Podcast: Sanctioning Oligarchs

 

This week on my TOL Podcast, I mused about the logic of the economic measures against Russia, particularly the oligarchs. Below the embedded podcast I have a few more tings pinned on the wall.

New Things Pinned to the Wall

ISW reports that 

"The Kremlin is also taking measures to prop up Russian businesses and targeted sectors. Russian President Vladimir Putin signed a decree to accelerate Russia’s domestic IT development on March 2, likely to minimize future Russian reliance on Western technology and imports following the withdrawals of Western tech companies from the Russian market. Mishustin also announced additional government provisions including preferential interest rates and tax and inspection exemptions for Russia’s IT sector. State Duma Chairman Vyacheslav Volodin created the Council for Social Protection and Support of Citizens under Sanctions on March 2."

U.S. launches 'KleptoCapture' task force : Reuters quotes: "To those bolstering the Russian regime through corruption and sanctions evasion: we will deprive you of safe haven and hold you accountable," said Deputy Attorney General Lisa Monaco. "Oligarchs be warned: we will use every tool to freeze and seize your criminal proceeds."

BBC Reports on Liz Truss (Mar 3, 6:13 EST):

Uk Foreign Secretary Truss: "We need to... degrade the Russian economy." "We need to make sure... that the Russian economy is crippled so it is unable to continue to fund Putin and the war machine."

CNN Reports (Mar 4): Putin: “We will just have to move some projects a little to the right, to acquire additional competencies. But we will still solve the problems that we face” he said. “In the end, we will even benefit from this because we will acquire additional competencies.”

CNN Reports (Mar 4): European Union's foreign policy chief Josep Borrell: “We are not on the regime change. The sanctions are not in order to provoke a regime change in Russia,” Borrell said. "On the contrary, the sanctions have been triggered by the war. And the purpose is to weaken the Russian economy, to make the Russian economy feel the weight of the consequences and to increase, strengthen the position of the Ukrainians on the coming negotiations. But nothing about regime change," he said.

The Economic War: Pinning Factoids to the Wall 1

 

Developments in the economic measures being taken against Russia are coming too fast to try to keep up with here. However, I do want to pin some things to the wall (hence the picture above) as they come up. I numbered this post as I expect to do more of this as events occurs and my broader research gets started.

What catches my mind's eye in these news pieces is the characterization of the purpose of the economic measures the west is taking against Russia. 

French minister declares economic 'war' on Russia, and then beats a retreat: The key quote from the French Finance Minister Bruno Le Maire here is "We're waging an all-out economic and financial war on Russia. We will cause the collapse of the Russian economy." So someone  else is also using the word "war" here. While I have said I don't want to get too hung up on using the word, I do have to point out that it is both evocative and ambiguous. It is evocative of a major effort against another nation but there are many different end-goals in wars and various strategies used to achieve them,  hence the ambiguity.

Medvedev Tweet: Dmitry Medvedev tweeted : "Today, some French minister has said that they declared an economic war on Russia. Watch your tongue, gentlemen! And don’t forget that in human history, economic wars quite often turned into real ones"  Looks like an attempt to use threats of forces in response to economic pressure. Also, begs the question of how often economic conflicts have turned into wars. I suppose US embargoes against Japan before WWII would be an example. Not sure how many more there are. 

Canada sanctions Putin, Lavrov in bid to 'suffocate' regime: Trudeau actually talked in terms of making it difficult for Putin to "finance his brutalities." The Canadian Foreign Minister, Mélanie Jol, added the more bellicose “We want to make sure that we’re suffocating the Russian regime — that’s our goal.” 

CNN Business, Feb 28: Their reports contains a couple  statements about the sanctioners strategies

• A Senior US Official:  "Our strategy, to put it simply, is to make sure that the Russian economy goes backward as long as President Putin decides to go forward with his invasion of Ukraine," Note that this is a counter-value strategy meant to inflict pain.
• European Commission President Ursula von der Leyen: "We will ... ban the transactions of Russia's central bank and freeze all its assets, to prevent it from financing Putin's war." Note that this is more of a denial strategy meant to limit capability.

Two of Russia's billionaires call for peace in Ukraine: In other news, Reuters reported that Mikhail Fridman and Oleg Deripaska, two Russian billionaires, have called for an end to the war. It will be interesting to see how this works out for them in terms of retaliation from the regime.

The New Economic War (Already in Progress)

     Though the future path of the war in Ukraine is still uncertain, it is a safe bet that the Russian invasion of Ukraine is going to provoke a long-term economic conflict between the NATO members and Russia. Indeed, such a conflict has been under way since 2014, and the threats of sanctioning preceding the invasion can be properly considered an evolution of the conflict. Now that the shooting war has started, the economic efforts are now shifting from punishing Russia for past actions and deterring future ones to compelling Russia to change policy, weakening Russia's military capability, and undermining Putin's regime.

