Money Talks: Is the West losing its sanctions war?

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Russia's war against Ukraine sparked a counteroffensive, not just by Ukrainian forces defending their homeland.

Together, along with our allies, we are right now enforcing powerful economic sanctions. We're cutting off Russia's largest banks in the international financial system, making Putin's $630 billion war fund worthless.

The US and its Western allies came at Russia with weapons from their economic arsenal. They imposed sanctions targeting Vladimir Putin's government and the oligarchs and businesses profiting from Russia's invasion of Ukraine. In the two years since, the U.S. uK and EU have imposed thousands of individual sanctions meant to hurt Russia's ability to wage war. Imports of Russian goods, from diamonds to coal, were banned. Some $300 billion in assets that the Russian Central bank held overseas were frozen. And wealthy oligarchs have had their private jets and yachts seized.

Tonight, the UK seizing a nearly $50.

Million superyacht owned by a Russian businessman tied to Putin. But while the west has been united in its condemnation of Russia, its new sanctions regime has not been bulletproof. And that's because much of the world refuses to enforce Western sanctions. Armenia, Kazakhstan, and Kyrgyzstan, for example, have all been importing more from Europe and have mysteriously since become major suppliers of critical goods for Russia. Countries across Asia not bound by the sanctions remain a lifeline for Russia to sell oil and receive critical imports and financial services. But that hasn't stopped fresh sanctions from coming.

President Biden warned today that Russia is.

About to pay the price in the.

Form of major sanctions for the death.

Of Russian opposition leader Alexei Navalny.

Far from being obliterated by the Western economic arsenal, Russia's economy has proved shockingly resilient. In fact, output appears to have grown slightly between 2021 and 2023. So does financial warfare work? You're listening to Money Talks from the Economist, our weekly podcast on the markets, the economy, and the world of business. In Singapore, I'm Mike bird.

In Washington, D.C. i'm Alice Fulwood.

In London, I'm Tom Lee Devlin.

And in today's show, have sanctions lost their bite?

First, we hear how the world is awash with sanctions to an unprecedented scale.

They really started picking up after 9, 11, 20 years ago, but since Ukraine, they've gone into overdrive.

Then we speak to one of the early architects of the current US Sanctions regime.

They're painful in the short and long term, but they may not be effective enough to change the strategic behavior that everyone so desperately wants to affect.

Finally, to become more effective, how will financial warfare have to evolve?

There's been a big push by the US to make arguments for the confiscation of frozen Russian reserves. It's a serious amount of money.

Alice. Tom, hello.

Hello.

Hi, Mike.

Alice, you are under a blanket. You look like you're lacking everything except, you know, a hospital bed and an oxygen mask. What is going on?

I seem to have been struck down by some strange virus. It might be Covid, some sort of later iteration or it might be something else. But you know, I felt better and more cheerful to be joining you both in the studio, but I'm still happy to be here.

Said with such conviction.

Yes. Still my general misery obviously pales in comparison to the very somber stuff that we are going to be discussing today. I understand you are about to remind us that it's been two years since the start of the war in Ukraine. Mike.

Yes, if you weren't aware of all that from the news coverage this week. And with two years having passed since the Russian invasion of Ukraine, that also means that it's been around two years since the US And a lot of European countries assembled this financial warfare in response to a boots on the ground war in Ukraine.

Right. And because of things like dollar hegemony and the correspondent banking system, the US has by far the most power to mete out these kinds of sanctions on people who are doing things it does not like. But even with all of that power, there are sort of a lot of reasons why you should be sceptical about how effective sanctions really are. Yeah.

And to that point, actually, things cranked up another notch last week. In response to the the killing of Alexei Navalny, the US slapped on a further 500 new restrictions on Russian firms and officials. It's also going to place export restrictions on about 100 new entities that provide support to Russia. But you know, I can't help but suspect this escalation of sanctions is somewhat subject to the law of diminishing returns.

