February 20, 2023 • 55 mins
It's been one year since Russia invaded Ukraine in an event that set off a chain reaction of both geopolitical and economic consequences. So what have we learned from the past twelve months? And what is the future of this ongoing conflict? On this episode, we speak with Robert Papp, a retired senior executive at the CIA about what to watch when it comes to the weeks and months ahead. Before joining the CIA, Robert was a cryptologist in the US Navy and also studied Russian and Russia's economic history. He walks us through key questions, including how things are going for either side, and the role of both economic and information warfare in the conflict.
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Speaker 1 (00:10):
Hello, and welcome to another episode of the Odd Thoughts Podcast.
I'm Tracy Alloway and I'm Joe. Joe. Can you believe
it has been one year since Russia invaded Ukraine? Yeah,
it has been pretty extraordinary, remarkable. You're just like in
so many different respects, sort of the changing narratives over
(00:30):
time with the war, the persistence of the war I
think some people might have expected to be and much sooner,
changing expectations, where would go the narrative arounda the effect
on commodities and economics changed a lot over the last time.
And I still feel like after this time, you know,
I'm still tons of ambiguity about where it's going and
(00:51):
what the effects are going to be. Well. Absolutely, and
I remember this time in two when Russia first invaded Ukraine.
Some of the headline that we're flying around where you know,
this is the beginning of World War three? Is this
the start of some sort of you know, nuclear apocalypse? Given, um,
we were talking about the involvement of Russia and potentially
(01:12):
NATO as well, And then you mentioned the economic narrative,
and that has changed quite remarkably in terms of you know,
the European energy story. There were lots of concerns about
We're going to have massive gas shortages, Europe isn't going
to be able to handle this. But actually, fast forward
twelve months, it hasn't been as bad as a lot
(01:32):
of people seem to have expected. You're absolutely right, This
winter so far has not been the disaster for the
European economy that many have expected it. Interestingly, my impression
is that the Russian economy is not the basket case
that many would have expected either, given both the cost
of prosecuting the war in terms of raw materials, human lives,
(01:55):
and so forth, and then of course the sanctions which
both limited a sort of revenue generation opportunities but also
the opportunity for technical imports. And my impression, again only
you know, only sort of very very modest insight, is
that Russia has over time figured out ways around or
(02:16):
how to live with these various constraints. Well, there is
a vibrant debate on the extent of damages that sanctions
have actually inflicted on the Russian economy, of course, and
also there's a lack of information at the moment, you know,
there there there are different sides in this conflict, and
each one has their own story to tell. So on
(02:38):
that note, in order to stop and think and discuss
what exactly we've learned over the past year or so
about this ongoing conflict. I'm very pleased to say we
actually have the perfect odd thoughts guest, really, the perfect
perfect guest. This is someone that I met at the
Explorers Club in New York. He is a retired senior
executive at the CIA. He also served with the FBI
(03:01):
and the Defense Department. He started out as a cryptologist
in the Navy, studying Russian and deploying at sea. He
has a PhD in Russian history at Colombia and in
Russian economic history. I should say he specialized in the
history of the Russian stock market. He is now a
consultant teaching at undergraduate and graduate levels. But really, I mean,
(03:24):
I'm trying to summarize the car but really, the perfect
odd lots guests. So we're going to be speaking with
Robert pat Robert, thank you so much for coming on
All thoughts well, Tracy and Joe, thanks for having me,
and thank you for that wonderful introduction. I consider myself
a bit of an odd lot, so I feel like
I'm in a good place you're in the right place.
I would also note that the last time we spoke,
(03:46):
we were surrounded by life sized polar bears and narwall
tusks and Ammonson's sled, So this is maybe a little
bit different, but I think we'll work it out. Fine. Yeah, well,
we'll ask all lots of listeners to just imagine that
you are surrounded by a stuff animals and that you know,
I think we were speaking during a thunderstorm um in
New York and it was quite atmospheric. Okay, with that
(04:08):
caveat Robert, why don't you start with just where are
we in this conflict? You know, it's twelve months on
from when Russia invaded Ukraine. A lot of people were
not expecting it to make that move. Where are we
in this conflict? I think this war, and we'll call
it a war. It started out for the Russians as
(04:28):
the Speziano Pazzi, the Special military Operation. We still don't
like to call it a war, although every once in
a while a minister like the German Foreign Minister actually
come out and say that it is. But it is
a war. It is one of the worst things that's
happened to Europe. I think since nineteen I think we've
gone well past the Balkans conflict at this point, and
(04:50):
you know, at one year, I think this is really
confounded expectations at at all levels. I remember days before it,
I was doing a teleconference on this and most people said, no,
the Russians, they won't do it, they're threatening there on
the borders, they won't actually go in. And then on
February they went in, and the way they went in
was so messy, so unsound from a strategic standpoint, attacking
(05:14):
on all fronts with insufficient personnel, with insufficient supply lines,
and not expecting the bravery of the resistance of the Ukrainians,
and also the level of support remember back in the
time of St. Javelin and the Stingers from the US
and its partners, and I think that just profoundly shocked them,
(05:34):
because a lot of people, even in the United States,
even on the intelligent side, thought no, Kiev may fall immediately,
and it didn't. And then the war started to drag
out and get uglier and uglier. So it's not that
war anymore. It's also not what I would call the
war that we saw in August and September, where the
Russians woke up to their shock and realized they didn't
(05:56):
have enough forces in country, and they were retreating wholesale,
giving up territory that they in fact that annexed at
one point, which is terribly humiliating for them, but it
was really part of a strategic decision I think by
the Russians to marshal their forces, to reduce their casualties,
and to dig in until this mobilization of reserves began,
(06:19):
not a general mobilization, but of reserves, and to strengthen
their lines along the Nupper River, a natural boundary. And
this fast forwards us to today as we watched this grinding,
painful level of battles and places like bah Mud for example,
and while we all in the United States and Europe
and and and frankly in Russian and around the world
(06:40):
marvel at all these weapons systems that are being deployed,
and drones and intelligence and I s R assets and
so on. This is becoming like a World War One
slug fest with artillery. And I think we're reaching a
point now where the main issue is who can last
the longest, who has the most personnel, who has the
(07:01):
most artillery shells, who can take the most pain and
how long will the resolve of the West last in this?
And I think on that account, there's there's a lot
of positive news coming out of coming out of NATO,
But I think the expectations at the beginning of the
war on all sides have truly been confounded. I don't
(07:21):
see a revel resolution at any point in the near future.
This could end up being something where both sides are
dug in and their positional battles for territory. That could
be a large or more than one Russian offensive, that
could be a Ukrainian counter offensive. But what worries me
the most Joe and Tracy is that the expectations on
(07:41):
both sides, it's hard to retreat from them. The United
States has said we're all in, NATO has said we're
all in. Russia is certainly all in as a matter
of national survival and political survival at this point. So
I'm kind of pessimistic about the outlook in the near term,
if that's fair. Let me just add a couple of
other things. There are a couple of areas that I
(08:03):
really follow closely with this, and these are how do
we define war? I think that is a fascinating strategic
question going forward. What is the role of information warfare
in this which I think is quite profound. And finally,
something I think of interest to to to your to
your listeners especially is the role of economic warfare here.
This question might dovetail with your sort of thoughts on
(08:26):
how do we define war? But some people we've spoken
to and people elsewhere, they have this idea that the
end of this war looks like the end of many
other wars, which is not ended. But you know, persistent,
low level, dotted line borders that no one ever really
agrees to, but that often is how the world ends up.
(08:49):
And I guess the classic example would be, you know,
the division between Korea and North Korea, which the war
is technically never ended. And I think people say, look,
this is how the final chapter ys of war. Look,
no one actually agrees that this is the border just
sort of becomes the new border. Does that seem like
the direction it's heading in? And I guess, like to
(09:09):
to your broader point, what does it mean to say
there is a war on or there isn't a war on? Ye? Joe,
I think that's a really great point. It's it's it's
interesting I often ask students when was the last time
the United States was in a war? And there are
a variety of answers. They come up with Vietnam, Iraq, Afghanistan,
the Global War on Terrorism. And I tell them and
(09:32):
some of them get it that it was really in
the World War Two. It was really the declaration of
war in World War Two. So we're seeing new ways
of looking at what participation and and a war is
direct versus indirect. For example, if you equip an army,
train an army provided with intelligence, give it strategic guidance,
tactical guidance, and even to a limited extent, there are volunteers, mercenaries,
(09:57):
contractors on the ground. When does a war become a
hot war? How do we define a war? And I
would put this in terms of the information war and
the economic war too. But your point about Korea is excellent.
And I think the way we're looking at this now,
now that the Russians are pretty much entrenched with with
a with a river, the Upper River between them, and
(10:18):
that great open mass heading towards the fields, heading towards Kiev,
I find it hard to imagine that the Russians will
retreat from the areas that they've annexed Donyetsk, Luganska, Zaporojia,
Zaria and Ukrainian Harson. Of course they've already lost some
of these areas two brilliant Ukrainian counter offensives. But I
(10:39):
see them fighting back until they recover these areas. And
the question is when we get to your demilitarized zone,
and I think it's a it's a it's a it's
a brilliant concept for this is where does that end?
I think if the Russians could, they would try to
get the whole Black Sea coast, meaning go down to Nikolaiev,
go down to Odessa maybe, and go all the way
(11:00):
down to the Maldovan border. The Maldovan government is collapsing
as we speak, and there's Transmistria there with Russian troops
in it. I think it's impossible to forecast this at
this point. I do not think the Russians ever sought
to take all of Ukraine, not that heart land part
of Ukraine, you know, going back to Alexey miy Kailovitch,
(11:22):
the the seconds are for example, I don't think they
ever had an interest in Lviv and Galicia. They might
going a little bit further north towards Harket, for example.
So I think you're right. I I think this will
have to end with exhaustion at some point and some
kind of low simmering demilitarized zone conflict line which frankly
(11:45):
has existed in the dunbast since two thousand and fourteen,
with artillery showing and fighting on both sides. I know
that's not a great answer, but I don't think anybody
has a great answer as to how this ends. Yeah,
you know, whenever I or a question like how do
we define war? I start to get flashbacks to studying
international relations at university, and you know, reading the likes
(12:09):
of Francis Fukiyama and the end of history and this
idea that no to true democracies have ever gone to
war with each other. And one question that I always
wanted to ask a spook or a former spook, is
you know when that conversation or when that talking point
was at its height, you know, the early two thousands,
(12:30):
everyone's talking about globalization and you know, democracy for the
win and all of that. What did you think, you know,
you're working in the background with actual intelligence reports, did
you think that that was something that was plausible at
that point. I I I personally thought at the time
that you know, we had this remarkable victory that ended
(12:52):
in the defeat of the Soviet Union, the dissolution of
the Soviet Union, and I think there was a great
opportunity early on in that after the war all fell,
after the Russian Federation became an entity in the Soviet Union,
went away to really help them into sort of the
world global order, if you will. And we sent a
(13:13):
bunch of venture capitalists in the time, and frankly, the
Russians with Western helped really botched the privatization. It was
terrible how it went about. I still have these pictures
of the old ladies selling their their potential shares and companies,
their certificates for a bottle of vodka, not understanding that
they were worth thousands of dollars if they could just
hold on, but at the time they couldn't need. The
(13:35):
situation was terrible. They had no money in the bank whatsoever.
