Frontline special - Russia & Ukraine economies expert, Anders Åslund
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Welcome to The World in 10. In an increasingly uncertain world, this is The Times' daily podcast dedicated to global security. I'm Alex Dibble and I executive produce the podcast. The World in 10 is partnered with Frontline, the interview series from Times Radio, available on YouTube, with expert analysis of the world's conflicts. At the weekend, we bring you Frontline interviews in full. Here's one from this week. I hope you find it interesting.

Hello and welcome to Frontline for Times Radio with me, Louis Sykes. Today we're joined by former diplomat and leading specialist on Eastern European economies, Anders Asland. Anders is a senior fellow at the Stockholm Free World Forum and was an advisor to the Russian government between 1991 and 1994, an advisor to the Ukrainian government between 1994 and 1997. He's also author of the book

Russia's Crony Capitalism, the Path from Market Economy to Kleptocracy. Anders, thank you very much for joining me today. Thank you. My pleasure. I wanted to start with these reports that the US has prepared new sanctions against Russia as the White House tries to push the Kremlin closer to this long-term ceasefire. Where should the US be applying sanctions now to get that economic pressure on Russia?

Well, the important thing that is happening now in any case is that the oil price is falling. And this is mainly a market issue. But it's vital that Russia cannot develop its oil sector. The technology sanctions are already quite strong.

And it's important to make sure that they are properly implemented. That is that those who violate the sanctions get punished. And with regard to the financial sanctions, the U.S. holds quite a bit of Russian money.

official funds and the US should confiscate that or seize it, whatever you call it, and deliver it to Ukraine. It's a $5 billion that is being held with the New York Federal Reserve. And basically, the Obama administration already adopted the legislation for it. That is, the Congress adopted it under the Biden administration.

So this is ready. It's just a simple executive order by the president that can deliver it. And it's very important that we don't see any easing of the US sanctions on Russia that was discussed. For example, taking off a major bank, Roselkos Bank, from the sanctions.

And you mentioned the oil price there. I mean, is it possible that economic pressure, putting economic pressure on Russia could kind of be out of the hands of the US at this point if those oil prices just continue to drop as a result of market forces?

You can say that sanctions are not really needed now. The oil price will fall in any case. And the Euro's oil price, which is the relevant price for the Russians, it's already about $10 below the Brent oil price.

So it's slightly under $50 per barrel now, while the Russian budget has counted on $70 per barrel. So this is a substantial blow to the Russian budget. So what sort of impact could that have? And more widely, how resilient is the Russian economy to sanctions? And what's the state of the economy now in general?

The general word for the Russian economy since October has been stagflation. The growth rate, according to the central bank, is likely to be 1 to 2 percent this year. I would rather take it at the lower level.

And the inflation is currently officially 10%, probably a few percent higher because inflation expectations are 13%. And the interest rate of a central bank is 21%.

you wonder why is the central bank interest rate so high if inflation is only 10%. And the central bank hopes to get the inflation down to 4% at the end of next year, while

the general expectation is that it will rise to 30%. Something there doesn't hang together. Inflation is a serious concern in Russia. And in terms of economic growth, things are going on.

slow, but that's not a catastrophe. And the Russian technology is gradually being undermined by the Western sanctions. While they are not complete, they are quite severe for the Russian economy. And what does that mean for the Kremlin long term? Are they anywhere near a crisis point yet? Well,

I wouldn't say so, but it means that they have less resources. They've already steered so much resources to the defence. 41% of the federal budget is now going this year officially to the military and to security. And Russia will have to cut.

its budget towards the end of this year, second half of this year, but by at least 2% of GDP because we're running out of liquid reserves, or perhaps by 4% of GDP, which would be quite severe if the oil price stays this low, which is likely.

And we're speaking only a few days after the signing of the Ukraine-US resources and reconstruction deal. What are the economic impacts of this deal? And has this become something more of a partnership than this kind of repaying of debt that Donald Trump tried to cast it as when he initially proposed this idea? Yeah.

Yeah, I must say that I looked upon this process with a lot of trepidation. And now, as far as I can see, I'm relieved. There were a lot of serious dangers that have disappeared. One was

President Trump said time and time again that Ukraine should pay back the $350 billion that the Biden administration had given to Ukraine. This was grant money and it should not be paid back.

It was $100-120 billion, not $350 billion. And now this stipulation has completely disappeared from the intergovernmental agreement that was signed. Another concern was that this fund should be a private company registered in Delaware, which looked utterly corrupt.

That was proposed by the US side, not by the Ukrainian side. And that has also disappeared. The Americans already demanded a majority on the board.

And now it's equal partnerships. And on the US side, it should be the Development Finance Corporation, which should be the partner of Ukraine, which is just the right one.

There was also trepidation that the Americans demanded first right of denial and that they would block further deals with these licenses. Otherwise, it was also discussed that state enterprises should be taken over. All these odious items that were proposed by various Americans have been taken out.

And I presume that it is Secretary of Treasury Scott Besant who clearly understands these things, who has made sure that the sense prevailed. So as far as I can understand, this is a very good agreement for Ukraine. And you can also notice that this is the first actual agreement with a foreign country that the second Trump administration signed.

has concluded, I shouldn't say concluded in the same sense that it has not been ratified by the Ukrainian parliament, which is necessary, but it has been signed by the government. So this is a substantial step forward both for the US and for Ukraine. And the immediate effect of it is not investment,

from the US, but that the relationship with the US has substantially improved for Ukraine. And we could see that immediately that President Trump himself allowed Ukraine to buy Ukraine.

arms from the US, which has not allowed for quite some time, and for $300 million. And this is serious arms, for example, parts to the F-16s that Ukraine has already got. So it looks as if this is really a turnaround and that the US now has rejoined Ukraine, but that remains to be seen.

And I want to talk more about how this changes the situation for Ukraine. But firstly, what is the impact of this deal on the US? Yeah, this is a very curious question. I was very impressed with the Treasury Secretary Besson's statement after the signing, where he said in public that there is no daylight between the US and Ukraine and that

where he sharply criticized Russia's full-scale war on Ukraine. And this is not what we have heard from the Trump administration recently. Remember that the Trump administration has, on two occasions, in the General Assembly of the United Nations,

voted with Russia, Belarus and a few other countries against the UN's majority members condemning Russia's war of aggression in Ukraine. So now it seems that the US has returned to its previous position, but it remains to be confirmed.

So in a sense, this deal has created something of an incentive then for the Trump administration, possibly even to get this lasting peace in Ukraine.

Well, it rather looks as if this is a fig leaf for the Trump administration to withdraw from the peace negotiations or so-called peace negotiations, where Special Envoy Steve Witkoff has effectively stood up for Putin against Ukraine. And now what we hear is that the

No further trips by Witkow to Russia are being planned. Witkow never went to Ukraine.

and didn't deal with the Ukrainians. And you can't really negotiate if you're only dealing with one side. So this very unfortunate and imbalanced U.S. approach to the war between Russia and Ukraine seems to be over now. And instead,

It looks as if the US is returning to support for Ukraine because it's obvious that Putin has not made any concessions at all. He still wants to take over Ukraine and that does not offer any possibilities for any ceasefire.

The Ukrainians have repeatedly been prepared to accept the U.S. bid on the ceasefire for 30 days, and the Russians have not.

And we talked a moment ago about the new U.S. military support that's come off the back of this deal. It's a different arrangement to what we've previously had in place, where there is still this idea that Trump put forward of, you know, we want something in return for this military and financial support. So does this deal still leave a solid foundation for future U.S. military and financial support for Ukraine?

Not quite. Ukraine was allowed to buy arms from the U.S., which is the most important. But the U.S. is not giving any military or financial support to Ukraine.

apart from what was already delivered by the Biden administration. In particular, the Biden administration managed to send off $20 billion of financial support for Ukraine to World Bank Trust Fund.

where it is safe, the US can no longer seize that money. And this is now being delivered to Ukraine in suitable portions by the World Bank. And of course, $20 billion is a lot. Altogether, Ukraine has got about $100 billion a year from the West. And you can say,

basically 40% from the US and 50% from the EU and 10% from international financial institutions like the World Bank and the IMF. But now it is more US money is not to be expected. But the most important is that Ukraine is allowed to buy and use US arms against Russia.

And that seems to have been sorted out by President Trump himself. And where does that leave Ukraine's economic situation? Is there enough European or wider Western support available to keep them afloat economically, as it were?

Yes, there is enough. So Ukraine this year is likely to get once again $100 billion in support from the West. And much more of it will come from Europe now than previously. But Ukraine needs probably $200 billion this year in order to win the war.

if it's allowed to buy U.S. arms. And the possibility is to seize these $200 billion of Russian central bank reserves that have been frozen in Belgium. And the question is if the Europeans can reach that decision.

I'm hoping that the Chancellor, when he now comes in, that he will make this one of the big issues that he will push. Then I think it can happen. His predecessor, Olaf Scholz, has been dead against it. President Macron is not excited about it, but I don't think that he's strongly committed. So this is the big thing that can be turned around to Ukraine's advantage.

But in order to keep the war going as before, the financing is sufficient. And Ukraine has now developed lots of new arms that are highly efficient. As we saw that Ukraine with airing drones

And rockets shot down one or two sophisticated Russian fighter planes, Su-30, over the Black Sea. So Ukraine has developed many new arms, primarily drones of all kinds.

which are highly effective. And it will be interesting what happens now on Victory Day, so-called on May 9th, if any foreign leaders dare to go there when the Ukrainians say, we are not prepared to have a ceasefire for you just so that you can celebrate your militarism.

The military on the Red Square is an acceptable military target, is the response from Kiev, from President Zelensky himself. And alongside the potential political and I suppose military impact of being able to hit

May 9th parade. How would you assess the wider economic impact of Ukraine's ongoing long-range strikes into Russia and how crucial could they be for Ukraine in putting pressure on Russia and possibly seizing some sort of victory in this conflict? Well,

Well, I think that they should primarily be seen as military. What the Ukrainians have hit is lots of military factories and oil refineries and oil depots and ammunition depots. So you can say that the oil hits cost a bit, but not all that much, while the hits on the military targets have been quite effective.