Yes. And after two years of the west trying to lock Russia out of a lot of the fruits of the global economy, we can now see a number of the ways in which Russia is coping with or adapting to its new economic reality, what structures it has to get in place to circumvent those sanctions. What's becoming clear is that it's getting by with a little help from its friends, or if not friends Then help from these sort of ambivalent neutral middle countries who have something to gain from keeping their own economic and financial channels with Russia open.

Ambivalent neutral Middle countries would be a.

Great name for our band, Ambivalent Neutral Milk Hotel. That would be a terrible tribute act.

Well, I play the guitar, so any musical talents from the two of you?

I have been known to sing in my life.

I think if I sang in an episode, the living would envy the dead. But getting back on track slightly to help us understand the sprawling world of sanctions, I wanted to speak with Kerrian Richmond Jones. She's the Economist's international economics correspondent, and she's been covering this story for us. Kerrian, welcome to Money Talks.

Thanks for having me.

So could you get us up to speed on what's the latest state of affairs when it comes to the West's economic sanctions? Because obviously in the last few years, especially in relation to Russia and the invasion of Ukraine, there's been a massive expansion in the use of these tools.

Yeah, absolutely. The US Is the dominant sanctions power. It presides over the global trade system. It presides over the global financial system through the dollar. So theoretically, that gives its economic warfare this deadly punch that no other countries has, and that's enabled it to impose a barrage of restrictions. And they really started picking up after nine, 11, 20 years ago. But since Ukraine, they've gone into overdrive. So American firms can't sell anything that the Russian army could repurpose, and that ranges right from drones, but also all the way through to ball bearings. There are import restrictions on commodities, such as the $60 barrel oil price cap imposed on Russian oil by Europe and America. That's meant to weaken hostile powers by reducing the revenue that their governments get. There are bans on doing business with Iranian and Russian governments, but it's not just isolated to Russia and Iran. So in the Middle east, everyone from the Israeli settlers in the west bank are under sanctions all the way to the Houthi rebels in the Red Sea. We're seeing an increase in sanctions on Chinese military firms. Even South American drug cartels are under more sanctions now than they were two years ago. America's first port of call for dealing with all of them is sanctions. The consequences of breaching these sanctions for firms all around the world can be really severe. They range from fines to jail time if you're in the U.S. so the.

World isn't just made up of countries implementing sanctions and the countries targeted. You've been looking at these middle power countries with growing influence around the world that are neither implementing nor subject to the sanctions. Can you explain which countries these are and what role they're playing, why they're important here?

Third countries are the countries that impose neither American nor European sanctions, and they're also not under sanctions themselves. Some people also call them neutral countries, non aligned countries, which refers to a movement that 120 of them are members of that includes Brazil, India. And it's a growing problem because in 1990 they produced 15% of GDP. Now in 2022, they produce 38% of global GDP. These countries tend to decline to participate in the West's economic war. Brazil, India and Mexic all bowed out soon after Russia invaded Ukraine. But the problem is that they're still keyed into the west systems. All of their banks rely on dollar transaction systems, dollar clearinghouses. If you want to bank in dollars in India and transact dollars to maybe Indonesia, the chances are that it's going to touch an American bank at some point. And the problem is that America really struggles to reach these firms in the same way that it would discipline the firms on its shores. So countries that are not party to the West's price cap on oil are willing to pay more than 60 barrel. Brazil, China and India have all bought more stuff, not less, since the war in Ukraine began. So that's really thwarting America's efforts to reduce Russia's government revenue. Many of the country's biggest customers, including the UAE and Turkey, import cheap fuel for domestic use at the same time as exporting their own more expensive, non embargoed oil. And in 2022, China, India, Singapore, Turkey and the UAE all together imported $50 billion more oil from Russia than in 2021. Meanwhile, the value oil imports from these countries increased by 20 billion. So it's very clear where that flow is going.

