this is bbc news. we will have the headlines and all the main story is for you straight out of this programme at the top of the hour. hello, everybody. and welcome to talking business weekly with me, aaron heslehurst. let's go and take a look at what's on the show. walking the diplomatic tightrope, countries not imposing us—led sanctions are accused of undermining efforts to cripple the kremlin�*s war machine and stop the fighting in ukraine. china and india, they're buying record amounts of russian oil, and other nations, from mexico to south africa and the united arab emirates, are all calling for peace while maintaining

business with moscow. so is there a financial consequence to not taking a side? i'm going to be discussing all of that with these two. there they are. a former uk diplomat and adviser to the prime minister and a renowned indian economist with the ear of the modi government. also on the show, global interest rates, they are on the rise in response to rampant inflation. but is it all too little, too late in the face of soaring prices? i'm going to be speaking to a former chief economist at the us treasury to find out. wherever you arejoining me from around the world, once again, a big hello, and a warm welcome to the show. you know, since russia invaded

ukraine, the western world, led by the us, has responded with a raft of sanctions looking to halt the kremlin war machine and stop the conflict. the war and the sanctions have had a huge impact on the global economy, with widespread inflation driven by soaring energy and food costs leading to warnings millions are at risk of hunger and unrest. the sanctions have sought to target russia's war chest, blocking access to financial markets and targeting those close to president putin, and restricting access to international markets for goods and services. and when it comes to russia, the most important set of goods for them are from the energy sector. gas and oil. with fossil fuel money making up nearly half of moscow's federal budget last year. but the west and particularly europe's dependence on russian gas has made weaning themselves off these fossil fuels particularly difficult. to cut russian gas supplies, it is simply not possible for large parts of europe.

but reducing russian oil — that's another matter. with the us banning imports, the uk phasing them out by the end of the year and the eu cutting supplies that come in by sea, but there are a number of countries that are not following these sanction regimes and taking a different stance. these include countries condemning russia's actions but not following the sanctions, like israel, mexico and the uae, the united arab emirates. and then there are those remaining neutral, walking something of a diplomatic tightrope, like south africa, brazil and india. and those criticising sanctions, like china. and it's those last two giant economies that are helping pick up the slack in the market for russian oil as they grab the cut—price crude that's now on offer. so just how much are we talking about here? well, take a look at this. in may, china's imports of russian oil rose by 55% from a year earlier, to record levels. that equates to some 62 million

barrels of oil in may, pushing saudi arabia, formerly china's biggest source of crude, to second place with some 57 million barrels. and the majority of what's left has made its way to india, not usually a big customer for russian oil. but a bargain is a bargain and india has been buying. and in some cases, at prices around $30 a barrel cheaper than brent crude. injanuary and february, india didn't import any oilfrom russia. not a drop. but since then, they have been hoovering it up with russia their second biggest source of oil in may. to put this in perspective, some industry experts predict that india will buy more of the kremlin�*s crude in five months this year than in the whole of last year. here's our man in mumbai, nikhil inamdar, to give us a picture from the ground. india shares deep and historic ties with russia, and has taken a resolutely middle—of—the—road position when it comes to russia's invasion of ukraine, abstaining from voting on any of

the resolutions that have been moved, either by the west, or by russia, in the united nations. but when it comes to business and trade, its stance has been very clearly dictated by economic compulsions, rather than by geopolitics. new delhi's purchases of russian oil have hit record highs, and indian companies have been snapping up cheap, discounted russian oil. coal imports have also surged, and the west has said that this is undermining its sanctions on russia. but responding to the criticism, the indian foreign minister has said that india perhaps buys in an entire month what europe buys injust an afternoon, as far as russian oil is concerned. and so these purchases are unlikely to seize any time soon. and it's all adding up, with one thinktank reporting that russia received almost

$100 billion from fossil fuels in the first 100 days of the war, covering the estimated cost of the invasion of somewhere in the region of $876 million a day. but there are a raft of other measures the sanctions cover that are undoubtedly having an impact, working to isolate moscow. these us—led sanctions are having a transformative effect on the global economy, as some countries shift away from russia and others step into the gaps. so let's get more on all of this, because a little earlier, i caught up with the former economic adviser to the british prime minister, and now the global economy director at chatham house. creon butler, a real pleasure having you on the show. thanks so much for your time. creon, can we start with this? just how much of an impact are the current western—led sanctions having not only on russia but on the global economy? well, i think the first thing to say is that the west really had no choice but to implement what has turned out to be an unprecedented set of sanctions. but further to that, it's really the war that is having the impact on the global economy. now, if you look at particular areas, like the rise in energy

prices, which has been very sharp, that's to some extent due to the reduction in the supplies of gas to europe from russia, which is linked to sanctions. but then also, if you look at the rising food prices, that links to the mere fact that you just cannot get food out of ukraine at the present time. so i think it's the war itself — sanctions are a factor — but it's the war itself. creon, how much of a problem are countries who don't follow the sanctions against russia to this whole process? it's clearly a factor. i mean, if you take china as an example, so china is now russia's largest importer of hydrocarbons. something like two million barrels of oil a day. 0n the other hand, the west is a very large market, as well, for the things that russia wants to sell. and china itself will be quite cautious in how far it wants to go down the road of full and total support for russia and assistance to russia. and there are a number of factors to that.

