What the Russian Sanctions Mean Here and Abroad (with David Frum)
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Andy digs into the global sanctions levied against Vladimir Putin and Russia as a result of the invasion of Ukraine with Atlantic staff writer David Frum. They get into how the sanctions are already affecting Russians, how they may play out here, and if David thinks there’s a point at which they could go too far.
Keep up with Andy on Twitter @ASlavitt and Instagram @andyslavitt.
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Check out these resources from today’s episode:
- Read David’s latest piece about the sanctions: https://www.theatlantic.com/ideas/archive/2022/02/how-russian-sanctions-work/622940/
- Watch Ukrainian President Volodymyr Zelenskyy’s full address to the European Parliament: https://www.youtube.com/watch?v=hVvkdwksxMw
- Get the latest news on the war from The New York Times: https://www.nytimes.com/live/2022/03/01/world/ukraine-russia-war
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Andy Slavitt, David Frum
Andy Slavitt 00:45
Welcome to IN THE BUBBLE, this is your host, Andy Slavitt. It is March, the second 2022. That voice you just heard was Juan Zarate. He’s the former assistant secretary of the Treasury. And he’s talking about the scope of Western sanctions against Russia. And that’s the focus of today’s show, is the war behind the war. And we’re going to talk with David Frum, and get really in depth on these sanctions and the consequences that they’re likely to have on Putin’s invasion of Ukraine. And we’ll hear how it’s playing out in Russia, which I think is startling, but also how it’s gonna affect us here in the US at the gas pump. David is a staff writer, at The Atlantic he was a speechwriter for President George W. Bush, very knowledgeable about global topics, global economics. And while he’s not a particular expert in Russia, we thought it was important to talk to today, because the side of this war that may sway it, one way or the other, and that we’re likely to see here and feel here in the US is going to be really driven by this wholesale that the West is driving right now on sanctions. And I do appreciate when David says things he’s not experts at, you know, I’m used to everyone being an expert from looking at Twitter. Amazing that many of the armchair epidemiologists will probably have a PhD in international relations in European politics before the weekends out. So before we dive into conversation with David though, I want to give an update on a couple of the headlines coming out of Ukraine. President Zelensky addressed the European parliament on Tuesday morning. And he asked the EU, to grant Ukraine membership. Here’s an excerpt through an interpreter who at times got emotional. So listen closely. He’s talking about Freedom Square in Kharkiv. He ended his address with […]. Glory to Ukraine. A patriotic refrain that’s become the nation’s rallying cry, glory be to Ukraine and he was given an immediate standing ovation.
Andy Slavitt 04:37
So now the UN estimates that more than 660,000 people encountered and fled Ukraine in last six days, with more than 150,000 leaving in the last 24 hours. The UN’s High Commissioner for Refugees said the number could reach 4 million in the coming weeks. Here’s a bit of this report from ABCs chief national correspondent, Matt Gutman..
So hard to imagine how these events around the world, which are happening right now are taking place and disrupting people’s lives. A UN official told that, that the Exodus we’re seeing from Ukraine is the biggest number of people displaced from Europe in the shortest amount of time since World War II, when he called that unprecedented. I think people who have been looking at Yemen might beg to differ, that it’s unprecedented and more attention needs to be placed there as well. Finally, satellite images that show a Russian military convoy making its way to Kiev is now more than 40 miles long. And at some point, the vehicles are three wide on the road. Here’s Joe Scarborough and Edward Luce of the Financial Times Tuesday morning on Morning, Joe.
Andy Slavitt 06:48
So hard to imagine how these events around the world, which are happening right now are taking place and disrupting people’s lives. A UN official told that that the Exodus we’re seeing from Ukraine is the biggest number of people displaced from Europe in the shortest amount of time since World War Two, when he called that unprecedented. I think people who have been looking at Yemen might beg to differ, that it’s unprecedented and more attention needs to be placed there as well. Finally, satellite images that show a Russian military convoy making its way to Kiev is now more than 40 miles long. And at some point, the vehicles are three wide on the road. Here’s Joe Scarborough and Edward Luce of the Financial Times Tuesday morning on Morning, Joe. But
Andy Slavitt 08:13
So that’s the facts of the grounds. That’s what we’re dealing with. And it’s incredibly sobering. And it lays out what the stakes are. And so that’s where I begin with David Frum. While we are not using the NATO to send in troops, we shouldn’t mistake that for not fighting this war. And that’s the topic I’m going to get into David. That’s where we’re gonna start.
What’s at stake here? And what is poot? trying to accomplish? What’s really what are we really on the verge of with the outcome here?