Though I don't want to get hung up on the term, it is the beginning of an economic war and, given the nature of the global economy, the impact of it are not going to be limited to Ukraine, Russia and NATO. Instead, no nation that is engaged in the global economy will be insulated from the impacts of the conflict. More importantly,  this will be a global economic war in the sense that even if a country has not picked a side and is not actively engaged in the conflict, its economic actions and inactions will have an impact. 

As an old Cold Warrior who did his dissertation on the effectiveness of sanctions, and taught IPE since then, this all seems to be in my wheel house, so I guess a lot of my "Thinking Out Load" is going to be devoted to this in the future.

As a starting point, I want to pin a couple articles to the wall (we'll get the string and Post-It notes out later).

"Sanctions will put Russia's 'fortress' economy to the test" by Chris Riley at CNN Business; Riley uses the fortress term to describe Putin's efforts to insulate Russia's economy from external sanctions. Most of the discussion is focused on financial mechanisms. However, one sentence got my attention. Riley wrote that "Putin's economic planners have sought to boost domestic production of certain goods by blocking equivalent products from abroad." This is interesting because providing protection to an industry is a private benefit to the owners of firms (probably an oligarch or two) in that industry and could be part of a pattern of providing such benefits to supporters. According to Selectorate Theory (see references at bottom) that in itself could strengthen Putin's hold on power regardless of any economic impact of the policy. These are the kind of details in which the Devil resides.

"China lifts restrictions on Russian wheat imports" by Laura He, CNN Business: In related news, Laura He reports that China  has lifted restrictions on wheat imports from Russia. While one would expect China to take an active role in the economic conflict, here they are playing the simpler role of ROW (i.e., rest of the world). Sanctions on exports have no effect, other than diverting trade patterns, if the target can find enough alternate customers in the rest of the world to buy what the sanctioning nations are boycotting. I talk about this and other things in the video below.

Here are some video comments about what I see as the nature and  dimensions of the conflict: 

Selectorate Theory References:

Bueno de Mesquita, Bruce, Alastair Smith, Randolph Siverson, and James D. Morrow. (2003) The Logic of Political Survival. Cambridge, MA: The MIT Press.

Bueno de Mesquita, Bruce, Alastair Smith. (2011) The Dictator’s Handbook: Why bad Behavior Is Almost Always Good Politics. New York, NY: Public Affairs.

The View of Science in "Don't Look Up"

 For my first "official" podcast of the new term, I commented on the way science and expertise were portrayed in Netflix's movie "Don't Look Up".  My thoughts were motivated by a review of the film on   CNN by Holly Thomas as well as Daniel Drezners' book, The Ideas Industry.

BTW- You can see Daniel Drezner talk about his book on YouTube

Informal Comments on The Proliferation of Aircraft Carriers

I posted a podcast while on break that stepped out of my normal academic boundaries to comment on the apparent proliferation of aircraft carriers. The though came to my mind when I saw this article on CNN about South Korea's design competition for a new carrier. This had me looking at other articles including

• Italian Aircraft Carrier ITS Cavour Departs Norfolk, Completing F-35B Certification
• U.K. Aircraft Carrier, Italian Navy Carrier Cross-Deck F-35Bs in Mediterranean
• Japan’s Helicopter Carrier JS Izumo To Start F-35B Tests

Since I was technically on break between terms I decided to indulge myself with a little amateur military analysis.

December Podcast List

 December 5

The Cultural Impacts of Globalization: Rudolf as Menace

December 12

Russia's Threat to Ukraine

November Podcast List

 

November 23

Oil Export Ban?

November 28

Xi Jinping's Tightening Control Over China

China's Evergrande Crisis

 

CNN's recent article on Evergrande has me thinking out loud about the problem of ghost cities in China and the prospects for a downturn in the country.

Biden's comments and US Policy on Taiwan

At a town hall meeting last night, President Biden twice said the US was committed to defend Taiwan if China attacked it. White House aides immediately walked the comments back, saying that the US remains committed to the provisions of the Taiwan Relations Act of 1979, and by implication to the policy of strategic ambiguity. In todays TOL podcast below, I talk about Biden's comments and Us policy towards Taiwan.