one is they know, in the long term, that china and the west is very integrated, and they need to maintain reasonably good relations. but secondly, also, chinese private sector companies will worry about the kind of measures that the us justice department can take. so they will also be cautious, perhaps even more cautious than the chinese government. and a number of countries remain officially neutral. i mean, countries like the uae, united arab emirates, mexico and israel. some condemning the war, but still doing business with russia outside of the sanctions. and critics will argue that they're propping up the kremlin war machine. are there economic consequences of not taking a side? i think the key thing is that if you look at the sanctions the west has imposed — i mean, they had three key elements. one is to detach russia from the international financial system. and frankly, the west itself is enormously powerful in that. there are only a limited number of truly convertible

international currencies, and they're all either within the g7 or countries very closely linked to the g7. so cutting russia off from those currencies, by for example freezing the russian central bank's assets, that is very powerful. even though some other countries with their own currencies may not be taking the same kind of measures. similarly, in terms of the freezing of the assets of wealthy people who support president putin, a lot of those assets are in western countries. now, there is an extent to which they may have been able to move them to other countries previously, but again, it's limited. and then, finally, in terms of restricting russian access to international markets where they want to sell and buy, i mean, just take for example the civil aircraft sector. i mean, some 70% or so of russian airline fleets, civil airline fleet, is airbus and boeing, and if you can't get parts, you can't get replacement planes, you know, there really is nowhere else to go,

in the short term, at least. so i think again it is a factor in weakening the effect, but the sanctions still remain very powerful. but creon, do you have sympathy for countries taking this stance? i mean, there's a world price crisis, and they have a responsibility to their people to get supplies at the lowest price. yes, i do. and in a way, and this is true also in relation to some of the advanced countries who have to deal and are dealing with the threat of cut off gas supplies, you have to do in the very short—term what you can do, but that shouldn't become an obstacle to finding a permanent solution over the longer term. creon butler, how i've appreciated your insights and thoughts. thank you forjoining me and i will talk to you soon. so, as we have been discussing, one of the biggest country so, as we have been discussing, one of the biggest countries not following those us led sanctions and buying up lots of russian oil, is india. to find out why, i have been speaking to the former vice

chairman of the top indian government thinktank run by the prime minister. a real pleasure having you on the show. thank you for your time. can we start with this, how has the war in ukraine affected the indian economy? the war has most importantly caused a lot of uncertainty for the indian economy. in the sense that the global situation becomes uncertain and it is affecting investment in the country, but also politically it is raised global oil prices, and given we import 85% of our energy, this has a big impact on our country. do you see the us—led sanctions as a worthy response to russia's aggression? we in india don't really have a direct comment on it or response to it, but it would be best if this could be sorted out and this conflict, this issue could be resolved as peacefully and quickly as possible. the fact remains that the sanctions have also caused an impact, their own impact,

on the global economy. the sooner these sanctions are not needed, the better off we will be, all of us. do you think the sanctions are working, though? yes and no, because i see that these sanctions are also impacting the global economy, because of russia being such a large and important supplier of energy, and ukraine being a supplier of food and commodities, so i think overall, the sanctions hopefully will help to bring the conflict to an early end, but i'm not so sure about their impact is what the us wanted the impact to be, and whether that impact has been borne out.

you know that the critics will say that, by buying all of this extra oil from russia, that fundamentally, india is helping to fund the kremlin�*s war machine. is that right, for the world's biggest democracy? there are more matures and bigger democracies, but i think we need to be evenhanded about this, as to who is financing russia's war machine and how is that going. for us, energy is very critical, as i explained earlier, and the price, whatever lower the price we can obtain our oil and energy, we can carve out exceptions for hungary and poland.

