Full interview: Timothy Frye discusses Russia-Ukraine war's impact on economy with John Dickerson

[00:00:00] Speaker 1: Let's just start from the broadest perspective as possible, Tim, which is how in your mind has the invasion of Ukraine changed the global picture, not just what's happening within Europe, but even throughout the globe? [00:00:12] Speaker 2: Well, for me, the biggest change has been in energy markets, where prior to the war, Russia supplied about 40 to 50 percent of Europe's gas, and Vladimir Putin thought that this was going to be his ace in the hole, that he would be able to use this to really leverage his position in Ukraine and keep Europe at bay. But to the surprise of everyone, Europe has really stood out in their ability to shift from getting gas from Russia, which makes perfect economic sense, to getting gas from Algeria, the U.S., and Norway. So Putin has lost his sense of leverage, and going forward, it's really accelerated the green transition in Europe, where Europe is now buying 50 percent more solar panels from China than they were prior to the war. So it's going to be difficult for Russia to get those markets back in the future. [00:01:09] Speaker 1: What surprised Russia and the Americans, probably, about the European reaction or the German reaction to this that they had to make so fast on energy? [00:01:19] Speaker 2: Well, I think most people thought that technically it would be difficult, but the efforts of the private sector companies in Norway, North Africa, and the U.S., was really remarkable. Also, Russia is now in response selling more gas to China, Turkey, and India, but they can't use the gas weapon over China the same way they can over Germany and the European Union, where they could divide and conquer the European Union. Now they're much more of a raw material appendage of China than they were as an important energy supplier to Europe, and that gave them a club that they could use to try to get policies that they liked. [00:02:03] Speaker 1: I want to pick up, you mentioned Russia as an appendage of China. So what I wonder is if you think this is true, that Vladimir Putin launched this invasion to sort of create a greater Russia, and yet because he was wrong about energy, he was wrong about how quickly Ukraine would fall, he's ended up now as a junior partner to China. He stumbled into a weaker global position as a result of this. [00:02:28] Speaker 2: Yeah, I think that's right. I mean, if you think structurally, you know, there really are two superpowers, and Russia is a great power as well, just given its geography, you know, it's a large internal market, it's a big player in natural resources. So, you know, it's not a run-of-the-mill country in global politics, but I think the war in Ukraine has really shown the limits of Russian ambition to play on the global stage. If you look at, for example, UN votes, and how difficult it has been for Russia to get countries to back its invasion of Ukraine, you know, most countries, powerful countries, have either been condemning Russia or abstaining. [00:03:08] Speaker 1: What's your assessment of what the invasion of Ukraine has done to the West, or the United States, Europe, and how it's changed in the last year? [00:03:18] Speaker 2: That's really demonstrated the role of the United States as the leader of a broad coalition, not just in Europe, but also in Asia as well. I mean, bringing on board South Korea, Japan, and Taiwan as important players in the sanctions regime. The other issue is the reinvigoration of NATO. You know, NATO was kind of wandering, looking around for a mission, and, you know, they say they're building a bust of Vladimir Putin, you know, at NATO's headquarters because he's really reinvigorated NATO. And if Putin thought that he could Finlandize NATO by intimidating them into being neutral, instead, he's kind of NATOized Finland, as Finland and Sweden are now looking to join NATO. [00:04:07] Speaker 1: What's the sticky material that keeps this alliance together? [00:04:11] Speaker 2: Well, you know, the U.S. has played a key coordinating role, and I give the Biden administration a lot of credit for particularly how they dealt with Germany, which obviously has a very complicated history in the region. And Biden behind the scenes was gently pushing the Germans to kind of make the right decisions, but not be so far out front that the Germans would be seen to be being pressured by Washington. So eventually they got to the right place where they were willing to, for example, provide tanks to Ukraine, which, you know, if we would have thought that a year ago, I think that would have been really difficult to conceive of. [00:04:51] Speaker 1: How have sanctions operated? Have they worked or not worked with respect to Russia? [00:04:55] Speaker 2: So sanctions, it's been quite surprising in some ways. So sanctions have been an important signal of Western solidarity, right? That Western countries are willing to suffer some economic losses and economic hardships to send a message that, you know, violating international sovereignty is unacceptable. The sanctions have also helped to degrade Russia's military capacity. You know, you need lots of the high-tech chips that are more difficult for Russia to get. At the same time, they have not caused the Russian economy to collapse the way many have predicted. You know, Russia is a big economy, you know, 145 million people, well-educated public. And, you know, they are pretty adept at finding ways to get substitutes from China or Turkey. Although the sanctions do make life much more difficult and they've no doubt slowed the Russian economy, they haven't produced the kind of collapse that some people thought. [00:05:59] Speaker 1: You mentioned signal. What did you make of President Biden's decision to visit and actually go into Ukraine? [00:06:06] Speaker 2: So, I mean, a year ago, I think most people would have thought it would have been President Vladimir Putin strolling along the streets of Kyiv. And to have President Biden in his aviator sunglasses walking as air raid sirens are going off in Kyiv, I think, was really important symbolically. And in, you know, chatting with Ukrainian friends this morning, I think it really made a big impression. [00:06:32] Speaker 1: And help me understand that, though, symbolically, it's a huge coup, the