July 14, 2025 • 30 mins
Watch Joe and Kailey LIVE every day on YouTube: http://bit.ly/3vTiACF.
US President Donald Trump threatened to impose stiff financial penalties on Russia if it does not end hostilities with Ukraine even as he pledged fresh weapons supplies for Kyiv.
“We’re going to be doing very severe tariffs if we don’t have a deal in 50 days, tariffs at about 100%,” Trump said Monday during a meeting with NATO Secretary General Mark Rutte at the White House.
Trump said the levies would come in the form of “secondary tariffs,” without providing details. The US president has used the term in the past to describe duties imposed on countries for trading with American adversaries.
Bloomberg Washington Correspondents Joe Mathieu and Kailey Leinz deliver insight and analysis on the latest headlines from the White House and Capitol Hill, including conversations with influential lawmakers and key figures in politics and policy. On this edition, Joe and Kailey speak with:
- Bloomberg Washington Deputy Bureau Chief Laura Davison.
- Center for Strategic and International Studies Director the Europe, Russia, and Eurasia Program Max Bergman.
- Foundation for Defense of Democracies Senior Fellow Retired Rear Admiral Mark Montgomery.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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(00:20):
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Speaker 2 (00:25):
We hope you had a great weekend and welcome, indeed
to the Monday edition and more specifically, the early edition
of Balance of Power here on Bloomberg Radio, Satellite radio
Channel one twenty one, Bloomberg Originals, and YouTube. Search Bloomberg
Business News Live to find us on YouTube. We keep
the stream up all day for our programming from Washington
to New York and back again with the President not
(00:45):
wasting time in making some news today, and I'll let
you know lawmakers are coming back to town. There's going to
be a lot of talk about sanctions on Capitol Hill
as well as recisions, and we'll get to all of
that in a moment with Laura Davison. Today it's about Ukraine,
and the President told you this was coming right. We
sat here Friday knowing that the President was planning a
(01:05):
major announcement, as it was termed on Monday. There were
great questions about what this might include and whether it
would be offensive weapons. The answer is kind of yes.
The news here really is more not just American weapons
reaching Ukraine, but the fact that NATO is going to
pay for them. This answers the question we were asking
(01:25):
about whether it be a major emergency supplement or request
coming from this administration, something we couldn't imagine right The
idea of spending more money on Ukraine would go against
the grain for this president, but he's clearly upset with
Vladimir Putin and he's found a new way to get
American weapons in the hands of Vladimir Zelenski. Here's Donald
Trump from the Oval Office a short time ago, sitting
next to the NATO Secretary General Mark Ruder.
Speaker 3 (01:48):
We're very very unhappy with him, and we're going to
be doing very severe tariffs if we don't have a
deal in fifty days.
Speaker 4 (01:57):
Tariff said about one hundred percent.
Speaker 3 (01:59):
And I'm disappointed in President Putin because I thought we
would have had a deal two months ago, but it
doesn't seem to get there. So based on that, we're
going to be doing secondary teriffs if we don't have
a deal in fifty days.
Speaker 4 (02:10):
It's very simple, and they'll be at one hundred percent.
Speaker 3 (02:14):
And that's the way it is.
Speaker 2 (02:17):
Is there more gold in there than there was on Friday?
Are you seeing this on YouTube? The guilding never stops
in the Trump White House. It was that big gold
eagle there on Friday. Laura Davison is our deputy bureau
chief here at Bloomberg in Washington, d C. And is
of course helping demand all of our coverage here from
the White House to the Capitol. In backage, she's with
(02:39):
us right now. Great to see you. They're adding to
the gold as we go here, are they not.
Speaker 5 (02:43):
There was a certain glow in that clip in particular.
Speaker 6 (02:45):
My god, that was like Liberaci's office.
Speaker 2 (02:48):
He did, by the way, mention the resolute desk, which
I guess has been cleaned up and returned. I've been
waiting for the update on this. Remember when Elon Musk's
son X he drooled or something on that they brought
the desk out of the oval, were going to have
it refinished, And I never heard that it came back.
Speaker 5 (03:03):
And this is clear.
Speaker 7 (03:04):
You know.
Speaker 5 (03:04):
Even at the cabinet meeting on Friday, Trump was talking
about the decor he's been spending a certain amount of
time picking different frames, picking different clocks, including stealing some
apparently from the State Department from Marco Rubio.
Speaker 6 (03:16):
This is, of course, not why you're here.
Speaker 2 (03:18):
We're talking about Ukraine, and this is really interesting watching
the evolution here when it comes to Donald Trump, Vladimir
Putin and this war. Because it was just weeks ago
he was talking about his great relationship with Putin. It
was weeks before that he was yelling at Vladimir's Zelenski
and the Oval, and it was weeks before that he
predicted that he could finish this war on day one.
Speaker 6 (03:38):
What does he think at this point?
Speaker 5 (03:39):
This is a total reversal. And even go back, you know,
even further a year ago he was talking about abandoning
NATO partners. That really causes her on the campaign trail.
Now you have a meeting in the Oval, a very
cordial meeting with the Secretary General of NATO. You know,
you even mentioned that he's really become very friendly with
his organization, especially at the NATO meeting a couple of
weeks ago. You know, part of this is that Mark
(04:01):
Rod has been very strategic in how he's courted this
relationship with Donald Trump, and he's arranged this deal that
Trump very much likes of that the US won't be
giving weapons that they're going to be purchased through NATO
and then given to Ukraine. This is very much the
way he has always wanted to structure these deals, going
back to day one of his term. Ifs he didn't
want some sort of aid, he wanted some sort of
(04:21):
financial deal. Remember there was the rare Earth's Deal that
he was trying to cut. And this is, you know,
very much kind of where he sees kind of the
role he wants to play of making these financial deals,
these business deals, versus sort of a diploma diplomatic solution.
Speaker 2 (04:33):
It's like the military version of We're going to build
a wall and have Mexico pay for it. Right, he
gets to do something that is maybe controversial, giving weapons
to Ukraine, at least with his own base. But as
long as we're not paying for it, we somehow don't
have our fingerprints on it.
Speaker 5 (04:46):
Is that the idea, Yes, And it's also makes it
an easier self for Trump because he doesn't have to
go to Congress and get them to approve additional money.
You know, it's not clear if Congress is going to
approve this Russia sanctions package that has been debated for
several weeks. You know, these at various versions of this
bill have you know, sanctions of five hundred percent. Those
are massive. You know, Lindsay Graham has been talking about
scaling that back. But the bill right now has pretty
(05:07):
significant support, and it's possible, as Trump mentioned in the
Oval Office earlier, that it could pass, you know, in the.
Speaker 6 (05:12):
Coming weeks, even with the help of Democrats.
Speaker 2 (05:14):
It's interesting. I'm glad you mentioned that. In that soundcut
we just heard of the president. He's talking about tariffs.
He's one hundred percent tariffs, he means sanctions.
Speaker 6 (05:22):
That's what this bill is.
Speaker 5 (05:23):
Yes, this is and Trump it seems to really be
talking about two things. One, perhaps some sanctions that he
would impose unilaterally in addition to whatever Congress decides to do.
So he's talking about these one hundred percent secondary tariffs,
which we understand to be sanctions. These would be essentially
levies on trading partners that buy Russian goods, especially Russian oil.
So this would be hitting other countries essentially trying to
(05:46):
further isolate Russia and further dampen any demand for their goods.
Speaker 2 (05:49):
We've got a great conversation coming up a little bit
later in the hour with Max Bergman at the Center
for Strategic and International Studies, who's looking at what the
effect would be here, and if you're a country like India,
that could be a real problem if that's past.
Speaker 5 (06:02):
Right, Yes, there's especially if it's you know, one hundred
percent or even you know, forget five hundred percent, right,
Those are you know, tariff levels that just completely cut
off or sanction levels that cut off trade entirely.
