Talking out his asks: Putin’s NATO demands

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Hello and welcome to the Intelligence from the Economist. I'm your host, Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. This year's big AEA meeting of economists was unusual in its focus on the future. Rather than making sense of the past, our correspondent heard lots of research on homeworking and what it'll mean for employees, companies, even politics. And imagine this, banks that have to close temporarily to process piles upon piles of cash. It happens frequently in Cuba. And the source of all that money, sellers of garlic. But first.

This is the beginning of a diplomatic process. We welcome the fact that the Russian Federation is taking part in this dialogue with us. We think it's important.

American and Russian officials talked for nearly eight hours yesterday. There was little to suggest progress in addressing the mounting tensions that brought them to the table. But both sides agreed to keep negotiating. Russia's Deputy Foreign Minister, Sergei Ryabkov said, we urge the United States to be as responsible as possible at this moment. The risks of escalating the confrontation can't be overestimated. NATO diplomats will join negotiations tomorrow in Brussels. And on Thursday, there's a meeting in Vienna of the Organization for Security and Cooperation in Europe. This frenetic diplomacy comes after some serious saber rattling. Russia has 100,000 troops stacked up on its border with Ukraine and has been talking tough. With the prospect of a full on invasion of Ukraine hanging in the balance, Russia and specifically its president has a lot to ask.

What Vladimir Putin really wants is a massive retreat on the part of NATO, the Western military alliance that is led by America.

Shashank Joshi is the Economist's defense editor.

And in its place, what he'd like to see is effectively a Russian sphere of influence that stretches right across Eastern Europe, the Caucasus and Central Asia.

How do you mean, what do you mean by the Russian sphere of influence?

Well, Jason, just before Christmas, Mr. Putin publicly demanded new treaties with America and NATO. And he didn't just demand them, he actually published a couple of drafts to say here's what they ought to look like. And they look like something Bismarck or some sort of 19th century statesman might have come up with. The to a supplicant defeated on the battlefield. They said no more NATO expansion. But not just that. They said NATO cannot cooperate in any fashion with Ukraine or any other former Soviet states. It said NATO can't put troops or weapons even on the soil of its own members in Eastern Europe, which would effectively mean dismantling the battle groups that have been put there since Russia's invasion of Ukraine in 2014. And they said America has to get all of its tactical, short range nuclear weapons out of Europe. And Mr. Putin has offered almost nothing in response.

And who exactly is he making these demands of all these talks going on this week and what likelihood that any of them will be granted?

Well, he's making them to NATO. The alliance. And NATO and Russia are going to have a meeting tomorrow on Wednesday to hash some of this out. But he really sees the demands as directed to America. Now, whether it's America or NATO, the answer to these is mostly no. Even some of the simpler demands are very tough to stomach. So, for example, take the question of whether NATO can expand any further. NATO has an open door policy which says in theory, any new country can join if it wants to and if it satisfies various requirements. In 2008, NATO said Ukraine will become a member of the alliance. And it has repeated that pledge every year since then. Ukraine is realistically not going to become a member of the alliance anytime in the next 10 years. It just isn't going to happen. The country has an open war with Russia. It has, you know, huge corruption, it has lots of problems. It isn't going to join the alliance. But NATO can't say that. It can't rule it out formally as Russia wants it to, because that would be giving into a Russian veto and it would be demoralizing reformers in Ukraine. So I think that gives you an indication of how hard it is to negotiate under the shadow of war in this way.

And it seems clear that the headline demands can't be met. But is there room for some compromise? Is there a diplomatic way to thread the needle here?

I think there are a couple of areas, Jason, where there's thinking on potential pragmatic cooperation. There is some talk that the two sides might find a way to revive parts of something called the Intermediate Range Nuclear Forces Treaty. It was a treaty that Donald Trump walked away from a few years ago because he felt Russia was cheating. The idea is that both sides would say, we're not going to put medium range missiles in Europe that can reach their targets within minutes and that make people very twitchy on military exercises. The suggestion is perhaps there could be more restraint on the size of exercises and they could also be more transparent about them. They could perhaps give more notice to the other side. Those are the sorts of areas on which you could perhaps see some kind of deals that might have benefit to both sides.

