July 17, 2025 • 9 mins
Today we'll talk about Doomberg's claim that sanctions such as those that some Republicans want to impose on Russia (and Trump seems to be considering) are a bad idea.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Scurrying around the yard pecking at corn, being the source
of green eggs for doctor Seuss and writing the most
insightful analysis of I would say, the intersection of energy
and policy that you're going to find anywhere, and that
is Doomberg, who appears as a green chicken whenever I
(00:21):
talk with him. Slash them on on zoom Doomberg dot
com or Doomberg dot substack dot com. It is an
absolute must subscribe. So, first of all, doom thanks so
much for coming back. I hope I didn't interrupt your
pecking around in the yard for corn.
Speaker 2 (00:39):
Now, Ross always great to be with you, and it's
always a good time.
Speaker 1 (00:42):
So I want to just spend maybe seven minutes with
you on a very very specific question, and that is sanctions.
You have said repeatedly, and you said again recently in
a short note on substack that sanctions not only don't work,
but often, or maybe more than often, backfire. And some
(01:03):
of this, as in much of trade economics in particular,
as counterintuitive.
Speaker 3 (01:07):
So give us a lesson, can you bet?
Speaker 2 (01:12):
Thanks for the opportunity. So, sanctions against strong countries never work.
Occasionally you can bully around a small country like Cuba
and it's effective. You can't really sanction countries like Iran,
Russia or China and expect that they're just not going
to punch back, and that the nature of their response
(01:33):
doesn't end up rebounding onto you in ways that are
a unexpected and be almost always worse for you if
you just hadn't done it. And as evidence, the European
Union is currently debating the eighteenth sanctions package against Russia
over the war in Ukraine. Somehow the first seventeen weren't
quite enough, and we're three and a half years in
and Russia has become a mostly self sufficient economy. It
(01:56):
has learned to insulate itself against whatever it needs from
the outside world. New trading routes have been developed, and
the US dollar system has been substantially weakened sanctioning China,
while you know, I think China showed, as we predicted,
that it had escalation dominance in such a war. It
has a monopoly control over rare earth metals, and it
(02:18):
decided to pull that lever in response to the Liberation
Day sanctions that Trump imposed on all the countries. And
so a final example is the sanctions against the Chinese
semi conductor industry. All that is done is convinced them
to invest way more money, way more quickly than they
otherwise would have, and soon they will be totally self
sufficient in semi conductors as well. You can't sanction large countries,
(02:40):
and the more you try, the weaker the US dollar
system becomes.
Speaker 1 (02:44):
I do very much like the term escalation dominance, and
I think it's been around for a while, but I
think I might have actually heard it first from you,
And I think I was kind of channeling my inner
green chicken talking to listeners at some point a while
back when Trump was starting to ratch up the trade
war against China, and I told listeners, and again I
could have gotten this from you, that what listeners needed
(03:06):
to understand is that, of course it's true that we
buy a lot more from China than they buy from us.
But the problem is that the vast majority, at least
a lot of what they buy from us they can
buy other places. There are some things at least that
we buy from them that we must have and we
(03:27):
can't buy anywhere else. So is that the kind of
the frame for escalation dominance.
Speaker 2 (03:34):
Yeah, So escalation dominance is one of the most important
things to nail down before you enter into a competitive negotiation.
Let's take this to the extreme and see who has
to blink. And you've correctly articulated what we've been pointing out.
China buys LNG, you know, soybeans fertilizers from the US,
and China owns monopoly share over rare earth metals products
(03:59):
like magnesia, which you're critical for aluminum composits in the
auto sector, and they have done this purposefully over the decades.
We wrote a piece two years ago called Geopolitical Warfare
where we pointed out that China was willing to degrade
its local environment in ways that Western countries were not
willing to do in order to achieve its geopolitical aims.
When China is susceptible to a supply chain or considers
(04:22):
it in the country's strategic interest, it finds the earliest
phase in that supply chain and can dominate that. It
can dominate using just brute force, brute financial force. And
in this case, no matter where you mine your rare earth,
you have to ship them to China for processing into
pure metal. That's the stage that they dominated. That also
happens to be the most environmentally challenging stage. And as
(04:46):
we said in a recent piece, you can't compete when
your competitor's idea of a water treatment plant is a
pipeline to the river. And the New York Times had
a giant expos a of the nastiness surround being the
Chinese local rare earth processing and that's very predictable for
anybody who's been an industry like we have.
