Wide Latin noL Speaker 1: Ukraine says it's in danger of losing the war.
Wide Latin noL Speaker 1: And Russia is more confident of victory than ever.
Wide Latin noL Speaker 1: And here’s one of the biggest reasons: oil.
Wide Latin noL Speaker 1: Russia’s most important and most enduring weapon.
Wide Latin noL Speaker 1: The country raked in at least $218 billion from oil in 2022.
Wide Latin noL Speaker 1: That's why western leaders made it the MAIN target of
Wide Latin noL Speaker 1: their sanctions against Moscow.
Wide Latin noL Speaker 1: The oil price cap is the west’s most important sanction.
Wide Latin noL Speaker 1: It was designed to keep Russian oil flowing to the global market -
Wide Latin noL Speaker 1: whilst also limiting the amount of money the Kremlin could
Wide Latin noL Speaker 1: make from it.
Wide Latin noL Speaker 1: For a while, it worked.
Wide Latin noL Speaker 1: Not anymore.
Wide Latin noL Speaker 1: When the price cap was introduced, it had a clear impact on the price
Wide Latin noL Speaker 1: Russia got for its oil.
Wide Latin noL Speaker 1: But for almost six months now, Russian oil has been sold on global
Wide Latin noL Speaker 1: markets well above the price cap of $60 - the rate at which G7 states
Wide Latin noL Speaker 1: cut off access to their services.
Wide Latin noL Speaker 2: The first half of 2023, Putin really suffered from
Wide Latin noL Speaker 2: the oil price cap.
Wide Latin noL Speaker 2: Now he learned how to circumvent it.
In this episode, we’ll look at
Wide Latin noL Speaker 1: how Russia rejuvenated its oil revenues - and we’ll consider what
Wide Latin noL Speaker 1: options Ukraine’s allies have to hit back.
Wide Latin noL Speaker 2: There is kind of a sense of urgency to make some adjustments to
Wide Latin noL Speaker 2: the sanctions regime now to make sure that pressure on
Wide Latin noL Speaker 2: Russia is maintained.
Wide Latin noL Speaker 1: As the war drags on, questions are being asked of how long both sides
Wide Latin noL Speaker 1: can fund the fight.
Wide Latin noL Speaker 1: There are doubts over how long western support for Ukraine will
Wide Latin noL Speaker 1: last - and Russia is ramping up military spending.
Wide Latin noL Speaker 2: The huge increase in budget spending for war next year, we are
Wide Latin noL Speaker 2: talking about going from 4% of GDP to 6% of GDP.
Wide Latin noL Speaker 2: This is a lot.
Wide Latin noL Speaker 2: How long Russia can sustain this war?
Wide Latin noL Speaker 2: Unfortunately for an extended period of time.
Wide Latin noL Speaker 1: Welcome to Business Beyond.
Wide Latin noL Speaker 1: Let’s go back a bit.
Wide Latin noL Speaker 1: After the full-scale Russian invasion
of Ukraine in February 2022
the US, the EU and other western powers
Wide Latin noL Speaker 1: introduced a range of sanctions
which mostly targeted Russia’s financial system.
Wide Latin noL Speaker 1: Hundreds of billions of dollars worth of Russian Central Bank reserves
Wide Latin noL Speaker 1: held abroad were frozen, while the country was excluded from
Wide Latin noL Speaker 1: the Swift international payments system.
Wide Latin noL Speaker 1: These sanctions are designed
to take a heavy toll
Wide Latin noL Speaker 1: on the Kremlin's interests and their ability to finance war.
Wide Latin noL Speaker 1: The Russian economy weathered those better than many experts
Wide Latin noL Speaker 1: expected it to.
Wide Latin noL Speaker 2: But they still had an effect.
Wide Latin noL Speaker 2: So imagine the world without sanctions.
Wide Latin noL Speaker 2: So reserves are not frozen.
Wide Latin noL Speaker 2: Putin has full access to Western military technology or
Wide Latin noL Speaker 2: dual purpose technology.
Wide Latin noL Speaker 2: Putin can trade with whoever he wants.
Wide Latin noL Speaker 2: So if you think about this world, I guess the outcome of the war on
Wide Latin noL Speaker 2: the battlefield in Ukraine would have been very different
in favor of Putin.
