Sanctioning Russia Is a Form of War. We Need to Treat It Like One.

The Russian political scientist Ilya Matveev recently described the impact of the West’s sanctions on his country as “30 years of economic development thrown into the bin.” He’s not exaggerating. Economists expect the Russian economy to contract by at least 15 percent of G. D. P. this year. Inflation is spiking. An exodus of Russian professionals is underway. Stories of shortages and long lines for basic consumer goods abound. The U. S. and its allies have turned to sanctions as a way of taking action against Russia’s atrocities without direct military intervention. But to describe these sanctions as anything short of all-out economic warfare is euphemistic. Measures like these might be cloaked in the technocratic language of finance and economics, but the immiseration they cause is anything but abstract. Nicholas Mulder is a historian at Cornell University and the author of the terrifyingly relevant new book “The Economic Weapon: The Rise of Sanctions as a Tool of Modern War.” In it, Mulder focuses on the last time economic warfare was waged at the scale we’re witnessing today, the period between World War I and World War II. And the book’s central lesson is this: We ultimately don’t know what’s going to happen when sanctions of this magnitude collide with the ideologies, myths and political dynamics of a given country. They could persuade the targeted country to back down. But they could also make it so desperate that it becomes more aggressive or lashes out — as Germany and Japan did on the eve of World War II. So this is a discussion about what kind of weapon sanctions are, whether they actually achieve their goals and how they might shape the future of the Russia-Ukraine conflict — and the world. We also explore how sanctions “weaponize inflation,” whether they could lead to Vladimir Putin’s downfall in Russia, the toll they have taken on the Russian economy, how the West can leverage its sanctions to help bring about an end to the war in Ukraine, whether a European energy embargo could backfire, how this economic war is destabilizing countries around the world, the humanitarian crisis U. S. sanctions are helping create in Afghanistan, and what a foreign policy that didn’t rely so heavily on sanctions could look like. This episode is guest hosted by Rogé Karma, the staff editor for “The Ezra Klein Show.” Rogé has been with the show since July 2019, when it was based at Vox. He works closely with Ezra on everything related to the show, from editing to interview prep to guest selection. At Vox, he also wrote articles and conducted interviews on topics ranging from policing and racial justice to democracy reform and the coronavirus. Mentioned: “The Inflation Weapon: How American Sanctions Harm Iranian Households” by Esfandyar Batmanghelidj “Iran, Sanctions and Inflation as a Weapon of Mass Destruction” by Spencer Ackerman Oligarchy by Jeffrey A. Winters “If Joe Biden Doesn’t Change Course, This Will Be His Worst Failure” by Ezra Klein Book recommendations: Collapse by Vladislav M. Zubok The Perfect Fascist by Victoria de Grazia My Century by Aleksander Wat Thoughts? Guest suggestions? Email us at [email protected]. You can find transcripts (posted midday) and more episodes of “The Ezra Klein Show” at nytimes.com/ezra-klein-podcast, and you can find Ezra on Twitter @ezraklein. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-klein-show-book-recs. “The Ezra Klein Show” is produced by Annie Galvin, Jeff Geld and Rogé Karma; fact-checking by Michelle Harris, Kate Sinclair and Mary Marge Locker; original music by Isaac Jones; mixing by Jeff Geld; audience strategy by Shannon Busta. Our executive producer is Irene Noguchi. Special thanks to Kristin Lin and Kristina Samulewski.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:05Ezra Klein?

  I'm Ezra Klein, and this is The Ezra Klein Show.

• 0:21Ezra Klein?

  Hey, this is Ezra. I am off today, but sitting in behind the mic is our staff editor, Roji Karma. Roji is centrally responsible for a huge amount of the prep on the show, of our editorial direction. So today, he's sitting down with Nick Mulder to talk about sanctions as a tool of war and sanctions in this war. I'm excited for it, and I hope you are too.

• 0:50Speaker 01

  It's really hard to overstate the severity of the sanctions imposed on Russia right now. The country has been functionally cut off from the global financial system. The majority of its central bank assets have been frozen. Hundreds of private companies, from Visa to Shell to McDonald's, have pulled out indefinitely. And that's just a partial list. And here's the thing. We know from experience. We know what sanctions like this do to countries. Living standards collapse. Inflation surges to levels that are hard for us in the West even to imagine. People end up bartering for basic necessities like medicine and fuel.

• 1:34Speaker 01

  One Russian political scientist recently described the impact of the sanctions on the country as, quote, "30 years of economic development thrown into the bin," end quote. I want to be really clear here. This is economic war. And in particular, this is economic war aimed directly at civilians, directly at those who had the least say in the decision to invade Ukraine in the first place. All of this, of course, is meant to pressure Putin. And here's the thing, it very well may be working. I am not going to deny that. But we should be clear eyed about what it is, in part because this has become such a

• 2:16Speaker 01

  standard tool of America's foreign policy arsenal. Just in the last few years, we've levied devastating sanctions on the populations of Iran, Syria, Venezuela, Afghanistan. We continue to maintain a decades-long embargo against Cuba. And in many of those cases, there's no real indication that the pain and emisseration we're inflicting is actually achieving much of anything. Nick Mulder is a historian at Cornell University and the author of the terrifyingly relevant new book, The Economic Weapon: The Rise of Sanctions as a Tool of Modern War. The book is a history of the last period of time when economic warfare was waged at

• 3:02Speaker 01

  this kind of scale, that being the period between the world wars. And for that reason, it has some real lessons for our own time. So this is a conversation about what kind of weapon sanctions are, whether they actually work in achieving their outcomes, and how they could shape the future of this conflict, and the world, for that matter. Like always, you can contact the show with feedback or guest suggestions at ezraekline show at nytimes.com. Nick Mulder, welcome to the podcast. Thanks for having me on, Rajan. The way we tend to think about sanctions today is as an alternative to war.

• 3:47Speaker 01

  But that's not how they've always been thought of. So tell me, how did the architects of the modern sanctions regime understand their power?

• 3:55Speaker 02

  Initially, the challenge that sanctions were created to solve was how to avoid a conflict on the scale of World War I or World War II from breaking out. And it's in the aftermath of World War I that internationalists came together and wanted to find something that had the power to potentially stop war in its tracks before it even got going. And what they found was that if you could find some sort of force that would affect a nation in its entirety, not just the elite, not just the army, but the nation as an entire unit, you might have an instrument in your hands that could persuade that nation from not embarking on war.

• 4:37Speaker 02

  And sanctions initially came out of that realization that in a world that was very globalized, where there was a lot of trade and finance and cross-border interaction, you could actually threaten to cut off all that access at once. And in that sense, sanctions really are a total weapon. They are a creation of the era of total war. And that's the history that I try to tell in the book, which shows that at the time, before even the word sanctions came to be used, people referred to this instrument of the ability to impose a blockade on an entire country in peacetime as the economic weapon. So they were very open about the fact that this was a weapon, it was meant to be used

• 5:16Speaker 02

  as such, and it was considered so powerful that it had a potential war-stopping or war-dissuading capacity.

• 5:24Speaker 01

  Let's dig into this, because I think at first, it's hard to even imagine that sanctions, the economic weapon, whatever you call it, it's hard to imagine that it could be anywhere close to as terrible as actual war. So what do sanctions do to a country? How do they impact the economies they're wielded against and the people who depend on those economies?

• 5:50Speaker 02

  So if you look at sanctions in the world today, some of the effects of them include incredibly severe shortages of essential goods and a kind of immediate crisis of the economy, of the ability of countries to get what they need from the rest of the world. That translates into high prices, into basic essentials and necessities, right? Food, fuel, medicine, becoming not just more expensive, but sometimes even entirely impossible to find. And if you do want to find those things in countries under sanctions, you oftentimes have to be closely connected to political power. So obtaining basic necessities for your family becomes a game of political patronage and political connections.