Speaker 1 (05:06):
All Right, I'm not done with sanctions yet. We only
have about three minutes. I want you to give me
twenty nine seconds because I like prime numbers on MP Materials.
Speaker 2 (05:18):
MP Materials is a minor of rare earth in the US.
That's primary customer was a Chinese company that then converts
their mind concentrated into pure metals. And this week the
Pentagon wisely made an equity investment in MP Materials to
help underwrite the processing plant and construction plant that would
be needed in order to serve you US military needs.
Speaker 1 (05:41):
Do you think MP Materials, by themselves, it can be
a big enough player in rare earths to not liberate
US from China, but reduce our utter dependence and maybe
change the escalation dominance question.
Speaker 2 (05:59):
Yes, and well, it certainly can meet a lot of
the Pentagon's needs, which is the most important thing, and
the market fails at pricing national security risk more important
to us, and the reason why we're inspired to write
that piece is the framework and the change of direction
that it implies the US government. You know, Trump's administration
is filled with smart business people, and they made a
very intelligent investment decision. Not a grant, not a giveaway.
(06:23):
They invested, and not only will the US public have
some national security risk abated, it will also more than
likely make money as a result.
Speaker 3 (06:32):
We're talking with Doomberg.
Speaker 1 (06:34):
The most successful, arguably most interesting financial category substack there
is Doomberg dot substack dot com.
Speaker 3 (06:42):
It's a must subscribe.
Speaker 1 (06:43):
All right, let's do just another ninety seconds on sanctions,
So I'm going to play Devil's advocate for a second.
Speaker 3 (06:52):
Well, do me.
Speaker 1 (06:53):
I realize you think sanctions aren't great, but if we
want to try to get some of these other countries
to do what we want, we really have nothing else
that we can use as leverage against them. So do
you either A think I'm wrong that there we have
no other leverage or B it's just a factor life.
Sanctions don't work. So suck that up too, and you
(07:15):
just have no leverage, so figure out something else.
Speaker 3 (07:20):
It's mostly both.
Speaker 2 (07:22):
You have no leverage and actually the only way to
gain comparative advantage. I think it's a strong country is
to get better yourself. It's very difficult to sustainably weaken
a strong geopolitical opponent economically, especially in the case of Russia,
which produces commodities the world desperately needs. Is a major
producer of natural gas, a major producer of oil. We've
(07:43):
argued from the beginning the best way to punish Russia
was to flood the market with those commodities. The US
Navy should be escorting Russian tankers, make it as easy
as possible for as much oil as possible to get
to the market, drive the price down below their profitability levels,
and then you starve the Russian war machine of the profits.
You don't sanction volume in commodities. You try to drive
prices lower, which is what James Baker did before the
(08:06):
first golf wor went around the Middle East. Made everybody
pump more, and that's why that campaign was successful.
Speaker 1 (08:11):
Okay, I'm out of time, but I need to ask
you one more question, because I think it's maybe the
most important one, and I haven't gotten to it. Trump
has spent a bunch of time talking about secondary sanctions,
so not just a sanction on Russia, but a sanction
on countries that do business with Russia. And I think
the biggest buyers of Russian oil are India and China.
With going back to the stuff you said at the
very beginning of this, we either can't or won't for
(08:33):
sanction them, probably, but how should we think about sanctions
on countries that are the customers of the country we're
actually mad at?
Speaker 2 (08:43):
Yeah, secondary sanctions is the US threatening to impose tariffs
on countries that by Russian oil, and you correctly identify
the two biggest and as briefly as I can say it,
it's a bluff and it's going to be called.
Speaker 3 (08:55):
Dumberg is the best.
Speaker 1 (08:58):
You know. It's hard for Doomy to find a lot
of time to write because picking up, you know, pecking
at colonels and corn takes a very long time. But
in the free time that he has, nobody does better writing.
It is an absolutely must subscription Doomberg dot substack dot com.