And this became kind of a kleptocracy there where the
oligarchs and later the the the the the the the
power people in Russia who are more important than the
oligarchs in this war just took everything, and it became
a country where you were not going to have a
conventional type of capitalism. So I feel there was a
(13:58):
bit of a lost opportunity be there. I don't know
if a martial plan was needed as we had after
World War Two, or another massive aid package, or more
just understanding how deeply wounded people like Putin who emerged
from this were, the feeling that they had lost their
way of life their government, for good or for bad.
(14:19):
Communism has always resulted in dramatic failure. But when Fukayama
came out and I wanted to avoid this, but you've
dragged me in an alternate. I think his comment that
somehow that this was the end of history, that liberal
democracy had won, that all the old things that bothered
people in the past, ethnicities, language, culture, borders, just jealousy
(14:44):
over a size of military over economic resources and so on,
suddenly this had gone. And I thought that was naive then,
and I think it's it's naive now. He didn't invent that.
Of course, this was thought after the French Revolution. This
was thought with the Congress of Vienna after the War
of eighteen twelve. You can even go back to Hagel
(15:05):
and Marks and look at how the dialectic of how
society would would develop and how the world would developed.
I think what we're seeing now is that all of
the old things that bothered people in the past and
brought people to war in the past still exist. And
I find it horrifying that Russians and Ukrainians, who speak
(15:25):
relatively similar languages, who have relatively similar cultural backgrounds, are
now killing each other on mass and I find that
very disturbing, and I think there's almost no going back
at this point. I want to ask a sort of
(15:58):
concrete question. Maybe it's a little bit theoretical, but like,
how would you characterize the degree of involvement of US
and NATO in this war? Because you know, leaders in
the West make pains to say we are not at
war with Russia, and for all kinds of reasons, particularly
because of anxiety about nuclear war, they're very good reasons
(16:21):
to sort of not actually do things that would entail
the US or other NATO countries of being at war
with Russia. Nonetheless, obviously we've supplied Ukraine quite a bit
of weapons, as you mentioned, training, etcetera. Can you help
like tease apart in our minds, What is the role
of the US and NATO in this war currently and
(16:42):
what would be the type of action that would go
over some line that people in the international community have
about what sort of a direct involvement means, you know,
those are those are those are great and and and
very uh vexing questions. I think it's it's quite are
to say we are fully engaged in a proxy war
(17:03):
at this point, and I wish I hadn't seen some
of the statements I have from people who I think
should not be making them that goals include breaking up
the Russian state, pushing Putin out of power, and even
the idea that Ukraine is somehow going to get back
every last inch of territory, including Crimea, which the Russians
recovered in fifteen and historically was a Russian area. So
(17:28):
I think I think the the role of diplomacy, which
has really been biled in this effort. There was a
bit with the Turks early on, and now some countries
even like Brazil and Mexico and others, are talking about engaging.
But I think there's really no place for diplomacy right
now the way both sides are dug in on this
but when we look at the participation of the US
(17:50):
and NATAL and in the war, it's it's profound the
Ukraine would not last, frankly, if it was not for
the economic support, the military support provided by the US
and by its NATO partners. The Ukrainians have been exceptionally brave,
exceptionally good at fighting back against this Russian invasion. And
(18:11):
whatever we may say about the causes of this, this
was a brutal invasion that has resulted in already it's
turning out hundreds of thousands of lives lost. So we
do have to condemn that. What I am worried about
is at the next level, what would cause this war
to expand your as you point out, into something with
a nuclear component, or expand into Europe, or become a
(18:34):
full on boots on the ground war between Russia and NATO.
I think there's been so much that's happened over the
past year, so many changes and the way we look
at this war, so many lines that have supposedly been
drawn about levels of support and so on, that it's
(18:57):
really hard to predict what would be the catalyst for
this to become an expanded war. I'm very worried about
things like possible use of chemical and biological weapons, or
just by mistake even or hitting a nuclear power plant
with shells and there's a leakage of radiation, kind of
a Chernobyl scenario. And and I've been to Chernobyl, and
I certainly do not want to see something like that
(19:19):
ever again. But the Russians have basically set a few
times some red lines that they have and it's it's
it's almost like a dance now, it's it's or the
dance of a thousand veils or a Kabuki dance, where
each time another layer is removed, it's removed to the
next level. Will it be armored fighting vehicles will be
in main battle tanks, there will be a missiles of
(19:39):
a certain range that can reach Russia proper, And it's
hard to even define what that is. Would it be
the presence of advisors and assistance on the ground, for example,
and firing artillery or targeting or something like that. I
personally don't think the Russians would allow this to go
to that level unless they felt that their sovereignty was
(20:02):
in danger. I think of Ukrainian troops were heading for Sevastopol,
for example, then almost anything would be possible. I think
of long range Ukrainian missiles hit major cities deep inside
of Russia. Anything would be possible. I worry also on
the other side about for example, Poland is deeply worried
(20:23):
about this, and Poland has really been out in front
in supporting the Ukrainians, both diplomatically and in terms of
material support and rhetoric. But right now, for this to
go to the next level, I don't think we're there yet.
But I don't know how this ends. I don't know
what victory looks like for either side at this point,
(20:44):
and that's the part that I find most troubling. You
mentioned the importance of oligarchs in post Soviet Russia. Can
you talk to us a little bit more about what
Putin's domestic support looks like at the moment, both from
these sort of oligarchic slash political class and also from
(21:04):
average people on the ground. I guess another this is
my way of diplomatically asking you what we're supposed to
make of all these people falling out of windows and
such forth. Well, there's certainly been plenty of that, and uh,
and the Russian state historically has never shied away from
pushing people out of windows or impaling them or anything,
(21:25):
depending on how far back we go in history. The oligarchs,
I think, is an interesting question. The oligarchs, when when
they came in and just basically ceased, They just stole everything,
created this kleptocracy in Russia. They acquired a great deal
of power, and Putin was really against that, and he
told them he was against it, and he told them,
(21:46):
for example, if you're a Betzovsky or you're in a
Bramavitch or whatever, we're going to deal with you in
a certain way. And in some cases that meant that
they died. In some cases that meant that they went abroad.
In some cases that meant that they lost their their holdings.
We revel in watching these ridiculous yachts of Russian oligarchs
being seized in Italy or along the French riviera. I mean,
(22:08):
it's it's it's it's a great feeling to see that.
But the oligarchs are really not the key here. In fact,
if Putin had his way, many of the oligarchs would
lose all of their money and would and would go
into immigration. He doesn't like them, he doesn't bit what
they stand for. Particularly if they're not one hundred percent
behind his war effort. More important are these the Siloviki,
(22:31):
these power people that he has, many of whom were
ex governors, ex ministers, people who grew up with Putin
and helped him along the way and supported him along
the way. And I I think more about them, And frankly,
the more sanctions are placed on people like that, the
more they revel with it. They go to the dodga,
they have a few glasses of vodka and they say, ah,
(22:53):
I was sit with sanctions today, and they go me too,
and that they actually think of that as a kind
of a badge of honor in terms of support for Putin.
Very very interesting dynamics here. You remember at the beginning
of the war, when when when Russians were worried about
being called up, and there was this exodus of young
intelligent Russian people, everything from computer programmers to people from
(23:15):
different walks of life that that didn't buy into the
whole Russian status model just left. They left. They lined
up at the borders, whether they wanted to Norway, whether
they flew out in business class, or whether they went
to Poland or Georgia, and they left and I think
President Prutin said goodbye, see you later, don't come back.
(23:36):
What's yours is ours now, And I think what we're
left with there is a surprisingly hom a genious level
of support for Putin in the country. Not everybody, needless
to say, but your average guy in Siberia, your average
guy who works in a factory, for example, is looking
(23:57):
at this war and looking at the rhetoric on Usian
social media and Russian news and starting to think maybe
he was right, Maybe the West is trying to destroy us,
maybe Russians are being mistreated abroad. And and I would
say in this context that I find something very alarming
(24:18):
and unnecessary in the way this war is being reported.
When you listen to most of the Western press, the
words that are used are fulled with contempt, derision, hatred,
even rejection of culture, art, music, history, language, sports. I
(24:39):
found myself on YouTube looking at at at a gaming
show where there's a there's a new game out called
Metro Exodus, which is really cool, but it's Russian, and
I'm like, wow, I guess you can't. You don't really
want to buy that anymore, that that would not be
patriotic if you bought that I would be a little
bit more worried about, you know, Swan Lake, Shaikovsky, uh
Pushkin and so on. I don't think this is necessary,
(25:00):
and I think it strengthens Putent domestically rather than weakens.
And the Russians are doing enough things that are bad
that the reporting doesn't have to be one animosity towards
the Russian state. Every attack is not a massacre of civilians.
Every allegation of a war crime is not necessarily true
(25:23):
until it's researched correctly. And I think it's backfire is
not only in the Russian population, but also I dare say,
in the global South. And I spend a lot of
time following social media in the global South. So I
think in a roundabout way, i've i've I've come at
your answer, but let me know if I have you
basically took to my next question out of my mouth.
(25:43):
Because when the invasion first happened, there were a lot
of people who are pretty impressed by the Biden administration's
ability to sort of corral a wide degree of global
support against Russia and then effect that in the sanctions.
