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Are Russia鈥檚 Crippling Financial Sanctions The Start Of An Economic Cold War? - YouTube
Channel: CNBC
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Russia's invasion of Ukraine is
disrupting the world's markets.
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A rapid series of historic
sanctions have rocked the
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Russian economy.
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We're banning all imports of
Russian oil and gas and energy.
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The US and NATO Allies warned
Russia for months that invading
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Ukraine would result in
devastating financial and
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economic penalties
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The world needs to see and Putin
needs to learn that if he does
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this kind of thing, the price
they will pay is devastating.
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And some of that's already
happened, billionaires
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moving their yachts, scrambling
their jets and shifting their
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assets to prepare for a possible
crackdown,
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you're seeing the Germans doing
things and none of us could have
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expected a couple of weeks ago.
Now the Russian financial system
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is trying to weather the storm.
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The sanctions mean that imported
goods and the trappings of
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Western life to which many
Russians have become accustomed
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to these are going to be far
more expensive or in some cases
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unavailable.
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Along with the punishment facing
large institutions, the average
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Russian consumer is paying a
price Russians have lost access
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to mobile payment systems. It's
been kicked out of major
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sporting and cultural events.
And now you can't even watch
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Netflix or tik tock there.
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So there are a lot of unknowns
about what is going to happen to
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the Russian economy. One of the
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biggest unknowns right now is
how bad inflation is going to
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get. Because there's no
precedent in modern history for
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what's happened to the Russian
ruble in the past month.
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The Donetsk People's Republic in
Luhansk People's Republic are
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two breakaway regions of
Ukraine. Russia has been
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supporting the two rebel states
since 2014, but it did not
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recognize them as sovereign
republics. On February 21 of
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2022. Russia recognized the DPR
and LPR setting the stage for
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the invasion of Ukraine. In the
US President Biden announced
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prohibition on investment in the
breakaway regions. On February
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22, the UK targeted sanctions
towards several Russian
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oligarchs with ties to Putin as
well as several Russian banks.
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The US sanctioned two Russian
banks VSB and the military
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affiliated PSB certain Russians
close to Putin, generally
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referred to as oligarchs had
their assets in the US seized in
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Germany halted the approval
process for the gas pipeline
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known as Nord Stream 2.
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when we look back at this
conflict, if there is one moment
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in the unification of the west
of the United States and NATO.
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That really was a watershed.
It's going to be the
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announcement by Germany that
they were willing to cancel Nord
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Stream 2
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on February 23, Russia announced
the launch of a special military
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operation in Ukraine, the
European Union sanction 351
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members of the Russian
Parliament lower house who voted
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for the invasion. On February
24, Russian ground forces
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invaded Ukraine, President Biden
restricted aerospace and tech
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exports to Russia. Sberbank is
also booted from the US
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financial system. On February
27, BP announced it will end its
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partnership with Roseneft, a
Russian oil company in divest
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its 20% stake in the company. On
February 28, the US and allies
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moved to have several Russian
banks disconnected from Swift
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the SWIFT system stands for
Society for Worldwide Interbank
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Financial Telecommunication.
Swift provides a secure way for
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financial institutions to
exchange information about
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things like money transfers.
Swift doesn't actually move
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money, but it does function as a
middleman to verify information.
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The US and allies also moved
against Russia central bank
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freezing its assets held abroad,
that means the bank can access a
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large chunk of its $643 billion
in foreign currency reserves.
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Working together with the United
States and European Union, we
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are cutting off the Russian
Central Bank from the global
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financial system.
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This is what was the real
deathblow to the Russian
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economy, because for the past 20
years, Putin had been building
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up one of the world's biggest
reserves, and he had been
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filling it with euros and with
dollars, and not with rubles.
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And what was basically the plan
was that when he decided to make
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his move against the West, that
the Russian economy was going to
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be insulated from retaliatory
sanctions that he knew would be
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coming from the central
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bank is limited to whatever
reserves it has on hand. Plus
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whatever's coming in to prop up
the ruble. It's implemented
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really strict capital controls
internally to try to conserve
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what Foreign cash is there.
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On March 2, the Department of
Justice announced Task Force
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klepto capture which would go
after the assets of sanctioned
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Russians, I say
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to the Russian oligarchs, and
the corrupt leaders who built
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billions of dollars off this
violent regime no more.
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On March 2, China announced it
will not join the sanctions. Two
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reasons why Putin thinks he can
get away with this. Number one
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is oil and gas. And number two
is nuclear weapons.
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companies around the world begin
to stop services in Russia. This
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includes big names like Apple,
Microsoft and Netflix, but also
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companies that do everything
from shipping such as MSC to
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payment companies like Visa and
MasterCard.
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So what's becoming increasingly
clear is that this is a war on
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two fronts. You've got the
battlefield and Ukraine and you
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have the boardrooms of central
banks. And of fortune 500
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companies.
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On March 8, the US banned Russia
oil and gas imports.
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President Biden says the ban on
Russian oil and gas will deal a
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powerful blow to Putin and
weaken Russia,
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That means Russian oil will no
longer be acceptable at U.S.
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ports and the American people
will deal another powerful blow
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to Putin's war machine.
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After the invasion, Russia
attempted to insulate itself
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from economic shock, but the
scope of the sanctions mean that
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the entire country is witnessing
the financial repercussions.
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McDonald's announcing it as
temporarily closing 850
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restaurants in Russia,
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we needed to take a position in
Russia. That's why we suspended
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our business in Russia despite
the fact that we've been there
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for many, many years
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moving from a period in which we
were talking about quite
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targeted measures to basically
broad financial sanctions is
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remarkable and is probably the
most unprecedented aspect of the
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sanctions program. So far,
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Russia is limiting information
about the war in Ukraine and
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referring to it in state media
as a special military operation.
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lines for ATMs in Russia
continue to be long as many
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residents attempt to withdraw
cash. Some mobile payment apps
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like Apple Pay have also stopped
working, adding one more item to
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the disruption of daily life in
busy cities like Moscow,
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if Russians began sliding back
to the economy they had in the
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standard of living they had
their years ago. That's when
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we're really going to see
putting in trouble.
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One downside of sanctions is
that they're easier to enact
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than remove.
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Even if Vladimir Putin has a
change of heart and decides to
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end this brutal war and Ukraine.
And Western governments decide
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to respond to that move by
lifting some or all of the
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sanctions that have been imposed
in the last few weeks. There are
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going to be lingering effects
related to the sanctions because
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companies will have de risked
and they will be sort of
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hesitant to go back into the
Russian market or resumed the
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activities they stopped because
of concerns that there could be
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basically a recurrence of the
crisis and the sanctions will be
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reimposed again
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