Wide Latin noL Speaker 1: The EU was slow to target Russian gas and oil early on,
Wide Latin noL Speaker 1: mostly because its own economy was so reliant on it.
Wide Latin noL Speaker 1: Part of the reason the Kremlin made so much money in 2022.
Wide Latin noL Speaker 1: Late last year, the EU finally took action on Russian oil,
Wide Latin noL Speaker 1: along with countries from the G7 and Australia.
Wide Latin noL Speaker 1: That was with the introduction of something we’ve mentioned already
Wide Latin noL Speaker 1: and which you’re going to hear a lot more about in this episode -
Wide Latin noL Speaker 1: the price cap.
Wide Latin noL Speaker 2: The EU decided that it was going to
implement its embargo on Russian
Wide Latin noL Speaker 2: oil and petroleum products.
Wide Latin noL Speaker 2: And part of that embargo was also a prohibition for European service
Wide Latin noL Speaker 2: providers to participate in the trade with Russian oil.
Wide Latin noL Speaker 2: And this would be, for instance, shipping companies
Wide Latin noL Speaker 1: and maritime insurance companies.
Wide Latin noL Speaker 1: But energy prices soared throughout 2022 and there were concerns
Wide Latin noL Speaker 1: the embargo would push them up again, which would defeat the purpose
Wide Latin noL Speaker 1: of the sanction.
Wide Latin noL Speaker 2: Out of this concern resulted the concept of the price cap, which
Wide Latin noL Speaker 2: is really a very complex intervention into global oil markets.
Wide Latin noL Speaker 2: And the basic idea is that this provision of the embargo
Wide Latin noL Speaker 2: that would have prohibited European companies from participating was
Wide Latin noL Speaker 2: rolled back as long as the oil was sold under a certain threshold,
Wide Latin noL Speaker 2: which was later set at $60 per barrel.
Wide Latin noL Speaker 1: The oil price cap aims to keep Russian oil on the global market -
Wide Latin noL Speaker 1: but also aims to limit the price it can be sold for.
Wide Latin noL Speaker 1: Companies from the EU or G7 countries can provide services such as
Wide Latin noL Speaker 1: insurance for the transit of Russian oil… but only if it is
Wide Latin noL Speaker 1: shown that the oil was traded for no more than $60 per barrel -
Wide Latin noL Speaker 1: well below average global oil prices.
Wide Latin noL Speaker 1: It was an unusual and somewhat daring intervention.
Wide Latin noL Speaker 1: But in its first few months, it worked like a charm.
Wide Latin noL Speaker 1: The cap had an
immediate impact on revenues.
Wide Latin noL Speaker 1: In the first six months of 2023,
Russia took in 47% less in oil revenues
Wide Latin noL Speaker 1: than it did in the first six months of 2022.
Wide Latin noL Speaker 1: In April alone,
revenues were 67% down year on year.
Broadly speaking, the energy sanctions regime had
Wide Latin noL Speaker 2: the desired impact.
Wide Latin noL Speaker 2: We know that Russian oil remained on the market.
Wide Latin noL Speaker 2: Prices did not rise until at least the OPEC plus production cuts later
Wide Latin noL Speaker 2: in the year, and Russian export earnings fell sharply, we think,
Wide Latin noL Speaker 2: by about 30% year to date.
Wide Latin noL Speaker 2: And budget revenues from oil declined by something between
35 and 40%.
Wide Latin noL Speaker 1: But even before the cap was introduced, Russia was working on
Wide Latin noL Speaker 1: ways to get around it.
Wide Latin noL Speaker 1: One of the main ways is through its so-called shadow fleet.
Wide Latin noL Speaker 2: Russia's ability to ship oil on vessels that are
Wide Latin noL Speaker 2: essentially sanctions proof.
Wide Latin noL Speaker 2: So this is what is often talked about as the shadow fleet.
Wide Latin noL Speaker 2: It's a bit of a question what exactly constitutes shadow fleet vessel,
Wide Latin noL Speaker 2: but it essentially means Russia's ability to use ships
Wide Latin noL Speaker 2: that are not owned by an entity in the G7 or EU, and that is not
Wide Latin noL Speaker 2: insured by an entity in these jurisdictions.