Yeah, importing cheap oil and exporting more expensive oil sounds like a pretty good gig if you can get it. There's a general sense from your reporting that things seem to be getting worse on this front and that it's becoming more difficult because of precisely these trends to execute these sanctions. Is it simply a sense that there are more sanctions than ever? So we're seeing a natural increase in circumvention or. Or is it something more than that?

It is a bit of that. And that's a real dilemma for America's policymakers. Right, because the more that you restrict third countries, the more they're also encouraging them to circumvent. But I think there's also more going On a lot of it is simply that two years post Ukraine countries have had the chance to set up systems to circumvent. So it's actually getting easier. So a lot of third countries are now participating in ruble and yuan based payment systems efforts by Russia and China to build dollar alternatives. Indonesia is participating in trials for China's digital currency. We've seen a huge uptick in the amount of countries that are distributing MER cards, which is meant to be Russia's alternative to Visa and MasterCard. And it's run by the Central Bank. Exports from the EU to Russia have collapsed, but places like Armenia, Kazakhstan and Kyrgyzstan have been importing much more from Europe and have mysteriously become important suppliers of critical goods to Russia. Last year we saw Central Asia's logistics industry expand by more than a fifth.

So presumably the sort of sanctions making policymakers in Washington and Brussels and London aren't just planning on taking all of this lying down. Are they getting tougher on the rule breakers? What steps are they taking to try and address this circumvention?

They are definitely getting tougher. So Russia's sanctions are almost incomprehensible in their scope. But now we're seeing a different kind of sanctions. We're seeing a lot of secondary sanctions coming out of the White House. So Biden made an announcement in December last year that he was willing to target foreign financial institutions. So banks in Indonesia or India that have been facilitating the transactions that mean that weapons can get from China to Russia. That's a really big threat. So far we haven't seen any banks on the list, but we may well in future months. The question then will be how the governments of these countries really take that. There's a chance that they could cooperate with America, but if they don't, all that these sanctions will do is encourage them further into the arms of Russia and China.

This feels a lot like one of those subjects that we're going to be coming back to again and again. Kerryan, thank you very much for joining us.

Thank you so much for having me.

So that's the lay of the land. Now to understand a little more about how policymakers in the US might be viewing the relative success of their sanctions endeavours. I spoke to Juan Zarate. He's a former counterterrorism official who held a number of positions with the US government. He's now chief strategy officer at K2 Integrity, a risk advisory services firm. Juan, welcome to Money Talks.

Thank you, Mike. I'm happy to be with you.

So you were, among other things, the Assistant Secretary to the treasury for terrorist financing, the first person in that role back in 2004 when the US was among other things, looking for Saddam Hussein's assets in the immediate aftermath of the Iraq war. Tell us a little bit about that job which was newly created when you took it.

Well, Mike, what happened after 911 was a mandate to the US Treasury Department to use its authorities, its information, its suasion around the world to make it harder, costlier and riskier for America's enemies to raise and move money around the world, first and foremost with Al Qaeda and terrorist groups, but very quickly moving to other nefarious actors, rogue regimes, proliferators. And over time that work expanded to looking at how nation states and non state networks were trying to leverage the financial system and evade those sanctions.

And how have things in this sanctions world in the sort of approach to trying to identify and interrupt financing for America's enemies. How has it changed since then?

The sanctions themselves have grown more complicated in both their nature and scope. So more things are sanctioned, more activities fall under the purview of sanctions, and more types of sanctions are implicated. Sectoral sanctions, debt and equity services, export controls that are much more exquisite in their type. And so you just have a degree of complexity. And of course you've got more major targets that are now subject to sanctions, major economies like Russia, G20 economy, major sectors like oil and energy, and a whole range of actors to include facilitators that form part of networks that attempt to circumvent sanctions and to work around the measures that the US and Europe and others are putting in place.

So you mentioned state actors and specifically Russia there. How does it differ in thinking about these sanctions regimes when you're focusing on an individual or a non state group versus when you're focusing on an entire country?

