Curious Worldview

#UkraineRussiaWar (+1 Day) - Jim Henry | Impotent Sanctions & Explaining SWIFT

• Ryan Faulkner-Hogg • Episode 73

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🎙️: https://atlasgeographica.com/jim-henry-sanctions/

This was recorded at 19:00 on the 25th of February.

We spoke about SWIFT and expanded on the sanctions chat that started the day previous.

Jim Henry is a godfather to the field of investigative journalism into financial secrecy, offshore finance, capital flight and kleptocracy. He published Blood Bankers in 2003 which exposed 100s of corrupt, kleptocratic infrastructure projects across the developing world which we covered in #49 of this podcast.

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  • 00:00 – Update On The Sanctions
  • 08:29 – Can It Be That Private Incentives Are Getting In The Way Here?
  • 11:00 – Explaining Swift & It’s Implications For Russia.
  • 21:01 – Turning Attention To Oligarchs + Commenting On Russian Apologists.
  • 35:12 – Closing Thoughts.

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SPEAKER_00

Hello, Jim. Good afternoon. So what's an update on the sanctions?

SPEAKER_01

Well, in the context of uh horrific expansion of bombing and deaths in uh Ukraine, we we would have hoped that the the US and the EU would have uh pulled out all the stops here. They pulled out some of the stops and they've added some new banks to the list. Um but uh even those banks like Cyberbank are not fully blacklisted yet. Um they have added some individuals to the list, and including um President Putin and Sergei Lavrov, who is the foreign minister. Uh but uh since Switzerland is not a member of the EU, and Switzerland said yesterday that they were not going to blacklist any Russian oligarchs, uh, and since Putin's key assets are in uh the Russian oil trading companies that are based in Switzerland, shares in those companies, uh that is uh that's a problem. We need to get Switzerland on board here. Uh as for the other big option that they've decided to uh not so far not to go forward with, uh there are still meetings going on today to perhaps toughen these sanctions, but the big one that's missing is the sanction that would cut them off from the international bank clearing system, SWIFT system, uh, that is used by 11,000 banks around the world to uh to send money back and forth and to make payments. This is a sanction that was implemented against Iran in 2012 with great success and resulted in a reduction of Iran's uh trade by 30%. Uh oil exports fell by 50%, and is one of the reasons Iran proved to be more flexible going forward in terms of coming to the table with regards to a nuclear development program. Um, in this case, however, we have this interesting phenomenon that within the EU and also I think in the U.S. Treasury, there are real skeptics about uh, you know, real uh opponents of extending this to the bank. One of the key factions here are those countries that have lent money, uh have banks that have lent heavily to uh Russian creditors, counterparties. And so if you look at the latest Bank for International Settlements data, you find that as of uh September 2001, uh 2021, um there were uh about 106 billion dollars of loans outstanding to Belarus and Russia. Uh of that, the EU and the United States account for 90% of all loans. And the banks are apparently concerned that if they implement a SWIFT cutoff, they won't get paid on these loans. And the big uh countries most exposed there are Hungary, where we don't have individual data because they don't uh report to the BIS. But Austria has about $19 billion of loans outstanding to Russian counterparties. Uh Italian banks have about $23 billion, French banks have $26 billion. That maybe account for some of Macron's interest in talking to Putin. Uh, and U.S. banks have about $15 billion. So those are the big players, and they're probably the big sources of resistance. Um, you know, the the other thing is that uh behind the scenes you have uh U.S. and uh sanctions policy being heavily influenced uh by a bunch of so-called uh legal sanctions experts. And when you look closely at who they are, um they you know they were working for Obama under the U.S. Treasury on the so-called OFAC offshore uh foreign assets controls uh system in uh you know the 2014-2016 period. Um, and then they went on to careers in major uh kind of Wall Street law firms. Um, Gibson Dunn is an LA-based firm, but it has offices in 20 uh places around the globe, and it's probably best known right now for having uh gone after Stephen Donziker, the environmental lawyer that went after Chevron. Uh they basically end up getting him thrown in jail for uh a year, and Gibson Dunn was heavily involved in that effort. In this case, they have an expert on Swift who has taken a very vigorous uh public position against extending Swift. Uh and, you know, we'd love to know uh how many clients he has in the banking industry because they're probably uh as opposed to it as he is, if not more so. So, you know, that kind of confluence of uh forces has made this different from Iran. Iran didn't have a lot of foreign banks that had loaned money to it, were looking to get paid, and uh didn't have any, you know, sort of uh didn't have a this influential fifth column in Switzerland uh that's been uh uh making uh it difficult for Switzerland to act here. You know, the four or five big there's must be about twenty five major trading companies in Switzerland that are uh you know connected to Russia. The top four are like Gazprom, uh Gazprom Bank, and uh uh Luke Oil has a trading company, uh Rossneft has a big trading company. These are all major uh Russian companies with uh close to $100 billion each of revenue. Um and so far as we know they have not been put on any kind of sanctions list. Obviously, the EU is exposed to uh pressure in the energy sector. They're concerned about, you know, they have 40% of their oil is coming, um their gas is coming from uh from uh Putin. But uh, you know, this is a um another leverage point that I would have thought in this crisis uh at least uh temporarily we could suspend the SWIFT system and and apply some more pressure to Putin. It's not clear for all that uh what Putin will respond to. You know, what is really uh is are his pressure points. I suspect that what we might hope is that we've already seen protests in Russia, um surprising number of people getting arrested to oppose this war within two days of the invasion. Uh it's quite striking. Quite a few leading artists and musicians, rap singers, uh, you know, have gone out. A leading soccer player in Russia uh has gone out publicly and said, stop the war. This is ridiculous. These people are our our cousins. And uh, you know, there's no there's no Nazis uh in in the government that we know in in the Ukraine. That's one of the more preposterous aspects of this. Here we have uh an action by Putin that is as similar as anyone can remember to uh exactly what you know Hitler was up to in Czechoslovakia and uh and Poland in the in the late uh 30s. So, you know, the idea that this is a Nazi action uh that he's after he's gonna trying to extinguish is is preposterous. So, you know, uh we'll have to see how this plays out, but I would hope that under the impetus given by simply by the uh the dire situation on the ground and the fact that the Ukrainians need our support and deserve it, and are waging uh uh you know a ground battle that's surprising people, they are holding up uh the Russian uh forces. And there it was a US general an hour ago who said that uh Russians are uh Russian military is not moving nearly as fast as it has hoped. But that that being said, you know, there's already 50,000 Russian troops in Ukraine. They have overwhelming uh preponderance of force on their side, and the the main force that the world has to apply are financial sanctions and m and suasion, you know, persuading these people that persuading Russians at large that uh what their leader is doing is wrong.