Wide Latin noL Speaker 2: And then the price cap doesn't apply.
Wide Latin noL Speaker 1: Russia has amassed a fleet of hundreds of often ageing tankers to
Wide Latin noL Speaker 1: move its oil around the world without being subject to the cap.
Wide Latin noL Speaker 1: They typically have complex ownership structures.
Wide Latin noL Speaker 1: Many operate without proper insurance.
Wide Latin noL Speaker 1: And they use various methods to avoid detection, including creating
Wide Latin noL Speaker 1: fake location signals.
Wide Latin noL Speaker 1: Being able to sell oil without abiding by the cap means Russia is
Wide Latin noL Speaker 1: now getting close to average global prices per barrel.
Wide Latin noL Speaker 2: The mechanism through which it worked seems to be
Wide Latin noL Speaker 2: losing some steam.
Wide Latin noL Speaker 2: So this mechanism is the spread between global prices and prices
Wide Latin noL Speaker 2: for Russian oil, in particular Ural's crude oil, which is what is
Wide Latin noL Speaker 2: exported from Russia's ports in the Baltic Sea and Black Sea,
Wide Latin noL Speaker 2: to markets originally in Europe and now increasingly to India.
Wide Latin noL Speaker 2: This spread was about $40 per barrel in January, has now come
Wide Latin noL Speaker 2: down to around $15 per barrel.
Wide Latin noL Speaker 1: It’s not only the shadow fleet that helps Russia beat sanctions.
Wide Latin noL Speaker 1: There is also the problem known as “attestation fraud” - that is where
Wide Latin noL Speaker 1: paperwork is falsified to fool G7 shipping service providers into
Wide Latin noL Speaker 1: thinking the cargo is compliant with the price cap - when in
Wide Latin noL Speaker 1: reality it has been sold at rates far above it.
Wide Latin noL Speaker 2: We see many kind of new entities, a lot of them Dubai based, that are
Wide Latin noL Speaker 2: now trading Russian oil.
Wide Latin noL Speaker 2: And these are suspected also to be linked to Russian oil companies.
Wide Latin noL Speaker 2: And these are the companies that are providing
Wide Latin noL Speaker 2: the pricing information.
Wide Latin noL Speaker 2: We believe that some of this pricing information was
Wide Latin noL Speaker 1: falsified.
Wide Latin noL Speaker 1: Experts say Russia barely sells any oil below the price cap anymore -
Wide Latin noL Speaker 1: and goes to considerable expense to evade it.
Wide Latin noL Speaker 2: It costs money.
Wide Latin noL Speaker 2: Shadow tanker fleet costs money.
Wide Latin noL Speaker 2: Transportation costs is higher.
Wide Latin noL Speaker 2: Still, if you look at the data from July, August, September 2023
Wide Latin noL Speaker 2: already it looks like Russia is doing okay.
Wide Latin noL Speaker 2: And if you compare the third quarter 2023 to third quarter 2022,
Wide Latin noL Speaker 2: the difference is much, much smaller.
Wide Latin noL Speaker 1: The data for the last few months
does indeed confirm just how much
Wide Latin noL Speaker 1: Russia's efforts have worked.
Wide Latin noL Speaker 1: From July-October this year,
Russian oil revenues exceeded those
Wide Latin noL Speaker 1: of the same period last year by 34%.
Wide Latin noL Speaker 1: In October, the country took
in a massive $16.6 billion from
Wide Latin noL Speaker 1: its oil revenues alone.
Wide Latin noL Speaker 1: That's a more than 50% increase
on the same month last year and
Wide Latin noL Speaker 1: the most of any month since April 2022.
Finding ways to beat the oil price cup
Wide Latin noL Speaker 1: was pretty tricky for Russia,
Wide Latin noL Speaker 1: for a while at least, but
Wide Latin noL Speaker 1: finding buyers was much easier.
Wide Latin noL Speaker 1: Two countries stand out when it comes to Russia’s post
Wide Latin noL Speaker 1: invasion economic order.
Wide Latin noL Speaker 1: China and India.
Wide Latin noL Speaker 1: Their willingness to trade with the sanctioned regime has seriously
Wide Latin noL Speaker 1: helped Russia maintain some kind of economic stability - and in turn,
Wide Latin noL Speaker 1: propel its war effort.
