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There are two Wars happening right now, involving Russia, Ukraine, and the world to battlefields.

You could say.

The first Battlefield is, geographic its physical.

0:37

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 Nation’s Banks companies.

0:56

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 one.

It is getting demolished by the West on Battlefield 2 in the past few days as we’ve discussed in the show.

1:15

The US.

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.

Its banks is companies.

It’s athletes.

Its investors.

1:30

Its oligarchy X.

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.

1:46

We’re going to talk about both theaters.

Both battlefields of this war, the military battlefields, and the economic Battlefield on the military front.

Here is by summary of what matters.

Most the Russians seem discombobulated discouraged, surprisingly depleted.

2:02

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.

2:21

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.

2:41

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, the Russian economy.

We have.

Made it impossible for Russia to do business with Europe and the US other than sell gas.

2:58

There is now a global Cascade of punishment and outraged, 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.

3:14

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.

3:29

This isn’t 1914.

It’s not 1939.

That’s not what I’m saying.

What I’m saying is if 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 US.

3:47

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.

4:04

This is Terra incognita, the goal cannot be the simultaneous destruction of Ukraine on Battlefield one and Russia on Battlefield to 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.

4:29

And not by bombing.

I’m Derek Thompson.

This is planning.

4:56

My first guest is Paul Post Hall 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 Wednesday afternoon.

Professor posts, welcome back to the podcast, glad to be back.

5:17

Let’s start with the latest.

This is day 7 of the war.

Russia’s surge to take key Ukrainian cities seems to have accelerated Russian forces claim.

They have full control of Kirsten a port near the Black Sea and the south of Ukraine and Russia is shelling kharkiv a city in the north east of Ukraine and region in the north east of Ukraine that borders Russia.

5:38

It seems also to be converging on the capital of Kiev from several.

Actions 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 for my read of the situation is to borrow the churchillian phrase.

5:59

We we unfortunately are not 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.

6:15

And this unfortunately is looking like a campaign again.

For reasons we can talk about for can’t 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.

6:32

You have watched and learned from Russia’s previous military operations in chechnya.

Small region, just north of the nation of Georgia and Central Asia.

And Mia.

Which is in southern Ukraine.

Given your understanding of Putin’s Playbook.

6:50

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.

7:07

Based on the information that I’ve seen.

I think many people are seeing, we’re seeing a shift in Russian.

Terry 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?

7:22

I mean if you go back to 2014 when Russia took the Crimean Peninsula they did.

So without really firing a shot.

They sent in their troops.

They refer to them as little green men and they just went in took control.

This was called a fait accompli, which means by the time, anybody can react the troops are already there.

7:40

And so that’s it.

You have control of it and my sin.

Is that that was the Playbook.

They were hoping to be able to use.

But at scale for the entire country of Ukraine, sending the forces very quickly 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.

8:02

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.

G.

And now we’re starting to see a shift the shift to what you could call the chechnya Playbook or even the Syrian Playbook.

8:19

If you look at the military operations that that Russia has engaged in 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.

8:34

This is something that even folks have talked about.

Some analysts have said, like where’s the Russian Air Force in all 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 chechnyan Playbook.

8:50

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.

9:06

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 surrounded and take that Capital.

So I’m watching this as closely as I think everybody else is trying to is watching this.

9:23

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 Came to adopting the Crimea model.

They just took the roads.

9:39

And indeed, that is what we were witnessing them doing.

And in that is what this Caravans trying to do is just use the roads to make its way to Kiev.

We also had yet seen sustained bombing kind of in a Siege campaign, but we’re starting to see some of that.

9:55

And that’s where some analysts are now saying, it’s not a matter of if it’s just a matter of when keep 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 were only six days in.

There’s a lot of uncertainty about what exactly has been bombed has been bombed.

10:12

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.

And indicating that they’re also not going to Russian forces are also not clear exactly what they’re supposed to be attacking so, but again, I think that when it comes to keep it truly is 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 Bravery of the Ukrainian people, The Valor of zalenski, their ability to hold off the Russians in early battles.

10:58

We still have to see reality as it exists.

Not as we hope it exists and reality is that Russia is Times larger than Ukraine by GDP and its military Advantage goes beyond that.

So how would you characterize the Russian advantage over Ukraine?

11:18

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 sites, Russia has a very large military.

One of the largest in the world.

11:33

I think only second to the United States in terms of Ice and that military is anywhere from four to five times larger than Ukrainian national forces, depending on whether you count reservist or how you factor in active Personnel.