• 6:35Speaker 02

  Corruption increases, elites on the whole have better connections and so they tend to basically insulate themselves. But if you're an ordinary working person in a society under sanctions, you're not just dealing with inflation, you're dealing with shortages, inability to get money from the bank. Very likely, your employer or the place you work will go out of business or will be forced to cut your pay. So this would be a very grave economic crisis in many ways. I think that's sort of an all encompassing shock to every material facet of your livelihood. I think that's really what you can see in societies that are under serious sanctions today.

• 7:12Speaker 01

  I want to hold on to something you mentioned there, which is inflation. I think that it's easy for those of us who have never experienced sanctions like this to misunderstand the actual lived experience of it. But something we've all become pretty familiar with in the US, at least over the past year, is what it's like to operate in an inflationary economy. And one way to understand the impact of sanctions is that they essentially weaponize inflation. There's a really great paper on this that I'll link to the show notes that uses Iran as a case study for this dynamic. But you could apply it to countries like Russia, where we've deployed similar kinds of sanctions. And the basic point is that what these sanctions end up doing

• 7:57Speaker 01

  is they create massive supply chain disruptions. The number of suppliers willing to sell goods to a country, the number of logistics firms willing to transport those goods, the number of banks willing to process those transactions, all of that just shrivels up. And as we know all too well from our own supply chain issues, that causes prices to skyrocket.

• 8:20Speaker 01

  But we're not talking about, right, 6%, 7% year-over-year increases here. Based on the latest numbers, the annual inflation rate for health and medical services in Iran is running at about 40%. Food and beverage inflation is at over 50%. So I'm wondering if you could talk a little bit about that dynamic of sanctions. And let me ask the question this way. What would the experience of the US economy be like if another country were able to do to us what we've done to Russia or Iran?

• 8:54Speaker 02

  That's a really great question. So, you know, this is of course hypothetical because we don't really know what the effects on the United States would be, but a possible scenario is something like this. The prices of your basic necessities go up dramatically and not just a little bit, like you mentioned, 6% or 7% like what we have now, but 15% to 20% as a baseline. So that's the sort of inflationary level that the United States in the 20th century is only really seen for any prolonged period of time in the 1970s. But that's the baseline. So like you said, it can go much, much higher than that. And what that does is that it really creates a pervasive anxiety and a sense of insecurity that everyone in not just the working class, but middle-class families are perpetually

• 9:37Speaker 02

  on the brink of a potential ruinous situation to their household finances. They need to operate every single connection that they have in order to obtain things that ordinarily would be very easy to find. And the government in many of these sanctioned countries, so the US government might then step in and still try and provide some goods, but rationing will very quickly become a necessity in some sectors where there just isn't enough to go around. And in order to preserve public order, the government needs to prioritize who gets these goods first. On the whole, I think then you can also start to experience that the quality of what does become available is going to be very poor because either these are things that have

• 10:19Speaker 02

  been sourced through the black market and many people will have to resort to the black market. So it becomes much more difficult to get people to purchase and sell you things fairly.

• 10:30Speaker 02

  You will not really have legal recourse like you do in almost most transactions in the United States. So much of our experience in the US of buying, consuming, living and spending money, I think, will become much more fraught with all sorts of problems. It's a very difficult thing for vast majority of the population. At least 70 or 80% of the population would see an immediate collapse in their standard of living. And even for people in the elite that are used to all sorts of conveniences, things would become much harder.

• 10:57Speaker 01

  This gets to me to what feels like one of the cruelest aspects of sanctions, which is that we have all of these rules that are supposed to make conventional war more humane. Civilians are supposed to be off limits. Threatening basic necessities like food supplies is supposed to be off limits. And those rules aren't always followed. The US has violated them many times, but at least we try or pretend to hold ourselves to those. And we become outraged when other countries like Russia right now is violating them. But the whole idea of sanctions is to make regular people suffer. And that's a pretty radicalizing thought.

• 11:40Speaker 01

  The journalist Spencer Ackerman had this line in his newsletter that I can't stop thinking about, which is, quote, "To recognize that sanctions are war by other means is to recognize that economic weapons make the equivalent of war crimes scalable," end quote. I'm wondering what you think of that description.

• 11:59Speaker 02

  I think it's important to recognize that that's what sanctions in the most severe case can do, right? Not all sanctions are like that. But if you keep increasing the severity of sanctions, then that is definitely where you will end up. And part of the reason why we find it much easier to impose sanctions is because there's not the kind of directness that you see in war, right? Where bombs are dropped or munition is fired, explosions happen and people are killed. It's an extremely obvious cause and effect chain. Sanctions have a lot more things happening in between because they pass on these effects through an entire society, through the price mechanism, in the case of the phenomenon of inflation like you just mentioned. But also through shortages, through what people are able to buy.

• 12:43Speaker 02

  And then as a result, right? How they're able to fend for themselves and fashion their own lives. So all of that becomes much more difficult, but it's not immediately clear what the cause of it is. And that also, I think, is what people designing sanctions sometimes hope for. That by creating this sense of unease and damage in civilian societies, pressure on governments to do something and change course to do what the sanctioning countries want them to do will, will increase. And that's, I think, a very difficult thing because it all depends on the sort of circumstances in which you impose sanctions, the avenues and the mechanisms that ordinary people have to change their government's behavior, which aren't always there and in many countries are really underdeveloped or even absent.

• 13:27Speaker 02

  So that's what makes sanctions both very easy to use, but it makes them also, I think, morally pretty difficult and fraught with all sorts of problems, particularly when you have sanctions that are capable of creating that sort of damage to ordinary civilians.

• 13:44Speaker 01

  I want to talk about that question of whether sanctions work. Because I think the response you'll get to this conversation is, sure, sanctions have all these terrible effects, but the ends justify the means. The world is full of bad guys and we need a way to stop them from waging war or to punish them when they do. So let's talk about that. You, you gestured at it there, but what's the theory of how sanctions are supposed to work?

• 14:13Speaker 02

  So the theory is at a basic level that you create an economic shock. The shock creates discontent or a desire for political change. And that political desire for change then translates into ultimately a change in behavior. That's the very basic theory. But the way that that actually works can be thought of in different ways. So you, in a democracy, do that through elections. But in many countries, it's not that easy to change the government by vote. Certainly, right, in a large amount of countries around the world that are autocracies or authoritarian states or illiberal democracies, it becomes quite Difficult to do that quickly. And in those cases, there's still sometimes a hope by the people designing sanctions

• 14:57Speaker 02

  that the sanctions will work because unrest is unrest. It doesn't really matter if there's a an electoral system through which that discontent can be translated into different political government. If people who are impoverished by sanctions begin to truly riot, even an authoritarian government is going to, at some point, consider whether the course that is causing it to be the target of sanctions is really worth it. So I think those are the two basic ideas through the population. And then there's a another variety, which is how sanctions are supposed to work in countries where there isn't a direct link between what the population wants and what the government does, where the regime really has a lot of distance from the population

• 15:39Speaker 02

  and can even afford not to really care about riots and about people simmering discontent. In those cases, there's still a theory that sanctions might work if you hit very powerful business people and people in the economic elite of the country hard enough. Because if the population is not the group that has the ear of the rulers, potentially, the business elite will have it, so corporate and financial elites. And no country really, in the long run, can afford not to care about some basic level of material prosperity. So if you hit those elites, they're much more proximate to power. They're much closer to the regime. They oftentimes are pillars of various authoritarian regimes. So if you can hit them,

• 16:21Speaker 02

  then that way sanctions can still force insiders in the regime, basically, to push for a change in behavior. I would say those are sort of the three broad ways in which sanctions are supposed to work, depending on which country you use them against.

• 16:35Speaker 01

  So I want to tag here that if Russia and the language around sanctioning oligarchs, Biden's comment over the weekend that was interpreted as a call for a regime change, if that's all in the back of your mind right now, we are going there. But first, I want to talk about how these different theories actually play out in the real world. So we have these different theories of how sanctions are supposed to work. Do they actually work? What's the empirical track record of sanctions?