Wide Latin noL Speaker 2: China now gets just under
20% of its oil from Russia.
Wide Latin noL Speaker 1: But that's been an increasing trend.
Wide Latin noL Speaker 2: I think before the war it was about 15%.
Wide Latin noL Speaker 2: So it's a modest increase.
Wide Latin noL Speaker 1: For India, India began with about 1%, and now it's more than 20%.
Wide Latin noL Speaker 2: So that was a huge change.
Wide Latin noL Speaker 1: China’s growing geo-political partnership with Russia meant
Wide Latin noL Speaker 1: stepping up trade relations was an easy decision for Beijing.
Russia is a strategic partner,
Wide Latin noL Speaker 2: so China was trying to help Russia in this situation, but also to
Wide Latin noL Speaker 1: benefit from any deals that might be available.
Wide Latin noL Speaker 1: I don't know that this was completely an altruistic effort by
Wide Latin noL Speaker 1: China to backstop the Russian economy, but I think China saw it
Wide Latin noL Speaker 1: as an opportunity to increase economic ties with Russia, which
Wide Latin noL Speaker 1: had always been a weak point in their partnership.
Wide Latin noL Speaker 1: While China has gradually increased the amount of oil it imports from
Wide Latin noL Speaker 1: Russia, it has become especially important for Moscow
Wide Latin noL Speaker 1: as a technological partner, particularly for semiconductors.
Wide Latin noL Speaker 1: Such products are called “dual purpose” in that they are vital for
Wide Latin noL Speaker 1: military production, but also have other uses.
Wide Latin noL Speaker 2: Where China is playing a huge role is when it comes to Russia's
Wide Latin noL Speaker 2: ability to buy certain things it needs for its military production.
Wide Latin noL Speaker 2: So these are the kind of Western components that we're talking about
Wide Latin noL Speaker 1: that are now largely routed to China on its way to Russia.
Wide Latin noL Speaker 1: Semiconductors, for example, can be used in a variety of technologies
Wide Latin noL Speaker 1: that have military applications, but also things like heavy trucks
Wide Latin noL Speaker 1: that are needed on the battlefield and are not on the surface
Wide Latin noL Speaker 1: a weapon, but they are certainly used in the battle space in Ukraine.
Wide Latin noL Speaker 2: China has not sold weapons to Russia.
Wide Latin noL Speaker 1: Doing so would result in heavy sanctions.
Wide Latin noL Speaker 1: But expanding trade with Moscow - as India has done - has helped
Wide Latin noL Speaker 1: the Kremlin fund its war.
Wide Latin noL Speaker 1: 2024 is a critical year for Ukraine.
Wide Latin noL Speaker 1: Its counter offensive in 2023 did not yield the results
Wide Latin noL Speaker 1: its allies hoped for.
Wide Latin noL Speaker 1: And the sense that Russia had lost
momentum - very apparent in
Wide Latin noL Speaker 1: the early months of this year as sanctions hit hard - has passed.
Wide Latin noL Speaker 1: There are also serious doubts about how long western support for
Wide Latin noL Speaker 1: Ukraine will last.
Wide Latin noL Speaker 1: The possible return of Donald Trump as US President is just one reason,
Wide Latin noL Speaker 1: given his previous closeness with Putin...
Wide Latin noL Speaker 1: Another is the new conflict in the Middle East, which has diverted
Wide Latin noL Speaker 1: attention from Ukraine.
Wide Latin noL Speaker 1: Meanwhile, Moscow has announced it will ramp up defence spending next
Wide Latin noL Speaker 1: year as part of a record budget of nearly $380 billion.
Wide Latin noL Speaker 1: Much of that huge 25% hike will go towards defence spending.
Wide Latin noL Speaker 1: In fact, Defence and security will comprise a massive 40% of
Wide Latin noL Speaker 1: the total budget.
For Putin the priorities are war
and staying in power.
Wide Latin noL Speaker 2: So he spends more money on war.
Wide Latin noL Speaker 2: He spends more money on domestic security, on the security of
Wide Latin noL Speaker 2: the regime, and he spends more money on propaganda.
Wide Latin noL Speaker 2: So they are not worried about the falling incomes of
Wide Latin noL Speaker 2: the Russian population.