Now, not obviously, not all of those personnel and it’s over a million Russian, military personnel, not all of them, are a mass at the border with Ukraine.

11:56

Not all of them are 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?

12:12

The other one is that when it comes to Russian military hardware, Russia is one of the major military exporters military hardware exporters in the world, Russia, and the United States.

Why is that?

Because their equipment is desirable their fighter.

12:27

Jets are desirable countries, want those Fighters as they want their weapon tree.

And that’s the kind of weapon.

Do you 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.

12:44

But those two factors alone, the size of their military 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 tipped, 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.

13:06

Just simply putting everything out there and just wearing down 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 zolensky and for The ukrainians Who live there?

13:28

So 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 it.

No it is it is quite meaningful from a symbolic standpoint.

13:47

Also from just, to be honest, a practical standpoint terms of being able to have control of the various assets of government for me, the best thing to look at the best thing.

Analogy to look as to go back to the Iraq War in 2003.

So US forces, of course, made it to Baghdad made it there in about two weeks and that’s important to keep in mind.

14:07

It was a, it was, 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 operation.

14:28

And they had yet captured Saddam Hussein.

He was, 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 is once Russia.

14:45

Gains control of Kiev zielinski will probably be gone.

He might be fleeing.

He could be an 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.

15:03

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 creating resistance.

15:20

The fact that Russians were stymied in the days after they invaded Ukraine.

And the fact that there’s generally this, this Lobel boycotts 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.

15:41

They might think we’ll, wait, you sound very pessimistic, still about Kia’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 and people that this day is, this war is only six, seven days old and it’s already passed through what I see is three phases phase, number one, and initial Invasion, the road Invasion tanks going down the road number to Russia, being stymied the push back 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 were.

16:34

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.

16:52

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?

17:09

I mean again, this is only 6 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.

17:27

They’ve been having Faculty 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.

17:47

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.

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.

18:10

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.

18:26

And this is a On pattern, an example that I’ve been drawing on recently is quite a ways back, but it is near the beginning of World War Two and it’s called the winter War.

It was between Finland and Russia.

It was a three-month war and it’s fascinating were to look at it from the standpoint of how it ended.

18:46

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.

Point the Soviets were devastated by this war.

They incurred so many losses but it didn’t matter from their standpoint because they’ve just simply were going to overwhelm.

19:07

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 morality doesn’t matter.

The equipment breaks down there, just going to be able to overwhelm eventually the ukrainians because they don’t expect direct military involvement by the West.

19:27

So when you came 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 and Ukraine and ultimately perhaps Russia’s Retreat scenario to 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. 3 is that Russia conquers, Ukraine and X’s Ukraine scenario for 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.

20:05

Five the most catastrophic for the world was a great power conflict between Russia on the one hand and the US 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 100 hours later.

20:25

How have you updated from that?

Great question.

I’ve updated in a couple ways.

I’ve updated in a couple ways.

So first of all, there is this document that was leaked and it was called the translation to it was the solution to the Ukrainian problem.

20:43

This was leaked by Russian government sources.

Got out there.

They took it down.

But apparently this laid out kind of the scenario 3.

If you will the annexation bringing Ukraine into Russia, even When creating like perhaps even bringing Belarus into Russia, which we haven’t even talked about yet, but it’s kind of recreating.

21:05

So that would suggest that at least an initial War aim for.

There’s 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.

As I think they are going to be content, if you will, you want to use that phrase?

21:23

You 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.

21:40

That’s be incurred by, then that I think they are going to be more likely to settle for a scenario to as opposed to a scenario 3, 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.

21:57

Her 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 for.

However, there are some things that have happened.

That make me at least a little bit more nervous about scenario 5, which is the major power War, right over the weekend, where Putin raised the Readiness level of his nuclear forces.

22:21

That’s, that is not a good sign.

Now.

We’re still still dealing with a low.

A bloody 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 ramps in a second, but I need to ask you a question that comes from a place of honesty.

22:40

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.

22:57

Ears 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.

He’s economy has fallen apart.

I mean, this to me is like, it’s like draining your life savings to buy a tiger, like congrats.

23:16

Now, you have no money and your new toy wants to kill and eat you.

I don’t expect you to have Paul like a psychoanalyst, you know, 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.

23:36

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 would have been time for all these sanctions to come into place or even if they did they’d be like, well, you know, you just start to get people have cold feet and say Well, you know, the fighting’s over.