What you had in the 1990s and then post 2001 was really a focus on the use of targeted sanctions on individuals. First and foremost leaders, regime leaders, but then also criminal leaders, terrorist leaders. And so that's challenging in enforcement because many times those individuals and entities don't have bank accounts in the United States, they're not shopping in London, then they're trying to hide their hand. That's different from trying to affect a national economy that has complicated sectors, complicated interrelations and dependencies with other economies. And I think what's really interesting about the current environment is you have this admixture of sanctions that are trying to go after state entities, revenue and connectivity in the Russia context, in the Venezuela context, in the Iranian context, But it's often through the targeting of individual entities, companies, banks, brokers, that you have the effectuation of those sanctions regimes.

What should we be looking at to determine whether sanctions are working or not? What are the measures of effectiveness? What would show them to be effective or ineffective?

Well, this is the trillion dollar question when it comes to sanctions. Often when we ask this question, we ask this in the maximalist form, which is to say, are sanctions working to affect the maximalist intent of the policy? In the case of Russia, the question is, are the sanctions deterring Russia from further aggression? Are they able to weaken Russian military might? But it's also, we have to ask ourselves, is that what the sanctions are intended to do? And if they are, then you can look at several things. In the case of Russia in particular, a major goal of the sanctions is to decrease the revenue that the Kremlin has in order to wage war. Oil revenue in 2023 was down for Russia by 23, 25%. Second, looking at whether or not the target is able to access the things that they are presumably being denied, are they getting access to certain types of technologies? And some of that can be studied, some of it is anecdotal, but that's very important. And then finally, I think there's a qualitative dimension to this. How much is this hurting the target psychologically and operationally? It's often the case that those that are subject to sanctions are desperate to be taken off sanctions lists. Why? Because they are actually effective. They're actually impeding their ability to operate and to do business. It may not be in maximalist form, but they are, at a minimum, a tool of harassment and in maximalist form, disabling to a bank, a company, a rich oligarch, and even an economy to operate the way that they want, efficiently, in an open and notorious way. And so often you can see how hard a country or an individual or an entity is trying to get off the list, in my mind, is an indicator as to how well those sanctions are operating.

So if we take some of those things in together, what would your current assessment be of how the sanctions on Russia are functioning?

Those measures in toto are not changing Russia's behavior in terms of aggression in Ukraine, treatment of dissidents, or other activities that these kinds of sanctions would be intended to affect. And so on that level, you'd have to say the sanctions aren't working quickly enough to change, in maximalist form, the behavior of the Kremlin geopolitically and geoeconomically, often Sanctions are judged by the question of the day one effect as opposed to the day 365 effect, which is to say there is a longevity and a continuum to the application of sanctions and the enforcement of sanctions and the evasion of sanctions. And I think in the long term, assuming that sanctions can be enforced and assuming that there aren't too many backdoors created long term, this is not healthy for an economy under this kind of sanctions pressure, even if they're able to work around and even if they're able to create shadow fleets. So my answer is they work, they're effective, they're painful in the short and long term, but they may not be effective enough to change the strategic behavior that everyone so desperately wants to affect.

Juan, that's all absolutely fascinating. Thank you very much for joining us.

No problem, Michael. Thank you for having me.

So, Alice, Tom, my overall sense from what we've heard so far is that this is really a question of what we realistically hope sanctions can or should be achieving. What Juan was saying about the maximalist view is the one that I think gets taken quite often. If sanctions are so effective, why is Putin able to wage the war at all? And that seems to some extent like a pretty unfair high bar, which perhaps nobody should have thought was possible. If you're taking the more reasonable, modest approach that the sanctions can still be used to grade the economic capabilities of an opponent, whether that's a terrorist group or whether it's the Russian state, this sort of death by a thousand cuts approach, then you have to concede that there'll always be a sort of whack, a mole going on. These loopholes will pop up, people try and close them, the sanctions will go on. The question that naturally stems from that, I think, is whether the sanctions, as they're currently employed, even meet that more modest goal.