• 17:08Speaker 02

  If you put all the uses of sanctions together, and political scientists and international relations scholars and economists have now quite a lot of data on, in the last hundred years, how this has gone. They find that studies have different numbers, but usually they come up with a percentage somewhere between about 10 to 30% of the time. Do sanctions work at least somewhat to achieve one of their stated goals? So that's the kind of range of chances of success most of the time. But the most important question we should ask at the beginning is work to do what? And so what's the goal of sanctions, right? And there, it's very clear from historical experience

• 17:49Speaker 02

  that sanctions that have more ambitious aims are less likely to succeed. So the more modest the aim, changing only a small policy that's not of vital interest to a government, that's much easier to get accomplished through sanctions than to try and demand a very big policy change, like something about the essential national security interests of a country, let alone, of course, trying to entirely get rid of a certain regime. One of the hopes in the early 20th century, when sanctions were designed to stop war, that was their goal, was that they would work as a deterrent. So you would threaten sanctions to any country that would break treaties and begin a war, any country that would commit an act of aggression. And the hope was, front-load the damage, make it really, really severe from the beginning.

• 18:34Speaker 02

  And that way, no country will get, even consider really doing it. And even if it is at the point where it might consider it, then restating that threat and showing that an entire international organization, a large part of the international community is behind it, will work to deter. So deterrence did work, and we can get into some of those cases in a minute, in the 1920s in particular. But the other aim of sanctions is compelence. So trying to make a country do something that it wasn't intending to do, trying to make them pursue a certain course of action. For example, if a country wants to really develop nuclear weapons, making them not do that and making them pursue instead a civilian nuclear program. That's also what we've used sanctions to do in the past.

• 19:18Speaker 02

  So that is in general more difficult. And another great example of compellence is the situation right now, which is where we're using sanctions to try and actually make Putin stop his invasion of Ukraine. He's already embarked on this course and we're trying to move him away from it towards an end to the war, ceasefire, peace and withdrawal. That in general has proven in history to be more difficult to do than trying to deter a country from doing something that it intends to do in the future.

• 19:47Speaker 01

  I want to talk more about the current sanctions on Russia. But before we do, I just want to tag something that we're going to come back to throughout this conversation, or at the very least is going to be present in the background, which is, to our earlier discussion, sanctions inflict all kinds of truly terrible economic pain on civilians.

• 20:12Speaker 01

  And at the same time, as you just pointed out, the chances of them actually working are just abysmal. And I really just want to emphasize that dissonance. The pain that these sanctions cause on the one hand, and the lack of actual outcomes that they produce on the other, because it's one that I think should make us really ponder and think deeply about how we use this weapon moving forward. But you mentioned the ongoing sanctions against Russia, and I do want to talk about those. You've called this a watershed moment in global economic history.

• 20:51Speaker 01

  Tell me about that. What's unique about these sanctions from a historical perspective?

• 20:56Speaker 02

  Well, there's a few different ways of measuring the importance of these sanctions. One is the number of countries imposing them. That's been really pretty significant for sanctions in the last few decades. At this point, there's at least 37 countries that are all committed to a pretty unified sanction strategy against Russia. Moreover, those 37 countries have about 55% of the world's gross domestic product.

• 21:24Speaker 01

  Wow.

• 21:25Speaker 02

  That's a really, yeah, that's a really significant group. They're pretty much all of the advanced industrial democracies in the world. That's one way of measuring it, who's involved. But also, of course, what are the measures that they've taken? They've gone from a pretty low level of sanctions, which they had imposed against Russia since 2014, to a now very serious level of sanctions. I would say definitely about eight out of 10 in terms of how intense and severe these current sanctions are. Not at the absolute maximum, but very far along the spectrum. And what makes that intensity even more significant, and really a watershed,

• 22:05Speaker 02

  is that it's being imposed against an economy of the size of Russia, which is a $1.5 trillion economy. It's the 11th largest in the world. It's a G20 economy. So if you add those three things together, I think you have a pretty multi-dimensional understanding of why this is a major moment that really doesn't have any precedent in recent history.

• 22:28Speaker 01

  In the days following the announcement of the big Western sanctions package, there was an immediate impact on the Russian economy. The ruble collapsed in value, corporations were pulling out left and right. There were predictions of a major GDP contraction. It's been about a month since then. How would you assess the state of the Russian economy today?

• 22:51Speaker 02

  Well, Russia has most definitely undergone a really severe economic shock. It was also magnified by the fact that it didn't just suffer from the immediate effects of the sanctions imposed by Western governments. There was also a private sector reaction to those sanctions and to the war breaking out. 400 companies at least, now I think as of the last counting, have left Russia. That's billions and billions of dollars of foreign investment, of foreign capital, that will not probably return anywhere in the near future. So in the medium and long run, the growth prospects of the Russian economy, which already weren't that good, have now become really dismal. But in the shorter term...

• 23:35Speaker 02

  There's also been a significant set of effects in Russia on the price level. So again, inflation you start to see is really picking up. Russia has now all of a sudden, almost overnight, lost the ability to import many things from the West, because the West either will refuse to sell them, those things, particularly high-tech goods. But the Russians have also lost some of the reserves that they previously used to purchase those things. What all of that means is that all of a sudden overnight, Russians now have way less access to foreign goods, not just luxuries like handbags and cars and watches, but also really essential things for their own standard of living, for production in their most important industries,

• 24:19Speaker 02

  for know-how and expertise. And on top of that, a lot of these foreign workers have left, and there's now also a big brain drain happening from Russia. So the overall effect of the sanctions on Russia, I think, has been really quite severe. There are some areas where in the short term, the Russian government's been able to stabilize the situation. So the exchange rate of the ruble against the dollar is slowly improving again because of the total collapse almost of imports. And the Russian Central Bank has also prevented foreigners from pulling out some money from the stock market particularly, and it's really imposed a number of controls that prevent ordinary free market mechanisms. So that explains why the ruble hasn't suffered a sustained collapse, it's kind of recovered.

• 25:03Speaker 02

  The other thing that contributes somewhat to that short-term stabilization is the fact that there is still Russian energy that's being sold, particularly oil and gas on world markets. Energy prices are extremely high, so Russia is continuing to earn foreign currency, euros and dollars, by selling oil and gas. And as that comes in, it can replenish little by little some of this big pile of reserves that was confiscated, or frozen at least, by Western governments in late February. So that's how I would kind of assess the state of the impact of the Russian economy today. It's a really dismal picture, not an utter collapse, but a very severe shock that if it extends, will really reduce Russian GDP by an enormous amount.

• 25:47Speaker 02

  I think the realistic estimates now are at least 15% or so this year. And in the long run, it's also going to absolutely crater Russia's growth prospects.

• 25:56Speaker 01

  I think there's a way in which the language we use to describe the effects of sanctions here really masks the brutal reality of them. If you read descriptions of the war in the streets right now, it's about dead civilians, bombs exploding, refugees fleeing. The suffering of the war is really front and center. But the financial war we're waging is cloaked in an almost economistic, technocratic aesthetic. We're talking here about currency valuations, you know, about GDP. I want to pierce through that for a minute because I think that this language can sometimes get in the way. So let me ask it this way. If you're an ordinary Russian, how does your life look different today than it did a month

• 26:41Speaker 01

  ago? How have these sanctions impacted your day-to-day reality?

• 26:45Speaker 02

  For one thing, you will have lost a lot of access to ordinary consumption goods, shortages in all the shops, big lines to get food, and the ability to get medicine is all of a sudden really impaired. There's cancer treatments that are only produced by Western pharmaceutical companies that Russia needs to import. Those might not be available or only against a price where no ordinary Russian could afford them. So in a whole variety of ways, life has all of a sudden gotten a whole lot tougher. And then also, there are layoffs, there are companies that have to close up shop or stop production, so people go unpaid, go without wages. And there's quite a small and modest social security net in Russia.

• 27:30Speaker 02

  It's the social safety net is not amazingly sophisticated, certainly not compared to Western Europe. So this is hitting the standard of living of ordinary Russians really severely.