23:59

So, you know, why would we want to do this economic harm to ourselves?

Because that’s important.

Remember with these things, right?

You’re doing harm 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?

24:17

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?

24:35

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 it’s 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.

25:11

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.

25:47

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 to the International Community as a whole.

26:09

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.

26:26

Ito, that will be part of the package, or they’ll declare themselves.

A neutral country, will 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 have that, right?

So that would be the package.

We put forward.

26:42

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’ve been fine.

Right?

So he could have done that without Launching this whole campaign.

26:57

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 fact 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.

27:18

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.

Jean 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.

27:42

We’re talking to a reporter from the financial times 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.

27:57

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 encouraged him to go to the negotiating table before he otherwise would want to.

28:18

So I think you 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.

But 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.

28:36

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’s someone who’s written quite a bit on this.

And so and that’s the point.

I don’t think the overarching sanctions or what’s going to put the pressure on.

28:54

I think what could happen though, or 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.

29:10

If you will write that, you know, that is always the 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 would see the negotiation of peace talks.

29:26

So I don’t want to get high on opium here, but I do want to make sure that 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.

29:45

The outcome of this war, may be riots throughout Russia, achieve.

That effect may be Ukraine wins.

Maybe there is extraordinary, depletion of morale for Russian military forces and all sorts of attacks that were supposed to go forward.

30:02

Simply don’t I know.

These are optimistic and hopeful.

Comes, which of them do you find remotely plausible.

So I would begin this by saying.

I think all those scenarios are low probability events in terms of Shifting the course of the war, you know.

30:20

So for example, low, morale, defections desertions by the military, 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?

Well, that happened to the level that it would actually have a material.

30:36

Ariel 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 it’s a low likelihood event.

30:57

Again because autocratic leaders are very good at qu proofing.

This is something a lot of Scholars have looked at have looked at timing.

Again, Caitlin Talmadge at Georgetown University’s written a book literally called the dictators Army where she talks about how this is what dictators do.

31:17

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.

31:36

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.

31:53

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, Is that start to now filter into this or feed into this war of attrition that were talking about this Quagmire but a quagmire from a position where honestly the Russian forces feel like they can just wait it out.

32:19

Does that start to happen?

And if that happens, how does the West respond if Keith is under siege?

Do you start to see efforts such as going back to the Cold War era of like a Berlin airlift writing trying to bring resources into that City?

If Keith holds?

32:36

Then they’re going to have to say, well is this good enough?

Right?

It may be, it holds.

Maybe that’s maybe it holds in and they have to direct their efforts.

Elsewhere, that leads to the second thing that I want to pay attention to is, what does the lensky do?

Where is olinsky?

32:52

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 take 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.

33:09

So those are two key things is what happens to Kiev.

And what does the lensky do?

My second guests 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.

33:30

This is our second interview of the day.

Robin, welcome to the podcast.

Thanks for having me Barrack Robin in the last episode.

I had Noah Smith and The Economist Nicholas foreign on the show and they talked about the weekends announcements to cut Russian Banks from Swift.

33:47

They 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 busy?

Is genuinely, is earth-shattering.

34:03

I mean, this, Is I think the first case, or fall 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.

34:20

And that is wild.

I mean, really is wild.

It has enormous implications Swift that’s like a financial nuclear weapon potentially and then sectioning a central bank and is seizing foreign currency Reserves.

That’s the kind of stuff that I think pretty much is only happened a few times outside of war and has been only deployed very carefully and very Niche situations specifically most recently Afghanistan.

34:48

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 your position.

I appreciate your historical summary.

35:04

And I think it’s important to point out that Afghanistan, Iran Venezuela.

These are, 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.

35:23

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 and volume.

Umm, but everyone that I talk to says that the real weapon here is freezing the foreign reserves of the Russian Central Bank.

35:41

Can you just tell us?

Remind us 3060 seconds.

What it means that Russia’s Central Bank has its foreign reserves Frozen in the US and European Banks.

Well, broadly speaking.

There is agreement between countries, that certain things are sacrosanct.

35:58

For example, embassies.

We understand that embassies are inherently a foreign country song.

All in that country different laws, apply there and most countries have their property of those storen states are considered immune in the u.s.

36:14

You have the foreign Sovereign immunities act and every country has variance of that.

And Central bank’s money, that the money there was sometimes, gold bars or just digital Ledges.

They keep the New York Federal Reserve or the bank of England or the pink bank for international settlements and Switzerland, you know, they are a core part of a country’s Reserves.

