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The limits of economic sanctions against Russia are showing
Apr 27, 2023
Episode 912

The limits of economic sanctions against Russia are showing

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Plus, pranksters phone Powell.

Leaked documents show Russia could fund another year of war with Ukraine despite a whole lot of U.S. sanctions designed to throw a wrench in the Russian economy. Plus, diesel prices are half what they were a year ago. We’ll get into why gas prices are falling and what it signals about the direction of the economy. And, to keep or not to keep butter in the fridge?

Here’s everything we talked about today:

Got a question about the economy, business or technology? Leave us a voicemail at 508-U-B-SMART or email us at makemesmart@marketplace.org.

Make Me Smart April 27, 2023

Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.

Nova Safo 

Let’s do it.

Kai Ryssdal 

Alright. Hey everybody, I’m Kai Ryssdal. Welcome back to make me smart where we make today make sense. It is Thursday today, the 27th day of April. Kimberly is off today and tomorrow. Nova Safo is here. Nova Nova Nova Nova

Nova Safo 

Nice to be with you everybody. That’s my Kai impression.

Kai Ryssdal 

Oh is it? That’s really funny .

Nova Safo 

I am still working on it? I still working on it because you didn’t recognize it. So..

Kai Ryssdal 

The way it’s been repeated back to me is that I kind of slur the “everybody” that I throw a little southern in there too.

Nova Safo 

Well you know, the way I think of it is college professor plus the swagger of pilot, a fighter pilot. You just get get in that zone. And then you get Kai.

Kai Ryssdal 

Whose idea was it to get you on this podcast.

Nova Safo 

I don’t know. I know. I know. I’m already apologizing.

Kai Ryssdal 

We’re gonna we’re gonna do a little news. Then we’re gonna do a little make me smile. And then we’re gonna we’re gonna get on our merry way. Why don’t you go first? You go first.

Nova Safo 

Yeah, so the story that really caught my attention this week was this Washington Post article about some some of the things they found in the leaked documents that Jack Teixeira let out. And it showed that the assessment of the US intelligence community is that Russia can fund its war in Ukraine for another year. Yeah, that really struck me because weren’t they supposed to be crippled economically by now right?

Kai Ryssdal 

I mean, we’re sanctioned everything. And we’ve cut them off from finance and done everything.

Nova Safo 

Exactly. And yet, it’s, it’s having limited effects. And it really… remember when we first were doing the sanctions, there were some analysts coming out and saying, you know, sanctions, economic sanctions only do so much, you know. And it’s, it’s bearing out, you know, it’s limited power. Of course, there’s also the fact that they take a long time to take effect, right? And we have new oil price limits, kicking in February, we’re seeing their oil profits, you know, or revenues half what they used to be. But you know, you’d have to wonder if it’s wishful thinking, because we keep doing these, we keep doing these and Russia keeps funding its war. You know, and one thing that the documents did say that is that it’s adapted fairly well, you know, and they’re scrappy, you know. Even with their military defense infrastructure, we take away their micro-microchips and things, and they’re finding chips in consumer products and pulling those out and putting them in. So limited effects, apparently, but they’re doing it.

Kai Ryssdal 

Well. Yeah. So I’m actually just looking up the Urals Brent spread and Urals is what the global oil market calls Russian crude oil. Urals named after the mountains. And Brent is the global benchmark. And back a year, almost exactly a year ago, the difference between Russian oil and regular market Brent oil was $35. That is to say, Russian oil was $35 cheaper than Brent because of sanctions and because nobody wants to buy Russian oil. Now that spread is down to 21. So it’s gone from 35 bucks to $21. So the spread is narrowing. Right? Which means more people are buying it. The Russians are making more money from it. That’s this is really interesting. That’s a good story. Wow.

Nova Safo 

Yeah. Yeah, it just and you wonder what else can we do? And, and this was this has been one of the kind of designs of the global economic order for decades. That if we’re economically intertwined, we’re less likely to get into conflict and all of that has been thrown relativeley, I mean, for them out the window. Yeah, I mean, pretty much. So where do where do we go? Are we decoupling completely… we’re not you know, We still don’t know the implications. Yeah.

Kai Ryssdal 

So I’ve got two ones a little haha, but not really haha. The other ones kind of, you know, more substantive. So I’ll give you the substantive one first. There’s a story in The Wall Street Journal today, pointing out that diesel prices, US diesel fuel prices, have basically been cut in half from a year ago. They were at record a year ago. $5.34 a gallon at New York. Now in the most recent price fix $2.65. So it’s been cut by half. And why you might ask. First of all isn’t, you know falling gas prices good? Well, yes, falling gas prices are good. That means truckers have to pay less, and companies have to pay less. But the reason those prices are falling is because there is less freight demand. Why is there less freight demand? Because companies are shipping less inventory, they’re worried about consumers buying less. And the threat of recession now is showing up in freight. And so that’s sort of an indicator of where, you know, at least one slice of this market thinks this economy’s going.

Nova Safo 

You know, at the same time, we have OPEC cutting oil production. And yet, oil prices haven’t gone up as much as people feared right away. It feels like the the indicators we would normally look at are just use… almost useless.

Kai Ryssdal 

Well, look, I mean, that goes to the whole what the hell is goin on… Right, what the hell’s going on in this economy after the pandemic, right? We still can’t figure it out. And it’s crazy, because society writ large has mostly…  I mean, look, it’s hundreds of people in this country are still dying every single day from this disease. So we should not discount it. But society has by and large moved on. I was on airplanes, the last couple of days going to and from Washington. And I was as mask aware as anybody until like three months ago, and I was masking on planes. And now I’m just not, you know.