I claim no expertise on Russian politics, Putin, psychology, battlefields, I have no idea what is in Putin’s head, other than the same observations that any person could have. But I can talk a little bit about what is at stake for those of us on the receiving end of these actions, obviously, for the people of Ukraine, it’s their lives, it’s their homes, it’s their it’s their land, their independence, their ability to live a life of dignity and decency. It’s their physical security, for those of us who are under the protection of NATO and the United States. And so who don’t have those immediate fears that the people of Ukraine do, what’s at stake for us, is that we are we’re reconsidering the question that we thought had been solved once and for all back in the late 1980s-1990s, which is whether we’re going to have a Europe that is at peace with itself, that is whole that is moving toward more democracy, more liberal institutions. And that project was going forward for a long time. It began going backwards for a long time, and now it is in crisis. And this war could decide the outcome of whether We’re going to return to a divided European continent with all that means for the ideas that come out of Europe, I mean, Europe is not as economically central, as it used to be because of the rise of Asia. But it remains politically Central, at least to Americans. And if Putin succeeds, it is going to discredit a lot of the best hopes for a free world. And if he fails, he is going to feel, he’s gonna fail because of the power of free institutions.
Andy Slavitt 10:28
It strikes me that we’re seeing imagery on CNN or wherever we’re getting our TV, news of military battles and maps and incursions. But the things that you talk about that are at stake, and indeed, how the wars being waged in 2022 seems to go far beyond kind of what meets the eye. And I want to talk a little bit about that in some of the weapons, oil, currency, sanctions, etc. But first, maybe we could start by giving us a background about how Putin has thought about financing this war paying for this war. And what that is allowing him to do, I think that sets up the battle pretty interestingly.
Yeah. Well, this is something I have done some work about. For me, one of the defining images of the war, obviously, cable news is attracted to the glamour and horror and drama of the battlefield, bang, bang. But some of the images that have caught my eye are crowds forming at the turnstiles of the Moscow subway, forming huge queues because their Apple Pay no longer works, the stopping up of the collapse in the value of the ruble and the surge in the value of Bitcoin as Russians tried to find some way to avoid exposure to the power of central banks. By the way, Bitcoin won’t save them either. They are just going to be like to figure that out, it replicates all the problem. Putin had a primitive warlords attitude to finance. He thought if he accumulated enough hoards of coin, enough bonds, enough gold, that he would have something that would finance his war, and then he could declare that he lived in fortress Russia. So he piled up $630 billion of reserves, which is a lot for an economy of 1.7 trillion, the Russian economy isn’t that big. It’s a little smaller than Italy, a little smaller than Canada, about the size of South Korea. And he piled up these enormous reserves or he thought he had, including $139 billion in physical gold, all these numbers are I mean, there’s probably less of everything now. But from just before the invasion started, and he didn’t ask the question, when you have a reserve, what exactly do you have? How useful is it? And what reserves are, are claims on the central banks of the worlds that govern the world’s most trusted currencies, the two big ones, the euro, and the dollar, and the two secondary ones, the yen and the pound, that’s what you have claims. The thing about a debt is it’s really easy not to pay. And the debtor can always say, no, and Putin is discovering the old rule. He’s the banker. And that joke about if you owe the bank $100,000, you have a problem. And if you owe the bank 100 million, the bank has a problem. And in this case, it’s 100 billion, and he’s the bank he is trying to collect, and he can’t. And what he’s discovering is this, when this money can’t be spent, you’re just locked out of the whole global payment system. There’s a funny story for example, I found it funny about broadcasting, loud mouth jerk, the Sean Hannity of Russia, who has a house on Lake Como next door to George Clooney, which he bought, while we let’s not think about how he bought it, but anyway, he’s doing a renovation. And so he owes the contractor he owes the plumber. He owes presumably taxes, all of which has to be paid in euros. He can’t get them. He can’t get them. And he’s got lots of rubles, but he cannot, and he may have euros in an account, he can’t get access to it. So the plumber is going unpaid, the contractor is going unpaid. And if the local taxes go unpaid, his house is going to be seized and auctioned off. And George Clooney will have maybe a nicer neighbor. So these are the kinds of things that Putin and understand what he especially did not understand was the incredible limits on the usefulness of physical gold.