But even at the time, you know, there were clearly
big countries heavily populated countries that never really like took
(26:06):
US side, never took a stance on the invasion, particularly
across the global South. But really, you know, outside I
believe of the U. S and Europe, perceptions of the
war are far more scattered and less unified than they
are in the US and Europe. And so I'm curious
sort of like what the trajectory has been, you know,
in places like India, China, Brazil, South Africa, Israel and
(26:29):
so forth. And then I guess this sort of like
a two part question. Has has the ambivalence of these
countries to condemn Russia been crucial? And how helpful has
that been still maintaining markets for imports and exports to
prevent the sort of complete domestic collapse of the Russian economy. Yeah,
this is the this is the thing I think about
(26:51):
a great deal, and I look immediately at the bricks
nations obviously, of what Russia is one of them, because
all Russia, India, China, South Africa that as we speak,
the Russians have been doing naval exercises with South Africa,
and if we extend into Africa even further, there the
Russians just uh, it's almost complete, have an agreement now
(27:11):
with Sudan to make a naval base on the Red Sea,
and Wagner Group is now in Mali where the French
have left. So if we expand our our scope from
the Bricks to this great global South, including especially Africa,
the Middle East, parts of Asia, which I think are
more concerned with the China issue right now, but even
South America like Brazil and Mexico, and states obviously like
(27:35):
Nicaragua and Bolivia and and others that have a propensity
and Cuba that a propensity towards Russia. We're seeing a
very mixed bag. And I find this of arming. I
find it disturbing again going back to the thesis that we,
regardless of what the causes were, the fault were for
this war. And obviously a great deal of this is
on the Russians, but certainly not all of it. What
(27:58):
has happened in the Global South is they look at
this through a different prism then the United States, Canada, Europe,
the developed West. They are looking at this from a
I think a prism of history in which they look
kind of a scance at some of the activities of
what they might have called back in the day, an
imperialist nation, a colonial nation, something like that. And it
(28:22):
never fails to alarm me when I see even on YouTube,
but certainly in telegram, certainly on social media, and even
in mainstream news in places like once you mentioned Joe, India, China, Brazil,
South Africa, Saudi Arabia, Indonesia, the Emirates, Mexico, and throughout
Sub Saharan Africa. You see a narrative that in some
(28:45):
cases it is very forgiving of the Russian conduct of
the war, but in other cases actually groating over each
victory that the Russians have, gloating over each deployment of
a new Russian web, and gloating over this ability of
the Russians too counteract natal as a body. So I
(29:07):
think we've been enormously effective in terms of the developed West,
and I think less so in terms of the global South.
And that leads to the second part of your question
about the the economic impact. And I think this really
has confounded everyone, and we we can go in at
some point if you wanted to sanctions and asset for
(29:28):
reasons at all, but we have accelerated a trend where
Russia really wanted to do an Asia pivot or what
I would even call a global self pivot, a pivot
away from Europe, and they've been remarkably successful at it.
The data is all bad. We can't trust any of
the data, I think on natural gas and oil exports, commodities, diamonds,
(29:51):
anything like that, lithium for example, a gold, silver. But
it is quite clear that the natural gas is flowing
in to China through power of Siberia and eventually the
power of Siberia to pipeline tankers around the world. Some legally,
some illegally are moving Russian crew because there's just too
much money to be made on it at the prices
(30:14):
it's being sold and resold at. And I think even
in Europe you're seeing in the United States you're seeing
some kind of deceptive things in terms of loyal products
at all, and as to how they're moved around and
what counts as Russian loyal what doesn't count as loyal
that's gone through various levels of refining or processing. So
I think this is exacerbated a a an economic current
(30:36):
that the Russians kind of wanted to do anyhow, at
some point. I also fear that some of the nations
in the in the sort of the bricks environment, including
countries that are lining up now to join bricks, like
Saudi Arabia, like Algeria, perhaps like Argentina and Brazil. Argentina
at some point you're seeing them look for alternatives to
(31:01):
a US dominated world economy, to a dollar dominant denominated economy,
to an economy where the swift system and international banking,
which is dominated by American banks is really the only
way of getting two settlements where maritime insurance for tankers
and containers are controlled by United States interests. And I
(31:24):
find this disturbing because I think we need to promote
our model of liberal capitalism, of global markets, of free markets,
and I think the war might be having a somewhat
perverse effect on that. You know, you mentioned oil and
gas still flowing and emanating from Russia. Can you talk
to us a little bit more about the role of
(31:47):
those commodities in this conflict, or how different do you
think this would have been if Russia wasn't a major
world supplier of natural gas. I think right now Russia
is still and has been for a long time, you know,
largely reliant on its hydrocarbonate exports, and also it's it's
(32:07):
it's raw materials and mineral exports and such. Obviously they
export a variety of things, but I think they rely
very heavily on this. I think when the Europeans and
and did this quite brilliantly. I watched how quickly the
Germans put an L n G terminal in, for example,
in the Baltic and record time they built a terminal
(32:28):
to bring imports from the US. But when I think
when when the Russians started to lose a great deal
of this, especially the natural gas side into Europe, I
think this hurt them. I think it hurt them considerably.
I think they had considered this as a possibility, uh
the old lords dream Nords dream too, is as a
(32:48):
whole mother can of worms that could be talked about.
But I think they had already started to set up
alternatives in terms of the numerous pipelines that go into Europe,
go into the Middle East. They're talking going across Iran
now for example, and go into China. So I think
they were able to recover a lot of that, and
that is the fuel that keeps their military industry going,
(33:11):
That is the fuel that keeps them able to fuel
literally fuel that keeps them able to feed their people,
for example, and I think they've done much better than
we thought they did, but I think the sanctions have
caused some very big systemic problems for them, whether it's
in the aviation industry and the high tech industry and
(33:31):
access to certain types of products and services. You know,
it's funny. You can you can watch on YouTube Russians
going to supermarkets and you don't know if these are
Potemkin villages that are selected for that reason. I suspect
they are not. But the stories are full, the shelves
are full, and maybe the product mixes a little different.
Maybe they're complaining that the box the cardboard boxes are
(33:53):
painted white instead of multicolor because of the lack of dyes.
But you see, you see food from Turkey, from Iran,
from Asia of Russian production. Russia is a bread basket
and always has been, so I think they're doing reasonably
well on that. But the pain is certainly happening, and
over time it's really difficult to predict how bad the
(34:15):
pain will be with inside of Russia. And I think
this is part of the gamble that that we're taking
right now. Talk about that a little bit further. I mean,
I'm I'm still curious, you know, going back to one
of your first answers about the domestic support, and you
know you mentioned a lot of sort of young talented
people sort of got on got on the next flight
as soon as this war started. But obviously, you know
(34:37):
there's still a large middle class or the Russian middle class,
like in the major cities around Moscow, etcetera. How has
the sanctions are just the economic effects or the war
sort of affect date their day to day life so
best as you can tell, And what are the risks
to putin if this sort of ongoing degradation of sort
(35:00):
normal life continues and continues to worsen, because again, wars
are extremely costly for obvious reasons. Yeah, I think that.
I think at certain levels Russians, uh certainly are are suffering.
When you look at the major cities like St. Petersburg
and Moscow, I think it goes much further than your
inability to get a Gucci bag, for example, or to
(35:20):
have a Marks and Spencer. I think there are systemic
things that are happening. I think the inflation is is
not not too terrible. I think the product mixes not
too terrible. I think people would like to have better
access to cars. They'd like to be sure that the
aircraft are going to fly on are safe and are
being maintained. But you know, Russians historically are are used
(35:41):
to a bit of pain. I think of this is
a different era, of course, this is a different global
error where people can see on social media how others live.
But this is a country that lives through the nine
hundred days of Lennon Grad. This is a country that
lived through Napoleon actually taking and burning Moscow. This is
a tree that lost heaven knows how many twenty million,
(36:02):
forty million, some due to their own murderous regime in
World War two. So I think there is ability to
endure a lot of this. And one of the things
Putin is doing is he is paying the soldiers more.
He's bringing contract soldiers aboard. He's paying death benefits that
may seem very little to us, but are actually enough
to feed a family for a couple of years sometimes
(36:24):
for people who are are are killed in the war.
And there are many of those, and there are many
people that are very angry about this. The mothers of
of of the victims of the war but you know
it's funny. I was watching on YouTube a while back.
There's a charming series about Yakutia, the coldest place on earth,
with the temperatures at minus seventy, and they show the
Yakutsu Russians. They all speak Russian and they're out there
(36:48):
in minus seventy just trying to get to the bathroom
without freezing to death, or get to the rivers. They
can drill a hole and get some fish out without
freezing to death. And I laughed at one point one
of our officials that there the Russians aren't winter east
for the war, and I said, oh my god, there
are yakut mortar crews right now that the Russians are
showing on their social media in action. And for them
(37:09):
this is like, wow, it's pretty warm here, this is
pretty good weather here. We maybe we should stay here
rather than going back to Yakutya, except that they love it.
So yes, there is suffering, but on another level, the
suffering is understood and it's a part of the Russian condition.
And what we have to do is find that balance
between the economic suffering that would cause something to happen
(37:32):
there or derail the Russian war. Machine, but not to
cause such suffering that the people who listen to the
Russian propaganda and this is an information war, say again
he was right. They really are trying to break us
up as a country. Why would they want to destroy
my ability in Central Asia or in Eastern Siberia or
(37:56):
in ar Kanels to eat and to get electricity and
warmth and the things that we're used to in life.
And I think we have to be very careful about
this because this plays into, I think a Russian way
of thinking about life that has existed for centuries. You know,
(38:31):
I realized when I was doing your intro and summarizing
your career, I couldn't include everything. And there's one important
thing I left out, which was that you were a
director of the Center for Cyber Intelligence at the CIA,
and so we have to ask you. We would be
remiss not to ask you what your take is on
the cyber component of this particular conflict, because of course
(38:54):
we have had, you know, various things that have happened
over the past twelve months, certain explosions and things shutting down,
but it's never exactly clear whether or not there is
a cyber component behind them. Yeah, I'm I'm actually a
bit surprised at the minimal level of cyber activity we've
seen from the Russian side. Now, there's no doubt, and
(39:16):
they've been doing it for many years. They're doing reconnaissance
in our infrastructure, our electrical utilities are nuclear power plants
and so on, and needless to say, doing everything they
can to survey defense industry and government institutions. But no,
there has not been, for example, a attack on April
(39:37):
fourteen on the I R s imagine shutting down the
United States. There has not been an Internet of Things
attack on the air conditioning systems at the Pentagon Saturday night,
at midnight in August we've seen. I think you might
be giving them ideas. Now I don't think I have
to give them any ideas that these are, but I
(39:57):
will stop using examples in that case. They're they're The
Russians have always used patriotic actor hackers of fellow travelers
and such. Sometimes it's done directly from Russian intelligence. Sometimes
it's gone through proxies and cutouts and contractors. And again
this this small army of patriotic hackers, some of whom
have left the country to go make money doing cyber
(40:21):
work and information work outside of Russian and places where
they can earn a living. There was actually a report
in social and Russian social media last night that a
cyber attack had begun by these fellow travelers. I haven't
seen any indication of that yet. I think this is
very alarming to both sides. There are things that could
(40:41):
be done to the backbone of the Internet. People think
of the Internet as being in the ether somehow, when
it's actually largely dependent on fiber cables and it's kind
of back and forth between the Russians and the Americans
has been going on for a long time on this.
