in february of 2022 and and all of difficulties that have accompanied that. the book is based on ms. baker's own personal experiences as a reporter in russia and then the interviews that she's done with scores of people, all of the important characters in this drama. so i want you to order it, to buy it, to read it, because you will really enjoy it and you'll learn a great deal. as i did, too. and it will really help you understand these very and challenging times that we live at. so my first question, i think is going to be an obvious one. why did you decide to write this book? what was your motivation here? right. well, as soon as the full scale invasion happened, i realized it was the end of an era and one that would sort of bookend my career in a weird way that i'd

started out as a young reporter in russia where i fell into covering economics and finance, because that was the big story in the 1990s, the transition to capitalism in russia and, that all these companies flooding out of russia as a result of this dramatic hack, unprecedented invasion of a sovereign country, that this would really change things for the foreseeable future. i did not see this ending anytime soon. i had a lot of people saying, well, what happens if the war ends? and i thought, i don't think that the economic war is going to end any soon. and i also thought this was an interesting example to look at because we've never imposed sanctions on an economy as large as russia from a coalition, as large as the one that was assembled after 2020 to the u.s., europe, u.k., japan and australia represent something

like half, half of the world's gdp. and so i just thought it was a really interesting experiment to examine. would it work and how well would it work? and that this is a different challenge than sanctioning north korea or iran, for instance, because as you mentioned, russia is so much more integrated. the global economy, something that i covered for the past three decades and that was going to be much harder to impose these sanctions on russia. and i wanted to explore would be the limits and how it would work, particularly because russia as a nuclear power invading a sovereign neighbor that that the response really shifted to the economic sphere that we didn't have too many other tools to play besides military aid to ukraine. and i thought it just it it it created all these fascinating, frankly of billionaires with

their fortunes locked down and massive legal fights over assets, interesting policy questions about how to limit putin's oil revenues with know policymakers thinking outside the box. so i thought there was plenty of interesting material to explore to narrate this book. well, we're going to come back to the sanctions and all these interesting characters, particularly on the russian side, involved the people who were sanctioned. but let me take you back to the 1990s, because that's really how you start your book. when you were a young reporter in russia and you write this, you know, very eloquently, when the soviet union collapsed. and i'm going to quote you now, you say the end of the cold war gave rise to optimism that a new democratic russia would emerge from the shriveled of the soviet

command economy. and indeed, there was a lot of optimism. there was a lot of hope, a lot of belief that russia having had 74 years of soviet socialist communism would really want something different and would want to join the west in many ways. and we now know, of course, that these hopes were largely missed placed as was the western belief, that know if you had closer economic ties with russia, that somehow this would create a better environment, the political relationship, that the two that these two aspects of the transition that we hope would take place were linked. but of course, we now know, as i say, that that didn't happen. so i'd like you to talk a little bit about what you think went wrong. how much is the west to blame for the fact that the 1990 ended with the ascent? vladimir putin and we know what after that? or how much this was really due

to domestic russian internal russian forces over which really we didn't have much control and maybe many people in the west didn't fully understand. so i'd like. your thoughts on that. you were there at these during these very important times, including when russia that experienced a near economic collapse in 1998. that's a really good question. i think it i think it's a bit of both. i don't you know, we can't place the blame on the west entirely that there were domestic forces in russia. but i do make the point in the book that i don't think that the west rose to the challenge, the collapse of the soviet union and in the end of the cold war. and it really struck me with hindsight, obviously, as a reporter a young reporter in russia in the 1990s, i traveled and spoke to lots of and did a lot of reporting and spoke to lots of people coal miners who were unpaid textile workers who were also unpaid.