and germany can continue to import whatever they require. i hope india's requirements can also be looked at in— a similarlight. but those same critics will say that you are getting this discounted russian oil and, in effect, india is taking somewhat advantage of the war in ukraine? i think anybody in the world who can arrange for a lower price and imports at lower prices would want to do that. as an economist, i can say that this makes a lot of economic sense. i'm not sure they are taking advantage of it. yes, we are ensuring that our people don't have to suffer from runaway inflation... do you think the sanctions regime, do you think there are double standards in the system? well, there are double standards all round. you have a sanctions but then you permit multimillion dollars' worth of energy

imports over two months. i know too that imports in europe have gone up actually, compared to last year. so i'm not sure... let'sjust put it like this. every country looks after its own national interests, and then there are horses for courses and you do whatever to make sure that your people don't suffer at the result of an unnecessary conflict which is having an adverse affect on all of us. india is walking somewhat of a diplomatic tightrope, balancing relations with russia and countries that are imposing sanctions like the united states. do you think that position is sustainable or eventually will india have to pick a side? i'm sure all our friends and allies realise that picking

a side is not the order of the day, and if we are as good a tightrope walker as we hope we are, i think we would be able to walk the tightrope with help of the friends who understand india's very necessary requirements at this point of time. in international relations, i think all of us look at each other's interests, and it is with that understanding that international relations moves forward. in a sort of messy way, but nonetheless in a manner where we do the best. in economics we say we don't go for the best, but we try for the second best and make that work. and in terms of the indian economy, could india afford to cut ties with russia?

economic is one part of it but also, we have got, as you know very long standing partnership with russia. a very large extinction is imported from russia. i think cutting ties with russia is perhaps not on the table at all and has never been. and i don't think it will be. all of us have to live with this fact that there are some of us who will have multiple and different relations with our friends across the geography. and i think all countries have that to some extent. and i think that is the way the world is structured today. do you see the long—term future as having a new order away from us domination of world trade, for instance, to china? it is not for us. from americana

to something else. no, i think the post—world war ii global order was conceived to be made on rules, and i think along with the uk and europe and india, it is not anyone's hegemonic stance in the world. we are past that. we are way past that. it is a multipolar world and this is where i think formation like the 620, the presidency will come to india next year, will be very important. because we need to push for this rules—based order and convince all players, whetherthe us, russia, china, that it is in all our interests to do that, rather than talk about if there is one hegemony replacing another. rajiv kumar, a real pleasure having you on the show. thank you for your time, i would love to check

in with you soon. thank you very much. i look forward to being on with you again. since the financial crash of 2008, the world has become used to central banks doing all they can to stimulate economic growth by making borrowing money cheap. in fact, very cheap, with near—zero interest rates. but now, faced with skyrocketing prices, these same central banks are pushing up the cost of borrowing in a bid to contain the most rapid inflation in decades. but it is a very delicate balancing act, so will this age old economic formula work in today's highly volatile world? to find out, i have been speaking to a former chief economist at the us treasury. now a professor in massachusetts. professor michael klein, a real pleasure. thank you for your time. can we start with the basics, and perhaps for the uninitiated because occasionally you hear someone say that interest rates are the price of money. is that right, michael,

or is that a flawed statement? interest rates are the price of borrowing it. money that you pay back in the future. the price of money is actually inflation. the inflation rate determines how much you can buy with a certain amount of money. we are in the midst of this cost of living crisis. prices forjust about anything on the up. this inflation we are seeing is higher than it has been for decades. and we know that higher interest rates are typically seen as a powerful tool forfighting rising prices. explain that relationship. if central banks raise interest rates, that makes things more expensive, like cars or houses, because you typically have to borrow to get a mortgage or to get a car loan. so that tamps down demand, and by tamping down demand, you are tamping down price pressures. the challenge now, however, is that a lot of the source

of the inflation is on the supply side, not the demand side. central banks really have very little they can do about that. we know it is a very delicate balancing act, right? it puts the pressure on the central banks, in one way to rein in their economies but without sending growth tumbling. it's a daunting challenge, right? it is, it's very daunting. right now, i'm glad i'm not a central banker. the problem is that you have to try to slow the economy enough to bring down the pressure on prices, but at the same time not slow it so much that you tumble into a recession. this current inflation picture is certainly forcing central banks to become more aggressive, right? we have had something like 45 countries raise rates just this year, and last month's rate rise by the american central bank, that was the third increase this year and the biggest one since 1994. in the face of very high inflation, the highest we have seen in quite a while, central banks are taking an aggressive stance.