pictures are so strong, but how does that manifest itself in real terms? [00:06:42] Speaker 2: Well, you know, he also is, you know, that's a demonstration of the continued commitment of the U.S. to not only provide humanitarian and military aid, but also to continue to, you know, push from behind to ensure that other countries as well are following through with their commitments. [00:07:00] Speaker 1: What position is Vladimir Putin in now after a year? [00:07:04] Speaker 2: So, he launched this war without a lot of elite buy-in and without much support from the mass public. And this was a surprise attack that was supposed to be over in two weeks. It obviously hasn't gone that way. Russian casualties have been very high. But the U.S. government estimates that around 200,000 Russians have had injuries and about 40,000 Russians have died. And to put that in perspective, in Afghanistan, in the 10-year period, the Soviets lost around 10,000 soldiers. So, these are really big numbers. So, Putin is facing a public that, in some corners, there's enthusiastic support for the war. But in, I would say, in many quarters, there's an acquiescence. There is a lack of enthusiasm toward this invasion. And it's very different from 2014 when, after the annexation of Crimea, there was a spontaneous increase in support. I don't think we see anything like that. I think Russians are much more nervous and anxious about this war than Putin had expected. [00:08:26] Speaker 1: Do you have any sense of how this ends? [00:08:30] Speaker 2: Well, you know, I think if we look at war termination, around a quarter of wars end within a few weeks or a month, about a quarter of wars end after about six months. Once wars last for a year or longer, they tend to last for a long period of time, unfortunately. And, you know, the Russian side still has a lot of capacity, particularly if China were to take a more active role in, you know, supplying military aid to Russia. That would be a very worrying sign. Ukraine shows no sign of giving up. The fortitude and the resilience of the Ukrainian people have been just astounding. And I think it would be very difficult for Zelensky to sell an agreement that is short of reuniting all of Ukraine, however we want to define it. So I think it's going to last for a while. Also, we should remember that, you know, a Russian defeat in the war, however we want to define it, doesn't necessarily mean that Putin is going to lose power. Autocrats have often lost wars and not lost power. [00:09:44] Speaker 1: President Biden and others have looked at this and drawn global connections between democracies and autocrats. And how vast do you think the reorganization of our understanding of the globe has been as a result of not only the invasion itself, but then the reactions of the countries that have said, we want to be on the side of democracies and others, like maybe China, who have said, we'll, if not support Russia, we won't punish them. [00:10:15] Speaker 2: Yeah, well, I think the difficulties, the struggles, the incoherence of the Russian military campaign has hardly been an advertisement for autocracy as a form of government. And last year was a difficult year for autocracies. You know, that said, there are still lots of countries in the world for whom the Russia-Ukraine war is a distant issue. India, Pakistan, Brazil, Africa, they are largely on the sidelines of this. So to the extent that this is an event that's kind of reorienting the world, we need to bear in mind that this is really a great power conflict involving Europe with, you know, large parts of the globe as bystanders and sometimes experiencing, you know, damage, you know, particularly through food prices and other issues. [00:11:16] Speaker 1: The economy has changed as a result globally as a result of this invasion. [00:11:21] Speaker ?: Yes. [00:11:21] Speaker 1: We talked about energy prices. How has the global economic picture changed as a result of the invasion? [00:11:28] Speaker 2: Well, the invasion was just another match on the fire of inflation, which, you know, supply chain issues, loose monetary policies in some of the largest economies in the world. And then on top of that, you had Russia and Ukraine, which supply about 30 percent of the world's wheat involved in a conflict where, you know, Ukraine is, you know, lost about half of its revenue generated through wheat exports. And for countries that are dependent on those foodstuffs, like in northern Africa, you know, this was a really, really difficult, really difficult challenge. It seems to be abating somewhat as the global economy kind of rebalances and inflation is starting to come down. But I really think the energy market is one where we could really see long lasting changes. [00:12:23] Speaker 1: So as a final question, it's open ended. So take it anywhere you want. Yeah. But what other big changes do you think are indelible or surprised you over the last year? [00:12:33] Speaker 2: So, you know, some of the dogs that haven't barked. Yeah. So, you know, cyber war. Right. When they when the war began, people thought, oh, Western financial military institutions are going to be targets of just unrelenting cyber attacks from Russia. We haven't really seen that even in Ukraine. Ukraine has been very adept at beating those those kinds of attacks back. So that's been that's been one big surprise. I think another surprise is I think people thought there would be greater resistance from among the Russian public towards the war. We did have, you know, 700,000 Russians left the country immediately and many of them have have stayed abroad. But we haven't seen the kinds of anti-war protests. And in part, that's, you know, a testament to the fear that the Putin regime has been able to instill in their insistence that even minor protests against the war often provoke very severe punishments. I think going forward, we're likely to seek real cleavages in Russian society develop. And similar as we saw in the U in the Vietnam War in the United States, we're already seeing big splits between how people under 40 view the war in Russia and people over 60. There's a huge gap. And I think this generation gap, I think, is going to be a very important thing to watch going forward. That's fantastic. [00:14:07] Speaker 1: Thank you. Thank you so much. [00:14:09] Speaker ?: Thank you.