Wide Latin noL Speaker 2: That's not a major concern.
Wide Latin noL Speaker 2: The Russian economy is difficult to assess.
Wide Latin noL Speaker 1: For a start, there is distrust around official
Wide Latin noL Speaker 1: figures from Moscow.
Wide Latin noL Speaker 1: Another issue is the nature of the country’s war economy itself.
Wide Latin noL Speaker 2: GDP in wartime is different from GDP in peacetime.
Wide Latin noL Speaker 2: So in the wartime I pay for a tank.
Wide Latin noL Speaker 2: Then this tank is destroyed next week.
Wide Latin noL Speaker 2: And this is literally the case.
Wide Latin noL Speaker 2:
Wide Latin noL Speaker 2: Average lifetime of a tank on a battleground several days.
Wide Latin noL Speaker 2: So this tank is destroyed.
Wide Latin noL Speaker 2: So this money has no positive impact on the quality of life
Wide Latin noL Speaker 2: of ordinary Russians.
Wide Latin noL Speaker 2: But it looks like we produced a tank worth of GDP.
Wide Latin noL Speaker 1: As well as next year’s ramped up budget, the Kremlin recently added
Wide Latin noL Speaker 1: nearly $40 billion to the budget for 2023 - reflecting how much it
Wide Latin noL Speaker 1: was pumping into its war effort and raising concerns over inflationary
Wide Latin noL Speaker 1: risks in an already stretched economy.
Wide Latin noL Speaker 1: Yet any idea that the strain on the Russian economy could derail
Wide Latin noL Speaker 1: either Putin or the war effort itself, looks increasingly unrealistic.
Wide Latin noL Speaker 2: How long Russia can sustain this war? Unfortunately for an
Wide Latin noL Speaker 2: extended period of time, because this is not just about fiscal revenues.
Wide Latin noL Speaker 2: It's also about Russia's ability to finance any kind of deficit.
Wide Latin noL Speaker 2: Right now the country has been able to get the deficit under control
Wide Latin noL Speaker 2: for most of 2023,
Wide Latin noL Speaker 2: so it's not really a big issue at this time.
Wide Latin noL Speaker 2: The real incomes of the Russian
people has already fallen since
Wide Latin noL Speaker 2: the beginning of the war,
and quite substantially,
Wide Latin noL Speaker 2: but there is still a room to go, right?
Wide Latin noL Speaker 2: The thing is that the economy is not something like you.
Wide Latin noL Speaker 2: Like like the light, you switch it off and everything collapses.
Wide Latin noL Speaker 2: People live worse than they were living back two years ago.
Wide Latin noL Speaker 2: But still there is a room to their lives worsening without
causing, I don't know, a major political change.
Wide Latin noL Speaker 1: Russia’s capacity to keep going doesn’t mean the western alliance
Wide Latin noL Speaker 1: doesn't have options.
Wide Latin noL Speaker 1: There’s little doubt among experts that something needs to be done
Wide Latin noL Speaker 1: and done fast.
Wide Latin noL Speaker 2: So if he has two percentage points of GDP in oil and gas revenues,
Wide Latin noL Speaker 2: he will spend it on the war. If oil price goes up,
Wide Latin noL Speaker 2: because, for example, events in Middle East,
Wide Latin noL Speaker 2: he'll be happy to go further.
Wide Latin noL Speaker 2: And that's his preference.
Wide Latin noL Speaker 2: And so I think the tightening the sanctions to reduce the amount
Wide Latin noL Speaker 2: of money Putin can spend on the war is what needs to be done.
Wide Latin noL Speaker 2: There are things that need to be done to make sure that pressure on
Wide Latin noL Speaker 2: Russia is maintained.
Wide Latin noL Speaker 2: Otherwise the country will earn significantly more from its oil
Wide Latin noL Speaker 2: exports going forward.
Wide Latin noL Speaker 2: And it's also a problem with the credibility of
Wide Latin noL Speaker 2: the broader sanctions received.
Wide Latin noL Speaker 1: The European Commission has already agreed a new round of sanctions
Wide Latin noL Speaker 1: against Russia, although the exact details have not been released.