Yeah, I agree. I liked his point on the slightly more subtle goals of sanctions. Obviously they haven't stopped the war, but that doesn't mean that there is no purpose to them. I did think that the sort of point he made at the end there where he was saying, obviously it's unhealthy and very frustrating for a country to be under these kinds of sanctions, assuming that they are enforced and assuming that there are not enough backdoors for people to get around them, I guess you can't necessarily assume those things. In this specific example, we've heard about all kinds of sort of backdoors through sort of our media or wherever, that Russia is still managing to engage with the global economy. And I guess to get to the question you posed, are sanctions even meeting a more modest goal? I feel pretty certain that we can say that Russia wishes that it were not subject to these sanctions. That said, it does seem to have found quite a lot of clever workarounds.

One thing that's striking to me is that two years ago there was this outpouring of condemnation from Western businesses, but actually, a whole lot of them are still reported to be operating in Russia. And to be clear, that's not illegal. These industries aren't subject to sanctions. And some of these firms do say that they've scaled back their operations and are reducing the amount they're investing, but they're still helping to prop up Russia's economy and they're still paying taxes to the regime. Obviously, it's not an easy issue. These firms have an obligation to maximise shareholder value. If they leave their assets, they might just simply be handed over to Putin's cronies. And some of these companies, like drug makers, are providing something that is vital to the Russian people. But I guess regardless of how you feel about the morality of this, it's certainly another explanation for why Russia has held up so well economically despite the West's efforts around this.

Next we'll hear how sanctions are changing. But first we want to tell you that this episode of Money Talks is free to listen to, but to join us every week, you will need to be a subscriber. The good news is that we currently have a sale on which has been extended to Sunday 17th March. That means you can take out an annual subscription to Economist podcasts, plus for half price, which is less than $2.50 or £2.50amonth.

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So we've all got our thoughts on what's been going wrong with the recent wave of sanctions. But to find out how they've evolved and where we could be headed next, I wanted to talk to Nick Mulder. He's a professor at Cornell University and the author of a book, the Economic Weapon, about the rise of sanctions as a tool of. Nick, welcome to the show.

Very nice to be on the podcast, Mike.

So sanctions as we know them today first rose to prominence in the 20th century, between the two world wars. And for anyone who's been in a coma for the last 90 years or so, they'll be very disappointed to hear that they weren't a total success in preventing the Second World War. But, being slightly less cynical, what are the sorts of Things that we'd say had worked from the sanctions in that period. And what didn't work.

Sanctions were thought to be a kind of silver bullet in the early 20th century and hopefully they could substitute war entirely in the long run. Now that did actually work pretty well in the 1920s. So there are a number of nowadays quite obscure, forgotten little wars in the Balkans in the 1920s that were stopped actually with sanctions threats. One of my favorite ones is called the War of the Stray Dog, which was a border conflict between Greece and Bulgaria that started with border guard who led his dog off the leash, crossed the border, ended up provoking exchange of gunfire that escalated and was really going to result in a full on war. But then when the League of Nations threatened to use sanctions against Greece, the Greek government very quickly realized, oh, this is not actually something we want to do. And sanctions actually help to prevent that conflict from escalating.

So bringing things up to the present day, my colleague Kerrian has been looking at the reality that a lot of middle powers, a sort of growing group of largely middle income countries outside the Western world, are providing opportunities to sort of blunt the effect of sanctions. Is there a parallel for this in the sort of historical work that you've done?

Definitely. Countries that were under economic pressure historically have looked to neutrals to find ways out. So if you were a neutral country, a major economic war in a globalized economy, then there were potentially really big gains. And I think that that's what we see today. And the problem is, if anything bigger, because at the time when this was done In World War I, there were in Europe, for example, a few countries, the Netherlands, Sweden, Switzerland, that acted as conduits for German trade. But today we have dozens of countries actually that are performing this function for Russia. And we simply have three times as many states. There's way more sovereign states in the world today. So that means that even if you have a pretty small economy like say Kyrgyzstan, you could still make quite a difference in aggregate. If there are several countries doing that at the same time, and if they all choose to become conduits and routes for trade diversion, then it could add up to a pretty significant economic relief. And I think that's what we've really seen with Russia in the last two years.

