00:00Eighteenth package, that's what we're dealing with out of Europe.
00:02We were just talking about the kind of kinetic side of how Europe is dealing and trying to persuade Russia to withdraw.
00:09Let's talk about how the financial side of that equation is playing out.
00:13We've got the 18th round of sanctions being talked about right now.
00:17How effective have the previous 17 rounds been in deterring Russia from taking action in Ukraine, do you think?
00:24Well, the short version is the war continues, and therefore you could argue the sanctions have not been affected.
00:31But they have degraded the Russian ability to pursue its war through two lines, reduced funding.
00:38So go back three years, the foreign exchange reserves of the Central Bank of Russia were frozen, mainly in Belgium.
00:45And then access to the technology that Russia needs is being restricted.
00:49But it's all happening too slowly.
00:51Obviously, a promise of massive sanctions are repeatedly made by European leaders.
00:55And yet we are moving at a glacial pace, sadly, for the Ukrainians.
01:01Does that mean ultimately that the Russians can outpace any sanctions that are applied?
01:06And if so, what would be effective at this point?
01:10It's a mindset difference.
01:12So for the Kremlin, outpacing sanctions is existential.
01:15If Russia does not outpace sanctions, then its economy will collapse and its war will fail.
01:22In Europe, we continue to think that we can issue sanctions that will hurt Russia without hurting ourselves.
01:30And this is obviously a political challenge for leadership in Europe.
01:32If we really wanted to crush the Russian economy, crush its ability to fund its war in Ukraine,
01:38then we would have targeted energy sources, LNG, oil and so on, much, much harder a long time ago.
01:45And that's why it's interesting to see what people like Lindsey Graham are talking about in the United States.
01:49There's a willingness in the US, it sounds, to go after oil sales in a way that at the moment in Europe, we're just not prepared to do.
01:56Yes, I mean, so with that in mind, Tom, how do you evaluate the G7's failure to agree on bringing down that price cap on Russian oil,
02:07seaborne oil, the price at which it must not go above if it's to be insured and transported by Western infrastructure?
02:15Well, the oil price cap was a great idea, saying to countries like India and China three years ago,
02:23you are welcome to buy Russian oil as long as you buy it at a below market price.
02:27What's not to like about that?
02:29But frankly, the development of the so-called shadow fleet, the ability of Russia to continue to sell its oil around the world to willing buyers,
02:36has made a mockery of the oil price cap.
02:38And so that's why I think ideas such as the one put forward by Lindsey Graham to say,
02:43if you choose to buy Russian oil, then we will punish you, China, India and others.
02:49We have to go after the supply side.
02:51We see from the way in which the Russians react when the oil price drops, for example, how painful that is for them.
02:58So if we can stop them from being able to sell their oil, curtail the shadow fleet, then we might be onto something.
03:05But at the moment, sadly, we're just nibbling at the edges in Europe.
03:08We need to be much harder and go much faster.
03:11Yes, I mean, I suppose some people might push back and talk about sovereignty and independent nations being able to decide for themselves.
03:18China, maybe, and India decide for themselves whether they want to take Russian oil.
03:22And it might seem a little extraterritorial if the U.S. Republican plan were to be enacted and put 500 percent tariffs on countries that do buy Russian energy.
03:34I suppose it could be done, though, just to force people to the table.
03:37Would that be the aim, Tom?
03:40Look, I think fundamentally, if you start using the word extraterritorial, the people acting extraterritorially are the Russians by invading Ukraine.
03:48I think everybody would want this war to end.
03:51At the very least, it's a distraction in international relations.
03:54And, of course, it's a tragedy for the Ukrainian people.
03:58There are other sources of oil.
04:00You don't need to buy Russian oil if you're China or India.
04:04And they're choosing to prolong the war in Ukraine by funding the Russian government.
04:09So we haven't seen any sanctions from the United States on Russia since Donald Trump took over the presidency in January.
04:16And now, if he really is, quote, unquote, pissed off, very angry, et cetera, with Vladimir Putin, would be the time to follow the lead of the likes of Lindsey Graham.
04:26And it's also the time for the Europeans to step forward with the, again, quote, unquote, massive sanctions that they've repeatedly promised but not delivered.
04:33Tom, it's Creedy in London.
04:36Prior to Donald Trump's most latest comments, as you put them, on Vladimir Putin and simply being annoyed by that, he has previously talked about recreating a trade relationship with Russia.