Speaker 2 (06:13):
So we're speaking about tariffs, and the President actually made
news about tariffs over the weekend. He was asked about this,
and I'm not sure it's even top of mind with
the Ukraine stuff here, but he threatened another thirty percent
on Mexico USMCA excluded. We spoke to Peter Navarro here
on Friday talking about Canada thirty five percent. That also
(06:33):
is us MCA goods excluded. So these aren't terribly meaningful
at the moment, are they Doesn't that cover the vast
amount of imports from both countries, that.
Speaker 5 (06:42):
Really does, so that really lessens the scope there. And
of course, you know the Canada and Mexico are the
US's largest trading partners. Though not far down the line
is the EU, which has a thirty percent teriff rate,
much to the surprise.
Speaker 6 (06:53):
So that's the real news this weekend, right, keep going through.
Speaker 5 (06:56):
Yes, Yeah, and that really came as a surprise because
the US has been in talks with the EE for weeks,
if not months, about cutting a deal. The EU leaders
at one point thought they were going to be able
to keep that tariff level at ten percent, which, while
you know, wasn't their preferred outcome would be, you know,
a level that could support much of the trade that
is ongoing. But at thirty percent, you have a lot
of companies in the EU saying, look, this just doesn't
(07:18):
that the math of these trade deals don't make sense anymore,
and we're going to have to suddenly find other countries
to export our goods.
Speaker 6 (07:24):
Wow.
Speaker 2 (07:25):
The idea not to retaliate is pretty interesting here as well,
is this don't poke the bear or just give us
time to cut deals with other countries.
Speaker 5 (07:33):
I think the next three weeks will really be a
key sign here. You know, do they get to August
one and are they able to either you know, stave
off that implementation, push it back a couple of weeks,
get a lower deal, or you know, is it August
one and suddenly thirty percent. That's when you could really
see countries start banding together putting on some of these
retaliatory tariffs as sort of daring Trump to you know,
(07:53):
back down.
Speaker 2 (07:53):
Your calendar must look like a riot. So we've got
what is it now? August one is the next deadline
for reciprocal tariff. We just dropped a fifty day waiting
period on Russia sanctions. He said, I don't know why
fifty We seem to be in two week increments, and
didn't we already have something else we were waiting two
weeks on here?
Speaker 6 (08:11):
What else?
Speaker 3 (08:12):
Is?
Speaker 6 (08:12):
What's the other deadline on your calendar? Right now?
Speaker 5 (08:14):
We've got a lot of different things percolating between all
the copper tariffs and all these sector coppers all do
at various points in the fall. One nice thing about
that fifty day deadline for the U creatres that gets
us past Labor Day so people can enjoy their Labor
Day vacations and then come back to Washington and deal
with the next turn of the screw.
Speaker 6 (08:32):
So all right, I waited until the end to ask
you this.
Speaker 2 (08:34):
I don't want to put you in an awkward situation,
but I have to ask you about this Jeffrey Epstein story.
The President talked about it last week, called out the
reporter for asking about it. You've got the deputy director
of the FBI not showing up for work now calling
out the attorney general. Is this real, this MAGA split.
Does it spill over into anything policy related that a
(08:57):
Bloomberg audience should care about, or is this a tabloid story.
Speaker 5 (09:00):
This certainly could mean, you know, shakeups at the FBI
and the Justice Department at the highest levels. If you know,
some of what we're seeing comes to fruition. And this
is really sort of a cautionary tale of when you
make promises when you are not in government to then
you are suddenly in control of things. You control all
the levers of power. If you get your side really
amped up that something's happening, you have to be able
(09:21):
to then you know, show something on the back end.
So this is really sort of the insider outsider dichotomy
of you know, all these people from the outside a
railing against government are now in key positions and you
have to deliver.
Speaker 6 (09:31):
There's a lot of tape on cash Betel Bongino, jd
Vance talking about this list and how they're going to
expose it, and those things don't go away automatically. I'll
be very curious to see how they managed to do this. CC.
I think you might be onto something there, Laura. It's
great to have you back.
Speaker 2 (09:47):
Laura Davison helps to run our coverage here in Washington,
our deputy bureau chief at Bloomberg, and always great to
spend some time. Well, we can pull her away from
the desk. Producer James is back today. Did I tell
you that America's producer is back with us? We'll have
much more straight ahead as we consider the impact of
these Russia sanctions if they were in fact implemented, not
just sanctions, but secondary sanctions that could ricochet around the world.
(10:11):
Our conversation ahead with Max Berg at csis coming up
on Bloomberg.
Speaker 1 (10:17):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on
Apple Cocklay and Android Auto with the Bloomberg Business app.
You can also listen live on Amazon Alexa from our
flagship New York station. Just say Alexa played Bloomberg eleven
thirty with.
Speaker 2 (10:37):
Big thanks to c c cherandoff Justin Milner and Elizabeth
Severn for helping us out last week while producer James
was off golfing. He's back with us today here the
nation's capital, and we were raring to go with.
Speaker 6 (10:50):
News coming from the White House.
Speaker 2 (10:51):
We started early today Secretary General at NATO in the
Oval Office, President Trump talking about Ukraine as promised, this
is going to Cary. Is largely through the day here
in the newsflow. As lawmakers in the Senate Lindsay Graham
and John Thune for that matter, craft a sanctions package
against Russia. The President's tapping the brakes on this. He says,
(11:12):
fifty days. Give Vladimir Putin fifty days to cut a deal,
and then we'll talk about sanctions. That, of course has
been on the table for weeks now, the President even
altering the language in that sanctions legislation before it ever sees.
Speaker 6 (11:28):
The light of day.
Speaker 2 (11:30):
But it looks like the news today is about weapons specifically.
That's why the NATO boss was in the Oval Office,
Mark Rude, sitting next to Donald Trump as he announced
this plan. Something we touched on last week. If you
listen to this program, you might have seen this coming.
A deal in which American weapons get to Ukraine. But
we don't go to Capitol Hill and spend a bunch
of money to do it. They'll be bought by NATO,
(11:51):
from the US, from US contractors. In some cases European
countries will send their own weapons and will backfill them.
But in the end, our NATO allies will pay for this.
Here's Donald Trump speaking earlier about the Patriot missile batteries
that are on the way to Ukraine.
Speaker 4 (12:06):
Thank you everything.
Speaker 3 (12:07):
It's patriots, it's all of them. It's a full compliment
with the battery issue.
Speaker 6 (12:12):
And when do you expect it to write any Ukraincer.
Speaker 3 (12:14):
Well, we're going to have some come very soon, within
days actually. So a couple of the countries that have
Patriots are going to swap over and we'll replace the
Patriots where the ones they have, and Matt will coordinate
with NATO.
Speaker 4 (12:29):
But so it's going to be they're going to start
a arriving version.
Speaker 2 (12:33):
This was just last hour at the White House. As
we bring the voice of Max Bergman to this story,
who is director of the Europe, Russia and Eurasia program
at CSIS, the Center for Strategic and International Studies.
Speaker 6 (12:44):
Max.
Speaker 2 (12:44):
It's great to have you, and I'm curious to hear
more about your research into the impact of sanctions and
secondary sanctions on Russia and other countries around the world.
I wonder your thoughts initially though, on this deal to
continue providing weapons without going back to cong risk with
an ask, is this a smart angle for the White
House to get NATO involved financially as we heard today.
Speaker 8 (13:07):
Well, I think it's good news, especially for Ukraine. I
think we should be clear about what the baseline here was.
You know, the administration a week or so ago announced
that it was going to suspend deliveries of Patriot missile
systems to Ukraine. These are vital to protecting Ukrainian civilians,
and right now it just looks like the White House
(13:28):
is sort of turning that back on and that future
deliveries then are going to be paid for by the Europeans.