Andy Slavitt 14:45
So, I could see this impacting this effort in three particular ways, all of which I’ve seen you point out, but I want to just clarify them, the first of which is just the direct way, the funding and the resources that Russia has it won’t be, what would they appeared to be to him at least going in. But there’s secondary and tertiary effects as well. The devaluation of the ruble or the escalation of inflation in Russia creates domestic problems. How serious will those be for him politically as he deals with economic issues where, you know, basically as any business that relies in any way on interacting in the foreign atmosphere will not be able to do so.
Devaluation is not what has happened to the ruble, a devaluation is what happens when a currency loses 10% or 20% or 30% of its purchasing power. The ruble has been reduced to worthlessness, the ruble, it can command. I assume if you want to pay your rent in Moscow, you can still use rubles. And if you owe taxes to your local government inside Russia, you can still use rubles. If you’re trying to buy fruits and vegetables for the Russian version of Safeway, you can’t use rubles. If you’re trying to pay your contractor in Italy, the ruble doesn’t buy in, it is no longer an internationally tradable currency. Here’s the thing about what currency does, and this is I think, the thing that Putin misunderstood and a lot of people don’t understand. A currency is not something that you use only for bilateral transactions, the currency is not something that can buy something, you can buy something with a gold ring, you can buy something with, you know, antiques, you can always swap, what a currency is, is a device that can buy anything, anything and a potent currency, like the dollar, the euro, the pound, the yen, can be exchanged any currency on Earth and buy anything. So if the fruit comes from Kenya, you can convert the dollar, the euro into Kenyan shillings and buy the Kenyan products, the ruble has been locked out of that, what’s Putin strategy is going to have to be to revert to basically something like the old Soviet closed economy where the ruble isn’t unit of accounting for internal purposes, but cannot command goods or services on the global market. If you want blue jeans, if you want t-shirts, those old days from Russia, and the Soviet Union, the rubles just didn’t buy things. And that’s going to be true again.
So if you have a completely domestic business, a farm, or something you can imagine where you don’t need to interact with the outside world, you’ve got something of value, although even in that case, it’s of lesser value than it was a minute before an hour before a day before.
Yeah. And if you have a farm, one of the things you are aware of is that when yet you can sell your products and get your own rubles rather, but what do you do with these things? Because every there is no such thing as a completely I’m in Russia has built itself away from this old Soviet Union into an economy very integrated into the rest of the world. It is, it is an economy that sells oil, gas, grain and fertilizer, and some weapons and buys everything else. And there is no escape for Russia from the global marketplace. And I mean, people have this idea that, well, maybe they could buy from China, maybe China will take their physical gold and an exchange, give them credits. And well, now we’re back again to Soviet days where you’re bartering. That’s how the old Soviet Union used to work is it would, it would get imports from like-minded authoritarian nations and pay for them with oil and gold that’s swapping. But the Chinese currency is no more useful. I mean, you can’t use the Chinese currency to buy anything in the world. It also suffers from the same problems of being locked up within its economy. And the Chinese depend on this. I keep quoting, I had a long conversation with a Soviet born economist who has been writing about these kinds of sanctions for now, half a decade. His name is Michael Bernstein. And he had a formula which I called Bernstein’s law, never fight with countries whose currencies you use as the reserve currency for Euro and I posted this and then a reader corrected with a much more vivid way of explaining what burns Tim’s lies, which is never keep your savings in someone else’s mattress.
I think that that sums it up well, well, will this result in political pressure, domestic political pressure, from Putin, from the business sector, from oligarchs, from the big industries? And will that matter?
Well, I again, I’m not going to offer myself as any kind of expert on the internal workings of the Russian political system. From our point of view, the big problem with this kaput, central bank sanctions weapon is it’s too powerful. I mean, that you could we could actually push Russia into a total economic collapse with this where the ruble is worthless, where Russia can’t import anything where trade stops where money vanishes because Russia by the way, I mean they use elec it’s all money is electronic. They all these electronics like the people in the queue at the Moscow train station, they can’t, there aren’t there aren’t there isn’t enough paper money, Russian paper money inside Russia, and they’re going to have to do things like they’re about $12 billion worth of foreign currency, physical current currency inside Russia. euros dollars pounds $12 billion with Russians are allowed to have bank accounts denominated in foreign currencies. And there’s $65 billion of deposits on that. So that so I assume all of that $12 billion of physical currency is already disappeared into people’s drawers. And so that the Russian state, which owns the banks will be forced to tell Russians who thought they had an account with 30,000 euros in it sorry, we have converted you involuntarily to rubles. So our problem from a Western policy point of view is, you don’t want to create a kind of revolutionary situation, desperation, is dangerous to push your opponent too far. So we have to find some way to use this weapon. And one of the things I suggested was actually that you allow them a certain amount of foreign currency per month, you put them on a kind of diet, and say, okay, not enough to sustain a full-scale war, but some has to be available,
Andy Slavitt 20:49
because we’ll do don’t have that with the oil markets.