I would really fear that if things get really bad
for the Russians or they see this as a means
(41:04):
of stopping arms from getting to Ukraine, that they would
do such an attack, then there would be a retaliation.
And the US has become infinitely more capable over time
and made even places like Estonia, for example, our our
leaders in this area. I would worry about that, and
it's really mostly been at the tactical levels, and when
(41:26):
we talk about cyber of course we can't help but
mention Elon Musk. Elon Musk, who with Starlink was actually
one of the saviors of Ukraine early in the war,
and now he's having second thoughts about the use of
starlink for drone operations, for offensive drone operations again with
the fear that perhaps this will escalate the war. So
(41:46):
I think there's a lot of things we don't know yet.
I think there's a lot of very serious preparations going
on on both sides. But I'm just surprised we haven't
seen more yet. We've talked a lot, obviously out the
effect that this war has had on Russian citizens, the
support for Putin among those who are in Russia. We
(42:07):
haven't talked about the equivalent in Ukraine. Ukrainians have obviously,
you know, seeing their economy wrecked, They're experiencing power outages,
all kinds of devastations, famined obviously the incur incursion on
their sovereignty. What is the effect that this is having
in terms of support for Zelensky and the domestic political
(42:29):
trajectory in Ukraine, Because we talked about the West and Russia,
but can't leave out like the you know, the the
key other central actor here. Yeah, I think again we
have we have to go back to the original thesis
that It is absolutely amazing and heartening that the the
level of resolve of the Ukrainian people, they've suffered catastrophic
(42:49):
personnel losses, that the two numbers of which are we
may never know, but are coming out and are are
much larger than than we we thought they were. We've
seen exactly the kind of economic destruction that you've talked
about where the Russians they are engaged in economic warfare.
They are engaged in a classic type of economic warfare
(43:09):
that I would call old school that has always been
done in war, which is destroying infrastructure which is of
military value, electrical transmission, the ability of trains to bring
troops and equipment to the front, and so on. Economic
warfare is nothing new. Take of the Union blockades of
the South and the Civil war, understricted submarine warfare in
(43:30):
World War One, even strategic bombing in World War Two
where we try to take out all the German factories.
But you're right, this has a huge impact on the
Ukrainian economy and eventually it becomes a question of persistence. Now,
bearing in mind that a number of Ukrainians millions have left,
some will not come back, some are now in Poland.
(43:52):
If it. There's about a million and a half there
now in Germany and in other parts of the world.
Some have come back when they saw that the war
was angle a little better than they thought it would,
and they saw the bravery of the Ukrainian leadership and
the Ukrainian army. But eventually you reach a point where
the economy is moribund, but there is no economy. It
becomes a state completely dependent on the West, on financial support,
(44:18):
on donations, not even to think about the eventual reconstruction period.
And I think one of the smartest things President Zelensky
said was he made it very clear to Black Rock
and Goldman, Sachs and City Group and so on. He goes,
you are very welcome here. You will make money here
in the reconstruction period. And that's certainly a good argument
for continued support, because at the end of the day,
(44:40):
war comes down to money as well as power and
geopolitical issues. I think the issue of domestic support for
Zolenski is fastening. Zolensky is a rock star in the
West Okay. He can appear in really almost any format,
and he is welcomed. He has his he has his brand,
his way of dressing, his way of speaking, and he's
(45:01):
quite good at it, and I think he's been very
effective in the Westmond That very interesting. What's happening though
back in Kiev? Now, well, first we lost they lost
a helicopter with the entire Interior Ministry leadership on it,
which I think was a painful accident. But in the
same time frame, you saw quite a number of senior
officials being fired, being forced to resign, and I mean dozens,
(45:26):
and this includes you know, you're the Defense Minister, d Estovich,
who is his his primary advisor, a number of governors,
a number of senior officials in different areas, and now
you have the head of the Ukrainian Intelligence Service is
going to take over the Defense ministry. And you've seen
the mayor of Kiev sort of clash with President Zelenski
(45:47):
over the approach to the war and who's doing enough
and who's not doing enough. So it's very interesting to
watch the Russian reaction to these figures too, and the
Russians are are again it's a propaganda war and their
terror a lot of what they say, they call Zalenski
the clown, that's their name for him. They have a
number of epithets that they use. They don't say this
(46:08):
about Lusoni, the head of the General staff. They say
this is a final officer who we respect and who
has really given us a body knows. So my question
is where is President Zelenski right now? We know where
he is in terms of the west. Of that, there
can be a little question at home. I think he's
still doing enormously well because he is the face of
(46:28):
the war. But I think in a country where we
have to admit there is a deep level of corruption,
and like in any political system, there is in fighting,
there is a desire for power, there are resentments, there
are jealousies. We've seen a number of changes recently that
lead us to question where is this going in terms
of domestic politics, and what would the Russians do to
(46:52):
try to exacerbate this or take advantage of it. I
just have one more question, and it's, you know, one
of those things trying to sum up the whole conversation.
But what's been the most surprising to you about the
past twelve months. I think the difficulty of predictions again
and I started with that and I'll end with that
(47:14):
has has really confounded most observers in this from whether
the war would happen to how quickly it would be resolved.
And we're at a point now where we may be
looking like we're pretty Goes from the Wagner Group says, well,
it might take us two years to recover the rest
of the dun Bas. I think what surprised me, and
I think what surprised a lot of observers is we
(47:37):
watched as this war began, and we saw that the
Javelin missiles and the Stinger missiles, and the intelligence support
and law and now we're seeing that this is all
terribly important, the drone war, the aerial war, the intelligence war.
But we're seeing World War One type trench systems. We're
seeing the Russians bring out artillery pieces literally from World
(47:58):
War Two and just bombarding the front continuously, continuously, continuously
to try to break down the Ukrainian resistance. And I
think this new plan of bringing in tanks, you know,
whether it's American Abrams tanks or Challengers or Leopard twos
or less effectively, Leopard ones, I think this will make
(48:19):
a difference. But we're seeing a kind of war that
I think people thought had somehow gone away in World
War Two and we're seeing it back and this is
the Russian way of war. And when you see the
Russian Chief of the General Staff got Auso, now taking
charge of the war, you see that they're looking at
this in a different way, and this has become a
(48:42):
slug fest. So I think that surprised me. Another thing
I think that that surprises and and and confounds me
again is on the information warfare. I think we're all
sides of kind of painted themselves into a corner that
they can't emerge from anymore. The United States can't walk
away from this, not after Afghanistan, not with the very
(49:04):
real need to defend the Ukrainians against a Russian invasion,
and the Russians can't walk away from areas that they
have formally annexed, whether or not this has been recognized
by the world. And I think that's the most confounding
part of this, in that the rhetoric of the information
warfare and also the level of the economic warfare here
(49:28):
has made it that I don't see anything in the
short term that will allow this to resolve itself. And
I fear you knows, as you and Joe said at
the beginning, that we may end up in kind of
a demilitarized zone um with conditions of ceasefire and peace.
But I don't think anyone can predict it. So that
is what has confounded me, and also just the inability
(49:51):
of anyone to correctly determine what would happen in this war.
Predictions are just so hard to make, all right, Robert
pap really the perfect odd lots of guests, Thank you
so much for coming on. We're gonna have to have
you back to talk about the history of the Russian
stock market. Just do an episode on if any of
your investment audience want to revive their investments in nineteenth
(50:11):
century securities. I've indexed these and given total return models
for them, and sadly, just just just as an opening,
as a final comment, I would say what I found
in that period after all that work was you really
did well with blue chips. Nothing ever changes, nothing ever changed.
(50:32):
So that was that conclusion. And thank you guys so
much for having me. It's been a lot of fun.
Thank you, Thanks Robert. That was great. So Joe, I
(50:54):
thought that was a fantastic summary of the past twelve
months or so. And to Robert's point, it is kind
of crazy when you think back to February of two
and what people were expecting in terms of a military conflict, Like, yes,
we have had drones, there are some very very advanced
missiles being used and things like that. But on the
(51:14):
other hand, you know, we're talking about Russian tanks from
World War one world War two rolling across the border.
And you know, even I'm thinking back to that episode
we did on wooden paletts, like the shortage of Russian
wooden pallets, it all seems very very old school in
terms of military technology. Yeah, you know, I think to
Robert's point about, you know, the let the inability of
(51:38):
people who try to predict these things to get anything
right has been really striking. And I do think, you know,
if you go back to last February Prime, most people
in their minds would have expected something maybe more akin
to the invasion of Crimea, which for the Russian was
kind of a cake walk. They walked in and they
took it, and probably putin roughly thought the same thing,
(51:58):
maybe it would be a little tough for and that
explains the sort of very poorly thought out state of
the invasion, the allowed invasion that proved to be very costly.
The different terms in this and then yes, the fact
that now a year later and we talk a lot
about these advanced weapons systems, but it's just this grind,
this trench warfare, horrible human losses persisting, and then this
(52:23):
question of like, okay, how long can either side take
It is absolutely just the sort of horrible state of
affairs going on right now. Well, the other thing that
I was thinking about and Robert spoke about was this
idea of the entrenching of positions and the fact that
people are you know, they seem to come up with
(52:44):
rigid demands that don't really allow for some sort of
compromise I mean, for obvious reasons on on certain sides.
But then what that tends to lead to, and this
kind of gets into his information warfare point as well,
is that you just got these hardenings of alliances and
of feelings. And I don't think that in the West
(53:07):
we are necessarily seeing the extent of that in other
places in the world, Yeah, No, I mean, I do
think that the reactions to this war outside of US
and Europe have sort of been undercovered, and we're probably
explanatory about the degree to which the Russian economy continued
to operate. But to this point about the hardening positions,
(53:27):
it does make you wonder whether that's sort of dotted
line war forever outcome is where it's going, because if
none of the sides can, if there's nothing on paper
that any side can theoretically except except right, so then
you have to sort of find some outcome that is
(53:47):
like de facto acceptance but never stated publicly, and so
you know, hopefully that is something more peaceful than we
have right now. But again it's hard to see, like, Okay,
what is that ultimate of ramp look like? Yeah, all right,
on that pessimistic note, shall we leave it there? Let's
leave it there? Okay. This has been another episode of
(54:08):
the Odd Thoughts podcast. I'm Tracy Alloway. You can follow
me on Twitter at Tracy Alloway and I'm Joe wi
Isn't All. You can follow me on Twitter at the
Stalwart and for more of our special coverage on one
year of Russia's war in Ukraine, send up for the
Balance of Power newsletter that's at bloomberg dot com slash Newsletters. Meanwhile,
follow our producers Carmen Rodriguez at Carmen Armand and Dash
(54:32):
Bennett at Dashbot and check out all of the podcasts
at Bloomberg at podcasts, and for more Old Lots content
go to bloomberg dot com slash outlets. Thanks for listening.
