Plain English with Derek Thompson Russia’s Economic Meltdown, Putin’s Big Mistake, and the West’s Financial War Against Vlad and the Oligarchs
Mar 1, 2022
In this engaging discussion, Nicolas Véron, a French economist with deep expertise in international economics, delves into the swift sanctions imposed on Russia due to its actions in Ukraine. He highlights the chaos erupting in Russia, including bank runs and currency devaluation. The conversation also covers China's cautious stance, the targeted sanctions aimed at Russian oligarchs, and the long-term impacts on Russia's defense industry. Ultimately, they ponder the unforeseen consequences for Putin's regime and what a post-Putin Russia might look like.
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SWIFT's Importance
- SWIFT is a crucial messaging system for banks to communicate about trades, similar to an international Bloomberg terminal.
- Cutting Russian banks off from SWIFT makes it difficult for them to conduct business with Western banks.
Ruble Crash
- Currency swaps are essential for international trade, allowing countries to exchange their currency for the foreign currency needed for transactions.
- Cutting off Russian banks from normal exchanges causes a ruble crash as people rush to dump the currency.
Central Bank Sanctions
- Sanctioning the Russian central bank and freezing its foreign reserves is a significant move, even more impactful than the SWIFT cutoff.
- This action prevents the central bank from stabilizing the ruble by buying it up with foreign reserves.