But they have the same problem is even when they sell oil they get, they don’t get a suitcase full of money, they get clicks, notations in box, that’s where all these money lives. And all of it moves only with the permission of central bank. So yes, we could say when you sell your gas, that those units of currency, you can actually apply and convert music to sustain the ruble back inside. And this all gets more technical than I am completely fluent with. But there are things but the real risk here is that you just get a complete collapse of the currency, the financial system, and that, therefore the economy.
So the sort of new weapons issue, it feels like over the last four or five days, we’ve seen a bunch of weapons in this war, that we’re not used to seeing in wars, the Nord pipeline, the Swift messaging system on for financial transactions, you know, central banks, as you say, Yeah, devaluing or collapsing the ruble to use a phrase that you call more appropriate. You know, I guess the ultimate question, I mean, is, is that as an effective method of fighting this war, we’ve looked at President Biden, you know, took some criticism when he said, we’re not going to be sending troops are not going to step foot into Ukraine, yet he’s authorized hundreds of millions of dollars of defense, and he in Europe in lockstep appear to have acted at least strongly and in unison, and some of these other veterans,
well, this is a difficult thing to predict. But I would say, look, these methods may not work equally well, in all kinds of conflicts. I mean, in the Civil War, the northern United States reduce the Southern Confederacy to other beggary, they prefer to eat grass, rather than so I mean, they didn’t, they didn’t surrender until they were burned out of every dwellings absolutely starve to death. So the question is, How committed is the Russian state to this war, Russia is also state that is unusually vulnerable, because they export primary products and import everything else, they’re unusually vulnerable, because no one trusted the ruble very much before anyway, they were uniquely vulnerable. But I think the real question is, they may have a very low level of commitment to this war, and that’s, you will bear pain according to what whether you think it’s worth it. And if the frontline soldiers told I’m going on training exercises, I’m going with people who I’m maybe related to whose language I understand, with whom, you know, where I’m told their cities are important places in my culture. You can’t, how does the Russian feel shelling monasteries, and to when he has been taught that these monasteries are the incubators of his own culture. And then maybe that’s a little bit of a myth that that they believe that but they they’re taught that. And one of the things that also is going on here is because of the asymmetry of Africa, because it’s not Russia versus Ukraine. It’s Russia versus Ukraine back but all the money in the world. I want. Ukraine has an ability to lure people away. One of the things I’ve advocated, for example is that they should be making offers to say any Russian desert or any Russian prisoner of war, who does not shoot, you surrender not only to get a hot and tasty meal and a comfortable bed, but you’re going to get a 36-month work visa, and a train ticket to a job fair in any European city you want. And you know you’re working go on to Barcelona. Spain is 400,000 workers short. Go to Humber go to Birmingham is not no longer in the EU. But the UK is a part of the struggle to go, you know, 36 months’ work be paid in pounds or euros. Support your family. We have no quarrel with you, and we can use the tremendous. The thing and this is maybe goes back to your original question, was it staying? One of the things that we’ve been listening to for a dozen years from people unfortunately, in our own society, is that we are debt, is it liberal societies are decadent, we are weak, and that Russia and the authoritarian future that it offers it is strong. Reverend Ted Cruz tweeted that at that recruiting video for the Russian the Russian army Russian the Russians hired three or four Calvin Klein underwear models dirty them up a little bit made them look scruffy and have them pointed god, this is the kind of man who’s in the Russian army, not like, you know all those gender fluid weaklings in the decadent armies of the West. So one of the things that we are reminding everybody is this society where it’s tremendously attractive people want to live like this. And you say to an enemy who doesn’t want to be there anyway, and who’s not motivated, come on over. The quality of meal that has been given out to Ukrainian refugees in the Polish border is I’m sure much better than the quality of meal being served to frontline fighting troops in the in the Russian army. Now just let them see what there is to eat. Let’s give them a blanket and a comfortable bed and give them that train ticket and the possibility of getting a job and in Dusseldorf, and watch their army dissolve.
You know, it’s also interesting, it’s sort of a parallel point, it feels like after Afghanistan, this general sense that as wealthy nation as the US is, that those limits to that wealth, whether in Afghanistan or Vietnam, were such that we were we were fighting feudal battles with weapons that didn’t work. And, you know, wondering here in this sort of much more sophisticated multi front effort, whether or not without spilling a drop of blood, of our at least of our own military, we are, in some ways, asserting, I don’t know if I’d say greatness, because I don’t equate power with greatness, but certainly a level of strong influence based upon our resources, and the success of our way of life.