But really a lot of this money had already been
paid for by the Biden administration, and what we're looking
at are just sort of the deliveries of future systems.
But I think what it does represent is kind of
a real shift in the burden of supporting Ukraine from
the United States to Europe, where the Europeans effectively pay
(13:50):
us to provide weapons that we were previously providing. At
the very least, it is a good thing for Ukraine.
Someone is going to pay for this. It looks like
you're up and that the supply of very precious Patriot
missile systems will continue to flow to Ukraine, which is
really vital for their security.
Speaker 2 (14:10):
I'm glad you mentioned these patriot missile systems use the
word precious. How many of these do we have? Because
when weapons to Ukraine were halted by the Defense Secretary
and another official in the Pentagon a couple of weeks ago,
that was the justification that we've run out of stuff
like this.
Speaker 8 (14:26):
Yeah, and part of it is connected to events in
the Middle East, where the US has used a lot
of Patriot missile missiles interceptors to shoot down Iranian drones
and other missiles. And every winter it has been a
big test for the United States about whether it could
supply Ukraine with enough air defense to get through because
(14:46):
Russia started targeting Ukrainian power plants and other facilities. And
there are some reports that the US is really low
in stockpiles, perhaps down LEWBO of fifty percent. And this
is a big problem, and it's a big problem for
our defense industrial sector that really can't produce enough. And
there's just been big orders by the US Army to
(15:06):
try to ramp up production of these missile interceptors used
by the Patriot system. So this is a problem. It
has been a problem throughout this war that not only
does Ukraine need a lot, but that aren't defense industrial
base in Europe's defense industrial base can't really meet the
mark in terms of production.
Speaker 2 (15:25):
Really makes you wonder Max how many years we are
going to have this conversation for it's just endless and
everyone seems to know that it's something that's badly needed,
yet we never get down to actually increasing the capacity
of the DIB as they call it. I know that
your expertise, though, is in the sanctions package that we're
talking about. Your economic acumen here in the research that
(15:49):
you've done is something that I'd like to ask you about,
because sanctions are one thing, and that's another bit secondary
sanction something else. We talk about a lot, but we
never quite get to. This was on the tape for
the Balance of the Biden administration. But we're looking at
some pretty hefty numbers here, whether it's one hundred percent
or five hundred percent max. What would this mean for
the likes of India or other countries doing business with Russia.
Speaker 8 (16:11):
Well, it could be really significant. And you know, the
President is going about secondary sanctions in sort of a
different way by using terraffs as opposed to sanctioning the
companies or countries that are then acting as workarounds for
the main sanctions target. What's happened for Russia is that
the Russian oil market oil sector has been diverted to
(16:34):
India and China in particular, and the United States has
been very reticent in particular to sanctioned India. We are
trying to develop close ties with India, we see India
as a strong potential partner visa v. China, and we've
also been reticent in some ways to go after a
number of Chinese banks and other Chinese entities. So I think,
(16:56):
you know, with this tariff play, we'll see it could
have real ramifications, I think for Russia's oil sector, but
it would also have real implications for the United States
bilateral relations and the thing we have to remember, is
part of what the Biden administration was trying to do
was to keep Russian oil on the global market. We
(17:17):
wanted Russia to take a haircut in terms of how
much profit it was getting in terms of sales. But
we didn't really have a problem with Russia selling oil.
We just wanted to sell it at a haircut. Means,
we wanted Russian oil on the market to keep global
prices low. The Trump administration, i think, is taking a
bit more of a blunt approach, and so we'll see
if this begins to really lead to a spike in
(17:39):
oil prices.
Speaker 6 (17:41):
What would this mean for China as well?
Speaker 8 (17:43):
Max Well, I think what we've seen is that China
has means of retaliating, so it could lead to an
escalation of the US China trade war, which has sort
of already been rekindled. China has demonstrated its willingness to
use rare earths and other things to hit back at
the United States. So, you know, China does recognize that
it's oil dependence, its dependence on Russia as well as
(18:06):
the Middle East, represents a real strategic vulnerability. It's part
of the reason why they are going a whole hog
into renewables and clean technology. But for China, I think
this could be really significant if the US does impose this,
and I think we would see China try to retaliate
against US. So I don't think it would just be
(18:26):
we set these China stops buying Russian oil and moves on.
I think it would try to find other ways of responding.
Speaker 4 (18:34):
Well.
Speaker 2 (18:35):
So I guess what comes out the other end of
the pipe here if this is in place for some time, Max.
Are we on the phone with Opek about how this
is going to work and what would it mean for
crude oil prices?
Speaker 8 (18:46):
Yeah, I think there's some real potential that we get
on the phone with the Saudis and others in the
Gulf States and say, hey, we want you to offset
some of the shock that this could cause. We want
you to open up the taps put more oil on
the market. We shall see if.
Speaker 4 (19:02):
They do that.
Speaker 8 (19:03):
The Biden administration, I think, didn't feel that it had
the political relationship to actually do that. In the Saudis,
I don't think we're willing to. But with Trump maybe
it's different. I think the bigger broader question here, though,
is that Trump has not shown a lot of interest
in trying to really stick it to the Russians economically
or militarily. He has not demonstrated in the past a
(19:26):
lot of support for Ukraine. If that is shifting, the
question is how far does that shift. I think what
we've seen is a partial shift. US is now looks
like it's going to continue military supplies, but there's no
indication Trump is going to go to Congress try to
ramp up our production for Ukraine. And then the economic
question is how much of an economic hit is the
president willing to absorb to stick it to the Russians
(19:48):
in support of Ukraine. There's limits to what the Biden
administration would do, so I do have some doubts about
how far we are willing to go, and I think
Russia may just try to call our bluff here, and
then it'll be really interesting when the fifty or sixty
days expire whether that prompts sort of a strong US reaction.
But there could be a good outcome if we just
simply get India to lower what lower them out it's buying,
(20:12):
and maybe there's some way to negotiate something with the
Indians to reduce the amount of Russian oil and other
Russian military goods and things that it's purchasing.
Speaker 2 (20:22):
That'd be very trumpy, wouldn't it. You put five hundred
percent tariffs on the line or sanctions on the line,
and in the meantime you just crank back India a
little bit to try to increase the pain, knowing that
those sanctions were never going to take effect.
Speaker 6 (20:36):
Max. What happens over the next fifty days.
Speaker 8 (20:40):
Well, I think what happens over the next fifty days
is Russia keeps pummeling Ukraine. What I think we're seeing
with the statement on especially the arms deliveries, is simply
the preservation of the status quo in terms of the
West is going to keep supporting Ukraine and supplying Ukraine
with supplies. Now that's not quite enough. And Russia thinks
it can win this war now and is going on
(21:01):
another military offensive and has been going on a military
offensive because it sees a light at the end of
the tunnel of the US sort of drawing back support. Now,
what I hope happens over the next fifty days is
that there's a ramp up on European efforts to support
Ukraine militarily. I think that's happening, But then also that
the US begins to negotiate with India and perhaps even
(21:22):
with China to reduce oil or oil flows from Russia
in India, and that maybe there's talks with the Saudi's
about offsetting any cuts to Russian Russian supplies on the
global market. I would hope to see that. I'm not
sure we're going to see all of that, but I
think we may see some progress perhaps with India. That's
at least my hope.
Speaker 6 (21:43):
There you have it. Remember this conversation in fifty days
when this comes around. Max.
Speaker 2 (21:47):
It's great to see you. Thank you for the insights today.
Max Bergman CSIS. He's director of the Europe, Russia and
Eurasia Program at the Center for Strategic and International Studies.
Just a stable of smart people ATIS who we tap
on a regular basis. Here clarifying the remarks on tariffs
versus sanctions, here Howard Lutten at the Commerce Secretary saying
(22:09):
that it's economic sanctions. You can also make an economic
penalty if I catch you doing it, then you have
to pay. You can do tariffs, you can do sanctions.