And is that enough diplomatic room to move, do you think, to defuse the larger questions?

I'm afraid to say probably not. What we saw in Geneva was Sergey Ryabkov, Russia's negotiator, reiterate again that the non expansion pledge for NATO was a red line.

We need ironclad, waterproof, bulletproof, legally binding guarantees, not assurances, not safeguards, guarantees with all the words shell must, everything that should be put in this bow, never ever becoming member of NATO.

Now, if that's true, this isn't going to go anywhere. These negotiations are going to collapse. And I think one interpretation that is held among many European officials and American officials is that Russia never really wanted these demands to be met in the first place. The bar was set so high that these demands were intended to be rejected, thus furnishing Mr. Putin with a pretext to invade Ukraine. His animus isn't really with missiles or exercises or technical things like that. It's with the entire setup of the way the post Cold War architecture was built.

I mean, the way that you've laid this out, seems that an invasion of Ukraine that we've been speaking about for so long is an inevitability.

Then I think a major Russian attack on Ukraine is a very, very real possibility. Now, Russia has to make that decision by the end of winter, of course, because it can't keep thousands of troops deployed thousands of miles from their bases without Morale plummeting, their vehicles breaking down. The ground is going to thaw at some point and then it will be too soft to roll tanks over it. So Russia has to make a decision. But I think should Putin make that choice, he will find huge economic sanctions imposed by Europe and America. He may find Russian banks are cut off from the interbank networks that sustain them. Things like the Swift network, for example. He may find America supporting Ukrainian resistance for a long time, just as America did in the Cold War in Afghanistan against Soviet invasion. But I think the biggest thing that should give Putin pause is that if he wants to stop NATO expansion, invading Ukraine may end up worsening that problem. It could galvanize NATO into putting even more troops in Eastern Europe, just as they did after the invasion of Ukraine the first time round in 2014. And it could even prompt countries like Sweden and Finland. You could see even those countries join the alliance on pretty short notice. So over the longer term, I would say that if Putin's aim is to conquer Ukraine and bring it to heel, perhaps he can do that. But if his aim is to stop NATO in its tracks and roll back its influence, well, he may achieve just the opposite.

Shishong, thank you very much for joining us.

Thank you, Jason.

Every January the world's finest economic minds gather for the American Economic Association's conference the outlining their latest research. It's a window into the discipline's hot topics this year, everything from criminal gangs and the rule of law to cryptocurrencies to electric vehicles. No prizes for guessing. A very hot topic though, how the pandemic is changing personal preferences, business tactics and economies as a whole. We put one of our finest economic minds on the task of taking it all in.

This year's conversations were a lot more forward looking than they tend to be. And I think that is entirely related to the fact that we're in the midst of a pandemic which seems to be changing the world economy in some pretty fundamental ways.

Ryan Avant is the Economist's Trade and International Economics editor.

Which made it kind of interesting and exciting in a way that isn't always the case when you get 10,000 economists together.

So that's the mood, but what about the academia of it? What is the economic research saying?

Supply chains have been a big story over the past year. What's going to happen? Is there going to be de globalization, things like that? There were a number of panels that kind of examined these questions. There were questions about long run growth, prospects for emerging markets. Is there still a world in the Future in which these places catch up and have income growth that sort of approaches those in the rich world. There were a lot of questions about China. How integrated is China's financial system with that of the West? Is there the potential for a crisis? This shadow hanging over all of them was that maybe things aren't going to look so good moving forward.

Forward. Well, the other point is that that must take some assumptions. It might even be said to be presumptuous to do all this prognosticating when in fact we're kind of still in the pandemic.

Well, we are. And you know, economists love to work with data. And the problem with the future is you don't have very good data on it. I think there was a sense of humility in that we don't quite know what models are going to apply in what ways. But I think there was an attempt to try to think through those questions and to have some sort of sense of what some of the possibilities were.

And I know that you have a particular fixation with the future of work. What was the mood at the conference as regards business and working?

So I think one of the big questions that kind of appeared in a number of the sessions was to what extent can we expect the working arrangements that we've seen over the past two years to stick? A lot of people have moved to remote work and I think the general upshot is that actually, yes, quite a lot of this is going to stick. As we sort of begin to put the pandemic behind us, not everyone is going to be remote. Probably more than half of all full time work is going to take place in person as before the pandemic. But a large minority of full time hours that are worked are going to take place either completely remote or. I think what's going to be more common is a hybrid working arrangement where, you know, you spend a few days at the office and a few days not in the office. And I think the reason that economists think that it's moving in this direction is that if you look at sort of the polling of employers over the past two years, at the beginning of the pandemic, a very large number of them didn't know what they were going to do post pandemic. If you said, what are your working arrangements going to be? They said, we don't know. As those employers have made up their mind, the vast majority have said, we're going to do hybrid.

So the economists have come to that conclusion. Is the idea that business uniformly, since we've all done the experiment, has all come to that same conclusion.

No, there are big differences across employers as to how enthusiastic they are about this new world. But there is a substantial share of firms that are open to it or that are eager to do it, and those, I think, are going to help drive this shift. But I think the fact that you have a significant share of firms that are willing to engage in this ends up changing the picture for a lot of workers. Because as, as Adam Ozemak, who's the chief economist of upwork, put it, if you're a Facebook employee and Facebook says during the pandemic, yeah, you know, we're going to switch to remote work, but you're not confident that a lot of employers are, it's really risky then to kind of sell your house in Silicon Valley and move to Montana. Because if Facebook changes its mind, then, you know, you're stuck in Montana and you have to tend bar. Not that there's anything wrong with tending bar. It's a noble profession, as you know, Jason. But if there are a lot of firms out there that are willing to engage your remote work, then you have a bit of insurance. If Facebook changes its mind, there are still other people there who will hire you. And so you're not stuck. So it doesn't take every firm shifting to really change the game. It can just be a substantial minority. That is enough.

So do you think that'll feed into a kind of competition between businesses for workers?

I think it definitely does. Another piece of information that the economists presented at some of these sessions was that there is a large, and not a majority, but a significant minority of employees are willing to look for another job if their employer does not offer remote work as an option, probably about a quarter. And so, you know, that's a large share of the workforce probably concentrated on the white collar workforce, but that's a large share of the white collar workforce.

And what about more broadly? Still the real sort of crystal ball stuff, I guess, for meetings like this. What's the view on how all of this affects economies as a whole, growth and productivity and the like?

Well, I think there had been a lot of hope during the pandemic, partly because governments responded differently to the pandemic than they did to the global financial crisis, and that they were much more generous with fiscal stimulus and with aid to households. And then partly because you had these sorts of transformations where companies were embracing digitalization and you had these shifts in how work was done. There was an expectation that perhaps we would get much stronger growth post pandemic. Maybe we would see rapid growth in productivity and that this would really be an opportunity for the US to kind of shift into a higher gear. I think that the takeaway from the conference was a bit more pessimistic.

How though, what are the concerns that get you to pessimism?

I think there was quite a lot of concern about a few things. One is that the labor force has gotten smaller as a consequence of the pandemic. That's going to be a huge drag on economic growth. There is a lot of concern about the macroeconomic picture moving forward. You know, it looks like governments have been spooked a bit by high inflation and may take some dramatic steps to rein that in and then not support the economy to the extent that they need to. After that, we did much better economically during the pandemic than I think we had reason to expect. But I think that doesn't necessarily mean that the decade to come is going to be, you know, it's going to perform above expectations in the same way. I think actually that it may end up being a bit of a disappointment. Hopefully I'll be wrong. Hopefully I'll be here talking with you next year, in a few years and we'll be talking about the great post pandemic boom. But I think that wasn't necessarily the outlook that one received at the conference.

Ryan, thanks very much for joining us.

Always a pleasure, Jason.

Today we're making Cuban mojo, which is also known as a mojo criollo. It's a garlic sauce that's great as a dip or a marinade.