i mean, the trauma of that period. with hindsight, i mean, was really striking to me as i tried to recount that period. and i think it did it did strike me as a lost opportunity that the west did not provide more economic assistance, particularly in those very early years. i'm talking, you know, early 1990s when there really was a moment, i think, to step in. and i think political considerations elections in the united states got in the way to some extent i mean you can argue both ways that if the west had stepped up and provided more economic assistance to, russia during that period, maybe some of that money would have been stolen. you know, because of the corruption that ensued that we saw unfold over the the rest of the 1990s. but i do think that it was such a huge moment and there wasn't any kind of massive financial

assistance help mitigate some that economic trauma that, i think helped give rise to a leader like putin and. you know, obviously, yeltsin was a very complex hearted figure with his own, you know, a drinking problems and the like. but that there wasn't enough attention paid to the sort of building of democratic institutions and and the need for checks and balances on the power of the president. i mean, i, i reference in the book yeltsin's regrets about things that he might done differently with hindsight, like calling early elections to get rid of the communist dominated, for instance, that would have that you know, frustrating some of his reforms early on. it's always easy to with hindsight and think about things that could have been done differently, but i did note jeffrey sachs, who's now somewhat controversial figure when it comes to russia, he he

had advised the yeltsin government early on and he was calling for a marshall plan for. russia massive economic assistance. whether or not that would have made a difference. it's unclear. but i do think that we did not rise to the challenge of the moment. yeah, i really agree with particularly about the marshall plan. i know when i was interviewing people for the book i wrote on us-russian relations. i mean, the russians i talked to said it would have made a big difference. and the us answer to that was, well, you know, the ussr collapsed. congress would never have voted on this. and you know, we moved on to other things. so i think you're right there. i'm not sure much influence we could have had over the schemes that you describe well in the books. first of all, the privatization and then the loans for shares, which was, you know, when they thought the yeltsin was going to lose the election. and so the oligarchs got together and and raised money for him. and then, you know, bought a for

a fire sale price. some of the important assets in russia. i don't know how much we could have had, but i think it would have made difference at the beginning. but of course, we are where we are now. so move on now to the first, if you like, invasion of ukraine by in the 20th century, 21st century by russia in 2014. so in 2014, putin annexed crimea and then russia begins to support what were called separatists, but were really russian proxies in the eastern part of ukraine and. the obama administration has to respond to that. so i wonder if you could talk about the kinds of sanctions that were imposed then what explains what now appears to be the rather weak obama to this? first, russian incursion into ukraine right. i think it was a really interesting period to explore the economic response to russia's annexation of crimea and the the invasion into the

donbass. they were caught very unaware and unprepared and i would say they weren't. there wasn't a deep bench. i would say, in terms of russian expertise. they weren't expecting it. so when it happened, i think there was reluctance to move ahead. a strong economic response, strong sanctions without, having europe on board and at that time, europe was as it was in 2020, to very dependent on russia for in particular, oil and gas. and that made the europeans quite reluctant to move ahead with any kind of very strong economic penalties. and, you know, i go into some of the state department people, including dan freed, who was leading the sanctions effort and trying to persuade the europeans to get on board at the you know, go into some of the back, back and forth about whether or not to hit russia with sanctions. remember, this was a huge to try

to impose sanctions on russia. we'd spent the previous 25 years trying to get on board, integrate them with the western economy. it was a big deal to sanction russia, but what they did end up imposing was what we now call targeted. and i go the deliberations, how to impose sanctions on russia that are meaningful yet wouldn't impose a cost at home in the u.s. or in europe. and some of the ideas were devised. a couple of treasury department officials, as well as white house officials talking, about how to basically attack russia's financial plumbing to make it harder for big russian companies to raise money in the west, that this would be a sort of punitive measure that wouldn't cost the west much, but it would cost

russia much more. and if you remember europe was still coming out of the european debt crisis at that point, i think the u.s. economy, the recovery from the financial crisis was considered still weak. the obama administration just didn't have an appetite for hitting back hard. and, you know, i go into in the book about how obama makes this flippant remark, putin being just a regional power. and i think that is very reflective of the position of the obama administration and its response to the annexation of crimea that it was quite weak that there should have been a stronger response even if europe wasn't willing to go along. in retrospect, some of those sanctions did have quite an effect. but at the end of 2014, oil prices came down and that kind of doubled double down on the sanctions and created a mini currency crisis in russia. it's kind of to unpick what was