Doomy as always, thank you. I always learned something I
always enjoy our conversations. You bet talk soon, Okay, thank you.
Scurrying around the yard pecking at corn, being the source
of green eggs for doctor Seuss and writing the most
insightful analysis of I would say, the intersection of energy
and policy that you're going to find anywhere, and that
is Doomberg, who appears as a green chicken whenever I
(00:21):
talk with him. Slash them on on zoom Doomberg dot
com or Doomberg dot substack dot com. It is an
absolute must subscribe. So, first of all, doom thanks so
much for coming back. I hope I didn't interrupt your
pecking around in the yard for corn.
Speaker 2 (00:39):
Now, Ross always great to be with you, and it's
always a good time.
Speaker 1 (00:42):
So I want to just spend maybe seven minutes with
you on a very very specific question, and that is sanctions.
You have said repeatedly, and you said again recently in
a short note on substack that sanctions not only don't work,
but often, or maybe more than often, backfire. And some
(01:03):
of this, as in much of trade economics in particular,
as counterintuitive.
Speaker 3 (01:07):
So give us a lesson, can you bet?
Speaker 2 (01:12):
Thanks for the opportunity. So, sanctions against strong countries never work.
Occasionally you can bully around a small country like Cuba
and it's effective. You can't really sanction countries like Iran,
Russia or China and expect that they're just not going
to punch back, and that the nature of their response
(01:33):
doesn't end up rebounding onto you in ways that are
a unexpected and be almost always worse for you if
you just hadn't done it. And as evidence, the European
Union is currently debating the eighteenth sanctions package against Russia
over the war in Ukraine. Somehow the first seventeen weren't
quite enough, and we're three and a half years in
and Russia has become a mostly self sufficient economy. It
(01:56):
has learned to insulate itself against whatever it needs from
the outside world. New trading routes have been developed, and
the US dollar system has been substantially weakened sanctioning China,
while you know, I think China showed, as we predicted,
that it had escalation dominance in such a war. It
has a monopoly control over rare earth metals, and it
(02:18):
decided to pull that lever in response to the Liberation
Day sanctions that Trump imposed on all the countries. And
so a final example is the sanctions against the Chinese
semi conductor industry. All that is done is convinced them
to invest way more money, way more quickly than they
otherwise would have, and soon they will be totally self
sufficient in semi conductors as well. You can't sanction large countries,
(02:40):
and the more you try, the weaker the US dollar
system becomes.
Speaker 1 (02:44):
I do very much like the term escalation dominance, and
I think it's been around for a while, but I
think I might have actually heard it first from you,
And I think I was kind of channeling my inner
green chicken talking to listeners at some point a while
back when Trump was starting to ratch up the trade
war against China, and I told listeners, and again I
could have gotten this from you, that what listeners needed
(03:06):
to understand is that, of course it's true that we
buy a lot more from China than they buy from us.
But the problem is that the vast majority, at least
a lot of what they buy from us they can
buy other places. There are some things at least that
we buy from them that we must have and we
(03:27):
can't buy anywhere else. So is that the kind of
the frame for escalation dominance.
Speaker 2 (03:34):
Yeah, So escalation dominance is one of the most important
things to nail down before you enter into a competitive negotiation.
Let's take this to the extreme and see who has
to blink. And you've correctly articulated what we've been pointing out.
China buys LNG, you know, soybeans fertilizers from the US,
and China owns monopoly share over rare earth metals products
(03:59):
like magnesia, which you're critical for aluminum composits in the
auto sector, and they have done this purposefully over the decades.
We wrote a piece two years ago called Geopolitical Warfare
where we pointed out that China was willing to degrade
its local environment in ways that Western countries were not
willing to do in order to achieve its geopolitical aims.
When China is susceptible to a supply chain or considers
(04:22):
it in the country's strategic interest, it finds the earliest
phase in that supply chain and can dominate that. It
can dominate using just brute force, brute financial force. And
in this case, no matter where you mine your rare earth,
you have to ship them to China for processing into
pure metal. That's the stage that they dominated. That also
happens to be the most environmentally challenging stage. And as
(04:46):
we said in a recent piece, you can't compete when
your competitor's idea of a water treatment plant is a
pipeline to the river. And the New York Times had
a giant expos a of the nastiness surround being the
Chinese local rare earth processing and that's very predictable for
anybody who's been an industry like we have.
