been heading south for most of the time under Putin, but this has been just extraordinary. We're witnessing a full-on currency collapse. And these two stories intersect. The collapse of the ruble intersects with the run on the bank because it is in part a loss of confidence in the ruble that is encouraging lots of people to get out as much money as they can for fear that the rubble will collapse even further

and their money will be even more worthless if they don't make it to the ATM for two, three, four days. I think it's a good reminder that economics can sometimes seem like math. It can sometimes seem like a dry equation, but economics is it's blood and guts, it's psychology, it's people having a fear in their stomach that they won't be able to afford bread and milk in four days. And so they have to take out all this money in the short term

and through their collective action, help to breed fear throughout the community that encourages everyone else to take out their money and that's where you begin to get into these horrible spirals. I want to focus our conversation on the layers of the global boycott of Russia because I do think that this might be

the most important story right now in terms of the collective punishment of this country. I see four layers of this global excommunication of Russia, a financial layer, a corporate layer, a cultural layer, and a human layer. And I want to go through each of those four one by one. So first, let's review the financial layer of the global boycott of Russia. Tell me all the various ways that the international community, and specifically here, it's mostly the United States and Europe with a couple of

partners, have essentially cordoned off, besieged Russian financial institutions and made it hard for them to trade with the world. Everything in the world, whether you're like it or nut, touch his dollars. And if you can cordon people off from the dollar-based financial system, it basically just crashes. It doesn't function. And that's kind of what's happened with Russia, that the Americans with support from Europe, because obviously Europeans control Swift, and you kind of need their buying to really make this really bite, have basically said, well, Russia, you guys have trampled over international norms so grossly that this is completely unacceptable, and you cannot interact.

with the international financial system. Now, people can survive outside that. In North Korea is not integrated into the global economy. But it's very hard. Even for a country like Russia that still makes a lot of money from selling oil and gas that the Europeans and the Americans still want. And it kind of shows how powerful that weapon has always really been,

but there's been this reluctance to use it. And I think the real long-term issue could be that are we entering a world in error where financial warfare becomes a new dimension of the battlefield? I agree. It seems like the motivations here have their roots in something obviously moral. We are trying to save the country of Ukraine. But war is unintended consequences, and so is financial warfare, as you've described it. And I share your nervousness that we are opening Pandora's box, that we are unveiling a weapon that we don't exactly know the implications of. To your point, I think it's really important to point out, you know, especially compared with other countries that we have ostracized in this way. Iran, Taliban-controlled Afghanistan, Venezuela. Russia isn't just the 11th biggest economy in the world.

It isn't a relatively integrated member of the global economy, even with all these sanctions that we're in. put on it for its various infractions of global norms. Only 12 countries in the world have more total exports than Russia. Russia trades oil, gas, coal to much of Europe. It trades wheat to the Middle East and Africa. And the West sanctions are designed to essentially suffocate a country that needs the oxygen of global trade in order to function the way that it's used to. Let's move on to the second layer here, which is the corporate layer of the global boycott. We've seen a couple companies BP, Shell, disinvest from exit their joint ventures in Russian energy markets. Describe to me the corporate boycott, as you see it, this second layer of ostracizing Russia.

Well, it flows to an extent from the financial realm, but it's gone beyond that now, I think. that's really the fascinating aspect, that, you know, if you are a foreign bank that has a subsidiary in Russia, you can't interact with that bank anymore, essentially, because of this blockade. So you have no choice but to frankly probably pull out. But I think we've gone beyond that, just the logistical issues of having a foreign subsidiary or business in Russia, that it's become a moral crusade. This was a fairly old-sumptuble. school invasion of a neighbouring country that we just want to take over essentially. And that kind of forced, maybe that forced more moral clarity onto corporate sea suites than they

normally feel comfortable dealing with. But it's been fascinated because it's across the board. I mean, I live in Norway and the Norwegian sovereign wealth fund is the biggest in the world. They basically said almost immediately, yep, we're going to get out of Russia. Completely done. The Church of England has a big investment portfolio. They said, we're getting out of Russia. were out. BP, Shell, even the big commodity traders that frankly have grown really rich and fat, largely on the back of Russia, are kind of tiptoeing towards the exits. And that is incredible. And some of that is direct pressure. But some of it is people genuinely feeling, no, we can't countenance this in any way we're getting out, no matter what, no matter the

financial costs. Because for some of these companies, like BP, they own 20% of Rosneft, that is worth a lot of money. And they're essentially going to have to sell it for nothing. It's a big Russian state oil company essentially. And it makes a ton of money, as you'd expect a state-run oil company in Russia to do. And BP owns 20% of it. And they've basically said, we're going to sell it. We're just going to have to get out.