SPEAKER_00

Speak more about the incentives. You're almost suggesting that private banking incentives are outweighing public interest here.

SPEAKER_01

Aaron Powell I think that there's, you know, as long as the the discussions are going on in the you know uh behind the scenes and back doors, and there are technical discussions about systems like Swift that most people have never heard of, uh then the technocrats will be able to weigh in and say, no, this is going to create turmoil in the international system. We couldn't possibly do that. Um the way this gets done is for us to all uh begin to demand that we need to take action to stop this. And so at the one level, you say, um, what's working? You know, is he is he continuing to occupy the Ukraine illegally, uh the largest invasion uh since World War II? I mean, uh are we succeeding with our other sanctions? Um the other thing we might do is here, as I've made be the point before, is we might decide to uh go after anonymous flight capital, which is sitting in Western uh institutions in droves, and just basically, you know, do what the Italian did with the mafia. They would freeze the assets and say, uh, okay, come tell us how you got them, and then we'll give them back to you. But, you know, there's gonna be a period here where you know you're gonna have to sit on it. Um there's also a whole class of people in Russia who really enjoy, you know, the Mediterranean. They love Cyprus, they love flying around the uh, you know, going to Kopdown Teve, they like London. You know, we've talked about that before. So there's a lot of um issues, stuff to be done with visas, and I think they're beginning to take steps in that direction.

SPEAKER_00

There was a um on Twitter, of course, and this is all just something I see on Twitter, don't know how confirmed it is, but um, there's a flight path of Roman Abramovich's jet going back from Monaco into Russia uh the day before the invasion. Um I saw, I forget the name of the oligarch, but uh his Norwegian yacht up in Narvik, way up the top there, had been sort of boarded and seized. Um can you talk? Uh so I'm reading also as well that people are sort of leveling uh blame onto Germany for the reason that people that Russia is not getting cut off from the sort of Swift service. Could you actually first maybe talk about Swift? What is it? Why is it why would it be such a painful sanction?