the oil price decline, what was the the effect of the oil price decline versus the sanctions? but what what i recounted was this really out of the box thinking about how to use these economic tools in new ways. they'd never done this before restricting company from raising debt and equity in u.s. and european financial markets. that was a an innovative policy that they took on board. and i thought it was quite interesting. and one of the figures i quoted said, well, we know how to fight a financial crisis. can we figure out how to cause one? and i thought that was just a really fascinating idea to explore. yeah. and indeed, as say, the sanctions did probably have more of an impact in the longer run than they appeared to have immediately. but it is i just want to throw thing in his when all of this was on president obama at that point said that ukraine was an existential for russia and it

wasn't an existential issue for the us and therefore, you know, he thought that this was a a commensurate response to what happened there. and i'm sure putin away something from that. okay, let's move along now on to 2021 and the in the run up to the full scale russian invasion of ukraine. u.s. intelligence agencies understood this was coming and they make public, as you point out, some of their intelligence to try and persuade their very skeptical allies who did not believe that russia would undertake this full scale invasion and you describe in your book, and i'd like you to talk about this now, the preparation that were made for an economic response to a possible russian full scale invasion. what was the thinking then of the administration, of the biden administration before this happened on how they would respond economically, this

invasion? well, first off, they looked at the situation and thought if russia invades, our greatest weakness is energy. and they were trying to think ahead about how they could respond in the event that putin either weaponized energy supply or energy, russian energy supplies were off the market. and so there was a lot of thinking about how to use strategic petroleum reserves to get ahead of that and try to european allies to think about how they might wean themselves off of russian energy in the event of an invasion. but i think one of the recurring themes was that a lot of a lot european allies didn't believe that the invasion would actually happen and i do go through some biden administration officials saying, well, let's just plan just in case if it is going to if it does happen, let's figure out what we're going to do. let's come up with a package of sanctions. so i do think when the invasion

actually happened in many respects, they were caught off guard. the scale of the invasion that unfolded, i think there was perhaps some belief that it would be a more limited push out from the donbass, that it wouldn't we wouldn't be seeing tanks rolling headed for kiev. so i think when it ended up being at the worst possible end of expectations, they had to rip up the drawing board and come up with far more severe sanctions to respond. and that did take some time. but we can talk about that a little bit more about that. the response unfolded under the first few in the first few days and weeks after the. sure. i think we do that now. you know, you go into the range of sanctions that were imposed. we will get to those. but one of tools that they used was sanctioning, you know, the oligarchs, people that they believed were close to putin like oleg deripaska. and then we're going to come back to, i'm sure, in this discussion. but the idea somehow being that if you sanction these people,

that the wealthiest oligarchs who had their homes and bank accounts and, different western countries, they would somehow get together and decide, you know, this had to change. they weren't going to accept this. and of course, that proved to be wrong. how much how many illusions do you think there were among some of these officials, the biden administration, about the impact of sanctions on these oligarchs and how that would affect putin? i don't think that there was unified belief in how the sanctions against russian elite would pan out, what effect it would have. i think some people were perhaps overly optimist thinking that these sanctions would cost these oligarchs so much money that they would turn on putin. that quickly turned out to be wishful thinking. so many of oligarchs owe their wealth to putin driving. him out of office would immediately put a question mark

on their own futures and their own assets in russia. so i think that was a misconception. some in the white believed that just sanctioning them and seizing some of their assets would be one way of just exposing the corruption of the putin regime. the russian people in a way that hadn't been done before. and i think that, again, proved very difficult because of putin's grip on media and information within russia. it was very hard for that message to get through. and then i think with sanctioning some of these these oligarchs and then a focus on seizing some of their assets, remember, some of them had been sanctioned in 2018 and the justice department went after assets connected to some of those oligarchs who were sanctioned in 2018. there was hope that that they see some of those assets on the basis sanctions evasion and use those assets ukraine. now that has proven to be far more to do process of