Those are both tools in the toolbox. So I guess
those are interchangeable. Now you learn something every day on
this program.
Speaker 1 (22:28):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on Apple,
Cocklay and Android Auto with the Bloomberg Business App. Listen
on demand wherever you get your podcasts, or watch us
live on YouTube.
Speaker 9 (22:44):
And we want to get more on these weapons systems
that are going to be heading Ukraine's way, whatever the
route is, of course, this route through NATO. And turn
to retired Rear Admiral Mark Montgomery, who's joining us now
here on Bloomberg TV and radio. He's a former Destroyer
squadron commander and now senior fellow at the Foundation for
Defense of Democracies. Admiral, thank you for being here on
Balance of Power. When we consider these patriot missile systems themselves,
(23:08):
the idea that the US will be backfilling countries that
send these systems to Ukraine, how quickly can we actually
do so? What kind of capacity exists in this regard
right now?
Speaker 4 (23:19):
Well, thanks for having me. You know, this is the
real challenge.
Speaker 7 (23:22):
That the president's language was a little nonspecific, as was
Rutza's and conflicting, but I will tell you we can
get them there quickly.
Speaker 4 (23:31):
Through either the two routes that we're mentioned.
Speaker 7 (23:33):
The one route of the Europeans transfer their pack two
that's a lower level type of patriot missile to the Ukrainians.
Speaker 4 (23:41):
What the Ukrainians could use very easily.
Speaker 7 (23:43):
And then order backfill and order them from the United
States to refill the European armory, or the United States
could transfer.
Speaker 4 (23:51):
Them and then NATO pays European.
Speaker 7 (23:54):
Countries pay the United States for the United States to
replenish itself.
Speaker 4 (23:58):
Either of those methods gets.
Speaker 7 (23:59):
Them their much quicker than a Ukrainian order from the
United you know, from a defense industrial based country, which
would be years. Either of these cases, he says, could
be weeks to months to have missiles and batteries transferring
to Ukraine.
Speaker 2 (24:13):
Admiral, We're really glad to have you with us today
because before you were on the USS Nimics, the USS mccampbell,
the USS Elliott, the USS Bainbridge, and I can keep
going the Teddy Roosevelt. You were on the National Security
Council at the White House late nineties, and when we
look back a couple of years here, how do we
rationalize the fact that we've been having this conversation about
(24:35):
our defense industrial base for decades, and we really don't
have a greater capacity to show for it. Was this
not something but you were talking about that many years
ago inside the White House.
Speaker 4 (24:48):
Exactly right.
Speaker 7 (24:48):
I think we've got about a twenty year deficit, particularly
in our munitions, and that's what we're talking about here.
Whether it's Patriot missiles here, the standard missiles the Navy
was using to shoot down Huti rebel cruise missiles, or
the offensive weapons that we were using against the Huti's
or have used in other locales, we were running at
(25:09):
about twenty five percent of the proper level of munition
to order. In other words, when we needed four, we
ordered one. When you do that over twenty years, you
really create a deficit, and worse, you tell the defense
industrial based companies I'm not going to do major orders
and they reduce their ability to produce. So what you've
seen over the last three years are pretty consistent. From
the supplemental, the Ukraine supplemental, Taiwan supplemental a couple years ago,
(25:33):
this year's budget, and next year's budget. Actual investments in
the defensive dustrial base where the United States is contributing
to defensive dougtrial based companies like Lockheed and Raytheon and
Northrill Grunman to expand their ability their capacity to produce
they obviously contribute, and so we are beginning to grow
our capacity. But this is a twenty year deficit. The
(25:53):
only deficit that's worse is the European one, which almost.
Speaker 4 (25:56):
Went to zero.
Speaker 9 (25:59):
Well, and now where Europeans are trying to step up
in their own defense spending category, which is one of
the main aims of this administration. That was a point
emphasized by a Secretary General Ruta in the Oval Office
with the President earlier. As we consider the kind of
allied capacity, if you will, I also would like to
ask you, Admiral, about Russia's capacity and specifically the supply
of weapons that Russia is still getting from countries like
(26:22):
North Korea. How should we be considering Russia's ability to
continue to replenish its own stocks, continue striking Ukraine often
civilian targets, and how it's matched against the assistance Ukraine
is now getting in terms of air defenses.
Speaker 7 (26:37):
That's a great question, Kelly, because you're exactly right, Ukraine
is fighting four countries Russia North Korea, Iran, and China,
and in fact, Russia today is firing more artillery from
North Korea than their own. In other words, the majority
of the artilleria being used by Russia as North Korean.
Speaker 4 (26:53):
North Korea gave about six.
Speaker 7 (26:55):
Million rounds, which is twenty years of US production to
the Russians. Iran has built a Shahed drone factory in
Russia after giving them thousands of their own Shaheed drones
are selling them. They now have a factory, they're producing it.
That's what's hammering the Ukrainian cities every night. And the
third thing is China has been backstopping the economy with increase,
(27:18):
you know, with increases in imports and exports, but equally
importantly providing the microelectronics that are used in Russian cruise
and ballistic missiles. So all three of these countries, as
access of authoritarians, are supporting the fourth Russia in this fight,
and that's who Ukraine's been going against. So that's probably
why it's appropriate for the United States and Europe to
assist with at least with equipment but not forces.
Speaker 6 (27:42):
It's incredible to consider four countries, you know.
Speaker 2 (27:45):
Bloomberg interviewed the head of Ukrainian Military intelligence, Admiral who
said North Korea is now supplying as much as forty
percent of Russia's ammunition in this war. You mentioned the
shells that we're having trouble manufacturing is quickly, but they're
prepared at least to send a lot of other stuff,
(28:05):
ballistic missiles, artillery systems. Russia of course providing money and
technology to North Korea in return. What's the weapon system
you're most worried about? And could we see them include
nukes coming from Pyongyang?
Speaker 7 (28:20):
So well, certainly not nukes because you know not that
Russia would use them, but they have their own.
Speaker 4 (28:25):
Tactical nukes already.
Speaker 7 (28:26):
But I'm glad you mentioned that because that's something we
should always be sensitive too. But the North Korean thing
that the North Korean weapons that bother me the most are,
in fact, the artillery arounds are exactly right. But what
bothers me even more than those are those Shahed drones.
Shah edrones from Iran and the factory that was built
in Russia are really putting pressure on the on the
Ukrainian air defense system and they're causing civilian casuties and
(28:50):
damage to critical instructure. You know energy, water, you know
the financial systems of Ukraine or hit every night, and
so to me, that Iranian drone and that North Korean
artillery are really making a difference and hurting the Ukrainians well.
Speaker 9 (29:07):
And as you point to the targets that Russia is
taking amat in Ukraine, obviously part of the objective here, Admiral,
is to where on Ukrainian morale do you sense that
we reach a point where that is effective, where Ukraine's
kind of desire to keep prosecuting or defending itself in
this war is going to diminish as Russia being effective
(29:28):
in that regard.
Speaker 4 (29:30):
So I don't think so.
Speaker 7 (29:31):
And here's why I say that I go to Ukraine
every quarter for a couple of weeks to do training
with their military and their general staff, and I am
convinced the Ukrainians won't lose.
Speaker 4 (29:42):
That doesn't mean.
Speaker 7 (29:43):
They can push Russia out, it doesn't mean they can
recapture Crimea, but they won't lose. They're losing incrementally a
kilometer here, a kilometer there of land, but they will.
They have the societal resilience to stay in this fight
and win. They just need access to weapons and that's
what President Trump gave them today. He gave them access
to weapons systems that they need. The one thing I
(30:05):
wish he had gone one step further and give them
access to some of our offensive weapons again the attack
them's long range artillery. That would have been great because
then they could they could break up Russian formations when
they're coming together in Russia vice waiting till they're very
close to the Ukrainian lines.