(55:04):
The Year to E
Hello, and welcome to another episode of the Odd Thoughts Podcast.
I'm Tracy Alloway and I'm Joe. Joe. Can you believe
it has been one year since Russia invaded Ukraine? Yeah,
it has been pretty extraordinary, remarkable. You're just like in
so many different respects, sort of the changing narratives over
(00:30):
time with the war, the persistence of the war I
think some people might have expected to be and much sooner,
changing expectations, where would go the narrative arounda the effect
on commodities and economics changed a lot over the last time.
And I still feel like after this time, you know,
I'm still tons of ambiguity about where it's going and
(00:51):
what the effects are going to be. Well. Absolutely, and
I remember this time in two when Russia first invaded Ukraine.
Some of the headline that we're flying around where you know,
this is the beginning of World War three? Is this
the start of some sort of you know, nuclear apocalypse? Given, um,
we were talking about the involvement of Russia and potentially
(01:12):
NATO as well, And then you mentioned the economic narrative,
and that has changed quite remarkably in terms of you know,
the European energy story. There were lots of concerns about
We're going to have massive gas shortages, Europe isn't going
to be able to handle this. But actually, fast forward
twelve months, it hasn't been as bad as a lot
(01:32):
of people seem to have expected. You're absolutely right, This
winter so far has not been the disaster for the
European economy that many have expected it. Interestingly, my impression
is that the Russian economy is not the basket case
that many would have expected either, given both the cost
of prosecuting the war in terms of raw materials, human lives,
(01:55):
and so forth, and then of course the sanctions which
both limited a sort of revenue generation opportunities but also
the opportunity for technical imports. And my impression, again only
you know, only sort of very very modest insight, is
that Russia has over time figured out ways around or
(02:16):
how to live with these various constraints. Well, there is
a vibrant debate on the extent of damages that sanctions
have actually inflicted on the Russian economy, of course, and
also there's a lack of information at the moment, you know,
there there there are different sides in this conflict, and
each one has their own story to tell. So on
(02:38):
that note, in order to stop and think and discuss
what exactly we've learned over the past year or so
about this ongoing conflict. I'm very pleased to say we
actually have the perfect odd thoughts guest, really, the perfect
perfect guest. This is someone that I met at the
Explorers Club in New York. He is a retired senior
executive at the CIA. He also served with the FBI
(03:01):
and the Defense Department. He started out as a cryptologist
in the Navy, studying Russian and deploying at sea. He
has a PhD in Russian history at Colombia and in
Russian economic history. I should say he specialized in the
history of the Russian stock market. He is now a
consultant teaching at undergraduate and graduate levels. But really, I mean,
(03:24):
I'm trying to summarize the car but really, the perfect
odd lots guests. So we're going to be speaking with
Robert pat Robert, thank you so much for coming on
All thoughts well, Tracy and Joe, thanks for having me,
and thank you for that wonderful introduction. I consider myself
a bit of an odd lot, so I feel like
I'm in a good place you're in the right place.
I would also note that the last time we spoke,
(03:46):
we were surrounded by life sized polar bears and narwall
tusks and Ammonson's sled, So this is maybe a little
bit different, but I think we'll work it out. Fine. Yeah, well,
we'll ask all lots of listeners to just imagine that
you are surrounded by a stuff animals and that you know,
I think we were speaking during a thunderstorm um in
New York and it was quite atmospheric. Okay, with that
(04:08):
caveat Robert, why don't you start with just where are
we in this conflict? You know, it's twelve months on
from when Russia invaded Ukraine. A lot of people were
not expecting it to make that move. Where are we
in this conflict? I think this war, and we'll call
it a war. It started out for the Russians as
(04:28):
the Speziano Pazzi, the Special military Operation. We still don't
like to call it a war, although every once in
a while a minister like the German Foreign Minister actually
come out and say that it is. But it is
a war. It is one of the worst things that's
happened to Europe. I think since nineteen I think we've
gone well past the Balkans conflict at this point, and
(04:50):
you know, at one year, I think this is really
confounded expectations at at all levels. I remember days before it,
I was doing a teleconference on this and most people said, no,
the Russians, they won't do it, they're threatening there on
the borders, they won't actually go in. And then on
February they went in, and the way they went in
was so messy, so unsound from a strategic standpoint, attacking
(05:14):
on all fronts with insufficient personnel, with insufficient supply lines,
and not expecting the bravery of the resistance of the Ukrainians,
and also the level of support remember back in the
time of St. Javelin and the Stingers from the US
and its partners, and I think that just profoundly shocked them,
(05:34):
because a lot of people, even in the United States,
even on the intelligent side, thought no, Kiev may fall immediately,
and it didn't. And then the war started to drag
out and get uglier and uglier. So it's not that
war anymore. It's also not what I would call the
war that we saw in August and September, where the
Russians woke up to their shock and realized they didn't
(05:56):
have enough forces in country, and they were retreating wholesale,
giving up territory that they in fact that annexed at
one point, which is terribly humiliating for them, but it
was really part of a strategic decision I think by
the Russians to marshal their forces, to reduce their casualties,
and to dig in until this mobilization of reserves began,
(06:19):
not a general mobilization, but of reserves, and to strengthen
their lines along the Nupper River, a natural boundary. And
this fast forwards us to today as we watched this grinding,
painful level of battles and places like bah Mud for example,
and while we all in the United States and Europe
and and and frankly in Russian and around the world
(06:40):
marvel at all these weapons systems that are being deployed,
and drones and intelligence and I s R assets and
so on. This is becoming like a World War One
slug fest with artillery. And I think we're reaching a
point now where the main issue is who can last
the longest, who has the most personnel, who has the
(07:01):
most artillery shells, who can take the most pain and
how long will the resolve of the West last in this?
And I think on that account, there's there's a lot
of positive news coming out of coming out of NATO,
But I think the expectations at the beginning of the
war on all sides have truly been confounded. I don't
(07:21):
see a revel resolution at any point in the near future.
This could end up being something where both sides are
dug in and their positional battles for territory. That could
be a large or more than one Russian offensive, that
could be a Ukrainian counter offensive. But what worries me
the most Joe and Tracy is that the expectations on
(07:41):
both sides, it's hard to retreat from them. The United
States has said we're all in, NATO has said we're
all in. Russia is certainly all in as a matter
of national survival and political survival at this point. So
I'm kind of pessimistic about the outlook in the near term,
if that's fair. Let me just add a couple of
other things. There are a couple of areas that I
(08:03):
really follow closely with this, and these are how do
we define war? I think that is a fascinating strategic
question going forward. What is the role of information warfare
in this which I think is quite profound. And finally,
something I think of interest to to to your to
your listeners especially is the role of economic warfare here.
This question might dovetail with your sort of thoughts on
(08:26):
how do we define war? But some people we've spoken
to and people elsewhere, they have this idea that the
end of this war looks like the end of many
other wars, which is not ended. But you know, persistent,
low level, dotted line borders that no one ever really
agrees to, but that often is how the world ends up.
(08:49):
And I guess the classic example would be, you know,
the division between Korea and North Korea, which the war
is technically never ended. And I think people say, look,
this is how the final chapter ys of war. Look,
no one actually agrees that this is the border just
sort of becomes the new border. Does that seem like
the direction it's heading in? And I guess, like to
(09:09):
to your broader point, what does it mean to say
there is a war on or there isn't a war on? Ye? Joe,
I think that's a really great point. It's it's it's
interesting I often ask students when was the last time
the United States was in a war? And there are
a variety of answers. They come up with Vietnam, Iraq, Afghanistan,
the Global War on Terrorism. And I tell them and
(09:32):
some of them get it that it was really in
the World War Two. It was really the declaration of
war in World War Two. So we're seeing new ways
of looking at what participation and and a war is
direct versus indirect. For example, if you equip an army,
train an army provided with intelligence, give it strategic guidance,
tactical guidance, and even to a limited extent, there are volunteers, mercenaries,
(09:57):
contractors on the ground. When does a war become a
hot war? How do we define a war? And I
would put this in terms of the information war and
the economic war too. But your point about Korea is excellent.
And I think the way we're looking at this now,
now that the Russians are pretty much entrenched with with
a with a river, the Upper River between them, and
(10:18):
that great open mass heading towards the fields, heading towards Kiev,
I find it hard to imagine that the Russians will
retreat from the areas that they've annexed Donyetsk, Luganska, Zaporojia,
Zaria and Ukrainian Harson. Of course they've already lost some
of these areas two brilliant Ukrainian counter offensives. But I
(10:39):
see them fighting back until they recover these areas. And
the question is when we get to your demilitarized zone,
and I think it's a it's a it's a it's
a brilliant concept for this is where does that end?
I think if the Russians could, they would try to
get the whole Black Sea coast, meaning go down to Nikolaiev,
go down to Odessa maybe, and go all the way
(11:00):
down to the Maldovan border. The Maldovan government is collapsing
as we speak, and there's Transmistria there with Russian troops
in it. I think it's impossible to forecast this at
this point. I do not think the Russians ever sought
to take all of Ukraine, not that heart land part
of Ukraine, you know, going back to Alexey miy Kailovitch,
(11:22):
the the seconds are for example, I don't think they
ever had an interest in Lviv and Galicia. They might
going a little bit further north towards Harket, for example.
So I think you're right. I I think this will
have to end with exhaustion at some point and some
kind of low simmering demilitarized zone conflict line which frankly
(11:45):
has existed in the dunbast since two thousand and fourteen,
with artillery showing and fighting on both sides. I know
that's not a great answer, but I don't think anybody
has a great answer as to how this ends. Yeah,
you know, whenever I or a question like how do
we define war? I start to get flashbacks to studying
international relations at university, and you know, reading the likes
(12:09):
of Francis Fukiyama and the end of history and this
idea that no to true democracies have ever gone to
war with each other. And one question that I always
wanted to ask a spook or a former spook, is
you know when that conversation or when that talking point
was at its height, you know, the early two thousands,
(12:30):
everyone's talking about globalization and you know, democracy for the
win and all of that. What did you think, you know,
you're working in the background with actual intelligence reports, did
you think that that was something that was plausible at
that point. I I I personally thought at the time
that you know, we had this remarkable victory that ended
(12:52):
in the defeat of the Soviet Union, the dissolution of
the Soviet Union, and I think there was a great
opportunity early on in that after the war all fell,
after the Russian Federation became an entity in the Soviet Union,
went away to really help them into sort of the
world global order, if you will. And we sent a
(13:13):
bunch of venture capitalists in the time, and frankly, the
Russians with Western helped really botched the privatization. It was
terrible how it went about. I still have these pictures
of the old ladies selling their their potential shares and companies,
their certificates for a bottle of vodka, not understanding that
they were worth thousands of dollars if they could just
hold on, but at the time they couldn't need. The
(13:35):
situation was terrible. They had no money in the bank whatsoever.