Nova Safo 

I was on planes over the past few days too. And certainly almost no one else was wearing a mask. And, you know, one trick I read this somewhere, is that you know, because the plane engines aren’t on when you first get on the plane that there’s less air perhaps circulating. So leave it on at the beginning, but then once the engines come on, you can take off. And that’s what I’ve been doing, hoping that works out.

Kai Ryssdal 

Yeah look it sounds logical, right? I would do it. You do what you can. You do what makes you feel safe. Item number two for me is Jay Powell and a couple of Russian pranksters. They apparently pretending they were Volodymyr Zelensky, the President of Ukraine, they got Powell on the phone back in January. And I just want to know how you go about getting Jay Powell on the phone because I couldn’t call up the Fed switchboard and say “Hi, I’d like to talk to Jay Powell.” There must have been some effort and some energy and it does raise questions about the security of Mr. Powell’s communications, I suppose. But on the other hand, it’s kind of funny and so I just thought I would throw it out there. That this happened.

Nova Safo 

Kind of funny. Very funny. I thought it was hilarious. But also like, that’s an embarrassing mistake. Like a really embarassing.

Kai Ryssdal 

Oh yeah. Totally. Absolutely. Yeah.

Nova Safo 

At what point do we… does it affect credibility? I know, maybe I’m making too much of this. But like, he was already wrong about the interest rates. He can’t even tell a Russian prankster. I don’t know. I don’t know man. I was like he was wrong about the inflation thing, now we’re catching up who knows? And like he got had by a prankster? Come on, man. Like…

Kai Ryssdal 

Oh, man. All right. Let’s go from there, Drew. All right. I would just like to say that I am not a butter user. But I do not believe in putting butter in the refrigerator and the Wall Street Journal has come out in in my corner. There’s a big article in the paper today about butter and whether or not it has to be refrigerated at all times or whether you can leave it on the counter so it’s spreadable. Obviously Ii it put butter out of the fridge on your toast, or whatever, you have to like crumble it up and rips holes in the bread and all that jazz. Leave it on the counter. And that’s all I’m saying. Leave it on the counter.

Kai Ryssdal 

Nova is getting up and walking away.

Nova Safo 

Huh. I gotta I gotta say I was surprised at how long you can leave it on the counter. It was like multiple weeks. Right? Yeah, that’s crazy. Two things on that. First that very surprised second. It is the thing I can’t stand the most when you get frozen butter. Right? It’s the worse. Especially in a restaurant that’s supposed to be like a nice restaurant to go out. If they bring out frozen butter. That is my sign. That is literally my litmus test.

Nova Safo 

I am not kidding. Yes. That is like you are not worth the price if you bring out frozen butter.

Kai Ryssdal 

Oh my gosh. Oh my lordy be. What do you got?

Nova Safo 

Well, also kind of haha little bit funny, but also kind of oh my gosh, do we get along anymore? Ya-Ya, the panda on loan to the Memphis Zoo just got back to China today. And even before he got there, there have been photos and videos online. People circulating and calling into question how well Memphis Zoo took care of this panda because it looks really just not very good. It’s fur is patchy, it’s thin, it’s kind of listless. And there were a lot of calls, you know, bring the panda back, you know, bring the panda. And they did. But you know, the the awkward thing is that this is one place where Chinese and American officials actually agree. They’re saying the panda got great care. He just has a certain chronic disease of the skin and the fur. So you know what this goes to show right is don’t believe everything you see. It’s not always how it looks. But all the Chinese public went for it. Which maybe raises a little bit of concern of whether the distrust that the government’s have against each other is perhaps spreading to the public. We got to watch out for all right.

Kai Ryssdal 

Wow. Great picture the panda sitting in a little patch of bamboo. Eating.

Nova Safo 

I know. You know what’s funny is they were comparing it to the pandas on loan to Moscow. They’re like, look at how good those look.

Kai Ryssdal 

I don’t know if I want to be a panda in the Moscow Zoo.

Nova Safo 

I know right? At least it’s colder there though. So all that fur.

Kai Ryssdal 

Yeah, true. All right. There we go. Quick and Dirty. Nova Safo, getting this done. Speaking of which, we are done for today. Amy’s back tomorrow with me economics on tap with the news, have some drinks, maybe a little half full/half empty. And if you’ve got a question for us, you know how to do that. And I will too as soon as I scroll to the bottom of the page, giving that I freaking read this number a zillion times. 508-UB-SMART. 508-UB-SMART or makemesmart@marketplace.org. you can get us any one of those ways. We will answer to them all. That’s pretty funny. Nice job Kai, read the rundown. Make Me Smart, which is the podcast that you’re listenting to, is produced by Courtney Bergsieker. Today’s episode was engineered by Drew Jostad. Our intern is Antonio Barreras.

Nova Safo 

And Ellen Rolfes writes our newsletter. Marissa Cabrera is our senior producer. Bridget Bodnar is the director of podcasts. And Francesca Levy is the executive director of Digital.

Kai Ryssdal 

Nova that was great. Thanks for stepping on. I really appreciate it.

Nova Safo 

My pleasure. I enjoyed it.

Kai Ryssdal 

Super fun, everybody.

Nova Safo 

There it is. I love that. I’m still honing it. I feel like I have work to do.

Kai Ryssdal 

Next next time you come back, you can give it another try.

Nova Safo 

You got it.

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