Russia dismisses Trump’s economic threats
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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. Today with me, Stuart Willey and Alex Dibble. The Kremlin is calling Donald Trump's threats to impose more sanctions and tariffs on Russia nothing new, dismissing his ultimatum and saying it's part of his usual rhetoric.

The US president had gone on social media warning President Putin to settle now and stop what he called this ridiculous war in Ukraine. Today we're going to dig into just how effective these new threats could be at trying to end the war. For Evgeny Popov, a member of Russia's parliament and a pro-Putin television host, Trump's move is an empty threat.

He spoke to Times Radio and said nothing Trump does will affect Russia's people or its economy. Please tell Trump how much trade between Moscow and Washington is now. You know the number? It's about 300 million dollars, which means nothing. He can do nothing.

anything with our economy and he knows it because all sanctions he can do introduce he already introduced against Russia and it's stupid to think that our economy is now is only oil and gas last year we supplied with uh

billion equipment, electronics, engines to India, to Egypt, to China, of course.

But Ukraine welcomed the move, as did the Secretary General of NATO, Mark Rutter. He told reporters he was very, very happy that Mr Trump may choke off the Russian economy. He also hopes Europe will follow suit. At this moment, Putin has two problems. One, he is spending one third of his budget on defence. By the way, it should make us think that we have to spend much more here, but that's a different debate, but we have to.

But secondly, his economy is in a difficult position. It's not doing well. And these American sanctions will be effective. And if we in Europe could prop them up, basically work in conjunction, they will be even more effective.

So, a disagreement here. Either Russia's wartime economy is enduring and immune to these sort of threats, or it's vulnerable and in a very difficult situation. Our guest today is David Lubin, a senior research fellow at Chatham House, who specialises in the global economy. David, what's your take on this?

David, we heard that Russian MP there saying years of sanctions on Russia, little direct trade now with the US. How effective could these mooted threats by Trump be? Well, the idea of the US using direct sanctions on Russian trade with the US...

to change Russia's behaviour is a bit laughable. Bilateral trade between Russia and the US is pretty close to zero. In 2023, US exports to Russia were about $600 million. US imports from Russia were about $4.5 billion in the context of the fact that

that the Russian economy, you know, GDP, nominal GDP is around $2 trillion. There's just nothing there. There's just no bilateral trade sanctions that will make Putin blink. So the actual direct threat of additional sanctions on Russia is kind of meaningless. What's meaningful, I think...

is the body language behind Trump's statements. And in effect, what Trump has been aiming at in these comments is a kind of photographic negative image of what Richard Nixon did by prizing China away from the Soviet Union in the 1970s. So, you know, Trump, the logic is that Trump considers his main strategic rival to be China,

And he just wants to weaken China by severing its alliance or its partnership with Russia. What he needs to do, in other words, is to try and reinvigorate his capacity to negotiate with Putin. And so threatening to impose sanctions or threatening to get tough.

if Putin doesn't come to the negotiating table, is a necessary thing for him to do now. Because in the past, Trump has spent a lot of political capital sort of aligning himself with Vladimir Putin. So is the real threat perhaps to countries that have seen trade with Russia rise, like, as you say, China, as well as India, the Middle Eastern states, even some of those former Soviet states in Central Asia? Is that who these threats are directed at?

I hope so, because if you want to put additional pressure on the Russian economy, the most effective way of doing that by far, I think, is to work hard to further limit Russia's access to hard currency revenues.

But before the invasion in early 2022, about 50% of Russia's oil exports, its energy exports, went to countries that pay in convertible currencies. And now it's about 10%. So in effect, Russia's hard currency income has gone down from about $300 billion a year to about $60 billion a year.

The difference has been made up from non-convertible, by non-convertible currency income flows in the form of the renminbi or the Indian rupee or in rubles themselves from non-traditional trading partners. Now, that gives the United States and Europe...

a strategic advantage over Russia because the more that Russia receives non-convertible currencies, the more vulnerable the Russian economy becomes. The less Russia can depend on hard currency revenues, the more vulnerable it becomes and the more intense

Vladimir Putin's dilemma gets. The more the West can intensify that dilemma, the more difficult life becomes from him. But even then, the link between sanctions on the one hand and a change in the behaviour of the country receiving the sanctions is really pretty tenuous. Sanctions is often described as a spray and pray strategy.

And I don't think that there's any perfect sanction that can predictably change the course of the war, that can predictably change Putin's behavior. So what Trump wants to get out of Putin is difficult to discern, because if Trump's ultimate goal is, as I said, to ununite Russia from China, then

then the amount of pressure that Trump wants to put on Putin might be limited. And that's really the test. That's really what we have to wait and see, whether the goal that Trump seems to have of ununiting Russia from China is something that supersedes any effort to bring this war to a conclusion during the course of 2025.

Today, the Kremlin says things are going fine in the economy. Do you think that's accurate? How would you characterize Russia's economy just now? And how do the Russian public see it? I think there has been some loss of support for Putin, but probably not existential. But that's the point, you know, where the economy grew very rapidly during the course of 2024.

partly because of a surge in defence spending. You know, defence spending will occupy 43% of Russia's budget in 2025, but also because of efforts to protect the economy from the effects of the war, subsidised credit, lots of credit flowing to households and to firms. And because, you know, 500,000 troops have been added to Russia's military during the course, since the invasion began,

The availability of Russian labor is very constrained, particularly against the background that Russia is suffering a sort of demographic shock, has meant that wage growth in Russia is very high indeed. Wage growth has been around 20 percent year on year.

We haven't seen Russian wage growth like this for about 15 years. It's that overheating pressure on wage growth, which is the sort of biggest threat to inflation and therefore the biggest threat to the central bank's inflation target, which is 4%. David, what's your gut feeling about what we'll see coming next? What's going to decide Ukraine's fate? In the near term,

Putin, although, you know, he's making gains on the battlefield, he probably has relatively little to lose by agreeing to negotiate, because if he gets a deal that, you know, satisfies him minimally, then he can look like a peacemaker. If he doesn't get a deal that satisfies him, then he can walk away and just say that, you know, the terms are too onerous.

So I think that for the time being, there might be a reasonably positive news flow because over some time over the next few months, it seems to me more likely than not that Putin will find it convenient to agree to Trump's Trump's invitation to negotiate Trump, you know.

innately wants to confuse everyone, innately wants to surprise everyone. And so this kind of inherent unpredictability about his character means that you have to leave a lot of options open. So while it looks a little bit, as I said, difficult to be optimistic, you shouldn't be completely pessimistic.

David, thank you. That is David Lubin, a senior research fellow in the Global Economy Program at Chatham House. That's it from us. Thank you for taking 10 minutes to stay on top of the world with the help of The Times. See you tomorrow. ACAS powers the world's best podcasts. Here's a show that we recommend. We all have bad days and sometimes bad weeks and maybe even bad years.

But the good news is we don't have to figure out life all alone. I'm comedian Chris Duffy, host of Ted's How to Be a Better Human podcast. And our show is about the little ways that you can improve your life, actual practical tips that you can put into place that will make your day-to-day better. Whether it is setting boundaries at work or rethinking how you clean your house, each episode has conversations with experts who share tips on how to navigate life's ups and downs. Find How to Be a Better Human wherever you're listening to this.

Acast helps creators launch, grow, and monetize their podcasts everywhere. Acast.com.