36:34

And you know, not seizing them though.

I’m sure the Russians will see it this way but is 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.

36:53

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 room 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.

37:18

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 covers of 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, Libyan Civil War.

37:34

Is, you know, the size 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 is one of those types of fears that can become self.

37:52

Realizing that by people queuing, it spreads fear, and the local Financial system collapses, and Russia has obviously been through this in a horrific Runa.

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’s.

38:11

I pooted Russians wanted a strong man.

But if you want this a clean lying 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?

38:27

It’s been heading south for most of the time under Putin, but this is being just extraordinary.

We look witnessing a Foreign currency collapse and these two stories intersect, the collapse of the ruble, intersects with the run on the bank because it because it is in part a loss of confidence in the ruble.

38:45

That is encouraging.

Lots of people to get out as much money as they can for fear that the ruble 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.

39:02

It can sometimes seem like a dry equation, but Economics is is its Blood and Guts.

It’s but it’s psychology.

Its people having a fear in their stomach that they won’t be able to afford bread and milk and 4 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.

39:24

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 this might be the most important story right now.

In terms of the, the collective punishment of this country.

39:41

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 1 by 1.

So first, let’s review the financial layer of the global boycott of Russia.

39:59

Tell me all the various ways that the International Community and specifically here.

Mostly the United States and Europe with a couple other 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 liked it or not, touch his dollars and if you can call them people off from the dollar base Financial system, it basically just crashes, it doesn’t function.

40:29

And that’s kind of what’s happened with Russia.

That the Americans with support from the Europe because obviously Europeans control Swift and you kind of need their buy-in to really make those really B.

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.

40:52

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 It’s a lot of money from selling oil and gas that the Europeans and the Americans still want.

41:10

And it kind of shows how powerful that weapon has always really been that these been this reluctance to use it.

And I think the real long-term issue could be that are we get entering a world in error, where Financial Warfare becomes a, new dimension Dimension or the battlefield?

41:28

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 were unveiling a weapon that we don’t exactly know the implications of to your point.

41:55

I think it’s really important to point out, you know, especially compared with other countries that we have ostracized in this way.

A Ron taliban-controlled.

All deaf Gana, Stan Venezuela, Russia isn’t just the 11th.

Biggest economy in the world.

It isn’t a relatively integrated member of the global economy.

42:13

Even with all these sanctions that we 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 too much of Europe.

It trades, wheat to the Middle East and Africa, and the West sanctions are designed to essentially suffocate a country.

42:34

Three 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 kind of companies, BP shell disinvest from exit, their joint ventures in Russian energy markets, describe to me the corporate boycott as you see at this second layer of ostracizing, Russia.

43:04

Would it flows to an extent from the financial realm but is gone beyond that.

Now I think and 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 these this blockade.

43:23

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.

Sure, that it’s become a moral Crusade.

This was a fairly old school invasion of a neighboring country that we just want to take over essentially.

43:45

And that kind of forced maybe that Force more moral Clarity on to corporate c-suites than they normally feel comfortable dealing with.

But it’s been fascinated because it’s across the board.

I mean, eyes, I live in Norway and the Norwegian Sovereign.

Wealth fund is the biggest in the world.

They basically said, almost immediately.

44:01

Yeah, we’re going to get out of Russia.

Italy, done.

The Church of England has a big Investment Portfolio.

They said we’re getting out of Russia.

We’re out.

BP shall even the big commodity traders that frankly have grown really rich and fat large on the back of Russia are kind of tiptoeing towards the exits and that is incredible with some of that is direct pressure.

44:24

But some of it is people, genuinely, he’s feeling, no, we can’t countenance this in any way.

We’re getting out no matter what, no matter, the financial cost.

For some of these companies, like BP, they own. 20% of rosneft is worth a lot of money and there have sex you can have and rosneft is nothing.

44:43

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 Russia to do and BP owns 20% of it and the basically said we’re going to sell it.

We’re just going to have to get out and you know, at some point some only got 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.

45:09

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.

45:24

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 will, the will not really stood out.

To me, was Russia getting booted out of FIFA, essentially suspended from fee for the Football Federation, firstly, because FIFA is an infamously corrupt organization.

45:53

So you’re getting booted out of FIFA.

Take 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 for many many years.

Now.

That Sports is an area arena where politics doesn’t enter and and football.

46:13

I think I actually agree.

It is credit.

I think football has been a good platform for countries to get together.

And sometimes there is obviously political free song and the have been occasional times.