Right. And I think a lot of policymakers have been disappointed that the sanctions against Russia haven't made more of a difference. And partly because of that, there's been a push by some to go further, including the idea of expropriating Russian assets held abroad or even just the income on those assets. What do you make of that?

So, in the last few months, there's been a big push by the US to make arguments for the confiscation of frozen Russian reserves. Most of those are held in the European Union and actually particularly in Belgium and France, which together hold about 210 billion euros. So that's on the order of 240, $250 billion. It's a serious amount of money, and this has to be coordinated by the G7. And the Europeans have been much more reluctant to engage in it. And I think that this is tied to a much broader question, which is Western support for Ukraine. The US hasn't actually made clear moves until the end of last year to push for confiscation. And now, of course, the political situation is much tenser and entering an election year, the Republicans are holding up Ukraine aid. So I think you have to understand it against the backdrop of that increasing anxiety that there might not be an easy road towards securing more funding for Ukraine in the long run. And this is also where the Europeans are a bit more reluctant, because they have, of course, just approved a large package for the next three years, so they're under less pressure to do so. I would still, at the moment, support the option that's been put forward by the EU itself, which is to skim off the profits that are accruing to the frozen Russian assets and then give those to Ukraine every single year. And I think the best way to think about it is just in a sort of personal finance way. Would you rather get one big lump sum when you face an uncertain financial future, or would you prefer to have a steady stream of payments for many, many years into the future? And I think, given the uncertainty, it's in Ukraine's best interest in the long run, too, that they get a permanent boost to the funding and treat these frozen assets as their own sovereign wealth fund, so to speak? They can spend the income and use it to supplement their budget every year, but they shouldn't touch the principle, because as long as you don't do that, you keep getting all this income. Now, Brad Setzer at the Council on Foreign Relations has done some really good calculations, but with current interest rates of 5% on a stock of about 200 billion, you should at least be able to get 10 billion a year.

So, on the surface of it, it sounds like there's a pretty good strategy. You freeze Russian assets, you use the interest from those assets in order to finance part of Ukraine's defence. But there's no precedent for this, could there be any sort of backlash?

There's been a lot of concern over the effect it would have on the dollar and also the euro as reserve currencies. I actually think that's probably a bit overstated. Those those currencies will continue to be attractive or moderately attractive in the case of the euro as reserve currencies, regardless of what happens. But what I do think is it is a grave blow to Western claims to be playing by the rules, because there aren't actually rules at the moment that allow this in a very clear cut way, or at least there hasn't been any case of this happening. And of course, if you make this a precedent that for aggressive war or invasion of other countries, third countries have the rights to expropriate the assets of the aggressor, that could of course be applied in all sorts of cases. So just as a thought experiment, imagine what would have happened in 2003 when Coalition of the Willing invaded Iraq, which was not a legal war, and then India and China had said, okay, well, we're taking all the property of Western countries within our territory as punishment for Western aggression against Iraqi sovereignty. Now that's effectively the same kind of principle. None of that happened because there's no Western sovereign assets. But you're already starting to see that Russia is treating Western private investments as responsible for Western government action. So I think as we continue with these sorts of measures, we're really also at risk of blurring the distinction between public and private property. And that has really big implications in Asia. Not just because Asia has some of the world's largest foreign exchange stockpiles, really large net overseas assets. Right. Almost all of it is private. But if we started to treat Chinese investments abroad as somehow tied to the Chinese government, there's a really real risk that at some point China will say, okay, well, your private investment in our economy is also tied to your governments and will treat it as such. So I think this is a really slippery slope to go down and it's not really clear once you get on it where it stops.

Okay, so we usually discuss sanctions and these policies as a form of financial weaponry. But do you think it's possible to flip this around? Are there ways to incentivise countries to work with sanctions? Is there a carrot rather than a stick? Anything more than just the threat of punishment for the people violated?