forfeiture. the united states has been very difficult and lengthy you know going through the courts. so but i overall, there was a belief that some of these individuals should have been sanctioned long ago. i mean, if you look at the way economy works, they are all part of the dna of putin's russia. they all control major sections of the russian economy. and with with putin putting the russian economy on a war footing, they're all feeding that economy. so i think and it soon became clear that they were worthy targets of sanctions just on those grounds, because if you're going to try target sanctions, undermine putin's ability to maintain and finance the many of these figures, these billionaires are worthy of sanctions to try degrade putin's war machine. yeah, i think that's that's a very important point. and let me step a minute.

when cia director bill burns went to moscow in november of 2021 to warn russian officials and putin, with whom he as you say, he spoke by phone when he was that the us knew russia was doing and to to to tell them that if they in fact did that full scale invasion there would be very severe sanctions. this there was a belief think that this might have deterred putin but it didn't do it. so if you could talk a little bit about putin's own reaction to this and his thinking or did he believe any that if he undertook this full scale invasion, there would be more severe? but it really didn't bother him. right. so there were the this messaging exercise by bill burns and others of the economic consequences if he invaded. now, i think on one level, he probably thought it would be more along lines of what happened in 2014, that there

would be too much division, particularly within europe, to generate a united response. i don't think, you know, i think he was taken by surprise by some the measures that were taken in particular the decision to mobilize. russia's $300 billion worth of central bank assets, the west. that definitely took him by surprise. but one of the challenges of using sanctions as a deterrence is if you tell, your opponent, what you're going to do, they're going to respond in kind and try to move assets around. so there was they were limited in terms of how much they could spell out, well, we're going to do x, y and z because that removes leverage. you don't want to give just like in a kinetic or you don't want to give your opponent a road map of what you're going to do. so i think there was debate about whether or not to impose sanctions before the invasion as a way of deterring putin.

you had countries like poland and the baltic states arguing for that and others, you know, arguing for what i refer to, olaf schulz calling strategic ambiguity. and i think in retrospect, there's some debate about whether or not that was an effective policy, whether or not a major sanction move in the run up to the invasion would have had an effect. i'm not so sure i do think that putin was intent on invading. one of the things that i detail in the book is that putin doesn't really care about the long term health of the russian economy. he cares about his own wealth and the people around him. but he's not he's not focused on the long term, productive of health of the russian economy. i think that's a very important point. he cares about what happens as long as he's in power, he's around when he's not. he really doesn't seem to have any concerns about that. how difficult was it even in the run up to the war and particularly once it started to get the european on board? and how effective do you think

people in the biden administration were in persuading them that they should also these quite draconian. i think on the central bank assets there was rapid a rapid coming together within the first 48 hours. essentially of russia's full scale invasion, a decision to mobilize those reserves. and that was quite remarkable. on some other things, i think there was more division, particularly on, say, kicking russian banks out of swift, this sort of gmail messaging system for financial institutions to facilitate payments. and you even saw in first few days of the word that that there was reluctance to impose blocking sanctions on state controlled spare bank which i think some european countries were worried about how they would pay for energy supplies if if all these major russian banks were kicked off swift and they didn't have a method of paying for their gas.

so think that eventually did come together and europe did come on board. initially, europe was very reluctant to touch energy. but then as i recount in the book, when the atrocities butcher came to light, i think that that caused many europeans, european leaders to do an about face in total shock at the images that they were seeing and that then led europe to propose an embargo on russian oil, including a ban on western services insurance. and i go into that in my book about this. the the biden administration freaking out about what that might do that that it could cause russian oil to be taken out the market and caused prices to spike and potentially a global recession. so i think there was on this key issue of energy and that continued to play out as they tried to articulate the best way to respond. yeah, well, it's i think that's a very important point.