Comments on the News: China and Taiwan

 Tensions between China and Taiwan have been in the news recently as China has sent warplanes into Taiwan's Air Defense Identification Zone. I talk about this in my TOL Podcast (below) and have provided links to relevant articles below the podcast

Links to relevant Articles:

China isn't about to invade Taiwan. But the two sides are on a dangerous path by Ben Westcott and Eric Cheung, CNN

A Chinese invasion of Taiwan would be a bloody, logistical nightmare by Ben Westcott

What Is the U.S. “One China” Policy, and Why Does it Matter? by Michael Green, CSIS

NTD Talking Points interview: Ian Easton: An Invasion of Taiwan Would Be Nothing Like We’ve Seen in Modern Warfare

Does China Manipulate its Currency?

 The short answer is : Not anymore.

I have addressed this question on this blog twice before (in April 2016 and February 2014 ) and though I was done with it but it seems to keep re-emerging.

So today I am devoting a podcast episode to the topic. Also there are some graphs below the podcast link that depict important data related to the topic.

Graph 1: Exchange Rate- Yuan to the Dollar

Graph 2: China's Foreign Reserves (excluding gold)

Graph 3: Savings Rates

Source: Manning and Napier, Five Things to Know about US-China Trade

One more thing...

For a discussion of whether China was manipulating its currency in August 2019 when the Trump adminsitrations declared it a manipukatoir, see Brad Setser's Council on Foreign Relations brief

Comments on the News - Ojomo and Horn's take on Aid in Afghanistan

 In an attempt to reinvigorate this blog, I am launching a podcast counterpart. In this episode, I comment on the NBC News article "20 years after the Afghanistan invasion, a lesson in how not to spend development aid" by Efosa Ojomo and Michael B. Horn 

China's crack down on Cheng Wei

 CNN Business has an article about China's crack down on Cheng Wei's ride-hailing app. 

This seems to me to be an example of what Acemoglu and Robinson predicted about China's future in their book Why Nations Fail. That is to say that the authoritarian regime in China would not be able to sustain growth based on innovation due to its lack of control over such growth.

This is reminiscent of Chain crackdown on Jack Ma which was covered recently in a WSJ article entitled "Jack Ma’s Costliest Business Lesson: China Has Only One Leader."

Comments on the News: Nov 18, 2020: Economic Growth

 Al Jazeera has a Bloomberg article about generational economic growth (2000-2025) around the world. The analysis is based on the IMF's World Economic Outlook report from October.

Comments on the News: Nov 5, 2020 - China vs Jack Ma

 A couple days ago I talked about Jack Ma and his Ant Group IPO. In my comments I discussed how Acemoglu and Robinson's theory argued that innovators like Jack Ma would not be allowed to operate in an environment of extractive political institutions. Well, it didn't take long for China to support the theory as it has blocked the IPO. See the following articles

 CNN Business: Beijing just yanked Ant Group's IPO to show Jack Ma who's really in charge

Yahoo! Finance: Derailing of Jack Ma’s Ant IPO Shows Xi Jinping’s in Charge

Comments on the News: Nov 2, 2020 - Jack Ma

 Today, I look at Jack Ma who is in the news for a record breaking IPO.  I discuss how he is an example of a entrepreneur in Schumpeterian Growth Theory. I also discuss Acemoglu and Robinson's view on the threat Schumpeterian Growth (and the creative destruction) poses for China's authoritarian regime or, more likely, that the regime poses to the growth.

Comments on the News: Oct 30, 2020- WTO Director-General Selection

 Two links pretty much cover this topic

1. Politico: Discord over next global trade chief threatens to blow up WTO

2. Reuters: EU arms itself against U.S. and others in trade disputes

Comments on the News: Oct 28, 2020 - Effects of Education Levels

 This starts with a chart about the change in proportion of (white) people with a college education in the US since the '70s.

My comments then consider BLS data on the effect of educational attainment levels on unemployment and income.

Then I talk about Mansfield and Mutz's research on the support for free trade.

I close with some discussion of the Dunning-Kruger effect.

So, a lot going on here.

Comments on the News: Oct 27, 2020 - US defense ties to India and Japan

 Two items in the news about the US strengthening defense ties with India and Japan. 

1. India signs defensive agreement with US following Himalayan standoff with China
   
   
2. Japan and China both claim these islands as their own. Now the US is showing Tokyo how it can help defend them

CNN also has a good background report on the conflict between India and Chin over Kashmir 

Here are my comments:

Comments on the News: Oct 26, 2020 - Chile's Constitution

Chile just had a referendum on its constitution. CNN reports that they have voted to rewrute it with a convention of elected delegates. An early column on CNN asks the question "Can a new constitution solve Chile's old problems?" For background on the protests that led to the refendum, go to CNN's Chile Protest page.

Here are my comments: