Planet Money: The Planet Money Indicator: NPR




This is THE PLANET MONEY INDICATOR. I am Stacey Vanek Smith.


I am Darian Woods.

VANEK SMITH: And, Darian, we’re currently looking at about 100,000 Russian troops stationed along the Ukrainian border. And it’s – like, it’s kind of scary, honestly, to see that.

WOODS: There have been all kinds of meetings and negotiations all over Europe over the past two weeks. And basically, the United States and its allies are trying to convince Russia that it is not necessary to invade Ukraine.

VANEK SMITH: And it’s a bit difficult to pin down the exact reasons why Russia is bringing its army to the border right now. There is Russia’s common history with Ukraine – also, Russia’s sometimes acrimonious relations with some of its European neighbors and the United States and, of course, their military presence in the region.

WOODS: Antony Blinken – he’s the United States Secretary of State. And on Friday, he will meet the Russian Foreign Minister. And what they’re really trying to do is see if this impasse can be resolved unarmed.

VANEK SMITH: And one of the main ways to negotiate a conflict like this without arms is through economic sanctions.


WOODS: Sanctions – so stopping trade and finance with a country as a tool to get them to do what you want. And the United States and its allies have almost the equivalent of a nuclear sanctions option – complete exclusion from the global financial system.

VANEK SMITH: So today on the show, the system at the heart of how money moves around the world and whether that could be used to deter Russia from conflict.


VANEK SMITH: Russia has about 100,000 troops stationed around the Ukrainian border, and the United States and its allies are furiously negotiating with Russia to stop any invasion.

ALEXANDRA VACROUX: Emphasis on furious – the Russians are furious (laughs).

VANEK SMITH: This is Alexandra Vacroux. She directs the Davis Center for Russian and Eurasian Studies at Harvard. Alexandra first went to Russia in the 1990s. She was doing her thesis on privatization as the country’s economy began to open up after the collapse of the Soviet Union. Alexandra then worked for an investment bank in Russia for a charity fund. She stayed there for 12 years.

VACROUX: It was a lifetime of experiences in 12 years.

WOODS: And now Russia is in the headlines again.

VACROUX: Well, they say, for academics, bad news is good for business. But that’s not really the kind of news we want to follow. I would prefer to hear about Russia and the opportunities for cooperation, collaboration and business, and it is quite the opposite.

WOODS: Alexandra says that one of the main reasons Russia is placing these troops alongside Ukraine has to do with NATO. It is the North Atlantic Treaty Organization, which is a military alliance of the United States and 29 other countries besides Russia.

VACROUX: The Russians believe that the United States and NATO have promised not to expand eastward beyond East Germany. And in fact, they got bigger. They took in Poland. They took Hungary. The Baltic countries joined NATO – all those countries that are quite close to Russia and even then part of the former Soviet Union. And Russia has said, more and more vehemently, that this is a red line for them. They do not want countries that were in their orbit to join NATO.

VANEK SMITH: And in December, Russia submitted a series of requests to NATO. And NATO said, yes, there are some things we can agree on, like not having military exercises very close to the Russian border. But some of the other requests, we cannot meet them.

VACROUX: The Russians said, like, it’s not a menu. This is a package. Take it or leave it. And then the Americans and NATO are like, well, that’s a non-starter. Like, forget it. We do not buy this package. And the Russians storm out. And that’s kind of where things left off at the end of last week.

WOODS: So on the American side – you know, on the NATO side – they came up with a whole series of counter-offers. It includes carrots, concessions to Russia, but also sticks. And other than military force, the main stick you can threaten is sanctions.

VANEK SMITH: There is a long history where the United States and its allies imposed sanctions on Russia. And over the past decade, the United States has focused its sanctions on very narrow areas, such as oil and gas drilling. American companies are banned from lending to blacklisted Russian companies, and the sanctions have also focused on specific elites in Russia – high-level businessmen and government officials.

VACROUX: The original idea was that if you punished these people and made it difficult for them to travel or buy real estate in Miami or send their children to school, they would realize that Putin is not such a good thing, and they would win. no longer support it. But that turned out to be wrong.

WOODS: That’s right. We didn’t see the response the West wanted.

VACROUX: Exactly. What is at stake right now are more extreme sanctions and the use of the so-called nuclear option, which would cut Russia off from the SWIFT messaging system.

VANEK SMITH: The SWIFT messaging system – it’s the very fabric of the global financial system. This is how most banks communicate with each other for money transfers.

WOODS: SWIFT was established in Belgium in the 1970s and carries messages that are managed from three data centers in the United States, the Netherlands and Switzerland.

VACROUX: SWIFT is like a special social media platform for banks to talk to each other.

WOODS: Like a WhatsApp for money.

VACROUX: Exactly. Law. It doesn’t move money, but it moves information about money.

WOODS: And is that just the way international finance is done? I mean, are there alternatives to SWIFT?

VACROUX: So there are several alternatives. The Chinese have developed a system. It’s much smaller. It is used for certain regional transactions. It is denominated in Renminbi.

VANEK SMITH: Renminbi – the Chinese currency. The new Chinese messaging system is mainly used by banks in China – so not particularly useful for international transactions.

WOODS: Russia also tried to implement its own version of SWIFT.

VACROUX: After 2014, when Russia annexed Crimea, at the time, Russia immediately started working on setting up an alternative, just in case it was cut off. It’s like you were told you can’t use Twitter anymore, isn’t it? And you might find an alternative. But unless you have a lot of other banks or a lot of other people on this alternative platform, you won’t be able to do what you were doing before.

WOODS: You would just talk to each other in a vacuum.

VACROUX: Yourself or, you know, the other 200 banks that you forced to join…

WOOD: Yeah.

VACROUX: …Because the Russian Central Bank was trying to force its banks to join this new platform. So, how are you. But compared to SWIFT’s 11,000 members today, it’s not SWIFT.

WOODS: Has any country been cut off from SWIFT?

VACROUX: Well, Iran.

WOODS: Iran – and what happened to their economy?

VACROUX: It wasn’t great. They lost half of their oil export earnings and 30% of their foreign trade.

WOOD: Wow. So that decimated the economy.

VACROUX: Yeah. That’s why it’s the nuclear option.

WOODS: And I imagine that’s also – it’s not just bad for the country in question, whether it’s Iran or potentially Russia. It’s also bad for people who trade. So that would be a big call, to say the least.

VACROUX: So – yeah, and Germany is particularly concerned about that.

VANEK SMITH: Germany depends on Russia for natural gas, electricity and heating in winter. Interrupting this flow of natural gas would be extremely difficult for European countries like Germany.

WOODS: Alexandra says Russia’s exclusion from SWIFT is unlikely. But there are other smaller strategic sanctions that could be taken, such as banning the export of American-designed smartphones. But something like excluding Russia from SWIFT forever…

VACROUX: Once you impose it, right? – there is nowhere to go in terms of sanctions.

WOODS: That’s right. Like, you have to keep having marginal incentives. For example, we cannot exclude you from international life forever. There must be another deterrent after that.

VACROUX: The problem with sanctions is that they are very rarely lifted. So OK, we know – we don’t think we have that much influence over Putin now. Like, once you do that, basically you have zero leverage.

WOODS: That reminds me of the phrase: the beatings will continue until morale improves (laughs).

VACROUX: Yes, exactly.

WOODS: So you’re saying that the US track record is more stick-based than carrot-based.

VACROUX: It’s just – it’s impossible to get rid of the sticks. Like, once you throw them away, nobody wants to pick them up. I think, you know, this situation in Ukraine is – it’s an extreme gamble by Russia to try to force a return to a world order that they felt more comfortable with. And they don’t know if it’s going to work or not. But I think they still think it’s worth it.


WOODS: Today’s show was produced by Nicky Ouellet with help from Isaac Rodrigues. It has been verified by Corey Bridges. Viet Le is our lead producer and Kate Concannon is editing the show. THE INDICATOR is an NPR production.


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Don F. Davis