• 27:41Speaker 01

  What do we know about how Moscow views these sanctions at this point?

• 27:47Speaker 02

  Well, I think that that's an open question. And there are different things that the Russians are saying about the sanctions. They definitely don't like them and they call them illegitimate. They call them acts of war against Russia. But they also, at the same time, seek to play them down. The question for them, I think, is whether these sanctions are going to be in effect for as long as Putin himself is in power. So are these sanctions going to be permanently in place to try and cause regime change in Russia? An end to Putinism and some new kind of political order? Or are they really narrowly aimed at ending the war in Ukraine? And if that war ends, if Russia ceases to pursue active military operations,

• 28:31Speaker 02

  will some of these sanctions then be lifted? And if they withdraw, particularly, will these sanctions be lifted? So can Putin and Lavrov and the Putin regime expect a future? Can they envision a future in which they are free of some of these sanctions? Perhaps even all of them, but certainly some of them? That's the question. And I think that's the significance of Biden's remark. And also, other heads of state have said this, or hinted at this at least, that in the West right now, I think, there's an ongoing debate about whether these sanctions should be lifted if there is an improvement in the situation and if there is a ceasefire and a Russian withdrawal, or whether these sanctions now are going to have to remain in place for as long as Putin's in power.

• 29:14Speaker 02

  So are these sanctions aimed at compellence and the breaking off of this war? The ending of this war? Or are they aimed at the more ambitious goal of regime change? So that's an open question, I think, for Putin. Although perhaps, given his suspiciousness and paranoia, he has already decided that they're going to remain in place forever. That wouldn't be good, probably, if he does believe that. But that's, I think, the issue that we're dealing with right now. And Western governments have been debating this, but haven't given a single sort of unified message yet. They've hinted that sanctions relief is on the table. So Blinken said this, and Liz Truss, the UK Foreign Secretary, has also mentioned that some lifting should be possible. The question- However, also is do Western electorates,

• 29:59Speaker 02

  does the audience in the West, the population in the West, accept a future in which there are not going to be sanctions against Russia anymore because the war has ended? Or do they now think Putin is so unreliable and so dangerous to the world that they will want to keep those sanctions in place permanently? There's all sorts of open questions here.

• 30:36Speaker 01

  Something I find really striking about that answer is just how much hinges on the way Russia sees and interprets these sanctions. And depending on that interpretation, you can imagine a whole range of responses, right? Putin's initial response to the sanctions was to raise Russia's nuclear alert level, which is definitely not something the West anticipated. And that gets to one of the core lessons, I think, from the history here and of your book, which is that the impact of sanctions is fundamentally unpredictable. We really just don't know what's going to happen when a sanctions regime of this scale, of this severity,

• 31:19Speaker 01

  collides with the ideologies and the myths and the political dynamics of a given country. And I think this is a place where the history can be really helpful here for helping us think about different models of how this could play out. And one of the examples that really stood out to me from the book is how Germany and Japan responded to Western sanctions in the lead up to World War II. Can you talk about a bit of that history?

• 31:48Speaker 02

  Absolutely. So the temptation is that as we start to use sanctions more and more as a really serious instrument of pressure, we also start to think of them as similar in their employment as other weapons and as direct military kinetic weapons. When you fire a missile or drop a bomb, there's a very direct relation between the action and the outcome. But sanctions work in a much more complex environment. There's many more layers between the imposition of the restriction and the political outcome that you're seeking to achieve. In between those two things is an entire civilian society, an entire world economy, all sorts of markets, institutions, people, each of which can act in different ways.

• 32:33Speaker 02

  So that's why they're so unpredictable. In the 1930s, sanctions had been relatively recently designed. So using the power to economically isolate countries in peacetime was something that only really began in the aftermath of World War I with the League of Nations. In the 20s, it had been used twice, but only as a threat, once against Yugoslavia in 1921 and another time against Greece in 1925. But Yugoslavia and Greece were small countries. They didn't have large armies. So it was fairly easy and straightforward for great powers of the day, particularly Britain and France, to threaten a severe blockade and a severe economic isolation against them and make them back down.

• 33:15Speaker 02

  But that began to change in the 1930s, when a whole new group of countries, much larger, really middle powers, medium-sized powers, began to revolt against the international order that had been created after World War I. These were countries, Italy, Germany, and also Japan, that were pretty significant industrial powers. And in those situations, when the League of Nations and the liberal powers threatened sanctions against these countries and imposed sanctions against these countries, these countries had another option. They didn't necessarily have to back down the way Yugoslavia and Greece had backed down in the 1920s. They could, and they did, because they were already very inclined

• 34:00Speaker 02

  To do this because they were radical nationalists and fascist regimes. They could turn inward, they could try and build up reserves and become much more self sufficient. And even, and this was the ultimate escalatory move. Conquer territory from neighboring countries that did have crucial resources that they didn't have. So both Nazi Germany, which had this memory of having been the victim of economic blockade in World War One. And many of the Nazis were very obsessed with this memory, which was a big trauma to them. I should say, however, right, that this was a very highly ideologically charged and distorted memory. Also, of course, tied in with all sorts of antisemitism. And it was an entirely radical thing to conclude.

• 34:44Speaker 02

  But they were responding to a memory within Germany that was real and that had been held alive by nationalists. And that became kind of this thing that they were trying to avert in the future. And in Japan, there was a similar situation, which had to do mainly with the fact that Japan, even more so than Germany, is very poor in natural resources. And this created the possibility of using economic pressure against Japan, which the West began to use in the late 1930s. First kind of gently by stopping and revoking commercial treaties. And then steadily more and more as Japan became more aggressive in China. Where it was launching, where it had launched a big war against the Chinese nationalists.

• 35:29Speaker 02

  And as it became more and more aggressive in China, it actually started to become more and more dependent on imports from the British Empire and the United States. So this gave FDR in the United States particularly, a lot of leverage that he could use against Japan. And he did begin to use this particularly in 1939, 1940. And ultimately in 1941, he increases the goods that are under embargo. He first starts with things like aviation fuel to prevent the Japanese air force from flying. Then he expands it to iron ore and scrap metal to stop the Japanese steel industry and weaken it. And finally, in the summer of 1941, he freezes all Japanese assets in the United States, which are a very important thing. That Japan needs to pay for its own imports from abroad.

• 36:14Speaker 02

  And he bans, together with Britain and the Dutch government in what's now Indonesia, the export of all oil to Japan. So this now means that Japan has no more access to a large part of its foreign assets, has lost almost all ability to import the key raw materials for its vital industries, cannot really fly its air force beyond only a few months, or operate its navy beyond a few months of the fuel that it has stored. And so it's basically confronted with a future in which it will be completely immobilized by everything that the West has done. But it's still not officially at war with any of the countries or with the United States. And this is the moment where Japan takes the final radical step

• 36:58Speaker 02

  and embarks on a war which even the Japanese, I think, didn't really think that they were going to win, but they saw no other option but to try and take the fight to the enemy, try and secure these resources in Southeast Asia and conquer a large part of Southeast Asia where they could find these things, oil, rubber, coal, tin, et cetera. And that really is the whole story of the run-up to the attack on Pearl Harbor and the radicalization of Japan and its decision for war in late 1941.

• 37:25Speaker 01

  I have to say, I find that Japan example in particular really chilling. One thing I really worry about is that as we continue to strangle the Russian economy, and especially given the possibility of a truly devastating European energy embargo looming in the background here, I worry that we're going to back Putin into a corner and cause him to lash out in the same way that Japan lashed out, with the terrifying difference being Russia's massive stockpile of nuclear weapons. So I just wanna flag that possibility now. But there's another more optimistic scenario that's possible here and that I want to talk about,

• 38:10Speaker 01

  which is that in recent weeks, Russia seems to be scaling back its war aims. It's no longer talking about regime change in Ukraine. It seems more open to negotiations.