Cubans love, I mean, really love garlic. So much so that many of them call it white gold. It's a key ingredient in countless dishes. It's critical to the flavor of Cuban cuisine.

I'm going to show you how to make ropa vieja, which is a traditional Cuban beef stew.

All right, garlic time. Let's take our garlic. So we got three cloves here actually.

Look at that. I've got four. That's okay.

I like a little extra garlic.

But like so many things on the island, it's often in short sight supply.

There's a shortage of garlic in Cuba for many reasons, but mainly the long standing lack of fertilizers and pesticide make garlic particularly hard to grow.

Roseanne Lake is the Economist's Cuba correspondent.

Also, garlic is something that's only harvested once a year in January, which means that its price skyrockets around November and December, which is when its supply is most depleted. And because of the holidays, there's a particularly high demand for it. As a result, garlic sellers on the streets of Havana have resorted to peddling it from black backpacks. Towards the end of the year, this is especially common. You'll hear them saying, ajo, ajo, bendo, ajo. You know, selling garlic as if they were selling knockoff luxury handbags or electronics.

Okay, so what, what am I going.

To pay these days? It looks like you're going to pay over 250 pesos a pound, which is the equivalent of 10 US dollars. This is up from 60 pesos a pound just two months ago. So. So, you know, the prices increase pretty considerably. And this is because there's a ring of people in Cuba known as A that make money by buying garlic from farmers. They hold it and then they sell it a few months later.

And how much money is there in this business?

So these ajeros are savvy garlic resellers. They will buy out crops from garlic farmers. They'll pay between $50,000 to $100,000 to buy out yearly garlic harvests from the farmers. They then resell them to a network of other resellers, who then resell them to other resellers and so on. It's almost like a little garlic Ponzi scheme. And these make so much more money from the garlic trade than you would from depositing money into banks which pay no interest. One of the farmers that I spoke with said, in Cuba, if you want to get wealthy, you know, forget gold, forget crypto, forget investments, Buy garlic. These are hero kingpins, actually. They make so much cash from the transactions, everything set in cash, that there are banks in, you know, in the provinces that sometimes have to close to the public while they process the sacks of money that are being dropped off to be deposited by these after a big harvest.

This is like a garlic mafia.

It is exactly like a garlic mafia, and it's been around for a very long time. So in the 1980s, Fidel Castro initiated this way of farming. He almost kind of invited this by letting farmers set their own prices without any limitations. Imagine that, right? Farmers being able to sell what they produce without any limitations. And he gave them the freedom to sell 20% of their output privately on the private market. The rest they needed to hand over to the state. But by the spring of 1986, he discovered that a very sneaky, naughty garlic farmer was making upwards of $50,000 a year by privately selling what he had left over after meeting his quota for the state. Fidel was outraged that people were behaving like what he described as capitalist in disguise and in prevent, he closed all of the private farmers markets where the garlic was being sold, but also a lot of other produce. And this was very damaging because, you know, for the first time in a very long time, it was easier to buy produce because, you know, farmers had incentive to produce more, to be able to sell it because there weren't controls on their prices and, you know, up to 20% of what they produced they could sell. So that incentive obviously went away and so did a steady production of food and the ease of buying food at the market. It's a problem that still persists today.

Which contributes to the fact that it seems like almost every time we speak about Cuba, you speak of cues to get into stores that may or may not have anything on the shelves.

Yes. I feel like every time we speak, we are talking about long queues to get into stores and food shortages and also sort of quirky solutions to the food shortages that aren't very well thought out. There were some leaders in Cuba who were encouraging Cubans to eat Curiel, a member of the rodent family, a relative of the guinea pig, in place of pork, which is also very hard to come by and also a very important staple of Cuban cuisine. I wonder where Cuban cuisine would actually be without pork and without garlic. I guess we'll have to stay tuned to see what the government proposes that people consume in place of it.

Roseanne, thanks very much for joining us.

Thank you, Jason.

That's all for this episode of the Intelligence. If you like us, leave us a rating and a review and you can subscribe to the economist@examiner.com intelligenceoffer. The link is in the show Notes. See you back here tomorrow. Sam.