SPEAKER_01

Well, it's basically kind of a global messaging system that is established as a standard. It's owned by the banks and they allow people, some non-banks are involved in it. It's administered in Belgium since 1973 when it was first created. Uh it has grown to expand to sort of be a global standard for uh uh monitoring payments and uh financial transactions among banks, and so that's the the main thing that it does. Uh and you know, a huge number of transactions every day, I mean the trillions. Uh we're talking about uh a system that has become widely accepted as the as the gold standard. Russia has tried to get China uh to establish an alternative, but I think the the reality is that they're nowhere near getting uh everyone in the world to sign up for an equivalent SWIFT type system. So this is one of those uh pressure points that we have. Uh one of the arguments that comes up here is you know, do we apply rolling sanctions and gradually increase the intensity of them, or do we start out big and uh and and and have you know some real impact as soon as possible? I'm in the latter camp. I think that what we do is we offer withdrawals of sanctions and we extend more powerful sanctions up front and let them see uh the potential impacts and understand, you know, these will take some time to work in any case. But the idea that we would have this kind of graduated uh increased tax on this activity is you know, it's just uh it's it's an economist's kind of pipe dream. I think what we need to do is is have start setting some conditions. If you want SWIFT, you know, we will implement a SWIFT restriction. If you want it removed, then this is what we want. You know, the withdrawals, withdrawal of the troops by date X. Uh, you know, this uh this is not uh uh a poker game. We are we are way into, I mean Putin has pretty much burned his bridges. And um I think he's uh underestimated the degree to which we can actually get this very disparate set of interests uh in the world community organized around stopping this. Because we all are reminded in various ways of what this leads to if it's not stopped here.

SPEAKER_00

I was I heard on the Swedish news this morning them giving an explanation for why they hadn't cut Russia off the sort of swift access overnight. And the explanation um I I couldn't really uh understand at all, but they basically said that this would be the last sanction that they could that they could impose on Russia, economic sanction. This would be their final card to play. And for some reason they thought they still had maybe leverage over the Kremlin by just threatening it to be taken off, uh, which I thought was a really like a miscalculation, right? I mean, obviously, I don't know how how well your economic sanction is going to work at deterrence at this stage. You just want it to be a painful weapon instead.

SPEAKER_01

Uh I mean I think we just remember what goes on in the criminal justice system. You know, when someone commits a murder, you don't say, well, deterrence failed. Um let's just uh, you know, we you're this is for all of the other dictators in the world.

SPEAKER_00

It seems like you're beyond deterrence, right?

SPEAKER_01

Yeah, you're beyond deterrence. That's no longer the issue. Nobody's doubting that he has not been deterred. That is not the issue. It's it's really a ridiculous argument.

SPEAKER_00

Uh yeah, I thought so as well. I couldn't believe that they were making it.

SPEAKER_01

I sincere. And I thought the Biden administration got uh twisted in its knickers yesterday with uh sort of some was Biden uh, you know, differing with the other people in the administration who said that it was about deterrence. No, he was basically saying, you know, he's committed a crime. It's uh, you know, there are penalties. There have to be consequences. And uh, you know, deterrence failed, yes, you know, in this case, uh, but we want to show people what happens to you when you do these things. And that's, you know, that's so the argument that uh the Swiss system is something to save in our as our reserve is again the sort of the exactly the opposite of what we should be doing. We should be implementing the SWIFT cutoff and then offering to retract parts of it in various ways over time, and I think that that's um likely to have more uh impact. You know, the the other thing is that there is a bigger option with respect to uh Russia, and uh you know the SWIFT system is just banking. So there is a whole set of non-bank uh actors in Russia and elsewhere that uh have to engage in trade, and they have systems for engaging in trade. Um and moreover, as I mentioned, uh you know, the idea of declaring that anonymous assets in any way associated uh with Russia uh have to come in and justify their existence. Uh, you know, we're talking a couple trillion dollars of offshore wealth uh potentially that's uh owned by uh Russian oligarchs at this point, having accumulated offshore tax-free for 20 years. Um it was the largest source of capital flight uh in the world, second only maybe to China uh during this last uh two decades. And uh China has basically gotten a lot of it to come back and invest in China. Uh Russians are still decapitalizing their economy. So I think over time we need to explain to Russians that we're not against them. This is not an ideological dispute. Uh they happen to have lost uh their democracy, uh, and you know, they have to get it back. Uh and we're gonna help them do it. And maybe we have now a Marshall Plan for Russia and Ukraine, and we we actually contribute to their development. We offer some some carrots as well as sticks. So if you get rid of this guy and his cronies, uh put him out to pasture, you know, uh we will um, you know, there's there's going to be a better world, and we're gonna work together on climate change, which we really need the Russians involved in and behind. We're gonna work together on the public health issues we've all been facing. This is, you know, a gratuitous crisis in the world economy that we just cannot afford right now. There are too many other real issues that the world faces.