although, the time it took for them to take an aggressive stance, many people think that was a little bit too late. do you expect the us fed will continue raising rates at a rapid pace this year? they have given indications that they are willing to do that as long as inflation stays high, and it doesn't look like inflation is going to moderate a lot. just how high could they go? that's a good question and i think nobody really knows. a lot of this depends upon factors outside of the control of the central bank, or indeed any policymaker in the uk or euro area or in the united states, because it depends upon if there are new variants of covid that make supply chain problems severe again, what happens with the war in ukraine, what happens with the energy exports from russia, what happens with wheat exports from ukraine, so all these things are well outside the realm of central bank policy, and as a consequence

you cannot really predict what is going on. as the american philosopher and baseball player yogi vera said, it is very hard to make forecasts, especially about the future. we keep hearing about the worries or concerns of stagflation. michael, what is the difference between stagflation and inflation? stag, and what that means is that stagflation is a combination of stagnation and inflation. this was a term that was coined in the 1970s at a time of a similar kind of supply shock. the price of oil went up very dramatically and food prices were going up. and when something like that happens, you have pressure on prices to rise because of the supply side but the supply—side problem also causes an economy to crater in the worst case, or at least slow down. so you have a combination

of unemployment and inflation, and like today those are very difficult problems to try to resolve by a central bank or indeed any kind of government authority. but if high unemployment is a part of stagnation, —— stagflation, at the moment we don't have that. around the world, we have got the opposite. we have got labour shortages in many parts of the world. so how does that play into that picture? that's right, so what that does is perhaps give central banks a little more latitude now to raise interest rates and maybe that narrow path is a little bit wider because right now unemployment is quite low by historic standards. in say the united states and the uk. so maybe there is a little bit more room for central banks to tighten without causing the economy to tumble into a recession. and let me end on this, michael. if you could stare into your crystal ball, where do you think we might be going in the next few years with interest rates, and when do you think

we will see inflation numbers easing or at least returning to more manageable levels? if i had a good answer to that, i wouldn't be speaking with you now, i would be making huge amounts of money. and i'd be in saint tropez or something like that. as i mentioned, i think this is a real challenge and a lot of it depends on things that are really unforecastable, things like what happens with the war in ukraine, what happens with new variants of covid, so there is another famous saying about forecasting. if you are going to forecast, forecast often. so maybe we can come back to this in six months and i will tell you what i think will happen in the next month, but i don't really want to go much beyond that. professor michael klein, i will check in with you in a few months's time. we will see where we are at. thank you forjoining me. you're welcome. i enjoyed it very much. that is it from this

week's show. you can get the latest updates on the war in ukraine and the impact is having on our global economy on the bbc website or the smartphone app. you can also follow me on twitter. tweet me, i will tweet you back. thank you for watching, i will see you soon. goodbye. hello there. many of us were chasing cloud amounts around on monday, but the thickest cloud that brought some rain at times, well, that was reserved for the far north—west of scotland. let's take a look at this weather watcher picture from highland around lunchtime on monday. the best of the breaks in the cloud, the best of the sunshine and the warmth was in kent in the south—east — 2a celsius, 75 fahrenheit. and it looks likely that that weather pattern will stay with us for a few days. higher pressure is trying to build in from the south—west,

toppling across the high, these weather fronts that will always continue to introduce a little bit more cloud and some showery outbreaks of rain as the afternoon continues into western scotland and northern ireland. the cloud thick enough for some misty, damp conditions across west facing coasts of wales and south—west england. so, the best of the sunshine certainly further east, and that's where the best of the warmth will be once again. 23—24 degrees not out of the question in the south—east corner. that bodes well for wimbledon. i suspect it's going to be another day of fine, dry, sunny weather — very pleasant for both players and spectators. but it does mean where we've got the best of the sunshine, we're still looking at pretty high, if not very high pollen across the majority of england and wales and even into southern scotland as well. let's look further ahead. not that much in the way of change, in actual fact. this weather front will bring more significant rain on tuesday into wednesday, but it will also allow for some more warmth and more humidity to develop, particularly in the far south—east corner.

so, we start to see those temperatures perhaps widely into the mid—20s, maybe eventually getting a little bit higher. there'll be some nuisance rain just clinging onto the far north—west of scotland, more cloud along those west facing coasts once again. england and wales seeing the best of the sunshine and, again, the best of the warmth, so we can't rule out 2a or 25 degrees — that's 77 fahrenheit. we're almost stuck in repeat mode because as we move towards the end of the working week, that high pressure is still with us, still sitting out to the south—west, so it shouldn't get too extremely hot. but we still have the risk of weather fronts toppling across that high and still producing the risk of more cloud in the north, but at the same time, temperatures are likely to peak into the high 20s, and there's a lot of dry weather to look out for. take care.

welcome to bbc news — i'm david eades. our top stories: police in chicago arrest a suspect, following a mass shooting at a fourth ofjuly parade. gun shots at least six people were killed when a gunman on a rooftop opened fire on the crowds below. president putin orders his forces to push on with their offensive in eastern ukraine, after seizing control of the entire luhansk region. and, desperate to learn, we visit the secret school in kabul that dares to teach girls.