And this became kind of a kleptocracy there where the
oligarchs and later the the the the the the the
power people in Russia who are more important than the
oligarchs in this war just took everything, and it became
a country where you were not going to have a
conventional type of capitalism. So I feel there was a
(13:58):
bit of a lost opportunity be there. I don't know
if a martial plan was needed as we had after
World War Two, or another massive aid package, or more
just understanding how deeply wounded people like Putin who emerged
from this were, the feeling that they had lost their
way of life their government, for good or for bad.
(14:19):
Communism has always resulted in dramatic failure. But when Fukayama
came out and I wanted to avoid this, but you've
dragged me in an alternate. I think his comment that
somehow that this was the end of history, that liberal
democracy had won, that all the old things that bothered
people in the past, ethnicities, language, culture, borders, just jealousy
(14:44):
over a size of military over economic resources and so on,
suddenly this had gone. And I thought that was naive then,
and I think it's it's naive now. He didn't invent that.
Of course, this was thought after the French Revolution. This
was thought with the Congress of Vienna after the War
of eighteen twelve. You can even go back to Hagel
(15:05):
and Marks and look at how the dialectic of how
society would would develop and how the world would developed.
I think what we're seeing now is that all of
the old things that bothered people in the past and
brought people to war in the past still exist. And
I find it horrifying that Russians and Ukrainians, who speak
(15:25):
relatively similar languages, who have relatively similar cultural backgrounds, are
now killing each other on mass and I find that
very disturbing, and I think there's almost no going back
at this point. I want to ask a sort of
(15:58):
concrete question. Maybe it's a little bit theoretical, but like,
how would you characterize the degree of involvement of US
and NATO in this war? Because you know, leaders in
the West make pains to say we are not at
war with Russia, and for all kinds of reasons, particularly
because of anxiety about nuclear war, they're very good reasons
(16:21):
to sort of not actually do things that would entail
the US or other NATO countries of being at war
with Russia. Nonetheless, obviously we've supplied Ukraine quite a bit
of weapons, as you mentioned, training, etcetera. Can you help
like tease apart in our minds, What is the role
of the US and NATO in this war currently and
(16:42):
what would be the type of action that would go
over some line that people in the international community have
about what sort of a direct involvement means, you know,
those are those are those are great and and and
very uh vexing questions. I think it's it's quite are
to say we are fully engaged in a proxy war
(17:03):
at this point, and I wish I hadn't seen some
of the statements I have from people who I think
should not be making them that goals include breaking up
the Russian state, pushing Putin out of power, and even
the idea that Ukraine is somehow going to get back
every last inch of territory, including Crimea, which the Russians
recovered in fifteen and historically was a Russian area. So
(17:28):
I think I think the the role of diplomacy, which
has really been biled in this effort. There was a
bit with the Turks early on, and now some countries
even like Brazil and Mexico and others, are talking about engaging.
But I think there's really no place for diplomacy right
now the way both sides are dug in on this
but when we look at the participation of the US
(17:50):
and NATAL and in the war, it's it's profound the
Ukraine would not last, frankly, if it was not for
the economic support, the military support provided by the US
and by its NATO partners. The Ukrainians have been exceptionally brave,
exceptionally good at fighting back against this Russian invasion. And
(18:11):
whatever we may say about the causes of this, this
was a brutal invasion that has resulted in already it's
turning out hundreds of thousands of lives lost. So we
do have to condemn that. What I am worried about
is at the next level, what would cause this war
to expand your as you point out, into something with
a nuclear component, or expand into Europe, or become a
(18:34):
full on boots on the ground war between Russia and NATO.
I think there's been so much that's happened over the
past year, so many changes and the way we look
at this war, so many lines that have supposedly been
drawn about levels of support and so on, that it's
(18:57):
really hard to predict what would be the catalyst for
this to become an expanded war. I'm very worried about
things like possible use of chemical and biological weapons, or
just by mistake even or hitting a nuclear power plant
with shells and there's a leakage of radiation, kind of
a Chernobyl scenario. And and I've been to Chernobyl, and
I certainly do not want to see something like that
(19:19):
ever again. But the Russians have basically set a few
times some red lines that they have and it's it's
it's almost like a dance now, it's it's or the
dance of a thousand veils or a Kabuki dance, where
each time another layer is removed, it's removed to the
next level. Will it be armored fighting vehicles will be
in main battle tanks, there will be a missiles of
(19:39):
a certain range that can reach Russia proper, And it's
hard to even define what that is. Would it be
the presence of advisors and assistance on the ground, for example,
and firing artillery or targeting or something like that. I
personally don't think the Russians would allow this to go
to that level unless they felt that their sovereignty was
(20:02):
in danger. I think of Ukrainian troops were heading for Sevastopol,
for example, then almost anything would be possible. I think
of long range Ukrainian missiles hit major cities deep inside
of Russia. Anything would be possible. I worry also on
the other side about for example, Poland is deeply worried
(20:23):
about this, and Poland has really been out in front
in supporting the Ukrainians, both diplomatically and in terms of
material support and rhetoric. But right now, for this to
go to the next level, I don't think we're there yet.
But I don't know how this ends. I don't know
what victory looks like for either side at this point,
(20:44):
and that's the part that I find most troubling. You
mentioned the importance of oligarchs in post Soviet Russia. Can
you talk to us a little bit more about what
Putin's domestic support looks like at the moment, both from
these sort of oligarchic slash political class and also from
(21:04):
average people on the ground. I guess another this is
my way of diplomatically asking you what we're supposed to
make of all these people falling out of windows and
such forth. Well, there's certainly been plenty of that, and uh,
and the Russian state historically has never shied away from
pushing people out of windows or impaling them or anything,
(21:25):
depending on how far back we go in history. The oligarchs,
I think, is an interesting question. The oligarchs, when when
they came in and just basically ceased, They just stole everything,
created this kleptocracy in Russia. They acquired a great deal
of power, and Putin was really against that, and he
told them he was against it, and he told them,
(21:46):
for example, if you're a Betzovsky or you're in a
Bramavitch or whatever, we're going to deal with you in
a certain way. And in some cases that meant that
they died. In some cases that meant that they went abroad.
In some cases that meant that they lost their their holdings.
We revel in watching these ridiculous yachts of Russian oligarchs
being seized in Italy or along the French riviera. I mean,
(22:08):
it's it's it's it's a great feeling to see that.
But the oligarchs are really not the key here. In fact,
if Putin had his way, many of the oligarchs would
lose all of their money and would and would go
into immigration. He doesn't like them, he doesn't bit what
they stand for. Particularly if they're not one hundred percent
behind his war effort. More important are these the Siloviki,
(22:31):
these power people that he has, many of whom were
ex governors, ex ministers, people who grew up with Putin
and helped him along the way and supported him along
the way. And I I think more about them, And frankly,
the more sanctions are placed on people like that, the
more they revel with it. They go to the dodga,
they have a few glasses of vodka and they say, ah,
(22:53):
I was sit with sanctions today, and they go me too,
and that they actually think of that as a kind
of a badge of honor in terms of support for Putin.
Very very interesting dynamics here. You remember at the beginning
of the war, when when when Russians were worried about
being called up, and there was this exodus of young
intelligent Russian people, everything from computer programmers to people from
(23:15):
different walks of life that that didn't buy into the
whole Russian status model just left. They left. They lined
up at the borders, whether they wanted to Norway, whether
they flew out in business class, or whether they went
to Poland or Georgia, and they left and I think
President Prutin said goodbye, see you later, don't come back.
(23:36):
What's yours is ours now, And I think what we're
left with there is a surprisingly hom a genious level
of support for Putin in the country. Not everybody, needless
to say, but your average guy in Siberia, your average
guy who works in a factory, for example, is looking
(23:57):
at this war and looking at the rhetoric on Usian
social media and Russian news and starting to think maybe
he was right, Maybe the West is trying to destroy us,
maybe Russians are being mistreated abroad. And and I would
say in this context that I find something very alarming
(24:18):
and unnecessary in the way this war is being reported.
When you listen to most of the Western press, the
words that are used are fulled with contempt, derision, hatred,
even rejection of culture, art, music, history, language, sports. I
(24:39):
found myself on YouTube looking at at at a gaming
show where there's a there's a new game out called
Metro Exodus, which is really cool, but it's Russian, and
I'm like, wow, I guess you can't. You don't really
want to buy that anymore, that that would not be
patriotic if you bought that I would be a little
bit more worried about, you know, Swan Lake, Shaikovsky, uh
Pushkin and so on. I don't think this is necessary,
(25:00):
and I think it strengthens Putent domestically rather than weakens.
And the Russians are doing enough things that are bad
that the reporting doesn't have to be one animosity towards
the Russian state. Every attack is not a massacre of civilians.
Every allegation of a war crime is not necessarily true
(25:23):
until it's researched correctly. And I think it's backfire is
not only in the Russian population, but also I dare say,
in the global South. And I spend a lot of
time following social media in the global South. So I
think in a roundabout way, i've i've I've come at
your answer, but let me know if I have you
basically took to my next question out of my mouth.
(25:43):
Because when the invasion first happened, there were a lot
of people who are pretty impressed by the Biden administration's
ability to sort of corral a wide degree of global
support against Russia and then effect that in the sanctions.