Wide Latin noL Speaker 1: The Commission confirmed the following to DW in a statement:
Wide Latin noL Speaker 1: “As President von der Leyen said recently, the new package will include:
Wide Latin noL Speaker 1: ‘…new import and export bans,
actions to tighten the oil price cap,
Wide Latin noL Speaker 1: and tough measures on third-country companies which
Wide Latin noL Speaker 1: circumvent the sanctions.’.”
It’s now up to the 27 EU member states
Wide Latin noL Speaker 1: to agree unanimously to the proposals, but there is no
Wide Latin noL Speaker 1: clear timeline on when that may happen.
Wide Latin noL Speaker 1: There have been reports that the proposals include plans
Wide Latin noL Speaker 1: for Denmark to be given the task of inspecting and potentially blocking
Wide Latin noL Speaker 1: tankers carrying Russian oil through the narrow Danish straits.
Wide Latin noL Speaker 1: More than half of all Russia's seaborne oil exports
Wide Latin noL Speaker 1: cross the straits.
Wide Latin noL Speaker 1: It is believed that Danish authorities would target ships
Wide Latin noL Speaker 1: operating without western insurance, based on laws to do
with environmental risk.
Wide Latin noL Speaker 2: With Russia having moved on from kind of Western insurance to other
Wide Latin noL Speaker 2: schemes, we believe that these insurance companies are
Wide Latin noL Speaker 2: actually not financially equipped to pay out in the case of
Wide Latin noL Speaker 2: an ecological disaster.
Wide Latin noL Speaker 1: It’s a genuine risk, given how old some of the tankers Russia
Wide Latin noL Speaker 1: is using are.
Wide Latin noL Speaker 1: But introducing this sanction could cut Russia’s revenues.
Wide Latin noL Speaker 2: If we require, for instance, Baltic Sea coastal states, if we require
Wide Latin noL Speaker 2: certain insurance standards, that it would also force Russia to
Wide Latin noL Speaker 2: rely again on Western maritime insurance companies.
Wide Latin noL Speaker 2: And this would mean that the leverage of the price cap
Wide Latin noL Speaker 2: system remains in place for longer.
Wide Latin noL Speaker 2: Then there’s the question of enforcement.
Wide Latin noL Speaker 1: We mentioned attestation fraud earlier.
Wide Latin noL Speaker 1: That’s where paperwork is falsified to suggest ships are
Wide Latin noL Speaker 1: complying with sanctions.
Wide Latin noL Speaker 1: It’s another area which needs to be tightened significantly, if
Wide Latin noL Speaker 1: Russia’s revenues are to be restricted.
Wide Latin noL Speaker 1: Last month, the US sanctioned three UAE-based shipping companies for
Wide Latin noL Speaker 1: exporting Russian oil above the price cap.
Wide Latin noL Speaker 1: Benjamin Hilgenstock says the problem is rampant and current
Wide Latin noL Speaker 1: ways of dealing with it are nowhere near enough.
Wide Latin noL Speaker 2: It's very difficult for enforcing
authorities to investigate and to
Wide Latin noL Speaker 2: determine if a violation actually took place here.
Wide Latin noL Speaker 2: And what we're thinking about here is original sales contracts, bank
Wide Latin noL Speaker 2: transactions, related customs declarations that allow enforcing
Wide Latin noL Speaker 2: agencies to determine at what price actually this cargo was sold.
Wide Latin noL Speaker 2: Right now, you only have this attestation, which is
Wide Latin noL Speaker 2: essentially a one page document on which someone says this was sold at
Wide Latin noL Speaker 2: price cap or below and then signs.
Wide Latin noL Speaker 2: And that is entirely inadequate.
Wide Latin noL Speaker 1: So there’s Russia itself and then the various companies providing
Wide Latin noL Speaker 1: dodgy services to help it evade the price cap.
Wide Latin noL Speaker 1: But what about sanctioning the likes of India and China, who
Wide Latin noL Speaker 1: buy so much of the oil?
Wide Latin noL Speaker 2: We should remember that nobody wants to be sanctioned by
Wide Latin noL Speaker 2: the US or Europe.
Wide Latin noL Speaker 2: This is very costly for anybody who wants to work in the global market.
Wide Latin noL Speaker 2: And so I think the Western coalition should do more of that.