• 38:23Speaker 01

  And for some, I think that's pretty compelling evidence that sanctions could help to de-escalate this conflict. So I'm wondering how you think about that theory of how sanctions are working or could work.

• 38:38Speaker 02

  Yeah, well, the other factor in this conflict, which makes it, I think, very difficult to answer that question with any degree of certainty, is that this is a war in which there is actually an enormous amount of real fighting going on, right? In Ukraine, the Ukrainians are very bravely defending their own country against the Russian invasion. And it seems to me that if Russia is now scaling back its war aims, that must, to a significant degree, have something to do with its own military failure in the field. Because there was a threat of sanctions beforehand already on the table. So sanctions didn't deter this invasion. It is perhaps possible indeed that they are having an effect on his long-term thinking, right? So I definitely don't think that they have no effect.

• 39:22Speaker 02

  They are very likely now creating a picture in the Kremlin of a long-run outcome where if Russia doesn't manage to achieve any of its objectives or defeat the Ukrainian army, then it's going to be struck with a much smaller and weaker economy, no ability to really replenish some of its vital high-tech military supplies because of, you know, loss of access to things like semiconductors and important electronics and sensors that it gets from the West and that have now been placed under sanctions. So they're definitely a contributing factor. Are they the main factor? I don't know. And I would actually say that, in this sense, kinetic force in the field remains probably the more dominant direct influence, particularly because it seems like that's really the thing

• 40:05Speaker 02

  that Putin and the Russian elite have been focusing on from the beginning, because they didn't really heed the threats of sanctions that the West made in the months before this invasion began.

• 40:16Speaker 01

  Whether or not sanctions have contributed so far to the change in tone from Moscow, there's still a possibility that they could be used as leverage to bring about a negotiated settlement. And the example here, which is sort of the, I think, opposite of the Japan example that's often used, is the Iran nuclear deal. So can you talk a little bit about how US sanctions contributed to that deal? And whether you think it's possible to use sanctions in a similar way with Russia today?

• 40:54Speaker 02

  Yes, so just to continue actually from my answer to your previous question, Roji. I think that sanctions could be very effective in bringing this war to an end. So I think that there is a potential future role for them that that could be quite positive. But that depends indeed on, as you say, finding a way to tie them into a negotiated settlement, an end to the war that of course guarantees Ukrainian independence. It now even seems that Russia might not have an objection to Ukraine joining the EU, which is already, I think, real progress. And the Iran deal could serve as an example there because that's been the most recent case in which serious sanctions pressure from the United States was something that went

• 41:39Speaker 02

  hand in hand with a real good faith effort at a diplomatic settlement. So Obama and Kerry pursued talks in this special format in Vienna and Geneva and elsewhere and were able to convince the Iranians that they were better off in a world where they gave up their pursuit of nuclear weapons, but they would, under the Nonproliferation Treaty, get their right to civilian nuclear enrichment. So there was also a concession that was made. It's a right that Iran has under international treaties. And so by showing that they were willing to make concessions in addition to the sanctions and really promise to also lift them if Iran opened itself up to IAEA inspections, a UN agency that could do this verification, both sides made concessions.

• 42:24Speaker 02

  Iran gave up its program, the US gave up its opposition to Iranian civilian nuclear energy. So the broader lesson, I think, from the Iran deal is sanctions will work if you are making a bona fide effort at diplomacy, diplomatic negotiations, you're prepared to concede on things that aren't key to securing your vital interests. So you are not completely rigid in all your demands. You're willing to prioritize between more and less important demands and make concessions on the less important ones. And unfortunately, the Iran deal was torn up by the Trump administration, which withdrew from it. And since, right, we're still in right now in Negotiations to try and have some sort of interim agreement or a new deal.

• 43:07Speaker 02

  And one of the tragic things about the Russia-Ukrainian war is that it's actually placed in question whether that renewed Iran deal can be negotiated by the Biden administration right now. And one of the sticking points is can the US commit in the future to not only lifting sanctions as part of a renewed deal, but keeping them lifted as long as Iran is in compliance? Because this is what went wrong in 2018 when Trump came in and tore up the deal. So in order to make sanctions work, you should negotiate, you should make concessions. But both sides should be able to credibly promise that they are going to, on the one hand, refrain from the behavior that the sanctions were imposed to stop.

• 43:50Speaker 02

  But on the side of the United States, of the West, the countries using the sanctions, they must really commit to being able to keep those sanctions away in the future if there's full compliance. That's the tricky thing. And if that could work to end the war between Russia and Ukraine and help guarantee Ukrainian independence, most of all, that would be a great outcome. But it will be a difficult path to get there.

• 44:12Speaker 01

  I want to get into why this could be so difficult, though. Putting aside how serious Putin is about being willing to negotiate on the basis of the removal of sanctions, because neither of us can read his mind. I do want to focus on the West here. Something you really hit on in that answer was that in order for sanctions to work as leverage in a negotiation, you have to also be willing to make concessions. You have to be willing to make sacrifices. And that gets to a real worry of mine, which is these sanctions aren't just being used as a strategic tool at this point.

• 44:54Speaker 01

  They've also become the central signal of Western values in this conflict. They've become a projection, a symbol of the US standing up for democracy and autonomy and the Ukrainian people.

• 45:11Speaker 01

  And so the question I've been wrestling with is, even if it's strategically wise for the West to make these kinds of concessions, to attach conditions to sanctions removal, is it politically possible for Western leaders to do that, considering the extent to which these sanctions are now bound up with values, which are much harder to sacrifice, which are much harder to compromise on than strategic interests?

• 45:39Speaker 02

  Yeah, that's really where the rub, I think, lies. Because at this point, Western leaders are really committed to maintaining full pressure. And I think right now, there's, again, a movement, right, to increase pressure further, particularly to move towards a full embargo on Russian energy exports. They're really committed to pushing that pressure further for as long as Russia continues to fight and continues to inflict these terrible atrocities on Ukraine and on civilians in the war. So that's one connection that's now been made in the mind of many Western publics. The reason why that is indeed, like you say, a problem is because it creates a kind of dynamic where public opinion is going to push for further, further punishment.

• 46:22Speaker 02

  And I think in this case, it's extra strong, that desire, because there is no conventional military response to Russia, really, that we can directly take. NATO has already ruled out that it's going to do anything that even gets near the risk of a direct military confrontation with Russia, such as imposing a no-fly zone or providing direct fighter jets to Ukraine. So there's a very strong desire, I think, from the political and military elites of the West not to have a direct confrontation with Russia, which is, of course, a nuclear armed state. For that reason, a lot more expectation has come to be attached to the sanctions, for lack of a better alternative. And that's an issue here, because it means that all of the kind of moral outrage,

• 47:06Speaker 02

  but also all of our hopes for an end to this conflict and a better future have now been channeled into a pretty specific set of instruments. Whereas I think ultimately, the solution here lies in using the full range of instruments, militarily, because it's Really key to support Ukraine's ability to resist and fight Russia to a standstill as it now seems to be doing. Definitely economic pressure to send a signal and show that Russia cannot continue to access the rest of the world's resources without limit while it is pursuing such a war of aggression, but also diplomatic. You want to use the full spectrum of resources, basically. And I think the issue now is that it seems our desire and our attempts to expand military aid have kind of run up against the natural limit.

• 47:49Speaker 02

  We can continue to give aid, but we cannot really go further in terms of direct military involvement as the West. We, for moral and ideological reasons, also have decided that we just don't really want to deal with Putin. I think many people don't really think that he's reliable, right? He may well not be reliable at all. I think that that's a perfectly reasonable thing to think. But the consequence of thinking that is that your tools on the total spectrum of foreign policy and strategic tools to deal with this war and this crisis narrow and sanctions become the main thing that we have now. So then, right, like you said, the lifting of them might be very difficult to sell to Western publics. Because unless it's seen to be offset by some other sort of way that we keep the pressure on, it will seem like a concession.

• 48:33Speaker 02

  That's very hard to justify unless there's something to show for it.