SPEAKER_00

Um talk about how effective a sort of weapon removing Russia from the Swiss system would be. What would happen to Russia's economy were they to be completely cut off from it? Is it simply a matter of uh currency conversion would be halted? Like what is the mechanism that would be?

SPEAKER_01

It would be um, first of all, their banks would have a hard time making payments. Trade finance is heavily involved in banking. Uh it would be uh uh uh difficult for them, like in the case of Iran, uh they'd have to find complicated ways around this restriction to to even buy and sell exports, uh you know, sort of imports and and trade. Uh it would become more difficult for anyone, you know, who is uh interested in traveling uh to or from Russia to travel. Because I mean I think you would find the airlines. Uh this would put a difficult uh make it more difficult. We've already blocked Aeroflot from flying to London. You know, this is a generalization of that. That would be uh uh uh it'd be much more difficult for any kind of international transit to go on with Russia. Uh tourism, obviously, with international tourism is probably already dead, but uh uh Yeah, that wouldn't hurt them much.

SPEAKER_00

Well what about the real nuts and bolts of the economy? Why are we? Nuts and bolts of the economy are the commodities.

SPEAKER_01

Commodity exports. I mean, we're talking platinum, uh uh chromium, you know, the the uh diamonds, the uh aluminum, uh fertilizer, you know, oil and of course energy. But you know, their their clients there have been European, heavily European. And uh so this is gonna this would immediately make it difficult for them to sell there. And so, you know, Europeans are worried about the the short-term prices, price effects and income effects that this will have on them.

SPEAKER_00

But um, that's the same consent in the states though, right?

SPEAKER_01

Uh to a lesser extent. I mean, we already have inflation based on you know the kind of the supply side problems we've had last year and also.

SPEAKER_00

Yeah, you printed a couple trill.

SPEAKER_01

Well, that was that's more the demand side, but I I would argue that the Biden package was basically successful until it uh failed to get a tax increase. And uh, you know, sort of that that would have stymied some of the inflation. A lot of the inflation here has been driven in places like uh used cars and rents and you know, sort of uh the restrictions of COVID coming off and uh people going back to travel and you know there's just being scarcity. So labor market is tight and uh uh I don't think it's uh so much the you know the the spending boom fault last year. I think it's that we should have been able to take some money off the table at the end of the year and all the tax proposals got jammed in Congress.

SPEAKER_00

Are you hearing anything about applying pressure on the oligarchs uh specifically? Like you said yesterday, that really is the strongest economic sanction you could uh impose because then it would create this domestic pressure that is likely going to change uh the agenda more than anything.