And the Ukrainians, unlike the Russians, are not going for civilian targets, which is a big difference. But the Russian economy is muddling through.

with near stagnation and high inflation. And if you look upon the military cost, Russia spends officially now 9% of GDP on the military and security. Ukraine spends about 50% of the GDP, including all the Western assistance. And we hear the Russians complaining about the high military costs.

We don't hear the Ukrainians complaining because they know that this is necessary for the nation's existence. And that is a big difference. The Ukrainians are tired and dispirited, but we don't give up because they know if they give up,

They will be killed or they will have to flee their country. There is no possibility for the active Ukrainians to survive. And also, face it, Ukraine has probably 900,000 men and women under arms. And Russia has probably 650,000 soldiers involved in the war in Ukraine. So Ukraine has war soldiers.

And then Russia and it's the Russians who are attacking. Then you should be three times more. We are not. I heard recently about 60 to 80 Ukrainians who held a building in Pokrovsk with drones against 5,000 attacking Russian soldiers who are then taking out one after the other in a terrible meat grinder.

And so where does that leave Russia's war economy? When you last spoke to this programme, you mentioned that Russia probably wouldn't be able to take the conflict on much longer than the end of 2025. Has anything that's changed since then politically or militarily changed your assessment on that? The fundamental thing here is not economic but political. That is when the Russian people say enough is enough.

For the war in Afghanistan, it took one decade, but only 15,000 Soviet soldiers killed. And the Soviet Union had twice as many people as Russia has today. What we are talking about in Russia today is a loss of 160,000 to 200,000 soldiers killed.

and something like 600,000 injured soldiers. These are enormous losses.

And the question is, when will this ache through? This is more a psychological and political question than an economic question. To me, it's quite incomprehensible that Russia is prepared to take so much. You hear the interviews that are being undertaken in Russia. It says that people increasingly want peace.

that they want Russia to win. There will be no victory for Russia. What we're seeing is that the front has basically been standing still for the last year in spite of massive Russian resources being wasted. And you just wonder, for how long will the Russian people tolerate this madness? We know that the Russians can tolerate a lot, but why?

And is there anything that could change then this year that could change that outcome? I mean, before the visits had ended to the Kremlin, Steve Witkoff had suggested the US could reopen trade with Russia, for example, or lift some sanctions. Is that possible, given the wider international sanctions, if the US was going to do this unilaterally? And I suppose at this point, is

Is any of that kind of dead in the water after the announcement a few days ago? Exactly. This is the big thing that seems to have changed, although we don't have it clearly confirmed from the White House and probably won't have. So it seems that the White House now prefers to forget about this war.

And Secretary of State Marco Rubio has said a couple of times, if we don't get a result soon enough, then we will leave. And of course, it's an advantage for his position in Washington if Wyckoff turns out not to have managed anything. And I would presume that...

Rubio would not like to lift the sanctions. He has previously been a hardliner on Russia, and I don't think that he has fully forgotten his old positions. So,

To me, it looks as if Vytautas, in spite of being so close to President Trump, has really blown it in this very unbalanced negotiations with Russia. And therefore, it looks as if his agenda, which you just mentioned, is for the sanction and stimulate the U.S. investment in Russia, are gone.

And anyhow, Europe would not accept easing the sanctions and very few Americans, if any, would be prepared to undertake investments in Russia.

From my point of view, this seems to be the best we could have hoped for, because unfortunately the ceasefire negotiations from the beginning were at best meaningless, but probably harmful.

And to finish, Anders, Wednesday will mark 25 years since Putin's official inauguration as president of Russia. How would you judge his impact on Russia as an economic power and for that matter, Russia's impact on Europe and the world in the last few decades?

You can say that the first two terms of Putin until 2008 was a stunning economic success, 7% growth each year. But why did it happen? For three reasons, I would say. Because of the market economic reforms in the 1990s that finally succeeded.

The second point was the oil and commodity boom. And the third, that Russia then had lots of free resources.

Since 2008, the Russian economy has barely grown at 1% a year on average. And Russia's GDP is only $2 trillion less than the Italian economy.

And it is not going to grow anytime soon. And structurally, it has become backward in recent years when Putin's cronies and the state are taking over every one of the previously successful countries.

new enterprises. So economically it started off very nicely, but not because of Putin. He arrived at the late table and now Putin has eaten up all the good resources and he does not seem to be able to deliver anything else apart from war.

And he needs the war because that means that he has a purpose, a national purpose, and also an excuse to increase the repression. That is now worse than it has been at any time after the death of Stalin in 1953.

Well, Anders Asland, thank you very much for joining me today on Frontline. Thank you very much. My pleasure, Luis. Thank you for watching Frontline for Times Radio. For more on the war in Ukraine, you can sign up for a membership at the link below or subscribe to our YouTube channel. You can also listen to the latest news and analysis on Times Radio or read us on thetimes.com. Thanks for watching. Goodbye.

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