And at some point, some oligarch, the sad thing is that, you know, some oligarchs are going to make out like bandits from this, because they're going to be buying all these things that we're selling in the West. But still, the overall impact is incredible. Let's move to the third layer, which is cultural. Russian teams, Russian athletes, have now been banned from international soccer, international hockey, international ice skating, world taekwondo. These are athletes. These are not companies. These are not oligarchs. These are athletes being excommunicated from sports leagues because of Putin's war. What stands out most to you in this cultural layer of the boycott?

Well, the one that really stood out to me was Russia getting booted out of FIFA, essentially, suspended from FIFA the Football Federation. Firstly, because FIFA is an infamously corrupt organization, so getting booted out of FIFA takes some doing. North Korea is in FIFA. Wow. So getting suspended from that is pretty incredible, both because of the nature of the organization, and also because there's been broad agreement for many. many, many years now, that sports is an arena where politics doesn't enter.

And football, I actually agree. To its credit, I think football has been a good platform for countries to get together. And sometimes there is obviously political friece on. And there have been occasional times, like, for example, Yugoslavi in the middle of, you know, falling apart, didn't compete in the European championships. But it's a big deal. And then on a personal base, it, I love. I'm an unashamed fan of the Eurovision Song Contests. And seeing Russia booted out of that, I think, was, you know, really hit at home for me,

how Russia is really becoming essentially not booted out of polite society, but almost booted out of international society as a whole right now. Right. This is a cascade. There was a Stanford sociologist named Mark Granavetter, who had a theory about riots, how riots happened. And he said, you know, riots. don't happen because everybody suddenly picks up the courage to grab a rock and throw it at the

same time. Riots happen because the first person who throws a rock makes it less socially risky for the next person to throw a rock. And then another person throws a rock and another throws a rock. And before you know it, there are grandmothers throwing rocks, not because they're delinquent, but because it's normal. Everyone around them is doing it. And what we're seeing here in the world, you're making me think, is a kind of riot against Russia. It is a cascade. And maybe that language makes it sound bad. I don't think it is. It's a riot against a murderous, war-loving tyrant. But it is kind of astonishing to go online and see people with no expertise in finance calling for complex financial penalties with no historical precedent.

And to see people who seem to hate war, calling for a no-fly zone over Ukraine. I mean, I don't want people to misunderstand me. Putin has crossed a line that deserves swift and sharp penalties. No question about that. But Aren't you, Robin, a little bit astonished by how quickly the world order has changed? I think right now, even Norway, Norway where I live is a very sort of peaceful, boring country. It's delightfully boring. Even here, people are now suddenly saying, oh, scrap all those, all laws that we've had for half a century about not sending weapons into conflict zones. And I can see the argument for that.

But I think there are very obvious reasons why Norway for a long time decided we weren't going to, to send weapons into active conflict zones. And I think right now, everybody's kind of, every government, at least in Europe, as I can see, seems to be sort of trying to be the most hawkish on Russia without actually having, wanting to risk fighting a war, of course. But the problem is that sometimes this generates its own logic. I absolutely know what you're saying. There's a purity of moral clarity that we feel now about the evilness, about the inappropriateness, about the inappropriateness of Russia invading Ukraine, and that purity of moral clarity seems to be giving us the license to dust off these totally unprecedented tools to fight Russia, to essentially declare

financial warfare on Russia. And your point is, I think it's very sophisticated. We don't know what these tools can do either now, we're in Terra Incognito, we've never done this before, or in the future. We don't know what the unveiling of these tools can do. We don't know what it means to open Pandora's box. The very last layer of the international boycott of Russia, I just want to mention super briefly before we get to some of the deeper implications you've already alluded to. But we've talked about the financial boycott, the corporate boycott, the cultural boycott. There is also a human boycott. Russians are reportedly trying to boycott Russia by leaving Russia. There seems to be rising popularity in and interest in,