SPEAKER_01

Well, so so far the sanctions have focused very much on trying to tie it this to uh a relatively small circle of people around Putin. I think we're up to maybe 27 uh people who have uh uh been targeted by uh the uh OFAC and other uh sanctions abroad. I mean, that's that's the focus. The UK uh started out by following in the US footsteps. I think they're under pressure to expand their list independent of what we do. They have an enormous uh number of uh Russian oligarchs who basically have been using uh uh the UK as a pleasant place to live outside of. Russia and uh you know so that they have a lot of work to do. Um but the more general notion of extending this more broadly to more, you know, the top uh 2,000 uh wealthiest people in Russia, I think we probably can figure out who they are. Uh we probably can figure out what they own. Uh it's it's a question of the political will. You're talking about, you know, they have a quite a diversified uh audience within the private banking world and uh real estate and you know the legal community and you know they're all well represented in publishing and uh other avenues of influence. So it's more of a political will question, I think. You know, if we really wanted to there, the idea is that this would be a bunk shot, a bank shot in pool terms. Uh you're going you're going after uh you know the the the eight ball that's down there behind uh the the uh the six-ball, and you need to get a bank shot to to knock it in. And this would be a bank shot off the Russian elite. You know, it sort of says, you know, uh, we love the fact that you're enjoying life and you've you've got all this unearned money and you've been flaunting it around, spending money on uh on jets and yachts and uh Ribolovlov's yacht. I think the last time I looked, he was uh he was in the Cayman Islands for some reason. Um you know, there's a lot of those folks who basically uh they need a purpose in life, and I think we can give them one, which is you know, get rid of this guy. Uh and you we don't we you know we would love you to pay taxes and we would love you know to to encourage you to settle down, uh live a more productive lifestyle. But uh first order of business here is you're you're you have profited enormously from a system that uh was tremendously corrupt and it produced this bizarre dictator who is making life difficult. So, you know, that's an externality that we can no longer afford from this kind of uh political deal we did with the kleptocracy, you know, in in Russia. Um I think we talked about before the the choice that we made in the 90s was to kind of put them in power and accept the dominance of a handful of oligarchs uh who I think you know 200,000.

SPEAKER_00

We demain the U.S.

SPEAKER_01

Well, I mean the U.S. government, the you know, the specifically Larry Summers at the U.S. Treasury. I mean, they were Clinton's uh uh treasury team, the people who were influential at the IMF. Uh, you know, I think uh Yeltsin privatized 150,000 Russian state-owned companies for a grand total of $13 billion. And these people basically borrowed the money to get it, and they had political access, and they bought up all of the imagine the Russian citizen, you know, ordinary Soviet citizens who had sacrificed uh World War II. I mean, they're just decades of uh suffering under the Soviet system. And at the end of the day, at least they could say, well, we've got this, you know, re relatively industrialized uh industrial base, we've got, you know, a state sector that needs a lot of work, but you know, it belongs to us. No, I mean, the first thing that the you know these uh sharks did was to sell it off to their friends. And uh that's one of the greatest wealth transfers in history. So I think Putin is coming from a standpoint of kind of um that perspective. He is deeply resentful of what was done to Russia. He he perceives it having been done to Russia by the West in the 90s, you know, rather than help them through the crisis. We we've had them um pay an enormous price. And uh he he thought that was enormous injustice. And the people who um you know who who were involved in that, there's a relatively short list of U.S. policy uh economists and uh uh you know, sort of uh policy wonks and and and Swedes, uh Anders Anslens is one of the leading uh fellows who's involved in that failed transition. Um, you know, you could probably develop a short list of those folks who would be not more than uh not longer than the list of oligarchs, um, you know, who have some responsibility for what happened there. We wrote a book in 2001 that was uh we got Stiglitz and James Tovin, who was still alive uh at Yale, Larry Klein, um, and uh and one of the key guys was a guy named Glasiev, Sergey Glasiev, and he wrote a chapter in this book on the failed Russian transition. Uh Glaziev has now been added to the sanctions list. He's Putin's right-hand economic advisor. Uh and I uh met him in in in the early 2000s. Brilliant guy, um really very articulate about this whole perspective. Um I mean it doesn't justify what Putin is doing by any means. And there's a whole camp of people in the US who basically are now, you know, you'll see them in uh the the kind of uh the left-right types who are this argument about about uh well this is this argument.

SPEAKER_00

Russian apologists and Putin apologists.