Speaker 2 (30:22):
Yeah, we want to stay in touch with you, Admiral.
Let us know when you're going back to Ukraine. Retired
Rear Admiral Mark Montgomery, Senior Fellow the Foundation for Defense
of Democracies. We thank you for the insights only here
on Bloomberg. Thanks for listening to the Balance of Power podcast.
(30:43):
Make sure to subscribe if you haven't already, at Apple, Spotify,
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Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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(00:20):
you get your podcasts, or watch us live on YouTube.
Speaker 2 (00:25):
We hope you had a great weekend and welcome, indeed
to the Monday edition and more specifically, the early edition
of Balance of Power here on Bloomberg Radio, Satellite radio
Channel one twenty one, Bloomberg Originals, and YouTube. Search Bloomberg
Business News Live to find us on YouTube. We keep
the stream up all day for our programming from Washington
to New York and back again with the President not
(00:45):
wasting time in making some news today, and I'll let
you know lawmakers are coming back to town. There's going to
be a lot of talk about sanctions on Capitol Hill
as well as recisions, and we'll get to all of
that in a moment with Laura Davison. Today it's about Ukraine,
and the President told you this was coming right. We
sat here Friday knowing that the President was planning a
(01:05):
major announcement, as it was termed on Monday. There were
great questions about what this might include and whether it
would be offensive weapons. The answer is kind of yes.
The news here really is more not just American weapons
reaching Ukraine, but the fact that NATO is going to
pay for them. This answers the question we were asking
(01:25):
about whether it be a major emergency supplement or request
coming from this administration, something we couldn't imagine right The
idea of spending more money on Ukraine would go against
the grain for this president, but he's clearly upset with
Vladimir Putin and he's found a new way to get
American weapons in the hands of Vladimir Zelenski. Here's Donald
Trump from the Oval Office a short time ago, sitting
next to the NATO Secretary General Mark Ruder.
Speaker 3 (01:48):
We're very very unhappy with him, and we're going to
be doing very severe tariffs if we don't have a
deal in fifty days.
Speaker 4 (01:57):
Tariff said about one hundred percent.
Speaker 3 (01:59):
And I'm disappointed in President Putin because I thought we
would have had a deal two months ago, but it
doesn't seem to get there. So based on that, we're
going to be doing secondary teriffs if we don't have
a deal in fifty days.
Speaker 4 (02:10):
It's very simple, and they'll be at one hundred percent.
Speaker 3 (02:14):
And that's the way it is.
Speaker 2 (02:17):
Is there more gold in there than there was on Friday?
Are you seeing this on YouTube? The guilding never stops
in the Trump White House. It was that big gold
eagle there on Friday. Laura Davison is our deputy bureau
chief here at Bloomberg in Washington, d C. And is
of course helping demand all of our coverage here from
the White House to the Capitol. In backage, she's with
(02:39):
us right now. Great to see you. They're adding to
the gold as we go here, are they not.
Speaker 5 (02:43):
There was a certain glow in that clip in particular.
Speaker 6 (02:45):
My god, that was like Liberaci's office.
Speaker 2 (02:48):
He did, by the way, mention the resolute desk, which
I guess has been cleaned up and returned. I've been
waiting for the update on this. Remember when Elon Musk's
son X he drooled or something on that they brought
the desk out of the oval, were going to have
it refinished, And I never heard that it came back.
Speaker 5 (03:03):
And this is clear.
Speaker 7 (03:04):
You know.
Speaker 5 (03:04):
Even at the cabinet meeting on Friday, Trump was talking
about the decor he's been spending a certain amount of
time picking different frames, picking different clocks, including stealing some
apparently from the State Department from Marco Rubio.
Speaker 6 (03:16):
This is, of course, not why you're here.
Speaker 2 (03:18):
We're talking about Ukraine, and this is really interesting watching
the evolution here when it comes to Donald Trump, Vladimir
Putin and this war. Because it was just weeks ago
he was talking about his great relationship with Putin. It
was weeks before that he was yelling at Vladimir's Zelenski
and the Oval, and it was weeks before that he
predicted that he could finish this war on day one.
Speaker 6 (03:38):
What does he think at this point?
Speaker 5 (03:39):
This is a total reversal. And even go back, you know,
even further a year ago he was talking about abandoning
NATO partners. That really causes her on the campaign trail.
Now you have a meeting in the Oval, a very
cordial meeting with the Secretary General of NATO. You know,
you even mentioned that he's really become very friendly with
his organization, especially at the NATO meeting a couple of
weeks ago. You know, part of this is that Mark
(04:01):
Rod has been very strategic in how he's courted this
relationship with Donald Trump, and he's arranged this deal that
Trump very much likes of that the US won't be
giving weapons that they're going to be purchased through NATO
and then given to Ukraine. This is very much the
way he has always wanted to structure these deals, going
back to day one of his term. Ifs he didn't
want some sort of aid, he wanted some sort of
(04:21):
financial deal. Remember there was the rare Earth's Deal that
he was trying to cut. And this is, you know,
very much kind of where he sees kind of the
role he wants to play of making these financial deals,
these business deals, versus sort of a diploma diplomatic solution.
Speaker 2 (04:33):
It's like the military version of We're going to build
a wall and have Mexico pay for it. Right, he
gets to do something that is maybe controversial, giving weapons
to Ukraine, at least with his own base. But as
long as we're not paying for it, we somehow don't
have our fingerprints on it.
Speaker 5 (04:46):
Is that the idea, Yes, And it's also makes it
an easier self for Trump because he doesn't have to
go to Congress and get them to approve additional money.
You know, it's not clear if Congress is going to
approve this Russia sanctions package that has been debated for
several weeks. You know, these at various versions of this
bill have you know, sanctions of five hundred percent. Those
are massive. You know, Lindsay Graham has been talking about
scaling that back. But the bill right now has pretty
(05:07):
significant support, and it's possible, as Trump mentioned in the
Oval Office earlier, that it could pass, you know, in the.
Speaker 6 (05:12):
Coming weeks, even with the help of Democrats.
Speaker 2 (05:14):
It's interesting. I'm glad you mentioned that. In that soundcut
we just heard of the president. He's talking about tariffs.
He's one hundred percent tariffs, he means sanctions.
Speaker 6 (05:22):
That's what this bill is.
Speaker 5 (05:23):
Yes, this is and Trump it seems to really be
talking about two things. One, perhaps some sanctions that he
would impose unilaterally in addition to whatever Congress decides to do.
So he's talking about these one hundred percent secondary tariffs,
which we understand to be sanctions. These would be essentially
levies on trading partners that buy Russian goods, especially Russian oil.
So this would be hitting other countries essentially trying to
(05:46):
further isolate Russia and further dampen any demand for their goods.
Speaker 2 (05:49):
We've got a great conversation coming up a little bit
later in the hour with Max Bergman at the Center
for Strategic and International Studies, who's looking at what the
effect would be here, and if you're a country like India,
that could be a real problem if that's past.
Speaker 5 (06:02):
Right, Yes, there's especially if it's you know, one hundred
percent or even you know, forget five hundred percent, right,
Those are you know, tariff levels that just completely cut
off or sanction levels that cut off trade entirely.
Speaker 2 (06:13):
So we're speaking about tariffs, and the President actually made
news about tariffs over the weekend. He was asked about this,
and I'm not sure it's even top of mind with
the Ukraine stuff here, but he threatened another thirty percent
on Mexico USMCA excluded. We spoke to Peter Navarro here
on Friday talking about Canada thirty five percent. That also
(06:33):
is us MCA goods excluded. So these aren't terribly meaningful
at the moment, are they Doesn't that cover the vast
amount of imports from both countries, that.