04:47It doesn't really seem on the table at the moment.
04:49But he has made that comment in the past, which at the time begged the question of what a rehabilitation of Russia and the global economy actually looks like.
04:57Tom, from your perspective, is that still a possibility?
04:59Well, it's a real worry for Europeans.
05:03We know that Vladimir Putin loves to drive wedges between allies, whether it's between European Union member states or whether it's a transatlantic wedge.
05:11And, of course, if the Kremlin were to play its cards in a certain way, it would offer trade opportunities to Donald Trump.
05:20Nobody likes a deal more than Donald Trump.
05:22And that would be a classic way of the Kremlin driving a wedge across the Atlantic.
05:26So imagine, for example, Boeing being given lots of interesting deals by Russia, but Airbus continuing to be frozen out.
05:34That's a nightmare scenario for the Europeans.
05:37So I'm not surprised to hear talk of deals.
05:40I'm sure on these long phone calls that Donald Trump has with Vladimir Putin, Putin dangles deals like that for him.
05:47So, you know, this this isn't over and the Trump administration has yet to put sanctions on Russia.
05:54So until we see that happening, we have to assume that Trump is more interested in rapprochement with the Kremlin than he is in ending the war in Ukraine using tough sanctions on Russia.
06:04Well, Tommy, talk about those kind of carrots that may be used in terms of enticing Donald Trump.
06:11Talk to us a little bit about the energy space as well, because you specifically said that the EU has been hesitant to acknowledge and really address that part of the sanctions market.
06:20What would it take to get there?
06:22Well, let's talk about Russian oil primarily.
06:27I mean, at the end of the day, the Europeans control more or less the export of Russian oil because it passes through the Baltic Sea.
06:34It passes through the Danish Straits.
06:35It passes through the English Channel.
06:37It passes through the Straits of Gibraltar.
06:38Those are all stretches of water that Europeans control.
06:43But, of course, international maritime law and the rights of innocent passage mean that it's very difficult to disrupt those tankers.
06:50What we have started to see in the Baltic Sea is countries like Estonia being creative with the way in which they try and interdict vessels that they suspect are carrying Russian oil at a price above the price cap.
07:04So fundamentally, we need to see more of what the UK has done actually over the last two or three weeks, which is sanctioning vessels that are operating in breach of the oil price cap.
07:13We need to see sanctions on infrastructure.
07:16So that means the brokers that are selling these tankers to the shadow fleet, the Chinese refineries that are refining.
07:23And really, as I say, go full court press on the oil side, because without that revenue, the Kremlin is lost.
07:31And we can see just from daily reporting how the cost of groceries and the ability of general Russians to kind of lead their lives is being impacted by this.
07:40But we haven't been willing to, say, to press our foot to the floor.
07:45And that's what we need to do now if we want to end this.
07:49Tom, Europe has been through an energy crisis over the last few years.
07:53Would what you suggest cause a similar outcome?
07:58What would it what would it do to European industry and what would it do to European consumers?
08:04Because because politicians are short term thinkers and they worry about these kinds of things.
08:09And so I'm wondering what the kind of the net effect of this will be in Europe.
08:14I think the resistance seems to doing this seems obvious because of those sorts of concerns.
08:18Am I am I barking up the right tree when I think about it along those sort of lines?
08:23Because that's a really big story to overcome.
08:26Yeah, no, look, you're absolutely right.
08:28And indeed, in some countries like Hungary and Slovakia, in a way, that argument has already been won.
08:32That's why the Hungarians and Slovakians are so negative and push back on EU sanctions.
08:36I mean, if I had a euro for every time I've heard an official in the German foreign ministry, for example, say, Tom, you've got to understand we have Mittelstand companies that have longstanding relationships with Russian companies.
08:48It'd be very difficult to tell them to stop trading with Russia.
08:51You know, we ultimately it's a political choice.
08:53It's a political choice.
08:55And the only way in which Europe is going to really demonstrate resolve when it comes to sanctions is to be willing to take a bit of pain.
09:03And over the last three, three and a half years, we haven't been willing to take that pain to the extent that is necessary.
09:10And as I said earlier, for the Kremlin, avoiding sanctions is existential.
09:15And in a way, we need to treat it with the same urgency and vigor in Europe if we want the sanctions to work.
09:22If we simply want to drag this out for years and years and years, then carry on doing sanctions the way we are.
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