David Frum 26:42
The reason we the United States has been less successful in those kinds of counterinsurgency wars. Partly yes, as you say, the weapons weren’t quite right. We didn’t have the weapons. But the fundamental problem was, the goal was not important enough to the United States to render the sacrifices and costs worthwhile. That’s what we bumped into is ultimately, we don’t really care that much, who governs Afghanistan, and we don’t care that much, who governs Vietnam. There’s a story I read; I can’t quite authenticate it. But it sounds like something he would say the Gen Z app, the man who commanded the North Vietnamese victory in the Vietnam war with God received a delegation of Palestinians after because he was he was a huge figure in the art of people’s war, guerrilla warfare. And they went to what can we learn from you about how to defeat Israel? You defeated the French unit to defeat the Americans, what can we learn from you how to defeat Israel, and he said, Nothing, said We defeated the French, because the French could always go home, we defeated the Americans, because the Americans could always go home, the Israelis can’t go home, they won’t fight like the French and like the Americans, they are home. And when people fight differently when they’re fighting for everything, they win, they’re fighting for a little something. And so what happened to us in Afghanistan, was, look, we are going Afghanistan was to kill bin Laden, and to create an environment where bin Laden could not return safely and commit future crimes against the United States. And then we got dragged into an ever-greater effort to try to sustain an Afghan nation and that we’re always on why it’s unknown. Why are we doing this. And then we had a lot of domestic politics of what we’re doing this in part, because Democrats who were opposed to the Iraq War needed a war to before so they didn’t look weak. And so they pick this war, but they didn’t really believe in it either. And so we are there for reasons that we lost the ability to explain. And then when it was difficult and expensive, and we were distracted at some point, why, why are we doing this? Well, no one in Ukraine has to ask the question, why are we doing this? But everyone on the Russian side is asking, why are we doing this?
Andy Slavitt 28:43
And do you think that the West NATO, in particular, the US even more specifically, has that very clear, committed focus here?
We have a lot, we don’t have, we’re not gonna fight a nuclear war from Ukraine. So we don’t have everything at stake. We’re not gonna commit American ground troops. We’re not gonna commit ground troops from any NATO country, although there may be some infiltration of volunteers from countries with an important, you know, there may be Estonians and Finn’s and Poles who have memories, and who will then come in an involvement, you know, in a private way, but we don’t back them if they get killed in that war, that that doesn’t involve their governments. But we have a lot at stake. We also have, but what we’re, what we’re also doing is defining not just for Ukraine, or supporting not just Ukraine’s fight, but supporting a vision of Europe again, and one of the things that we’ve been arguing about the United States through the Trump years is our allies useful. Wouldn’t we be stronger if we were alone? And that’s discarding all the experience we had, not only since World War II, but during World War II of the power of cooperation and of having mutual interests, and we’re just discovering that, you know, it’s good to have friends. It’s good to have rich friends. And that means you want to have rich You don’t, you can’t just tell them what to do, you also have to listen to them. And one of the things the Biden people have done that has been, I think, really remarkable, is, even when you have a pretty good idea that they were pushing an initiative, they have always let the Europeans go first, on every major initiative against Russia, it has been the Europeans announced first. And we’re also what we’re doing is we’re helping to foster new capabilities and new self-confidence inside the institution of the European Union. And it’s one of the reasons why people why the Germans can act so decisively, no one gets twitchy because the Germans are basically they’re acting within the context of respect for their European partners in this new emerging financial superpower.
There are obviously, the cost we’ve talked about, are costs that are going to be borne in large, just sent by the Russian people of the sanctions and some of these other weapons, but it’s inescapable that we will bear some of those costs ourselves. So there is a cost to war. And, you know, I think if I’ve learned nothing over the last two years of the pandemic, it’s Americans have very little appetite for sacrifice. But let’s talk about this really. And I think it’s really a primarily in the energy markets. And the cost of gas, which is often one of the better gauges of political popularity is yeah, for our president. So help us think through what the subject is likely to be.