Yeah, I think so. So how do you get those countries on board and what can you offer them that they need or they want in return for them complying and ceasing trade or reducing significantly trade with Russia. So this involves compromise and it's a carrot and stick kind of thing. But it does seem to me really important. And you can't just rely on the threat of punishment. And at some point, the west really needs to think about, okay, what can we positively offer these countries as well? So I think we can learn something from China, which is that China has acquired most of its influence by the provision of goods and money, not by depriving other countries of resources. The other stuff that the west can do, I think, is to tie this much more to other goals that it wants to work on. Debt relief. We're in definitely with rates going up, a big global debt crisis, and then finally, I think doing something which only the global north could do, which is to provide real aid in climate change mitigation and the renewable energy transition. And I think those are just three sort of obvious things that we could be thinking about.

That's fascinating. And Nick, thank you very much for making the time to talk to us.

My pleasure, Mike, thanks very much for having me on.

So, Alice, Tom, after everything you've heard, do you think sanctions are a tool that just needs a little bit of sharpening or they're better off retired, back to the policy toolshed altogether?

I thought it was so interesting the sort of example Nick gave of a time in which sanctions really were effective at not just depleting a country's revenues or providing deterrence in the future, but actually stopping a war. I love the example of the war of the stray dog. It did make me wonder whether that because sanctions are so commonplace now and sort of everyone knows that if you start a conflict that America doesn't think that you should be, you'll sort of definitely be subject to sanctions probably pretty quickly. Whether you wouldn't even get to the point that Greece and Bulgaria got to in that conflict where they had escalated things to the point that it might become a full scale war and then the threat of these sanctions talked them down. I wonder whether now you just never would even get to the escalation point point, as in they probably do work as a deterrent now because they are so commonly sort of understood and widely applied. And I do think that as a result, even if it's becoming potentially harder to enforce and harder to sort of police loopholes that people use to get around sanctions, maybe again because people have become sort of more familiar with them as a tool, I'm certain there still is some sort of residual value in using them and the fact that they exist And I think that with the way the world is changing, it used to be that sort of America could basically impose these things unilaterally. And that certainly is not the case anymore. And definitely it's not the case in Russia. So there are definitely things that could be done to make them more effective, like building a sort of better network of countries that are willing to enforce these kinds of measures. So, yeah, I think probably they should be sharpened, but I definitely wouldn't bin them.

Yeah, I agree with that. I don't think the message here is that they should be retired completely. And I mean, this goes back to what Juan was saying earlier. But even if sanctions haven't crippled Putin's regime, that doesn't mean they haven't been a sensible thing to do to raise the cost of its actions. And also, I just think it would feel odd for the west to continue trading as usual with Russia and pretending that nothing's going on. But I think we are seeing that sanctions are simply not a substitute for the most important form of support that the west needs to give to Ukraine, which is more aid and more military support.

Yeah, I think all of this conversation just underlines the reality that the world we live in has changed a lot. I was thinking about this relative to the sanctions on Iraq that were quite a big talking point when we were kids. The ones that were put in place during and after the Gulf War and which continued on for a long time. The consensus with those wasn't just that they worked, but that they worked so well that they were enormously economically damaging. And there was, you know, huge concern over the impact that they had on the civilian population. And they did seriously disrupt Iraq's ability to rearm with especially dangerous weapons. And I think that's broadly the consensus. But since that period, since about 1990, the G7 has gone from something like 46% of global GDP, adjusted for purchasing power, to about 30% today. But naturally, these tools use used by that sort of group of countries are likely to become considerably less effective over time, unless you can bring in a much larger and broader group of participants. You can't do sanctions on high tech things without the participation of a lot of countries in East Asia. The banking and financial systems of dozens of other countries are inordinately larger than they were back then. And I think to that, one of the concerning things that you hear a lot from people in a lot of different countries in the part of the world I live in is that the Western world, America in particular, makes demands and doesn't offer Anything in return. It's all stick and no carrot, whether that's on sanctions or any number of other things. Trade, the environment. That doesn't mean the west can't do anything, but it does really raise the importance of reaching out to countries that don't have the same approach and don't have the same instincts. We do probably need to think a lot more about how you bring along a broader group of countries to an agreement. Agreement on these issues. It will, as an aside, be very, very interesting to see the developments in the next few weeks and months. On what Nick mentioned there, the prospect of using expropriation of Russian asset income to fund Ukrainian military spending, which I think is a sort of very neat way of tying this thread back together, of saying, let's find a version of sanctions that might work and let's use the money that that actually produces to fund the actual material side that really matters here, as Tom mentioned.