Speaker 1 (05:06):
All Right, I'm not done with sanctions yet. We only
have about three minutes. I want you to give me
twenty nine seconds because I like prime numbers on MP Materials.
Speaker 2 (05:18):
MP Materials is a minor of rare earth in the US.
That's primary customer was a Chinese company that then converts
their mind concentrated into pure metals. And this week the
Pentagon wisely made an equity investment in MP Materials to
help underwrite the processing plant and construction plant that would
be needed in order to serve you US military needs.
Speaker 1 (05:41):
Do you think MP Materials, by themselves, it can be
a big enough player in rare earths to not liberate
US from China, but reduce our utter dependence and maybe
change the escalation dominance question.
Speaker 2 (05:59):
Yes, and well, it certainly can meet a lot of
the Pentagon's needs, which is the most important thing, and
the market fails at pricing national security risk more important
to us, and the reason why we're inspired to write
that piece is the framework and the change of direction
that it implies the US government. You know, Trump's administration
is filled with smart business people, and they made a
very intelligent investment decision. Not a grant, not a giveaway.
(06:23):
They invested, and not only will the US public have
some national security risk abated, it will also more than
likely make money as a result.
Speaker 3 (06:32):
We're talking with Doomberg.
Speaker 1 (06:34):
The most successful, arguably most interesting financial category substack there
is Doomberg dot substack dot com.
Speaker 3 (06:42):
It's a must subscribe.
Speaker 1 (06:43):
All right, let's do just another ninety seconds on sanctions,
So I'm going to play Devil's advocate for a second.
Speaker 3 (06:52):
Well, do me.
Speaker 1 (06:53):
I realize you think sanctions aren't great, but if we
want to try to get some of these other countries
to do what we want, we really have nothing else
that we can use as leverage against them. So do
you either A think I'm wrong that there we have
no other leverage or B it's just a factor life.
Sanctions don't work. So suck that up too, and you
(07:15):
just have no leverage, so figure out something else.
Speaker 3 (07:20):
It's mostly both.
Speaker 2 (07:22):
You have no leverage and actually the only way to
gain comparative advantage. I think it's a strong country is
to get better yourself. It's very difficult to sustainably weaken
a strong geopolitical opponent economically, especially in the case of Russia,
which produces commodities the world desperately needs. Is a major
producer of natural gas, a major producer of oil. We've
(07:43):
argued from the beginning the best way to punish Russia
was to flood the market with those commodities. The US
Navy should be escorting Russian tankers, make it as easy
as possible for as much oil as possible to get
to the market, drive the price down below their profitability levels,
and then you starve the Russian war machine of the profits.
You don't sanction volume in commodities. You try to drive
prices lower, which is what James Baker did before the
(08:06):
first golf wor went around the Middle East. Made everybody
pump more, and that's why that campaign was successful.
Speaker 1 (08:11):
Okay, I'm out of time, but I need to ask
you one more question, because I think it's maybe the
most important one, and I haven't gotten to it. Trump
has spent a bunch of time talking about secondary sanctions,
so not just a sanction on Russia, but a sanction
on countries that do business with Russia. And I think
the biggest buyers of Russian oil are India and China.
With going back to the stuff you said at the
very beginning of this, we either can't or won't for
(08:33):
sanction them, probably, but how should we think about sanctions
on countries that are the customers of the country we're
actually mad at?
Speaker 2 (08:43):
Yeah, secondary sanctions is the US threatening to impose tariffs
on countries that by Russian oil, and you correctly identify
the two biggest and as briefly as I can say it,
it's a bluff and it's going to be called.
Speaker 3 (08:55):
Dumberg is the best.
Speaker 1 (08:58):
You know. It's hard for Doomy to find a lot
of time to write because picking up, you know, pecking
at colonels and corn takes a very long time. But
in the free time that he has, nobody does better writing.
It is an absolutely must subscription Doomberg dot substack dot com.
Doomy as always, thank you. I always learned something I
always enjoy our conversations. You bet talk soon, Okay, thank you.
The Ross Kaminsky Show News
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