As we quantify the costs, the costs are going to be borne by the Ukrainians and the Russians first, and I will say something about the cost of the Russian people. I mean, I think one of our goals here, and one of our hopes, has been if we are successful here, and we can create a new kind of, or political order inside Russia, because I don’t think this war can end with Putin still in power, that the better life that Russians have been seeking since the fall of communism that has eluded them because of corruption and oligarchs and dictate, maybe we can help make that a reality at last. Right, you know, the European Union isn’t finished until Russia is in it. And Russia can only be in it when it accepts that it’s not an empire anymore, that it’s a kind of a big country, but a country with that doesn’t dominate the former Soviet space of the former Russian Imperial space. And so there’s something there’s light at the end of the tunnel for them. But when you think about the sacrifices I there will be sacrifices for Europeans, higher energy prices, higher food prices, and for Americans to the worst of those are going to be borne by people in less developed countries. Russia and Ukraine are major food exporters and major fertilizer exporters. So when Americans meet higher food prices, they grumble, and in some cases, there is authentic hardship. But there’s a hunger when Libyans or Egyptians or African people, most of Africa meet higher food prices, that is a much more catastrophic thing. And they, the food these prices are now we’re all set in global markets, and the rise in the price of wheat and corn and barley. And fertilizer is going to that’s going to bear very heavily, there’s gonna be a lot of sacrifice here in the United States. food and fuel prices were rising anyway, for reasons that were both cyclical. When energy prices are low, as they were in the 2010s, investment in new energy supply slackens, we’re also trying to force a conversion to new sources of energy. And that’s, that’s had cost too. So I think, you know, there’ll be very little thanks from American voters for even the most successful handling of this crisis by President Biden. And there’ll be some cost to President Biden from gas. I think the record price of gas was set just before the 2008 financial crisis at $4. And the national average is $4. And something for 10 for 20. Nationwide for regular gas, we could easily see that price again, we’re likely to hit that we could easily that can easily happen again, bread prices, meat prices, which were rising before anyway are going to rise more. And President Biden and his party are going to pay the price for that in 2022.
Andy Slavitt 34:21
I live in Los Angeles, where notably, there’s a gas station that has I think, $6.37 Wow, gallon,
What would you get? Do you get like oat milk with that? Like, how do you do that?
Well, you know, it’s, as you say, it’s, you know, it’s one thing for somebody who’s spinning around in their gas-powered Mercedes, it’s another thing for a truck driver or, or someone else that as you said, it’s, you know, we think about it as gas prices, but it shows up at food prices. And you know, I think, I mean, I tend to think that the definition of a small problem, versus a big problem is really is it your problem versus my problem? Blum right here. And, and well, I think it’s really important point and I hope people take it seriously and put the context around what developing nations are going through. I do think that is interesting. We’re in a situation where you would like to think that the election could be a, a fight over NATO and alliances and all these sort of theoretical and institutional things that are so important definitionally to this country. Yet, of course, the more immediate concern in the more typical way elections are often decided is as on the pocketbook in the pocketbook issues. So, you know, that may just be a reality of the moment. And it may just be part of how you have to fight this war. If you can imagine a Trump being president who didn’t who would not have a Let’s share the burden attitude who would have an America First attitude? Yeah. Who would say I’m not gonna put any penalties on others are only limited as he did with tariffs and China?
David Frum 36:04
Well, I think if Donald Trump had somehow been reelected, one of the things that Trump defenders say he’s a Donald Trump had been reelected, this war would not have happened. And I think that’s true, but not in the way they mean. Nobody grabs what he’s going to be given for free. If Donald Trump had been reelected, NATO would have dissolved, the Western alliance structure would have dissolved and it’s not just Ukraine that would have been helpless before Putin, but all the countries of Europe, and with that prize glittering before his eyes, why would Putin settle for Ukraine and you can, you can get the whole, you can assert power over the whole continent. And we would have, I think, that this war dramatizes the threat to the whole security architecture, the whole liberal order that was on the table, so long as Donald Trump misoccupied, abused that position of trust he didn’t deserve and didn’t win by popular vote. So, this war is a testament to how the election of President Biden reduced Putin’s operations, reduced his chances made him realize he had lost, he’d lost his guy. And now he had to take a smaller prize by violence.
Well, you could imagine if the European Central Bank had acted, but the US central bank hadn’t in the recognizing US central bank is technically independent, of course, but that many of the actions and the sanctions do require the federal government how that would have left a giant hole?
They would never have done it. They would never have done it, because if the euro, I mean, it’s useless to say, okay, you can’t convert your ruble into rubles into euros, but you can convert your rubles into dollars, which can then be converted into I mean, that it doesn’t work. It only works when I say it’s that, you know, it’s […] the Europeans, the Americans, the pound and the Yen, that’s who has to be there.