Yeah, I thought it was interesting what Nick was saying about how some of the things that the west might want to do with Russian assets, like selling them off or using the income to sort of fund Ukraine, that if it does that now, it might not sort of be playing by the rules. And I couldn't help but think, well, maybe the rules will be slightly updated after this to try and make those things possible.

Yeah, this feels like one of those situations where the sort of pages of the rule book are being. You know, there's a lot of wet ink on them at the time when these sanctions are actually brought in. Right. I think that's about all we've got time for, except for our stats of the week. Who would like to go first?

I'll go. My stat of the week is 15,500, and that is the number of golf courses that exist in America, which is a huge number. The thing that I thought was so interesting about this is that it is, in fact more than the number of outlets that McDonald's has. Has. There are about 13 and a half thousand McDonald's outlets in the US and 15 and a half thousand golf courses, which I found completely baffling. Who knew Americans loved golf more than they love Big Macs?

I guess a McDonald's is more efficient. Right. It's like if I'm a good McDonald's, I can get like thousands of people through there an hour, which I'm not a golfer personally, but that sounds rubbish on a golf course.

Well, my stat of the week is $6.6 billion Australian dollars, specifically. And that is the additional contribution to my home country's first quarter GDP flowing from the fact that 2024 is a leap year and therefore has an extra day in February. This comes from a new research note from KPMG which reckons that the bonus GDP will be enough for the country to just avoid a technical recession. So Australia being the lucky country, once.

Again, a modest proposal. Why don't we do one every year and then we'll have loads of gdp. We should have a leap day in every month, every year or any time.

We fear a recession.

Yeah, please don't email in to tell me why that's not true. I know why it's not true. To save yourself a very tedious, tedious exchange. I know that that is not correct.

Surely this is not actually a way to avoid recession.

Leap year adjusted GDP figures. Maybe it will be the next thing.

It feels a lot like leap year adjusting is something they should be doing anyway. Right, so my stat of the week is 17th or potentially sixth if you're being very charitable. This is based on the news that the UK is trying to court Sheen, the Chinese e commerce giant, to list in London. For those who've been listening to the podcast for a while and paying any attention to the uk, the UK stock market has not done amazingly well. London listings have not been amazingly popular. So if Sheen listed based on its one time $100 billion valuation, it would be the sixth largest company listed on the LLC by my calculation. Or if it listed on its slightly more realistic reported 45 billion valuation. A couple of publications have suggest that that's roughly the level that shares are being sold for in private, then it would be the 17th largest. I'm not sure where it would rank in the US but it would be a lot lower than that because the UK just does not have as many valuable companies as it once used to see, this is another argument for Australia having a leap day every month because if you saved up all of that money you could buy Sheen by the end of the year.

This is not how any of this works.

No, no, it's free money.

There's no such thing as a free leap day.

And with that I think all there is left is to thank Juan Zarate and Nick Mulder for joining us.

And thank you for listening to Money Talks.

You can always write to us@podcastseconomist.com Today's.

Show was produced by Dan Asher, Marie Keyworth and Kevin Kaners.

Our sound engineer is Tingly Lim and.

The executive producer is Hannah Marino.

I'm Mike Bird.

I'm Alice Fulwood.

I'm Tom Lee Devlin and this is the.