• 48:37Speaker 01

  One of the possibilities that worries me here is that we continue to escalate the stakes of this through our sanctions, not de-escalate it.

• 48:51Speaker 01

  And the most obvious way that the West could step up sanctions right now would be, as you gestured at, a European embargo on Russian energy. And that would just be a devastating blow to a Russian economy that is already suffering. And so the big debate right now in Europe is, you know, can European countries do this? Can they afford to transition away from Russian energy in the near term? But a question I haven't heard talked about nearly as much is, should Europe do this? And this is where the Japan example is really lingering in the back of my head. Because something that stood out there is that an oil embargo, a cutting off of energy.

• 49:33Speaker 01

  And I know it was, you know, different between imports and exports, but that was really the final straw that pushed Japan into a corner and caused them to lash out. And one thing I worry about that's being missed in this conversation about European energy sanctions is the possibility that they push Putin into a similar corner, that they risk causing Russia to lash out in some unexpected way. I'm wondering how you think about that possibility and how you think about that question more broadly, not can Europe do this, but should they?

• 50:09Speaker 02

  So there is very much a risk of that, I think, that we shouldn't deny that that's there. And some people, I think, try and minimize that risk and say, well, we have been escalating sanctions for the last month, and Russia, while having increased the aggressiveness of its attack on Ukraine, right, targeting civilian areas much more, hasn't directly lashed out at the West yet. But there does come a point, certainly, where I think it would. And the difficult thing is that we just do not know where that point is. But I think it would be irresponsible not to presume that it does exist somewhere. And we probably haven't reached it. We're probably some way away from it. But are we right up

• 50:54Speaker 02

  against it? Or are we still quite far away from it? That's the big question. And I also think that there's an interest in trying to find a speedy end to this war, because the longer conflicts tend to persist, the more entrenched they become. If they are usually not ended within the space of a few weeks or a low number of months, wars do tend to last much longer. They acquire kind of momentum of their own. People have an interest in perpetuating them. And in this kind of situation, that means a permanently elevated risk of escalation. I mean, I'll leave it to the military experts again to kind of lay out what options for escalation by Russia there are. But it definitely seems

• 51:39Speaker 02

  to me like this is the last main foreign currency generating sector of their economy. And one reason maybe to be a bit more optimistic is that, like you said, Japan was totally dependent on importing oil. For Russia, this is its export. So Russia will still have fuel. There will still be things to power cars and to keep the lights on in Russia. Russia also still will have food, which it is self-sufficient in. But it's going to be lacking a lot of other things. It's going to basically lack all the money that it would earn from oil and gas in ordinary times, with which it would pay for essential imports. It could probably sell a bunch to India and China and to Asian countries. And I actually think that that is not insignificant, that that could be a lifeline,

• 52:23Speaker 02

  because those countries aren't part of the Western sanctions. But that will have to be expanded. And Asian countries, I think, are going to have to be buying more than they're buying now if that is to be a long-run lifeline to Putin. So I still would rate the chances of escalation lower than in 1941. But I do still think that that risk is there and we would be foolish not to consider it quite seriously.

• 52:49Speaker 01

  I agree, and that is definitely the question that I think we're all going to be keeping our eyes on. I want to get to the global picture in a minute and how this is affecting the rest of the world. But first, I actually want to go back to something we talked about earlier, which you mentioned of two of the different sort of theories of how sanctions are supposed to work. One is something we've mentioned a few times, which is regime change. Either people rising up under the face of economic pain and overthrowing a regime, or a inner group of elites who are pressured to the point where they decide that they need to oust the leader in charge.

• 53:34Speaker 01

  And both of these have been thrown out as possibilities when it comes to Russia. The latter one especially has been taken seriously. Like, if we put enough financial pressure on these oligarchs, who have basically built their wealth in concert with the Russian state. If we put enough economic pressure on them, maybe they can force Putin out. I'm wondering just how you think about those two theories in the context of Russia. Is there any validity to or possibility that we could see these sanctions end up creating some kind of regime change, as taboo as it is to talk about for someone like Joe Biden?

• 54:17Speaker 02

  The impression, I think, that's fairly unanimous from the Russia expert community is that these sanctions on oligarchs and the expectation of popular protests are difficult to see as mechanisms that are going to lead in the very short term to forces that will force Putin to change course. And the reason for that is that Russia, under Putin, has been repressing its political opposition, systematically imprisoning it, driving it out of the country. The massive brain drain and huge exodus of skilled and liberal-minded young Russians right now, also towards the rest of the world, is considerable. That is a natural constituency for an anti-Putin opposition. That's weakening. So the people

• 55:02Speaker 02

  that are left, that you would ordinarily rely on to be the backbone of political opposition, are less strong than they were before. That doesn't inspire great confidence. On the oligarch side of the picture, I think here, you need to think about what sort of an oligarchy Russia is. There's a great book by the political theorist Jeffrey Winters called Oligarchy, and he distinguishes several types of oligarchy. But Russia, in his theory, is a so-called "sultanistic oligarchy," an oligarchy in which the power of the wealthy and the assets of the wealthy are protected by a single sort of uber oligarch or sultan, who is able

• 55:46Speaker 02

  to discipline all of them, but provide for the protection of their wealth as a class against threats, particularly from below, from the mass of the population, but also from external actors. That seems to approximate quite closely the sort of political economy of wealth in Russia in the last few years and in the last decade. In the 1990s, it used to be different, but Putin in the 2000s steadily pushed out the oligarchs that were political opponents, and he, in a sense, rewrote the contract between the very wealthy in Russia and the national security state, such that if you want to be one of the oligarchs And if you want to be truly wealthy,

• 56:28Speaker 02

  you cannot but do so by accepting the basic ability of Putin and his security henchmen around him to control foreign policy and control the essential affairs of state. So this is a kind of regime in which the oligarchs are there, but they are not sort of the puppet masters behind political power, as you would expect in some other oligarchies, where a ruler truly rules by the grace, so to speak, of the truly wealthy. The truly wealthy here are, it seems, below the security elites in the Kremlin that really is in charge of this policy. And from also the most of the reports that we have, they seem to be largely suffering enormous losses to their assets, but suffering in silence because they do not have,

• 57:13Speaker 02

  by and large, that many avenues to voice their opposition. Again, it could very well be that eventually something changes, but this seems to be the read right now that I see among the majority of Russia watchers.

• 57:44Speaker 01

  Let's look at the global picture now, because the impact of these sanctions hasn't just been limited to Russia and the West. So for most of us in the West, the place we're feeling this war the most is the spike in energy prices. But these sanctions have impacted a much wider set of commodity markets. And this has been on my mind a lot recently, you know, as someone who has a lot of family in places like Lebanon and Palestine, who are being hit really hard right now by a conflict in a sanctions regime they had nothing to do with. So can you talk about some of the spillover effects this is having in the global South in particular?

• 58:25Speaker 02

  Yes, the main conduit for those spillover effects are, like you said, commodities markets. So Russia and Ukraine together export a large amount of the total exported amount of cereals and food grains, corn, wheat, sunflower oil, et cetera, to many countries. And particularly in North Africa and in the Middle East, right? They're very dependent on exports from Russia and Ukraine. So what this war and the sanctions that the West has used in order to try and stop Putin's war have done is that the war itself has closed Ukrainian ports, major ports like Odessa,

• 59:05Speaker 02

  Mariupol, Bergeonsk, are now no longer easily accessible by cargo ships and Mykolaiv. So those become inaccessible and normal exports from Ukrainian farmland to the rest of the world have been stopped. But the sanctions on Russia as well have had a supercharging effect on that access issue, because if it was simply Ukraine that could not export, we would certainly be seeing a spike in food prices. Ukrainian exports are significant, but Ukrainian and Russian exports put together, Russia has quite a bit more still exports in those key sectors than Ukraine. Those two shocks put together, the war shock to Ukraine and the sanctions shock to Russia,

• 59:49Speaker 02

  now mean that there's a significantly reduced supply of food for export to global markets. Food prices are already higher than they were in 2008 and in 2011. In 2008, there was a major global wave of political unrest and riots. And in 2010, 2011, these bread riots in North Africa particularly, but around the Middle East, were one of the main contributing factors that kicked off the Arab Spring. They weren't the reason that people revolted, right? It was also because of political repression and corruption and all sorts of grievances that had built up, but food riots were a trigger for them. And this is what happens in a complex globalized world economy. And that's, I think, why these sanctions are such a massive turning point and also why their consequences, I think, should be taken really seriously.