But even at the time, you know, there were clearly
big countries heavily populated countries that never really like took
(26:06):
US side, never took a stance on the invasion, particularly
across the global South. But really, you know, outside I
believe of the U. S and Europe, perceptions of the
war are far more scattered and less unified than they
are in the US and Europe. And so I'm curious
sort of like what the trajectory has been, you know,
in places like India, China, Brazil, South Africa, Israel and
(26:29):
so forth. And then I guess this sort of like
a two part question. Has has the ambivalence of these
countries to condemn Russia been crucial? And how helpful has
that been still maintaining markets for imports and exports to
prevent the sort of complete domestic collapse of the Russian economy. Yeah,
this is the this is the thing I think about
(26:51):
a great deal, and I look immediately at the bricks
nations obviously, of what Russia is one of them, because
all Russia, India, China, South Africa that as we speak,
the Russians have been doing naval exercises with South Africa,
and if we extend into Africa even further, there the
Russians just uh, it's almost complete, have an agreement now
(27:11):
with Sudan to make a naval base on the Red Sea,
and Wagner Group is now in Mali where the French
have left. So if we expand our our scope from
the Bricks to this great global South, including especially Africa,
the Middle East, parts of Asia, which I think are
more concerned with the China issue right now, but even
South America like Brazil and Mexico, and states obviously like
(27:35):
Nicaragua and Bolivia and and others that have a propensity
and Cuba that a propensity towards Russia. We're seeing a
very mixed bag. And I find this of arming. I
find it disturbing again going back to the thesis that we,
regardless of what the causes were, the fault were for
this war. And obviously a great deal of this is
on the Russians, but certainly not all of it. What
(27:58):
has happened in the Global South is they look at
this through a different prism then the United States, Canada, Europe,
the developed West. They are looking at this from a
I think a prism of history in which they look
kind of a scance at some of the activities of
what they might have called back in the day, an
imperialist nation, a colonial nation, something like that. And it
(28:22):
never fails to alarm me when I see even on YouTube,
but certainly in telegram, certainly on social media, and even
in mainstream news in places like once you mentioned Joe, India, China, Brazil,
South Africa, Saudi Arabia, Indonesia, the Emirates, Mexico, and throughout
Sub Saharan Africa. You see a narrative that in some
(28:45):
cases it is very forgiving of the Russian conduct of
the war, but in other cases actually groating over each
victory that the Russians have, gloating over each deployment of
a new Russian web, and gloating over this ability of
the Russians too counteract natal as a body. So I
(29:07):
think we've been enormously effective in terms of the developed West,
and I think less so in terms of the global South.
And that leads to the second part of your question
about the the economic impact. And I think this really
has confounded everyone, and we we can go in at
some point if you wanted to sanctions and asset for
(29:28):
reasons at all, but we have accelerated a trend where
Russia really wanted to do an Asia pivot or what
I would even call a global self pivot, a pivot
away from Europe, and they've been remarkably successful at it.
The data is all bad. We can't trust any of
the data, I think on natural gas and oil exports, commodities, diamonds,
(29:51):
anything like that, lithium for example, a gold, silver. But
it is quite clear that the natural gas is flowing
in to China through power of Siberia and eventually the
power of Siberia to pipeline tankers around the world. Some legally,
some illegally are moving Russian crew because there's just too
much money to be made on it at the prices
(30:14):
it's being sold and resold at. And I think even
in Europe you're seeing in the United States you're seeing
some kind of deceptive things in terms of loyal products
at all, and as to how they're moved around and
what counts as Russian loyal what doesn't count as loyal
that's gone through various levels of refining or processing. So
I think this is exacerbated a a an economic current
(30:36):
that the Russians kind of wanted to do anyhow, at
some point. I also fear that some of the nations
in the in the sort of the bricks environment, including
countries that are lining up now to join bricks, like
Saudi Arabia, like Algeria, perhaps like Argentina and Brazil. Argentina
at some point you're seeing them look for alternatives to
(31:01):
a US dominated world economy, to a dollar dominant denominated economy,
to an economy where the swift system and international banking,
which is dominated by American banks is really the only
way of getting two settlements where maritime insurance for tankers
and containers are controlled by United States interests. And I
(31:24):
find this disturbing because I think we need to promote
our model of liberal capitalism, of global markets, of free markets,
and I think the war might be having a somewhat
perverse effect on that. You know, you mentioned oil and
gas still flowing and emanating from Russia. Can you talk
to us a little bit more about the role of
(31:47):
those commodities in this conflict, or how different do you
think this would have been if Russia wasn't a major
world supplier of natural gas. I think right now Russia
is still and has been for a long time, you know,
largely reliant on its hydrocarbonate exports, and also it's it's
(32:07):
it's raw materials and mineral exports and such. Obviously they
export a variety of things, but I think they rely
very heavily on this. I think when the Europeans and
and did this quite brilliantly. I watched how quickly the
Germans put an L n G terminal in, for example,
in the Baltic and record time they built a terminal
(32:28):
to bring imports from the US. But when I think
when when the Russians started to lose a great deal
of this, especially the natural gas side into Europe, I
think this hurt them. I think it hurt them considerably.
I think they had considered this as a possibility, uh
the old lords dream Nords dream too, is as a
(32:48):
whole mother can of worms that could be talked about.
But I think they had already started to set up
alternatives in terms of the numerous pipelines that go into Europe,
go into the Middle East. They're talking going across Iran
now for example, and go into China. So I think
they were able to recover a lot of that, and
that is the fuel that keeps their military industry going,
(33:11):
That is the fuel that keeps them able to fuel
literally fuel that keeps them able to feed their people,
for example, and I think they've done much better than
we thought they did, but I think the sanctions have
caused some very big systemic problems for them, whether it's
in the aviation industry and the high tech industry and
(33:31):
access to certain types of products and services. You know,
it's funny. You can you can watch on YouTube Russians
going to supermarkets and you don't know if these are
Potemkin villages that are selected for that reason. I suspect
they are not. But the stories are full, the shelves
are full, and maybe the product mixes a little different.
Maybe they're complaining that the box the cardboard boxes are
(33:53):
painted white instead of multicolor because of the lack of dyes.
But you see, you see food from Turkey, from Iran,
from Asia of Russian production. Russia is a bread basket
and always has been, so I think they're doing reasonably
well on that. But the pain is certainly happening, and
over time it's really difficult to predict how bad the
(34:15):
pain will be with inside of Russia. And I think
this is part of the gamble that that we're taking
right now. Talk about that a little bit further. I mean,
I'm I'm still curious, you know, going back to one
of your first answers about the domestic support, and you
know you mentioned a lot of sort of young talented
people sort of got on got on the next flight
as soon as this war started. But obviously, you know
(34:37):
there's still a large middle class or the Russian middle class,
like in the major cities around Moscow, etcetera. How has
the sanctions are just the economic effects or the war
sort of affect date their day to day life so
best as you can tell, And what are the risks
to putin if this sort of ongoing degradation of sort
(35:00):
normal life continues and continues to worsen, because again, wars
are extremely costly for obvious reasons. Yeah, I think that.
I think at certain levels Russians, uh certainly are are suffering.
When you look at the major cities like St. Petersburg
and Moscow, I think it goes much further than your
inability to get a Gucci bag, for example, or to
(35:20):
have a Marks and Spencer. I think there are systemic
things that are happening. I think the inflation is is
not not too terrible. I think the product mixes not
too terrible. I think people would like to have better
access to cars. They'd like to be sure that the
aircraft are going to fly on are safe and are
being maintained. But you know, Russians historically are are used
(35:41):
to a bit of pain. I think of this is
a different era, of course, this is a different global
error where people can see on social media how others live.
But this is a country that lives through the nine
hundred days of Lennon Grad. This is a country that
lived through Napoleon actually taking and burning Moscow. This is
a tree that lost heaven knows how many twenty million,
(36:02):
forty million, some due to their own murderous regime in
World War two. So I think there is ability to
endure a lot of this. And one of the things
Putin is doing is he is paying the soldiers more.
He's bringing contract soldiers aboard. He's paying death benefits that
may seem very little to us, but are actually enough
to feed a family for a couple of years sometimes
(36:24):
for people who are are are killed in the war.
And there are many of those, and there are many
people that are very angry about this. The mothers of
of of the victims of the war but you know
it's funny. I was watching on YouTube a while back.
There's a charming series about Yakutia, the coldest place on earth,
with the temperatures at minus seventy, and they show the
Yakutsu Russians. They all speak Russian and they're out there
(36:48):
in minus seventy just trying to get to the bathroom
without freezing to death, or get to the rivers. They
can drill a hole and get some fish out without
freezing to death. And I laughed at one point one
of our officials that there the Russians aren't winter east
for the war, and I said, oh my god, there
are yakut mortar crews right now that the Russians are
showing on their social media in action. And for them
(37:09):
this is like, wow, it's pretty warm here, this is
pretty good weather here. We maybe we should stay here
rather than going back to Yakutya, except that they love it.
So yes, there is suffering, but on another level, the
suffering is understood and it's a part of the Russian condition.
And what we have to do is find that balance
between the economic suffering that would cause something to happen
(37:32):
there or derail the Russian war. Machine, but not to
cause such suffering that the people who listen to the
Russian propaganda and this is an information war, say again
he was right. They really are trying to break us
up as a country. Why would they want to destroy
my ability in Central Asia or in Eastern Siberia or
(37:56):
in ar Kanels to eat and to get electricity and
warmth and the things that we're used to in life.
And I think we have to be very careful about
this because this plays into, I think a Russian way
of thinking about life that has existed for centuries. You know,
(38:31):
I realized when I was doing your intro and summarizing
your career, I couldn't include everything. And there's one important
thing I left out, which was that you were a
director of the Center for Cyber Intelligence at the CIA,
and so we have to ask you. We would be
remiss not to ask you what your take is on
the cyber component of this particular conflict, because of course
(38:54):
we have had, you know, various things that have happened
over the past twelve months, certain explosions and things shutting down,
but it's never exactly clear whether or not there is
a cyber component behind them. Yeah, I'm I'm actually a
bit surprised at the minimal level of cyber activity we've
seen from the Russian side. Now, there's no doubt, and
(39:16):
they've been doing it for many years. They're doing reconnaissance
in our infrastructure, our electrical utilities are nuclear power plants
and so on, and needless to say, doing everything they
can to survey defense industry and government institutions. But no,
there has not been, for example, a attack on April
(39:37):
fourteen on the I R s imagine shutting down the
United States. There has not been an Internet of Things
attack on the air conditioning systems at the Pentagon Saturday night,
at midnight in August we've seen. I think you might
be giving them ideas. Now I don't think I have
to give them any ideas that these are, but I
(39:57):
will stop using examples in that case. They're they're The
Russians have always used patriotic actor hackers of fellow travelers
and such. Sometimes it's done directly from Russian intelligence. Sometimes
it's gone through proxies and cutouts and contractors. And again
this this small army of patriotic hackers, some of whom
have left the country to go make money doing cyber
(40:21):
work and information work outside of Russian and places where
they can earn a living. There was actually a report
in social and Russian social media last night that a
cyber attack had begun by these fellow travelers. I haven't
seen any indication of that yet. I think this is
very alarming to both sides. There are things that could
(40:41):
be done to the backbone of the Internet. People think
of the Internet as being in the ether somehow, when
it's actually largely dependent on fiber cables and it's kind
of back and forth between the Russians and the Americans
has been going on for a long time on this.
I would really fear that if things get really bad
for the Russians or they see this as a means
(41:04):
of stopping arms from getting to Ukraine, that they would
do such an attack, then there would be a retaliation.