SPEAKER_01

Yeah, I would I would I would put a to be fair to them, I mean the argument that they make is uh uh it's kind of like blaming Hitler on the Versailles Treaty imperfections. You know, in undoubtedly there are all kinds of problems with the Versailles Treaty, and they were unfair to Germany in some ways. And and you know, John Maynard Keynes made a uh famous uh wrote a famous book called The Economics of the Peace in 1921, in which he was quite articulate about how it was wrong to penalize Germany for World War I with these reparations, that this would actually cause the right of the certain resurgence in the German right, and it would cripple the German economy in the early 20s, which it did. Um some people try to argue that reparations weren't large enough to them, but the indirect effects of reparations, I would argue, were really much more substantial in terms of the psychology and this demonization of the Germans. So, you know, that that whole mentality uh pretty much went on uh and it survived. It's a it's a kind of uh uh an extent. In the case of uh the 1990s, we have the you know you know the argument that the West tried to uh extend NATO um after it promised that it wouldn't uh right up to the Russian border, that Putin wanted to join NATO and he wasn't allowed to. He wanted to join the EU and he was told that Russia was too big, um, that uh basically uh we had gone back on promises that were made to Gorbachev in 1990. Well, the closer you look at those arguments, the more uh fallacious they are. They have the the level of promise or commitment or treaty was just never quite there. But what is the case uh is that uh you know there was no Marshall Plan uh for Russia. Uh people like Paul Wuffelwitz, uh who was in the policy advising for uh for Bush Sr. Senior uh policy advisor wrote a memo that was uh uh you know published, I think, in 1992, got out, and it was basically saying, you know, we can't aid these people, they're guilty, and there should never again be any more than the any more countries than just the United States dominant in the world uh political system. Um and so that uh that was the ideology, the neocon ideology that I think was followed, as opposed to the policy advocated by my colleague Jeffrey Sachs, who was advising the Russian government at that time and was begging hard to get a $50, $50 million, $50 billion Marshall Plan. And uh he was told no by both the the old retiring Bush Senior administration uh and by the incoming Clinton administration that was worried that it would be associated with uh somehow with helping communists. Um there was a real favor failure of uh vision and perspective there. And uh so we get to 1998 or so, and George Keenan, who was the famous uh State Department policy analyst, uh Mr. X, who had written about Russia back in the late 40s and the author of the Containment Policy, uh, who predicted all this. He said this is going to in the long run be very uh destructive of US-Russia relations, and we just have to keep NATO uh you know s under control. But you know, under 2000 in 2007, uh, 2008, uh we had the war in in Georgia. It was an effort to get Georgia to join NATO, and Putin finally had enough and and said no. Um I think that you know Putin is able to use this argument, this this this history as a kind of justification. Uh, you know, there was no chance of uh Ukraine really joining NATO anytime soon. And uh, you know, the idea that uh that the NATO countries like Estonia and Latvia and Poland present a live military threat to Russia, I think it's you know sort of fantasy. But um you can tell the story, but it's it's it's it's a convenient excuse. It's provided him with a convenient excuse for what is really a kind of uh political grab and a land grab. And uh he he uh some some form of cultural unification to Well uh you know you don't know to what extent he's yeah he he's taking uh I don't know uh apparently he listens to all kinds of uh folks from the extreme right uh on these issues and the Russian nationalism and um the notion of uh you know sort of uh uh the Ukraine's history. Uh sort of perverse notions about uh its its its its history. What what's undeniable is that Ukraine has been an independent uh country that's struggling to be a democracy, but they're trying to be a democracy since uh 1990. And you know, there's no demand in the among the Ukrainian people, if they're allowed to voice their opinion, uh to rejoin, you know, Russia. They just they see they see nothing but bad from re especially uh Putin's uh uh Russia. That's not what's you know very attractive. So I think you know Putin is experiencing a lot of opposition at home for the first time. He's the economy has not performed that well, he hasn't succeeded in diversifying. I think he's out of cards here, and he just went to this desperate move. But the the NATO story, especially now in the middle of the bombing campaigns, is just offensive to try to hold that out as a as blaming the West for you know his decisions.

SPEAKER_00

So you wrote a book with Putin's current economic right-hand man. Uh is there any interesting, I don't know, takeaway that you got from that experience?

SPEAKER_01

Well, it's actually the book is edited by my friend Marshall Pomer, and I contributed to it. Uh we we had written for the New Republic um and we had a conference on this topic. And uh I mean I think it's you know, it's kind of it was predictive. It was uh uh in a way prescient, you know, about what the problems with um the strategy toward Russia that we adopted uh have been. And uh you know, it would have been much more productive to have uh this relatively small aid package as opposed to end up with this very concentrated level of wealth, uh political system that's completely hostage to a few people and uh you know all the capital flight that's poured out as a result. Um and the you know, the the size and growth of the Russian state has become heavily dependent on arms, capital flight, and commodities. That's their game.

SPEAKER_00

All right, Jim. Well that's pretty um a pretty good update as to where we are. Is there anything worth saying at this stage, in addition that you wanted to say about the current sanctions? Uh I would love to come to Sweden.