Russians getting out of an economy that's falling apart. And there are EU countries that are now debating offering visas to qualified Russian citizens to welcome them into their countries. Tell me a little bit about this final layer of the international boycott of Russia, as you see it. Well, this is, you know, probably not a tragedy of the level of what Ukraine is going through now. but I think we should remember that war has many casualties and victims on both sides, and there are many ordinary Russians who are as distraught, if not more so, than we are about this. I mean, this is the equivalent of England invading Scotland or Ireland or Norway invading Sweden. These are countries that have very close cultural ties,

that have distinct national identities, but they're very closely linked together. and, you know, Russians, young Russians have kind of become a little bit apathetic and apolitical for a while, almost forced to become so. But I think this seems to have caused a bit of a break. So I agree that

we don't have good polling on Russia and the numbers, but one of my colleagues have written a fascinating and almost a soul-destroying piece that shows that Google searches for emigration in Russia have just shot through the roof.

And there was one polling company, an independent polling company, estimated 22% of all Russians wanted to emigrate, and almost half of all young people. And that is incredible. Now, this happens. It doesn't, you know, lots of Americans said they'd emigrate when George Bush became president or one for the second time. Yes, I was just thinking of that.

It's interesting. But it does speak to a very profound level of, I'm not even disillusionment, but hopelessness in your own country. And I think that is horrific. And frankly, look, the financial crisis we are seeing in Russia now is going to have horrific economic impact. So these are the four layers of the economic war being waged against Russia. Number one, the financial layer that is swift, the central bank asset freeze.

Number two is the corporate layer. Companies like BP pulling out of Russia. Number three is the cultural layer, FIFA, the IOC, global Taekwondo, punishing Russian athletes. And number four is the human layer, the news beginning to trickle out of Russia that Russians themselves want to leave their country. Now, I want to get back to a really interesting point that you made that I haven't quite found the words for in the last few days, but maybe I'll find them right now as I'm talking. These are two statements that can be true. Number one, the weapons we've unveiled against Russia are morally righteous in this scenario. But also, number two, the weapons we've unveiled against Russia could be disastrous.

Like, central bank warfare is a kind of novel economic bomb. If Norway misbehaves, let's just say, in a way that, say, China dislikes. Could China use its political and geopolitical power to encourage, nations within its orbit to boycott the financial activity of Norway, to boycott economic activity with Norway? What I'm asking here, I guess, is, is this a Los Alamos moment? Have we unveiled the weapon that nations will spend decades fearing will be used against them? Essentially, we're weaponizing a globalized world. One of the things that we know has kind of made us safer, or I think at least, has made us safer as a species, is that humankind is more

closely integrated now than we were before. So the classic example of that is the European Union will set up explicitly to entangle the countries and economies more closely together to render it unthinkable that France and Germany will go to war again. And obviously we've seen many wars and obviously the world is not perfect. But broadly speaking, I do think that more integration is better for all sorts of cultural and political and economic reasons. And if this somehow becomes more of a dog-eat-dog world, that the world becomes more autarkic or balkanized in any respect, I think that's a short-term possible loss of economic dynamism for the world, but long-term mix us less as a species. I mean, that sounds very sort of highfalutant, but that is my worry,

that this is a tool that can have very negative long-term implications if it is misuse. And right now, Europe is happy to join in with the US. in this, because frankly, it's Europe's backyard and the US is kind of fighting our fight. But what if Trump wins in the next election? I bet the Europeans are going to think radically different about this as they started thinking radically different

about NATO only a few years ago. So, I think what's going on now is really cool and interesting and fascinating and I still, I agree with what they're pretty much everything they've done,

but I still can't shake off this nagging, feeling that, you know, we are maybe glossing over the downsides. That's the end of my interview with Robin. I'm sorry, it's a bit of a downer, but I think it's important to be clear about the stakes of this crisis and the path forward. The West has demonstrated unprecedented coordination and solidarity in destroying Russia's economy. but that is not the same as victory. It's not even the same as success. We've built a globalized world, and then we weaponized it. Maybe this was justified.

Maybe it was necessary. I happen to think it was both. But right now, we need to manufacture an off-ramp because the road we are on right now leads somewhere very, very bad. I hope I'll have better news for you next time. time. Thanks for listening.