• 1:00:34Speaker 02

  Be seriously intended, but especially also unintended, because the likelihood in this fragile world economy that's been hit by two thousand eight and COVID and is slowly recovering. In the global south, people are still dying on mass from COVID nineteen as well, and they continue to not get waivers for COVID vaccines, IP waivers. So the West continues to protect the intellectual property of its own pharmaceutical companies in many cases. These countries have not gotten also as much debt relief as they would have wanted from the IMF. So they have had a number of grievances already, a number of issues where they asked for help from the industrialized developed world, didn't get it.

• 1:01:15Speaker 02

  And now they're also on top of that, suffering from the spillover effects of this war and these sanctions. So it's really important, I think, that we take very seriously the damage and the effect that this is having on the global south and that we try and put in place as soon as possible stabilizing policies by governments through fiscal spending, by central banks to backstop some of these commodity markets, to make sure there's less volatility, that the prices aren't bouncing up and down. And that we invest very targetedly, but in large amounts and rapidly in specific places to expand port capacity, available infrastructure, ramp up shipbuilding. So we have extra shipping tonnage to move this stuff around. And of course, release grain and other food supplies from strategic reserves, which are very large in many OECD countries.

• 1:02:00Speaker 02

  So there's a lot of things that we can do, but there seems to be very little public pressure in the West to do them. Because in the West, this is largely a story about energy prices. But in the global south, even before that already, right now, there's a very severe food crisis that's beginning to take shape. And the consequence of that for political stability, right, we will know by the end of the year, but they are definitely not going to be positive.

• 1:02:24Speaker 01

  I want to pick up on that theme of possible political instability. Because a core theme of the book and a real lesson of the history of sanctions that you discuss is that they don't only have economic ripple effects, they really do have these political effects throughout the world. And obviously, we can't predict the future here. But I'm interested in your perspective, looking at this current global environment. What historical parallels feel the most relevant for you right now? And is there anything you think we can learn from them for our own time?

• 1:03:03Speaker 02

  Well, the book and also my professional background as a historian is as a specialist of the interwar period. So I have to say I'm a little professionally inclined probably to always look for parallels there, which is probably too restrictive. But one positive thing that came out of the interwar period is a sense that globalization is fragile and that it requires concerted cooperation and effort to stabilize it. The thing that is worrisome and the thing that the Great Depression and the 30s also teach you is that in that environment of mistrust, some countries are going to take an illiberal route. And there are better and worse ways of dealing with that. But I feel that we're

• 1:03:48Speaker 02

  still at such a moment right now where it is possible to try and emphasize areas where we can cooperate even with authoritarian and illiberal powers in the interest of global stability. We have way more issues. We have climate change. We have major inequality and international issues like tax avoidance, corruption. Those are all areas in which countries can collaborate, restraining cyber warfare and cybersecurity. There's a lot of domains in which we could embark on new treaties and new stabilizing institutions. But we also need to have both the confidence that we could do something better, that we could create something new, and in a sense, the wherewithal and the courage to do these things, even though right now, I realize in the West particularly, the tendency is

• 1:04:33Speaker 02

  to want to only band together with countries that share our values. What the interwar period teaches you is that that might be politically entirely justified, but it is geopolitically sometimes also dangerous because it burns some bridges that particularly right now, I think we should try and keep them open. In the 1930s, there was a threat of fascism and it was ultimately very justified that the West and countries went to war against it. And there was no really sharing the world with fascism that was really possible. But today, I think we have much larger challenges and we're not yet at the point where that sort of existential idiocy Ideological confrontation is happening.

• 1:05:14Speaker 02

  We're dealing with a pretty old problem, which is simply that there are freer and less free countries. So it seems to me that the absence of some of that ideological strife of the early 20th century is an asset today. And hopefully, we can look beyond some of those differences and think about, you know, what sort of global governance institutions can you preserve even as you stand confidently and steadfastly for your own values? You don't need to agree, you don't need to approve of every action of every other government. This is not a reason to take away criticism. It is, however, an argument to prioritize where will you criticize and compete and force laws? And where will you also preserve and talk across differences and try and manage common global problems?

• 1:05:56Speaker 01

  We've been talking a lot about Russia for obvious reasons. But the US is currently employing sanctions against a lot of countries around the world. Could you just give me an overview of the current US sanctions landscape beyond the sanctions on Russia that people are probably familiar with right now?

• 1:06:15Speaker 02

  Yeah, so the sanctions against Iran, of course, we already mentioned it, are still in effect. And these are not just very long on old sanctions, but the sanctions that the Trump administration imposed, the Biden administration has by and large preserved against Iran. So those are still in effect. The other important sanctions regimes are the ones against Venezuela, which is under sanctions that might even be more severe than those against Russia. It has had its assets frozen, foreign assets. But it also has seen large sanctions against its major oil sector, the main revenue earning sector of its economy. That as an effect that Venezuela has undergone one of the most dramatic peacetime collapses of an economy in the last 150 years.

• 1:06:59Speaker 02

  I think there's maybe only one or two other cases that have been as severe, but something like 75% of its 2013 GDP has evaporated as a result of the sanctions. So Venezuela remains a real nader of economic outcomes in terms of exposure to sanctions. North Korea, of course, we also, I think, have displaced that somewhat. Even as Kim Jong-un has continued to really provocatively fire all of these ballistic missiles, but that too is a country that the West and the UN even has with sanctions tried to restrain for many years now, and it hasn't really worked. And then one other important one that I think is important to mention here.

• 1:07:42Speaker 02

  Syria against the Assad regime, where from 2012 onwards, the West started to demand that as part of any resolution of the Syrian civil war, Assad had to go and it would keep these sanctions in place until he did. And it is a very contentious topic right now because the question is right. Assad has largely defeated the political opposition in a very brutal way. But does that mean that this country, including many of the people living in it, are still victims of his regime, should continue to also live in economic penury and cannot rebuild their country after this war ever either?

• 1:08:18Speaker 01

  You mentioned earlier in the conversation that there are studies showing that sanctions have about a one in three success rate of achieving, or at least partially achieving their their goals. But that list, that list is really disconcerting. We have sanctions on Syria and Venezuela. Assad and Maduro are still in power. We have sanctions on North Korea and Iran. They haven't stopped North Korea from developing a bomb. If anything, Iran is closer to developing a nuclear weapon today than when the Trump maximum pressure campaign started. It's a really dismal set of outcomes.

• 1:08:59Speaker 01

  And I think that's particularly worrisome because of the pain that they're inflicting. And I want to focus actually on a country you didn't mention, which is Afghanistan. Because that's a country that I think demonstrates this dichotomy versus between efficacy and economic pain. Because Afghanistan right now is undergoing a genuine humanitarian crisis. And it's one that our sanctions policies bear some real responsibility for. According to the most recent estimates, 95% of Afghans don't have enough to eat. We're talking about nine million people who are at risk of starvation.

• 1:09:44Speaker 01

  Could you talk me through the crisis right now in Afghanistan and the role that US sanctions have played in it?

• 1:09:49Speaker 02

  So, that's a very important case that you bring up, Roche, because we, since the military withdrawal from Kabul in August of 2021, have considered the war in Afghanistan over. The Taliban are now back in power. They took over at an unexpected speed at the end of last summer. And one of the things that the US Treasury decided to do in response was to freeze about $7 billion worth of assets belonging to the Afghan Central Bank, held in American financial institutions.