Andy Slavitt 38:05
Let’s talk about the role of China a little bit in this. What’s your observation on where they sit, I might also ask you, because you brought up Israel, India, two very powerful economies, but have, you know, stronger relationships, at least economically, and in some cases, militarily with Russia?
Shall we work backwards through that mean, the Israel, the Israel piece, I mean, I’m Jewish, and I’m a supporter of Israel. And so this is close to my heart. I was in Ukraine twice after the Maidan revolution. And one of the trips, I spent a lot of time with the Jewish institutions. And Ukraine has had was very hard hit. And there are 300,000, Jews, approximately still living in Ukraine. And it’s been a major project of the International Jewish and many of them are older, and many of them are living on pensions that have become they were professionals in the state sector. And they had pensions that were paid in, were earned in Soviet times, and that were effectively worthless in post-Soviet times. And these are people who didn’t have enough to eat, and were ashamed to admit it. And so there these social centers where, it was very moving to see that, you know, with money raised from Jewish communities around the world, they would send out buses to pick up older people who always would dress very nicely, and would come in, and they would give them a day of activity, and also feed them. And they were they never said you’re here for the meal. You’re here for the cultural program. But we also check that you’re getting a meal, because we know your pension is now worthless. They’re even more Jews in that in Russia and one of the responsibilities that the Government of Israel has is as a custodian of the security of Jewish communities worldwide. And this is a war where Israel has to be very careful, because if things get tough, there is in that part of the world, unfortunately, a long tradition of who you blame when things get tough, and there are hundreds of 1000s in Ukraine and millions and Russia of Jews who could be held accountable by dark elements in those societies, so I completely understand why I wish it were otherwise but Israel’s responsibilities force it to be, force it to be a neutral partner.
Andy Slavitt 40:13
How about India?
India has a long-standing security relationship with Russia. And he also has an overwhelming preoccupation with China. And India is not in a position to help them very much anyway, one way or another, so it really doesn’t matter. And they can abstain the United Nations, but they’re not much of a resource for Russian power. And we need, in many ways, the announcement of sanctions today from Monaco may matter more than anything India does. There are a lot of rich Russians who have just been sanctioned by the government of Monaco.
Interesting. Did China present some opportunities, some escape hatch for Russia, and how do you see that playing out?
Much less than many people are imagining. What Russia could certainly work out with China if the Chinese are willing to take the risk? Because, you know, why should they stick their necks out, but the Chinese are willing to take the risk, they make a lot of things. And it is always possible to move from a system of true international trade to a system of bilateral barter that is the old that’s how the old Soviet Union did it that they would put oil or wheat or something like that on a train to China and the Chinese would send them things. And that kind of trade could be managed Russia had even before sanctions already $64 billion worth of Chinese backed securities denominated in Chinese currency, they could sell China their gold and get more Chinese money. And they could use that for but that’s not, the goal is not getting stuff, that is the SEC. And that’s the thing, I really want to pound home about these sanctions, that central bank sanctions hurt and obviously make it difficult for you to buy particular thing. They hurt because they destroy the ability of your currency to buy anything, it’s not the cut off of trade. It’s the worthlessness of the currency, the non-convertibility of the currency, that is the power of these sanctions. And the Chinese cannot solve that problem for the Russians. Because China’s currency is not a truly convertible currency. And it’s not. And this is the, you know, if you have the rule of law, if you’re free elections, if people know that contracts are respected and rights are upheld, that translates into money that people trust. And if you’ve been doing it for hundreds of years, the way Britain in the United States, we know that trust turns into money they really trust. People just know, if I have keep an asset in dollars, it’s not going to be taken away from me. And the dollar may fluctuate may go up and down, but no one is going to walk in, if I obey the law of the United States, no one is going to take away what I own. And so those are tremendously powerful things. China doesn’t have that credibility, not even with his own people. One of the drivers of China’s problems in the financial world is anybody in China with any kind of wealth, their overwhelming preoccupation is find somebody get that wealth out of China, even at a loss and put it somewhere Australia, Canada, the United States, Britain, anywhere, anywhere where they know the money is safe from a regime that could seize it.
So we’ve got this isolated military battle, we’ve got this larger financial and economic battle. And then there are of course, in this day and age, other types of elements of this battle we can imagine. We can imagine, for example, a cyber war, we’ve got all kinds of interesting, biological and other types of quite lethal, but yet very different types of weapon out there, you know, is this, in fact, what I’ve heard some commentators say that this is in we are in fact entering into a world war of sorts, a different sort than World War II for sure. But a war none the less.