Wide Latin noL Speaker 2: And remember, oil price cap is designed in such a way that it's
Wide Latin noL Speaker 2: good for Indian buyers or Chinese buyers.
Wide Latin noL Speaker 1: In theory, it’s in India’s interests to pay less
Wide Latin noL Speaker 1: for Russia’s oil.
Wide Latin noL Speaker 1: They could potentially tell Russia that fear of sanctions means they
Wide Latin noL Speaker 1: won’t pay above the cap.
Wide Latin noL Speaker 1: But there are clear reasons why sanctions against India or
Wide Latin noL Speaker 1: China are unlikely.
Wide Latin noL Speaker 2: Europe doesn't want to sanction
China because Europe wants to play
Wide Latin noL Speaker 2: this role of a good cop, because in the US you have a bipartisan
Wide Latin noL Speaker 2: consensus to be a bad cop vis a vis China.
Wide Latin noL Speaker 2: US doesn't want to sanction India because India is an important
Wide Latin noL Speaker 2: counterweight in the standoff between US and China.
Wide Latin noL Speaker 1: So we don't see unity within Western coalition to go this.
Wide Latin noL Speaker 1: In the nearly two years since Putin’s troops poured across
Wide Latin noL Speaker 1: Ukraine’s borders, Russia’s economy has been hit
Wide Latin noL Speaker 1: with unprecedented sanctions.
Wide Latin noL Speaker 1: Its military campaign has floundered.
Wide Latin noL Speaker 1: It’s been written off.
Wide Latin noL Speaker 1: But it’s still going.
Wide Latin noL Speaker 1: And the huge increase in the defence budget suggests Putin
Wide Latin noL Speaker 1: still has serious means at his disposal.
Wide Latin noL Speaker 2: With Putin in charge, with this openly repressive regime in
Wide Latin noL Speaker 2: charge, I think they will manage as long as the economy is not in
Wide Latin noL Speaker 2: ruins, which is not the case and is not the forecast for the time
Wide Latin noL Speaker 2: being.
Wide Latin noL Speaker 2: 2% here, 5% there is not going to break the political equilibrium.
Wide Latin noL Speaker 2: We should dispense with the notion that sanctions alone can end
Wide Latin noL Speaker 2: this war because they mean that Russia can no longer finance
Wide Latin noL Speaker 2: its war expenditures.
Wide Latin noL Speaker 2: I don't think that's realistic.
Wide Latin noL Speaker 2: Ultimately, we're also talking about a dictatorship.
Wide Latin noL Speaker 2: And if you prioritize conducting this war over everything else, then
Wide Latin noL Speaker 2: you can shift expenditures.
Wide Latin noL Speaker 1: Given the limited battlefield progress for Ukraine recently - and
Wide Latin noL Speaker 1: doubts over continued western support - pressure is on to show
Wide Latin noL Speaker 1: that sanctions still matter.
Wide Latin noL Speaker 2: I don't think any of these developments or measures
Wide Latin noL Speaker 2: taken by themselves determine Russia's ability to conduct this war.
Wide Latin noL Speaker 2: It just makes it increasingly more painful,
Wide Latin noL Speaker 2: and that's why we should keep working on making sure
Wide Latin noL Speaker 2: that the energy sanctions regime remains effective.
Wide Latin noL Speaker 1: Those who know Russia - and Putin - best, say no amount of financial
Wide Latin noL Speaker 1: hardship will make him stop.
Wide Latin noL Speaker 2: The war is not going as they planned, but I think they have no
Wide Latin noL Speaker 2: doubt in their mind that they need to continue this war, and he will
Wide Latin noL Speaker 2: continue the war until his last breath.
Wide Latin noL Speaker 1: A sobering thought for those willing Ukraine to succeed.
Wide Latin noL Speaker 1: But also a call to action, to keep targeting his and Russia’s
Wide Latin noL Speaker 1: most powerful weapon.
That’s it from this
episode of Business Beyond.
Wide Latin noL Speaker 1: If you found this one
informative, you’ll probably be interested
Wide Latin noL Speaker 1: in some of the others
that we have released recently,
so do check them out on our youtube channel.
Wide Latin noL Speaker 1: Thanks for watching and until the next time,
Wide Latin noL Speaker 1: take care.