• 1:10:20Speaker 01

  So this is similar to the central bank freeze we just did on Russia, right?

• 1:10:23Speaker 02

  Exactly, yeah. Seven billion, right? Russia wouldn't even bat an eyelid about it. But for an economy of the size of Afghanistan, which is tiny in GDP terms, but the population of Afghanistan is actually very large. It's more than 33, 34 million. For an economy that is very poor and that has a large population to feed, even being deprived of access to just a few low, single-digit billion dollars is devastating. And over the winter now, the International Crisis Group, the United Nations have warned about one of the largest famines in recent history.

• 1:11:01Speaker 02

  And Biden has taken the decision, I think about a month or two ago, to unfreeze half of these assets and give them in a sort of small drip feed to Afghanistan in the form of humanitarian aid. And to release the other half and pay off the families of 9/11 victims who have pursued lawsuits against the Afghan government. So, the US government basically has now taken control of the foreign reserves of Afghanistan and is determining what can happen with them. And I think that besides the kind of ethical questions that that raises, the real, you know, long-run outcome being produced by it, we should ask ourselves questions about it. The whole reason for militarily intervening in Afghanistan in the first place was to

• 1:11:46Speaker 02

  prevent it from being a safe haven for terrorists and extremist groups. And that was partially because of... Afghanistan in the 1990s had come out of a decade of war with the Soviet Union, then went through a decade of civil war and was so poor and underdeveloped by the end of it, that it was a very much a kind of seedbed for those fundamentalist groups. And it had a governance problem, right? It couldn't control all parts of the countryside. So it was easy for groups to settle there and find local support. Those are the exact conditions that these Western sanctions and the US freeze is now recreating in Afghanistan. So it's imperative, not just for humanitarian and ethical reasons, right?

• 1:12:28Speaker 02

  To help the Afghans who we have been trying to help in some way for 20 years, to actually follow through and end this economic war on them. But also, I think, to make sure that we don't create the very problem that we originally went into Afghanistan to try and solve. So I think those are two pretty strong arguments for trying to restore those reserves and really increase humanitarian aid to Afghanistan.

• 1:12:52Speaker 01

  I want to end before a book, Rex, by talking about where all this leaves us. Because it sometimes feels like the only alternatives to sanctions are either go to war or do nothing. And neither of those are really good options either. So are there alternatives to sanctions? Or maybe a better way of designing sanctions? That could help us achieve better outcomes here, without having some of these truly brutal devastating effects on civilian populations?

• 1:13:25Speaker 02

  So, interestingly, in the interwar period, there was a strong sense that sanctions were only part of the way that you could weaponize the economy. You could kind of negatively weaponize the economy in the form of sanctions by cutting off access to resources and depriving economies of them. But you could also positively weaponize the economy. And that was by pooling resources, by securing them from places, pooling them together and then providing them to the victims of aggression. So in this case, that would be Ukraine, right? And they definitely do need a lot of economic aid. But also eventually to create a kind of positive sum dynamic in the world economy, where if you had large enough coalitions pooling resources. Sources and distributing them to those in need.

• 1:14:07Speaker 02

  There would be less distrust and less geopolitical uncertainty and instability to begin with. So this would, in the long run, even have sort of war reducing effect. War would just become less prevalent if there was more prosperity and more proactive economic and financial and logistical aid to begin with. Now, people might say that that's utopian and countries will continue to have differences, and that's doubtless true. But even so, I think if we complement our use of sanctions much more with thinking about positive aid, that would be a powerful thing. How can we not only sweeten the carrot? How can we make the reasons for pursuing good behavior and getting sanctions lifted more compelling to the countries that are under them?

• 1:14:50Speaker 02

  But also, how can we, after the sanctions are lifted and good behavior returns? Help those societies, right, that have been through something, approximating economic war? If we take that comparison seriously, I think that should lead us to also take the next step and say, well, if a war ends. Afterwards, there's a reconstruction process that takes place. Economic war should be followed by economic reconstruction. So countries after having been exposed to sanctions, they have all sorts of problems, corruption, major forms of damage to the social fabric, to institutions, to ability of markets and economic activity in life and investment to operate. Companies need to be convinced to move back. That's another thing, right? So this is an international private sector challenge as well.

• 1:15:32Speaker 02

  If we think about those things, so sanctions relief and post-sanctions reconstruction as something where we can really put a lot of our best and brightest and most sophisticated economic tools to work. I think we could go some way towards both expanding the toolkit that we have to deal with international crises and also hopefully making sure that the damage to ordinary people is going to be less.

• 1:15:57Speaker 01

  I think that's a good place to come to a close. So I'm gonna ask you the final question we always ask on the podcast, which is, what are three books that have influenced you that you'd recommend to the audience?

• 1:16:10Speaker 02

  I'll start with one that's very topical right now, and it's a book by Vladislav Zubok called Collapse. It just came out in November with Yale University Press. And Zubok is a historian at the LSE, the London School of Economics. And he's written this really fantastic and very gripping book on the end of the Soviet Union. So it's all about the late 80s and the early 90s. But for anyone, I think, looking to find some good background on why this war and this enmity between Russia and Ukraine already goes back three decades. And in a way, it was actually the consequence of unresolved tensions from that period. I think this is a great place to start, and it will really put a lot of things that I think

• 1:16:52Speaker 02

  listeners might be familiar with from that period, from having lived through it into a new life. So Collapse by Vladislav Zubok is one. The second book I'd like to recommend is Victoria de Grazia's The Perfect Fascist. Victoria de Grazia is a historian at Columbia, and she's specialized across her entire career in Italy. And she's written this phenomenal book, which is about one of the main henchmen in Mussolini's regime, the head of Mussolini's black shirts in fascist Italy, and his wife, who was a Jewish-American opera singer from the Upper West Side of New York City. And she married him, and it's a story about their marriage, but also about why people

• 1:17:34Speaker 02

  became fascists and how that affected people in their private lives and the public responsibilities of being in this authoritarian regime versus people's private doubts and idiosyncrasies. So it's a wonderful book at the intersection of public and private life. And it's also very much about, you know, what is life under fascism like? And how did Americans and Italians deal with that in the early 20th century? So I very strongly recommend that, The Perfect Fascist by Victoria de Grazia. And the final book I'd like to recommend is actually a memoir. By Alexander Watz, W A T, and it's called My Century. And Watz was a Polish Jewish writer and poet and a modernist literary figure in interwar Poland.

• 1:18:19Speaker 02

  And he had an incredibly difficult life. He describes his experience of the 30s and 40s, which he spent a large amount of in imprisonment by the Soviet Union. And he narrowly escaped death several times. And if you, I think, want, you know, we're living through tumultuous times. I've already compared it to the interwar period in some ways. It is very fruitful also to read a highly articulate and interesting person, document their experiences in that period, what it's like to read Marcel Proust in Lubianka, the headquarters of the of the KGB, for example, or the NKVD. Watz talks about all of that, but mainly despite the fact that he went through enormous

• 1:18:59Speaker 02

  sufferings, never lose his sharpness in observation, never lose his sense for humanity and beauty in the small moments. So in terms of memoir, I highly recommend that. So I think those would be my three recommendations.

• 1:19:12Speaker 01

  Nick Mulder, your book is The Economic Weapon. I cannot recommend it highly enough for trying to make sense of the moment we're living through. Thank you so much for coming on the show.

• 1:19:23Speaker 02

  Thank you very much, Roji. Absolute pleasure to have this conversation.

• 1:19:35Speaker 01

  The Ezra Klein Show is a production of New York Times Opinion. It is produced by Annie Galvin, Jeff Geld, and me, Roji Karma. This episode was fact checked by Michelle Harris, Mary Marge Locker, and Kate Sinclair. Mixing and engineering by Jeff Geld. Original music is by Isaac Jones. Our executive producer is Irene Noguchi. Audience strategy by Shannon Busta. And a special thanks to Kristina Samulewski and Kristen Lynn.