let's stick with the energy issue for a moment. i mean, one of the great difficulties, as you point out in the book of sanctioning russia is because it's such an important in global energy markets. you know, one of the most important, both producers and exporters of oil and gas. and to and to think that you could shut that down or really affect that, i think was that was a real challenge. now i think one of the things that again you go into it which was surprising was how quick europe and particularly germany was able to wean itself off russian gas imports. i mean, and they've been important importing russian gas since the early 1970s. but you also describe russia itself, then cut off the gas somewhat preemptively. but of course, russia continues to export large amounts of oil and gas to other countries and not to so much anymore. so i wonder if you could talk about the oil price cap. you go into great detail that in your book.

why that was imposed, how it was imposed, and how successful do you think it's been? right. so this the biden administration's response to the proposed embargo on russian oil. they thought there's got to be a better we're going to. so they came up with this wonky what many people thought was absolutely crazy, unworkable, to try to put a cap on. the price of russian oil and had to persuade european officials to go along with it and, you know, i recount the sort of trips that of these biden administration officials made to europe to try to persuade them their hair tear, you know, tearing out tearing out their hair, trying to figure out how to get this policy. the line in the end, what they ended up doing, imposing, agreeing a price cap, denying western services insurance, which had put, you know, european and uk insurance had been so important to maritime trade denying western services

to russian oil unless it was traded below $60 a barrel, it took quite a long time to negotiate that number. the ukrainians, as i documented the book, were really thought that this was a great policy, but they really wanted the price cap to be set much lower, knowing full well that russia has sold oil at at much lower rates over the years. and finally, when it was in december 20, 20 to it did have some effect on russian oil revenues for the first few months, russian oil export revenues came down significantly. but then after a few months, russia assembled, its shadow fleet of oil tankers was able to start export its oil outside of western services with these rusty old tankers and shipping its oil to to china and india,

which india has ended up being one of the biggest buyers of russian oil. and i think that did take many surprise. it was one of the objectives of the price cap. the biden administration wanted oil to keep flowing, but it wanted it to flow at a discount and enable countries like india to negotiate you know oil. russian oil purchases at a bargain. but don't think anyone anticipated the scale to which india would pivot and start buying russian oil. you know, that, i think, has taken many by surprise. but i do think oil is absolutely key here. and angela as you know, having studied russia for so many years, oil has always been the mainstay of the russian economy going back decades. it was one of the factors. low oil prices was one of the factors that contributed to the decline of the soviet economy in late eighties. it was a huge factor, hobbling yeltsin's ability manage the transition the 1990s and putin

got incredibly lucky by a relatively high price for oil and the growth you saw in the russian economy in the 2000 was not due to any great genius putin. it was due to increasing oil prices that really helped him reestablish state control over huge swathes of the russian economy. so i think that that the oil price cap is a really important policy i don't think it's been properly enforced, but russia's oil revenues are absolutely key to trying undermine putin's ability to finance the war. oil and gas revenues represent something like a third of russian state budget revenues. so i any thinking needs to go further on how to enforce this cap. and you do see now us treasury officials and uk officials trying to figure ways to actually enforce it and blacklist more tankers in this shadow and catch violations of

the cap. and i think that could really have a much more of an effect on the russian economy if it was properly enforced. yeah. i mean, you do make the very important point that there are these shadow fleets and the russians have been, you know, pretty successful in in evading a lot of these sanctions. but i guess they could be better enforced. but certainly that's all selling well, albeit like with a country, india, at a very discounted price. so you begin your book with a wonderful story about a yacht that the western countries have seized, were trying to impound and. you have very interesting description in the book about how difficult it's been in going after a number of these oligarchs to seize their and then to dispose of them. so, i mean, i have one fun question, which is why, are yachts so important to to these russian oligarchs?