Speaker 5 (06:42):
Really does, so that really lessens the scope there. And
of course, you know the Canada and Mexico are the
US's largest trading partners. Though not far down the line
is the EU, which has a thirty percent teriff rate,
much to the surprise.
Speaker 6 (06:53):
So that's the real news this weekend, right, keep going through.
Speaker 5 (06:56):
Yes, Yeah, and that really came as a surprise because
the US has been in talks with the EE for weeks,
if not months, about cutting a deal. The EU leaders
at one point thought they were going to be able
to keep that tariff level at ten percent, which, while
you know, wasn't their preferred outcome would be, you know,
a level that could support much of the trade that
is ongoing. But at thirty percent, you have a lot
of companies in the EU saying, look, this just doesn't
(07:18):
that the math of these trade deals don't make sense anymore,
and we're going to have to suddenly find other countries
to export our goods.
Speaker 6 (07:24):
Wow.
Speaker 2 (07:25):
The idea not to retaliate is pretty interesting here as well,
is this don't poke the bear or just give us
time to cut deals with other countries.
Speaker 5 (07:33):
I think the next three weeks will really be a
key sign here. You know, do they get to August
one and are they able to either you know, stave
off that implementation, push it back a couple of weeks,
get a lower deal, or you know, is it August
one and suddenly thirty percent. That's when you could really
see countries start banding together putting on some of these
retaliatory tariffs as sort of daring Trump to you know,
(07:53):
back down.
Speaker 2 (07:53):
Your calendar must look like a riot. So we've got
what is it now? August one is the next deadline
for reciprocal tariff. We just dropped a fifty day waiting
period on Russia sanctions. He said, I don't know why
fifty We seem to be in two week increments, and
didn't we already have something else we were waiting two
weeks on here?
Speaker 6 (08:11):
What else?
Speaker 3 (08:12):
Is?
Speaker 6 (08:12):
What's the other deadline on your calendar? Right now?
Speaker 5 (08:14):
We've got a lot of different things percolating between all
the copper tariffs and all these sector coppers all do
at various points in the fall. One nice thing about
that fifty day deadline for the U creatres that gets
us past Labor Day so people can enjoy their Labor
Day vacations and then come back to Washington and deal
with the next turn of the screw.
Speaker 6 (08:32):
So all right, I waited until the end to ask
you this.
Speaker 2 (08:34):
I don't want to put you in an awkward situation,
but I have to ask you about this Jeffrey Epstein story.
The President talked about it last week, called out the
reporter for asking about it. You've got the deputy director
of the FBI not showing up for work now calling
out the attorney general. Is this real, this MAGA split.
Does it spill over into anything policy related that a
(08:57):
Bloomberg audience should care about, or is this a tabloid story.
Speaker 5 (09:00):
This certainly could mean, you know, shakeups at the FBI
and the Justice Department at the highest levels. If you know,
some of what we're seeing comes to fruition. And this
is really sort of a cautionary tale of when you
make promises when you are not in government to then
you are suddenly in control of things. You control all
the levers of power. If you get your side really
amped up that something's happening, you have to be able
(09:21):
to then you know, show something on the back end.
So this is really sort of the insider outsider dichotomy
of you know, all these people from the outside a
railing against government are now in key positions and you
have to deliver.
Speaker 6 (09:31):
There's a lot of tape on cash Betel Bongino, jd
Vance talking about this list and how they're going to
expose it, and those things don't go away automatically. I'll
be very curious to see how they managed to do this. CC.
I think you might be onto something there, Laura. It's
great to have you back.
Speaker 2 (09:47):
Laura Davison helps to run our coverage here in Washington,
our deputy bureau chief at Bloomberg, and always great to
spend some time. Well, we can pull her away from
the desk. Producer James is back today. Did I tell
you that America's producer is back with us? We'll have
much more straight ahead as we consider the impact of
these Russia sanctions if they were in fact implemented, not
just sanctions, but secondary sanctions that could ricochet around the world.
(10:11):
Our conversation ahead with Max Berg at csis coming up
on Bloomberg.
Speaker 1 (10:17):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on
Apple Cocklay and Android Auto with the Bloomberg Business app.
You can also listen live on Amazon Alexa from our
flagship New York station. Just say Alexa played Bloomberg eleven
thirty with.
Speaker 2 (10:37):
Big thanks to c c cherandoff Justin Milner and Elizabeth
Severn for helping us out last week while producer James
was off golfing. He's back with us today here the
nation's capital, and we were raring to go with.
Speaker 6 (10:50):
News coming from the White House.
Speaker 2 (10:51):
We started early today Secretary General at NATO in the
Oval Office, President Trump talking about Ukraine as promised, this
is going to Cary. Is largely through the day here
in the newsflow. As lawmakers in the Senate Lindsay Graham
and John Thune for that matter, craft a sanctions package
against Russia. The President's tapping the brakes on this. He says,
(11:12):
fifty days. Give Vladimir Putin fifty days to cut a deal,
and then we'll talk about sanctions. That, of course has
been on the table for weeks now, the President even
altering the language in that sanctions legislation before it ever sees.
Speaker 6 (11:28):
The light of day.
Speaker 2 (11:30):
But it looks like the news today is about weapons specifically.
That's why the NATO boss was in the Oval Office,
Mark Rude, sitting next to Donald Trump as he announced
this plan. Something we touched on last week. If you
listen to this program, you might have seen this coming.
A deal in which American weapons get to Ukraine. But
we don't go to Capitol Hill and spend a bunch
of money to do it. They'll be bought by NATO,
(11:51):
from the US, from US contractors. In some cases European
countries will send their own weapons and will backfill them.
But in the end, our NATO allies will pay for this.
Here's Donald Trump speaking earlier about the Patriot missile batteries
that are on the way to Ukraine.
Speaker 4 (12:06):
Thank you everything.
Speaker 3 (12:07):
It's patriots, it's all of them. It's a full compliment
with the battery issue.
Speaker 6 (12:12):
And when do you expect it to write any Ukraincer.
Speaker 3 (12:14):
Well, we're going to have some come very soon, within
days actually. So a couple of the countries that have
Patriots are going to swap over and we'll replace the
Patriots where the ones they have, and Matt will coordinate
with NATO.
Speaker 4 (12:29):
But so it's going to be they're going to start
a arriving version.
Speaker 2 (12:33):
This was just last hour at the White House. As
we bring the voice of Max Bergman to this story,
who is director of the Europe, Russia and Eurasia program
at CSIS, the Center for Strategic and International Studies.
Speaker 6 (12:44):
Max.
Speaker 2 (12:44):
It's great to have you, and I'm curious to hear
more about your research into the impact of sanctions and
secondary sanctions on Russia and other countries around the world.
I wonder your thoughts initially though, on this deal to
continue providing weapons without going back to cong risk with
an ask, is this a smart angle for the White
House to get NATO involved financially as we heard today.
Speaker 8 (13:07):
Well, I think it's good news, especially for Ukraine. I
think we should be clear about what the baseline here was.
You know, the administration a week or so ago announced
that it was going to suspend deliveries of Patriot missile
systems to Ukraine. These are vital to protecting Ukrainian civilians,
and right now it just looks like the White House
(13:28):
is sort of turning that back on and that future
deliveries then are going to be paid for by the Europeans.
But really a lot of this money had already been
paid for by the Biden administration, and what we're looking
at are just sort of the deliveries of future systems.
But I think what it does represent is kind of
a real shift in the burden of supporting Ukraine from
the United States to Europe, where the Europeans effectively pay
(13:50):
us to provide weapons that we were previously providing. At
the very least, it is a good thing for Ukraine.
Someone is going to pay for this. It looks like
you're up and that the supply of very precious Patriot
missile systems will continue to flow to Ukraine, which is
really vital for their security.