And the US has become infinitely more capable over time
and made even places like Estonia, for example, our our
leaders in this area. I would worry about that, and
it's really mostly been at the tactical levels, and when
(41:26):
we talk about cyber of course we can't help but
mention Elon Musk. Elon Musk, who with Starlink was actually
one of the saviors of Ukraine early in the war,
and now he's having second thoughts about the use of
starlink for drone operations, for offensive drone operations again with
the fear that perhaps this will escalate the war. So
(41:46):
I think there's a lot of things we don't know yet.
I think there's a lot of very serious preparations going
on on both sides. But I'm just surprised we haven't
seen more yet. We've talked a lot, obviously out the
effect that this war has had on Russian citizens, the
support for Putin among those who are in Russia. We
(42:07):
haven't talked about the equivalent in Ukraine. Ukrainians have obviously,
you know, seeing their economy wrecked, They're experiencing power outages,
all kinds of devastations, famined obviously the incur incursion on
their sovereignty. What is the effect that this is having
in terms of support for Zelensky and the domestic political
(42:29):
trajectory in Ukraine, Because we talked about the West and Russia,
but can't leave out like the you know, the the
key other central actor here. Yeah, I think again we
have we have to go back to the original thesis
that It is absolutely amazing and heartening that the the
level of resolve of the Ukrainian people, they've suffered catastrophic
(42:49):
personnel losses, that the two numbers of which are we
may never know, but are coming out and are are
much larger than than we we thought they were. We've
seen exactly the kind of economic destruction that you've talked
about where the Russians they are engaged in economic warfare.
They are engaged in a classic type of economic warfare
(43:09):
that I would call old school that has always been
done in war, which is destroying infrastructure which is of
military value, electrical transmission, the ability of trains to bring
troops and equipment to the front, and so on. Economic
warfare is nothing new. Take of the Union blockades of
the South and the Civil war, understricted submarine warfare in
(43:30):
World War One, even strategic bombing in World War Two
where we try to take out all the German factories.
But you're right, this has a huge impact on the
Ukrainian economy and eventually it becomes a question of persistence. Now,
bearing in mind that a number of Ukrainians millions have left,
some will not come back, some are now in Poland.
(43:52):
If it. There's about a million and a half there
now in Germany and in other parts of the world.
Some have come back when they saw that the war
was angle a little better than they thought it would,
and they saw the bravery of the Ukrainian leadership and
the Ukrainian army. But eventually you reach a point where
the economy is moribund, but there is no economy. It
becomes a state completely dependent on the West, on financial support,
(44:18):
on donations, not even to think about the eventual reconstruction period.
And I think one of the smartest things President Zelensky
said was he made it very clear to Black Rock
and Goldman, Sachs and City Group and so on. He goes,
you are very welcome here. You will make money here
in the reconstruction period. And that's certainly a good argument
for continued support, because at the end of the day,
(44:40):
war comes down to money as well as power and
geopolitical issues. I think the issue of domestic support for
Zolenski is fastening. Zolensky is a rock star in the
West Okay. He can appear in really almost any format,
and he is welcomed. He has his he has his brand,
his way of dressing, his way of speaking, and he's
(45:01):
quite good at it, and I think he's been very
effective in the Westmond That very interesting. What's happening though
back in Kiev? Now, well, first we lost they lost
a helicopter with the entire Interior Ministry leadership on it,
which I think was a painful accident. But in the
same time frame, you saw quite a number of senior
officials being fired, being forced to resign, and I mean dozens,
(45:26):
and this includes you know, you're the Defense Minister, d Estovich,
who is his his primary advisor, a number of governors,
a number of senior officials in different areas, and now
you have the head of the Ukrainian Intelligence Service is
going to take over the Defense ministry. And you've seen
the mayor of Kiev sort of clash with President Zelenski
(45:47):
over the approach to the war and who's doing enough
and who's not doing enough. So it's very interesting to
watch the Russian reaction to these figures too, and the
Russians are are again it's a propaganda war and their
terror a lot of what they say, they call Zalenski
the clown, that's their name for him. They have a
number of epithets that they use. They don't say this
(46:08):
about Lusoni, the head of the General staff. They say
this is a final officer who we respect and who
has really given us a body knows. So my question
is where is President Zelenski right now? We know where
he is in terms of the west. Of that, there
can be a little question at home. I think he's
still doing enormously well because he is the face of
(46:28):
the war. But I think in a country where we
have to admit there is a deep level of corruption,
and like in any political system, there is in fighting,
there is a desire for power, there are resentments, there
are jealousies. We've seen a number of changes recently that
lead us to question where is this going in terms
of domestic politics, and what would the Russians do to
(46:52):
try to exacerbate this or take advantage of it. I
just have one more question, and it's, you know, one
of those things trying to sum up the whole conversation.
But what's been the most surprising to you about the
past twelve months. I think the difficulty of predictions again
and I started with that and I'll end with that
(47:14):
has has really confounded most observers in this from whether
the war would happen to how quickly it would be resolved.
And we're at a point now where we may be
looking like we're pretty Goes from the Wagner Group says, well,
it might take us two years to recover the rest
of the dun Bas. I think what surprised me, and
I think what surprised a lot of observers is we
(47:37):
watched as this war began, and we saw that the
Javelin missiles and the Stinger missiles, and the intelligence support
and law and now we're seeing that this is all
terribly important, the drone war, the aerial war, the intelligence war.
But we're seeing World War One type trench systems. We're
seeing the Russians bring out artillery pieces literally from World
(47:58):
War Two and just bombarding the front continuously, continuously, continuously
to try to break down the Ukrainian resistance. And I
think this new plan of bringing in tanks, you know,
whether it's American Abrams tanks or Challengers or Leopard twos
or less effectively, Leopard ones, I think this will make
(48:19):
a difference. But we're seeing a kind of war that
I think people thought had somehow gone away in World
War Two and we're seeing it back and this is
the Russian way of war. And when you see the
Russian Chief of the General Staff got Auso, now taking
charge of the war, you see that they're looking at
this in a different way, and this has become a
(48:42):
slug fest. So I think that surprised me. Another thing
I think that that surprises and and and confounds me
again is on the information warfare. I think we're all
sides of kind of painted themselves into a corner that
they can't emerge from anymore. The United States can't walk
away from this, not after Afghanistan, not with the very
(49:04):
real need to defend the Ukrainians against a Russian invasion,
and the Russians can't walk away from areas that they
have formally annexed, whether or not this has been recognized
by the world. And I think that's the most confounding
part of this, in that the rhetoric of the information
warfare and also the level of the economic warfare here
(49:28):
has made it that I don't see anything in the
short term that will allow this to resolve itself. And
I fear you knows, as you and Joe said at
the beginning, that we may end up in kind of
a demilitarized zone um with conditions of ceasefire and peace.
But I don't think anyone can predict it. So that
is what has confounded me, and also just the inability
(49:51):
of anyone to correctly determine what would happen in this war.
Predictions are just so hard to make, all right, Robert
pap really the perfect odd lots of guests, Thank you
so much for coming on. We're gonna have to have
you back to talk about the history of the Russian
stock market. Just do an episode on if any of
your investment audience want to revive their investments in nineteenth
(50:11):
century securities. I've indexed these and given total return models
for them, and sadly, just just just as an opening,
as a final comment, I would say what I found
in that period after all that work was you really
did well with blue chips. Nothing ever changes, nothing ever changed.
(50:32):
So that was that conclusion. And thank you guys so
much for having me. It's been a lot of fun.
Thank you, Thanks Robert. That was great. So Joe, I
(50:54):
thought that was a fantastic summary of the past twelve
months or so. And to Robert's point, it is kind
of crazy when you think back to February of two
and what people were expecting in terms of a military conflict, Like, yes,
we have had drones, there are some very very advanced
missiles being used and things like that. But on the
(51:14):
other hand, you know, we're talking about Russian tanks from
World War one world War two rolling across the border.
And you know, even I'm thinking back to that episode
we did on wooden paletts, like the shortage of Russian
wooden pallets, it all seems very very old school in
terms of military technology. Yeah, you know, I think to
Robert's point about, you know, the let the inability of
(51:38):
people who try to predict these things to get anything
right has been really striking. And I do think, you know,
if you go back to last February Prime, most people
in their minds would have expected something maybe more akin
to the invasion of Crimea, which for the Russian was
kind of a cake walk. They walked in and they
took it, and probably putin roughly thought the same thing,
(51:58):
maybe it would be a little tough for and that
explains the sort of very poorly thought out state of
the invasion, the allowed invasion that proved to be very costly.
The different terms in this and then yes, the fact
that now a year later and we talk a lot
about these advanced weapons systems, but it's just this grind,
this trench warfare, horrible human losses persisting, and then this
(52:23):
question of like, okay, how long can either side take
It is absolutely just the sort of horrible state of
affairs going on right now. Well, the other thing that
I was thinking about and Robert spoke about was this
idea of the entrenching of positions and the fact that
people are you know, they seem to come up with
(52:44):
rigid demands that don't really allow for some sort of
compromise I mean, for obvious reasons on on certain sides.
But then what that tends to lead to, and this
kind of gets into his information warfare point as well,
is that you just got these hardenings of alliances and
of feelings. And I don't think that in the West
(53:07):
we are necessarily seeing the extent of that in other
places in the world, Yeah, No, I mean, I do
think that the reactions to this war outside of US
and Europe have sort of been undercovered, and we're probably
explanatory about the degree to which the Russian economy continued
to operate. But to this point about the hardening positions,
(53:27):
it does make you wonder whether that's sort of dotted
line war forever outcome is where it's going, because if
none of the sides can, if there's nothing on paper
that any side can theoretically except except right, so then
you have to sort of find some outcome that is
(53:47):
like de facto acceptance but never stated publicly, and so
you know, hopefully that is something more peaceful than we
have right now. But again it's hard to see, like, Okay,
what is that ultimate of ramp look like? Yeah, all right,
on that pessimistic note, shall we leave it there? Let's
leave it there? Okay. This has been another episode of
(54:08):
the Odd Thoughts podcast. I'm Tracy Alloway. You can follow
me on Twitter at Tracy Alloway and I'm Joe wi
Isn't All. You can follow me on Twitter at the
Stalwart and for more of our special coverage on one
year of Russia's war in Ukraine, send up for the
Balance of Power newsletter that's at bloomberg dot com slash Newsletters. Meanwhile,
follow our producers Carmen Rodriguez at Carmen Armand and Dash
(54:32):
Bennett at Dashbot and check out all of the podcasts
at Bloomberg at podcasts, and for more Old Lots content
go to bloomberg dot com slash outlets. Thanks for listening.
(55:04):
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