I’ve couple of Yugoslavia in the middle of, you know, falling apart didn’t didn’t compete in the European championships, but it’s a big deal.

46:34

And then on a personal basis.

It I love and I’m in unashamed fan of the Eurovision song contest and seeing Russia.

Booted out of that.

I think was you know, really hit 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?

46:56

This is a Cascade.

There was a Stanford sociologist named Mark granovetter who had a theory about, right?

Riots how riots happened?

And he said, you know, rise don’t happen because everybody suddenly picks up the courage to grab a rock and throw it at the same time riots happened 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 they’re our grandmother’s throwing rocks not because they’re delinquents but because it’s normal everyone around them is doing it.

47:30

And what we’re seeing here in the world.

You’re making me think is a kind.

End 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.

47:53

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 understand me Putin has crossed a line that deserves Swift Sharp penalties.

No question about that, but aren’t you robbing a little bit astonished by how quickly the world order is changed.

48:13

I think right now you’re not even no way.

No way where I live is a very sort of peaceful.

Boring country is delightfully boring, even hear.

People are now suddenly saying I’ll scrap all those all laws and we’ve had for half a century about not sending weapons in Conflict zones.

And I can see the argument for that, but I think there are very obvious reasons.

48:33

Why Norway for a long time.

Decided, we weren’t going to send weapons into active conflict zones.

And I think right now everybody’s kind of every government at least in Europe is I can see, seems to be sort of trying to be the most hawkish on Russia without actually having wanting to risk her fighting a war, of course, but the problem is that sometimes this generates its own logic.

48:59

I asked, you know, you’re saying there’s a, there’s a purity of moral Clarity that we feel now about the evilness, but 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.

49:19

And your point is is it I think it’s very sophisticated.

We don’t know what these tools can do either now or in Terra Incognito.

We’ve never done this before.

For 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.

49:35

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 talked about the financial boycott, the corporate boycott, the cultural boycott.

There is also a human boycott.

49:52

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.

50:07

Now, debating offering, these has two 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, I mean, this is, you know, probably not a tragedy of the level of what Ukraine, he’s going through now.

50:29

Now, but yeah, I think we should remember.

The 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.

And this is the equivalent of England, invading Scotland, or Ireland, or Norway made in Sweden.

50:47

And these are countries that very have very close cultural ties that have distinct National identities, but they’re very closely linked together and you know, Russians young Russians.

Kind of become a little, a pathetic in a political for a while, almost forced to become.

51:03

So 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 has written a fascinating and almost no soul-destroying piece.

51:19

That shows that Google searches for emigration and Russia have just shot through the roof and there was one polling company and independent polling company that has Any 22% of all Russians wanted to emigrate and almost half of all young people and that is in, just, that is incredible.

51:38

Now this happens.

It doesn’t doesn’t, you know, lots of Americans said that emigrate when George Bush became president or one?

Yes, sometimes but but but it does, it does speak to a very profound level of.

51:54

I’ve not even disillusionment but hopelessness in your own country, and I think That is horrific and frankly, 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.

52:13

Number one, the financial layer that is Swift this 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.

52:28

Do punishing Russian athletes.

A 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 it in the last few days, but maybe I’ll find them right now, isn’t talking.

52:49

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.

53:06

Warfare is a kind of Novel economic bomb.

If Norway misbehaves, let’s just say, in a way that Satan 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.

53:28

With Norway, I think 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.

Like, one of the things that we know has kind of made us safer.

53:45

Well, 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 and countries and it Enemies more closely together to render it.

54:01

Unthinkable that France and Germany will go to war again.

And obviously we’ve seen many wars and then 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.

54:18

And if this somehow becomes more of a dog-eat-dog world that the world becomes more or toxic or vulcanize in any respect, I think that’s You know, a short term possible loss of economic dynamism for the world, but long-term.

54:35

Makes us less as a species.

I mean, that sounds very sort of highfalutin.

But that is my worried that this is a tool that can have very negative long-term implications if it is misused and right now, Europe is have to join in with with the us and this because frankly it’s yours backyard and u.s.

54:53

Is kind of fighting a fight.

But what if Trump wins And 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 agree with what they’ve pretty much everything they’ve done but I still can’t shake off this nagging feeling that.

55:27

You know, we are maybe glossing over the downsides.

Yeah.

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.

55:48

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.

56:03

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.

Lead somewhere very very bad.

I hope I’ll have better news for you next time.

56:21

Thanks for listening.