David Frum 44:13
Well, if World War means much of the planet is involved with it, yes. I really want to not conjure up those kinds of associations, and one of the things I often say on Twitter is one of the reasons to study history is to furnish your mind with a larger stock of analogies than Hitler, Hitler, Hitler all the damn time. One of the things you didn’t mention, and it’s a very important component of this war is the social media battle. and I were so used to it that we forget how new it is. During the Iraq war. There was no Facebook, there was no YouTube, there was no certainly no tick tock, no Twitter, and I have come to sincerely wonder whether the Iraq war could have been fought if YouTube existed, that if Americans had seen it, this was a war. People can see a lot if they are strongly committed to war, but if they’re not suffering wrongly committed to it and YouTube did come on online during the Iraq war, but it’s still very early and not many people are in the habit of using it. People have to look at war. What do they think? And social media humanizes people. And I think one of the things that many Americans are experiencing is as engaged as Americans are with Ukraine, I’m struck by how little anger there is at Russians. Because we see the humanity of these captured Russian. These scared star they don’t look like the Calvin Klein underwear models and Ted Cruz was advertising at all. They look like underfed people who don’t know why they’re there and don’t want to be there. And just, you know, why are they not studying, why they back home. And the Ukrainians have won this information war. And that’s startling as we were so used to in the Trump years, Russian propaganda being so powerful. And it’s interesting to think about why it has been so ineffective. And I think partly because the Russians never wanted to let their people know that this they were fighting, they were the ones that were doing this defensive action in these two border areas. And then we’re being drawn into something they didn’t want to tell them from the beginning, we are driving to Kiev, the heartland of Slavic civilization, and we’re gonna bomb and strafe and shell, and it’s worth it, trust us and believe in what we’re doing that people they don’t tell them the causes. They know the public wouldn’t believe in it. And so that’s why the Ukrainians to create all these humanizing videos that have been, I think have real world signal is why the Why did the Swiss government, which was willing to be completely neutral, why did they break with habits of so long to impose that they’ve never joined sanction regimes before? Why? The Republic opinion […], why? Well, partly because of all the TikTok videos.
David Frum 46:42
It’s interesting, because in that context, in some ways, you know, we’ve been at this, I think, by the time, maybe less than a week since the Russian attack. And yet, you don’t listen to you. There is something about the resistance about the president, staying in the country, continuing to talk to his people continue to talk to the global community, not just social media, but just played on talking to people and being there that even holding out for a week, I do think has given people who it feels like would otherwise have been more than glad to be on the sidelines. If they can help it. It’s sort of forced them off even the ones that you say, Israel in India that are uncomfortable having to do so.
Well, and I think that that game is over for the Russians, at this point, all they can do is kill him. And I wish him well, I hope they don’t kill him. But he would be a more powerful symbol if they killed him.
Well, David, thank you so much for coming on. We’re gonna watch what happens next. I appreciate having you in the bubble. And explaining all of these really, I think, in some respects, and it’s gonna sound like I’m intellectualizing it a little bit, but fascinating dimensions to this conflict today, and the repercussions that really reach everybody in the world without question.
David Frum 48:07
Thank you. It’s such a pleasure to be here. Thank you.
Thank you to David, thank you to the production team. For I think doing an excellent job putting this episode together, making sure we could bring you the information you most needed up front. And throughout the conversation. Let me tell you what’s coming up. On Monday, next week, Roh Khanna, who is representative from California, we’re going to talk about a number of topics including Ukraine, including a bunch of things here at home. On Wednesday, plenty of Gavin Newsom, the governor of California where we’re going to talk about everything from how he’s managing the pandemic, and entering the next stage to how we’re dealing with unhoused and how we’re dealing with climate here in California. Gavin is a great guest it’d be a lot of fun. And then David Ho, the incredible famous AIDS researcher, Time Person of the Year and really phenomenal person who I think you’ll enjoy Alright, have a great rest of the week be safe. Let’s hope for peace in God challenging times.
Thanks for listening to IN THE BUBBLE. Hope you rate us highly. We’re a production of Lemonada Media. Kryssy Pease and Alex McOwen produced the show. Our mix is by Ivan Kuraev and Veronica Rodriguez. Jessica Cordova Kramer and Stephanie Wittels Wachs are the executive producers of the show, we love them dearly. Our theme was composed by Dan Molad and Oliver Hill, and additional music by Ivan Kuraev. You can find out more about our show on social media at @LemonadaMedia. And you can find me at @ASlavitt on Twitter or at @AndySlavitt on Instagram. If you like what you heard today, please tell your friends and please stay safe, share some joy and we will definitely get through this together.