Speaker 2 (14:10):
I'm glad you mentioned these patriot missile systems use the
word precious. How many of these do we have? Because
when weapons to Ukraine were halted by the Defense Secretary
and another official in the Pentagon a couple of weeks ago,
that was the justification that we've run out of stuff
like this.
Speaker 8 (14:26):
Yeah, and part of it is connected to events in
the Middle East, where the US has used a lot
of Patriot missile missiles interceptors to shoot down Iranian drones
and other missiles. And every winter it has been a
big test for the United States about whether it could
supply Ukraine with enough air defense to get through because
(14:46):
Russia started targeting Ukrainian power plants and other facilities. And
there are some reports that the US is really low
in stockpiles, perhaps down LEWBO of fifty percent. And this
is a big problem, and it's a big problem for
our defense industrial sector that really can't produce enough. And
there's just been big orders by the US Army to
(15:06):
try to ramp up production of these missile interceptors used
by the Patriot system. So this is a problem. It
has been a problem throughout this war that not only
does Ukraine need a lot, but that aren't defense industrial
base in Europe's defense industrial base can't really meet the
mark in terms of production.
Speaker 2 (15:25):
Really makes you wonder Max how many years we are
going to have this conversation for it's just endless and
everyone seems to know that it's something that's badly needed,
yet we never get down to actually increasing the capacity
of the DIB as they call it. I know that
your expertise, though, is in the sanctions package that we're
talking about. Your economic acumen here in the research that
(15:49):
you've done is something that I'd like to ask you about,
because sanctions are one thing, and that's another bit secondary
sanction something else. We talk about a lot, but we
never quite get to. This was on the tape for
the Balance of the Biden administration. But we're looking at
some pretty hefty numbers here, whether it's one hundred percent
or five hundred percent max. What would this mean for
the likes of India or other countries doing business with Russia.
Speaker 8 (16:11):
Well, it could be really significant. And you know, the
President is going about secondary sanctions in sort of a
different way by using terraffs as opposed to sanctioning the
companies or countries that are then acting as workarounds for
the main sanctions target. What's happened for Russia is that
the Russian oil market oil sector has been diverted to
(16:34):
India and China in particular, and the United States has
been very reticent in particular to sanctioned India. We are
trying to develop close ties with India, we see India
as a strong potential partner visa v. China, and we've
also been reticent in some ways to go after a
number of Chinese banks and other Chinese entities. So I think,
(16:56):
you know, with this tariff play, we'll see it could
have real ramifications, I think for Russia's oil sector, but
it would also have real implications for the United States
bilateral relations and the thing we have to remember, is
part of what the Biden administration was trying to do
was to keep Russian oil on the global market. We
(17:17):
wanted Russia to take a haircut in terms of how
much profit it was getting in terms of sales. But
we didn't really have a problem with Russia selling oil.
We just wanted to sell it at a haircut. Means,
we wanted Russian oil on the market to keep global
prices low. The Trump administration, i think, is taking a
bit more of a blunt approach, and so we'll see
if this begins to really lead to a spike in
(17:39):
oil prices.
Speaker 6 (17:41):
What would this mean for China as well?
Speaker 8 (17:43):
Max Well, I think what we've seen is that China
has means of retaliating, so it could lead to an
escalation of the US China trade war, which has sort
of already been rekindled. China has demonstrated its willingness to
use rare earths and other things to hit back at
the United States. So, you know, China does recognize that
it's oil dependence, its dependence on Russia as well as
(18:06):
the Middle East, represents a real strategic vulnerability. It's part
of the reason why they are going a whole hog
into renewables and clean technology. But for China, I think
this could be really significant if the US does impose this,
and I think we would see China try to retaliate
against US. So I don't think it would just be
(18:26):
we set these China stops buying Russian oil and moves on.
I think it would try to find other ways of responding.
Speaker 4 (18:34):
Well.
Speaker 2 (18:35):
So I guess what comes out the other end of
the pipe here if this is in place for some time, Max.
Are we on the phone with Opek about how this
is going to work and what would it mean for
crude oil prices?
Speaker 8 (18:46):
Yeah, I think there's some real potential that we get
on the phone with the Saudis and others in the
Gulf States and say, hey, we want you to offset
some of the shock that this could cause. We want
you to open up the taps put more oil on
the market. We shall see if.
Speaker 4 (19:02):
They do that.
Speaker 8 (19:03):
The Biden administration, I think, didn't feel that it had
the political relationship to actually do that. In the Saudis,
I don't think we're willing to. But with Trump maybe
it's different. I think the bigger broader question here, though,
is that Trump has not shown a lot of interest
in trying to really stick it to the Russians economically
or militarily. He has not demonstrated in the past a
(19:26):
lot of support for Ukraine. If that is shifting, the
question is how far does that shift. I think what
we've seen is a partial shift. US is now looks
like it's going to continue military supplies, but there's no
indication Trump is going to go to Congress try to
ramp up our production for Ukraine. And then the economic
question is how much of an economic hit is the
president willing to absorb to stick it to the Russians
(19:48):
in support of Ukraine. There's limits to what the Biden
administration would do, so I do have some doubts about
how far we are willing to go, and I think
Russia may just try to call our bluff here, and
then it'll be really interesting when the fifty or sixty
days expire whether that prompts sort of a strong US reaction.
But there could be a good outcome if we just
simply get India to lower what lower them out it's buying,
(20:12):
and maybe there's some way to negotiate something with the
Indians to reduce the amount of Russian oil and other
Russian military goods and things that it's purchasing.
Speaker 2 (20:22):
That'd be very trumpy, wouldn't it. You put five hundred
percent tariffs on the line or sanctions on the line,
and in the meantime you just crank back India a
little bit to try to increase the pain, knowing that
those sanctions were never going to take effect.
Speaker 6 (20:36):
Max. What happens over the next fifty days.
Speaker 8 (20:40):
Well, I think what happens over the next fifty days
is Russia keeps pummeling Ukraine. What I think we're seeing
with the statement on especially the arms deliveries, is simply
the preservation of the status quo in terms of the
West is going to keep supporting Ukraine and supplying Ukraine
with supplies. Now that's not quite enough. And Russia thinks
it can win this war now and is going on
(21:01):
another military offensive and has been going on a military
offensive because it sees a light at the end of
the tunnel of the US sort of drawing back support. Now,
what I hope happens over the next fifty days is
that there's a ramp up on European efforts to support
Ukraine militarily. I think that's happening, But then also that
the US begins to negotiate with India and perhaps even
(21:22):
with China to reduce oil or oil flows from Russia
in India, and that maybe there's talks with the Saudi's
about offsetting any cuts to Russian Russian supplies on the
global market. I would hope to see that. I'm not
sure we're going to see all of that, but I
think we may see some progress perhaps with India. That's
at least my hope.
Speaker 6 (21:43):
There you have it. Remember this conversation in fifty days
when this comes around. Max.
Speaker 2 (21:47):
It's great to see you. Thank you for the insights today.
Max Bergman CSIS. He's director of the Europe, Russia and
Eurasia Program at the Center for Strategic and International Studies.
Just a stable of smart people ATIS who we tap
on a regular basis. Here clarifying the remarks on tariffs
versus sanctions, here Howard Lutten at the Commerce Secretary saying
(22:09):
that it's economic sanctions. You can also make an economic
penalty if I catch you doing it, then you have
to pay. You can do tariffs, you can do sanctions.
Those are both tools in the toolbox. So I guess
those are interchangeable. Now you learn something every day on
this program.
Speaker 1 (22:28):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on Apple,
Cocklay and Android Auto with the Bloomberg Business App. Listen
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Speaker 9 (22:44):
And we want to get more on these weapons systems
that are going to be heading Ukraine's way, whatever the
route is, of course, this route through NATO. And turn
to retired Rear Admiral Mark Montgomery, who's joining us now
here on Bloomberg TV and radio. He's a former Destroyer
squadron commander and now senior fellow at the Foundation for
Defense of Democracies. Admiral, thank you for being here on
Balance of Power. When we consider these patriot missile systems themselves,
(23:08):
the idea that the US will be backfilling countries that
send these systems to Ukraine, how quickly can we actually
do so? What kind of capacity exists in this regard
right now?