SPEAKER_01

I would love to see Sweden get off get off the dime. And uh I don't know, you know, Sweden Swedish banks do not report to the BIS, so we don't know how much uh lending they do to Russia, but it would be a good uh sort of fact factual question if you could.

SPEAKER_00

No Swedbank um only a few years ago went through a giant controversy um having been very complicit in huge money laundering scandal. I don't remember if it involved Russia. Um I get the feeling it didn't, but it was uh organized crime. Um but yeah, I mean they they straddle the the neutral card very egregiously.

SPEAKER_01

Well, it been it was a very profitable position to take in the 30s.

SPEAKER_00

Uh didn't work out too well after that, but you know, so but but right now, I mean uh final word on Swift, whether you think they will uh ultimately use it as an economic weapon to sanction uh Russia.

SPEAKER_01

I think it depends on what's I think it really depends on real time on uh you know how I mean let's say that Putin manages to take all of the Ukraine quickly. That's one possibility, I suppose. Uh then I think the case for uh for Swift is if anything stronger. I mean, we have to show that this kind of behavior has uh has penalties. Um if he's stuck there and he's not doing very well, uh, and uh you know it's pretty clear that he wants to come to the negotiating table, and you know, then we can we could hold it in reserve. But I guess as I said before, my preferred option is to implement it now and then offer to take it back. Um and uh, you know, as in the case of Iranic, I think it can have a try quite a dramatic impact on Russia. The the estimates for Russia are something like 5% of GDP, which sound low to me.

SPEAKER_00

I'm so fascinated by the the trade-off negotiation that's constantly happening with these decision makers. Um, because they also, I mean, I suppose they have one of the hardest jobs in the world right now, because pretty much no matter what they do, they're just going to be judged in hindsight, irrespective of what they did in the moment. But who is it actually making these decisions? Who's the group of people that come together and decide no, Russia will actually be removed from the SWIFT system? Uh you know, like I because you could just abstractly say they. But I mean, where does this happen?

SPEAKER_01

Right. I think there's probably a very unequal kind of distribution of power within the EU, and there are certain certain countries that effectively have blocking power, and uh uh and then you also have countries like uh Switzerland that are quite uh But they're not in the EU. Why do they have a say? They're not in the EU. They have a s say because they're a big player in the Swiss system, and if you wanted to have an alternative to the Swiss system, uh you know, you would say China, Russia, oh Switzerland, yeah, let's go. So uh that's a concern that people would have. I don't know about the inner workings of this. It's a it's always been, you know, the sort of the uh sausage making has always been a mystery, but I'm quite sure the U.S. Treasury is is weighing in heavily, and uh we've identified some of the folks who are advising them, uh, you know, who are basically uh revolvers, we call them. They've been in they've been in the Treasury and then they've gone out to fancy Wall Street firms and uh you know they're representing you know the bad guys uh for a living. And uh so it's hard for them not to be regarded as hired guns in this. And so I hope we're not leading too heavily on that.

SPEAKER_00

And that's the law legal firm you mentioned at the beginning, and then a lot of the Well, there's probably a bunch of the uh folks like that, but the Treasury tends to have But that's an example of it.

SPEAKER_01

That's an at senior levels. There tend to be policymakers who we regard as, quote, experts. And uh my uh I was a you know graduate student at Harvard when Janet Yellen was there. I have nothing but uh regard for Secretary of Treasury Yellen. But she has to advise be advised on all these rather technical things by these uh GD lawyers, and uh they get to write the regulations and the rules at the end of the day. And if they are fundamentally dug in and opposed, then they're sort of telling you this is for too complicated and uh you know we can't really make it happen. Um it'll it'll turn out to be, you know, ineffective. So uh it's hard to find lawyers with any kind of uh uh you know sort of uh mission and passion in these issues. So uh that may be part of the problem. No, I I I'm I'm you know kind of uh uh I'm assuming that the the the policy design is uh roughly proportionate to their uh to you know the size and influence that people have within uh the EU and the OECD, but you know that that's probably there's probably an opportunity for smaller countries to take a lead and be more independent here. Uh so but all right, Jim.

SPEAKER_00

Well good. That um well I'm sure we'll check back again, check back in again uh very soon in the coming days. So cheers, mate.

SPEAKER_01

It's a rolling donut. All right. Take care, thank you.