Speaker 4 (23:19):
Well, thanks for having me. You know, this is the
real challenge.
Speaker 7 (23:22):
That the president's language was a little nonspecific, as was
Rutza's and conflicting, but I will tell you we can
get them there quickly.
Speaker 4 (23:31):
Through either the two routes that we're mentioned.
Speaker 7 (23:33):
The one route of the Europeans transfer their pack two
that's a lower level type of patriot missile to the Ukrainians.
Speaker 4 (23:41):
What the Ukrainians could use very easily.
Speaker 7 (23:43):
And then order backfill and order them from the United
States to refill the European armory, or the United States
could transfer.
Speaker 4 (23:51):
Them and then NATO pays European.
Speaker 7 (23:54):
Countries pay the United States for the United States to
replenish itself.
Speaker 4 (23:58):
Either of those methods gets.
Speaker 7 (23:59):
Them their much quicker than a Ukrainian order from the
United you know, from a defense industrial based country, which
would be years. Either of these cases, he says, could
be weeks to months to have missiles and batteries transferring
to Ukraine.
Speaker 2 (24:13):
Admiral, We're really glad to have you with us today
because before you were on the USS Nimics, the USS mccampbell,
the USS Elliott, the USS Bainbridge, and I can keep
going the Teddy Roosevelt. You were on the National Security
Council at the White House late nineties, and when we
look back a couple of years here, how do we
rationalize the fact that we've been having this conversation about
(24:35):
our defense industrial base for decades, and we really don't
have a greater capacity to show for it. Was this
not something but you were talking about that many years
ago inside the White House.
Speaker 4 (24:48):
Exactly right.
Speaker 7 (24:48):
I think we've got about a twenty year deficit, particularly
in our munitions, and that's what we're talking about here.
Whether it's Patriot missiles here, the standard missiles the Navy
was using to shoot down Huti rebel cruise missiles, or
the offensive weapons that we were using against the Huti's
or have used in other locales, we were running at
(25:09):
about twenty five percent of the proper level of munition
to order. In other words, when we needed four, we
ordered one. When you do that over twenty years, you
really create a deficit, and worse, you tell the defense
industrial based companies I'm not going to do major orders
and they reduce their ability to produce. So what you've
seen over the last three years are pretty consistent. From
the supplemental, the Ukraine supplemental, Taiwan supplemental a couple years ago,
(25:33):
this year's budget, and next year's budget. Actual investments in
the defensive dustrial base where the United States is contributing
to defensive dougtrial based companies like Lockheed and Raytheon and
Northrill Grunman to expand their ability their capacity to produce
they obviously contribute, and so we are beginning to grow
our capacity. But this is a twenty year deficit. The
(25:53):
only deficit that's worse is the European one, which almost.
Speaker 4 (25:56):
Went to zero.
Speaker 9 (25:59):
Well, and now where Europeans are trying to step up
in their own defense spending category, which is one of
the main aims of this administration. That was a point
emphasized by a Secretary General Ruta in the Oval Office
with the President earlier. As we consider the kind of
allied capacity, if you will, I also would like to
ask you, Admiral, about Russia's capacity and specifically the supply
of weapons that Russia is still getting from countries like
(26:22):
North Korea. How should we be considering Russia's ability to
continue to replenish its own stocks, continue striking Ukraine often
civilian targets, and how it's matched against the assistance Ukraine
is now getting in terms of air defenses.
Speaker 7 (26:37):
That's a great question, Kelly, because you're exactly right, Ukraine
is fighting four countries Russia North Korea, Iran, and China,
and in fact, Russia today is firing more artillery from
North Korea than their own. In other words, the majority
of the artilleria being used by Russia as North Korean.
Speaker 4 (26:53):
North Korea gave about six.
Speaker 7 (26:55):
Million rounds, which is twenty years of US production to
the Russians. Iran has built a Shahed drone factory in
Russia after giving them thousands of their own Shaheed drones
are selling them. They now have a factory, they're producing it.
That's what's hammering the Ukrainian cities every night. And the
third thing is China has been backstopping the economy with increase,
(27:18):
you know, with increases in imports and exports, but equally
importantly providing the microelectronics that are used in Russian cruise
and ballistic missiles. So all three of these countries, as
access of authoritarians, are supporting the fourth Russia in this fight,
and that's who Ukraine's been going against. So that's probably
why it's appropriate for the United States and Europe to
assist with at least with equipment but not forces.
Speaker 6 (27:42):
It's incredible to consider four countries, you know.
Speaker 2 (27:45):
Bloomberg interviewed the head of Ukrainian Military intelligence, Admiral who
said North Korea is now supplying as much as forty
percent of Russia's ammunition in this war. You mentioned the
shells that we're having trouble manufacturing is quickly, but they're
prepared at least to send a lot of other stuff,
(28:05):
ballistic missiles, artillery systems. Russia of course providing money and
technology to North Korea in return. What's the weapon system
you're most worried about? And could we see them include
nukes coming from Pyongyang?
Speaker 7 (28:20):
So well, certainly not nukes because you know not that
Russia would use them, but they have their own.
Speaker 4 (28:25):
Tactical nukes already.
Speaker 7 (28:26):
But I'm glad you mentioned that because that's something we
should always be sensitive too. But the North Korean thing
that the North Korean weapons that bother me the most are,
in fact, the artillery arounds are exactly right. But what
bothers me even more than those are those Shahed drones.
Shah edrones from Iran and the factory that was built
in Russia are really putting pressure on the on the
Ukrainian air defense system and they're causing civilian casuties and
(28:50):
damage to critical instructure. You know energy, water, you know
the financial systems of Ukraine or hit every night, and
so to me, that Iranian drone and that North Korean
artillery are really making a difference and hurting the Ukrainians well.
Speaker 9 (29:07):
And as you point to the targets that Russia is
taking amat in Ukraine, obviously part of the objective here, Admiral,
is to where on Ukrainian morale do you sense that
we reach a point where that is effective, where Ukraine's
kind of desire to keep prosecuting or defending itself in
this war is going to diminish as Russia being effective
(29:28):
in that regard.
Speaker 4 (29:30):
So I don't think so.
Speaker 7 (29:31):
And here's why I say that I go to Ukraine
every quarter for a couple of weeks to do training
with their military and their general staff, and I am
convinced the Ukrainians won't lose.
Speaker 4 (29:42):
That doesn't mean.
Speaker 7 (29:43):
They can push Russia out, it doesn't mean they can
recapture Crimea, but they won't lose. They're losing incrementally a
kilometer here, a kilometer there of land, but they will.
They have the societal resilience to stay in this fight
and win. They just need access to weapons and that's
what President Trump gave them today. He gave them access
to weapons systems that they need. The one thing I
(30:05):
wish he had gone one step further and give them
access to some of our offensive weapons again the attack
them's long range artillery. That would have been great because
then they could they could break up Russian formations when
they're coming together in Russia vice waiting till they're very
close to the Ukrainian lines.
Speaker 2 (30:22):
Yeah, we want to stay in touch with you, Admiral.
Let us know when you're going back to Ukraine. Retired
Rear Admiral Mark Montgomery, Senior Fellow the Foundation for Defense
of Democracies. We thank you for the insights only here
on Bloomberg. Thanks for listening to the Balance of Power podcast.
(30:43):
Make sure to subscribe if you haven't already, at Apple, Spotify,
or wherever you get your podcasts, and you can find
us live every weekday from Washington, DC at noontime Eastern
at Bloomberg dot com
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