STEVE INSKEEP, HOST:
We now know that economic sanctions by the United States and many other nations were strong enough to collapse the value of Russia's ruble this week and also force the closure of the Moscow stock market for two days running. People have been lining up to get currency out of banks in Russia. Russia's central bank has been making moves to prop up the economy. But they are having to act without access to hundreds of billions of dollars in foreign currency reserves that Western nations possess and that Western nations froze. So how far-reaching are these sanctions, really? And could anything be too far? Juan Zarate is a former assistant secretary of the Treasury, now global co-managing partner at K2 Integrity. Welcome back to the program, sir.
JUAN ZARATE: Thank you, Steve. I appreciate it.
INSKEEP: I want to note that some of these sanctions have been tried on countries before, like Venezuela, for example, but not on a $2.7 trillion economy in a country that covers 11 time zones and has nuclear weapons. Do you feel, you know, the full effects of all this?
ZARATE: I don't think anyone does, Steve. This is unprecedented both in terms of scale, pace and the effect on a major global economy. Certainly, we went through this debate in 2014, when Russia invaded and took over Crimea and parts of eastern Ukraine. And there were plenty of discussions about how far to take the sanctions, how aggressive to be, in particular with unplugging Russian financial institutions from the international financial order. But what you've seen over the course of the last week is really unprecedented and in particular from Europe, where you have the unplugging of Russian institutions, the targeting of oligarchs and leadership - and even the private sector now, Steve, unplugging from their interactions, leading to what is, in essence, the financial and commercial isolation of Russia and very much putting at risk the Russian economy. Where this goes next, we are in uncharted territory in the midst of a conflict.
INSKEEP: When you were in the government and considering sanctions on this or that country, I'm sure you thought through, what are the consequences? And what is the end state that we want? What do we want that country to look like when the sanctions take full effect? Do you feel you have a picture of what the current administration visualizes as to what they want to be happening in Russia in one week or one month, or six months?
ZARATE: I think, right now, Steve, this is less about what happens within Russia, although, that's playing itself out with the collapse of the value of the ruble and Russian institutions at risk. I think the challenge here is that the weight of the crisis and the conflict has been put on the shoulder of sanctions. And so the U.S., Europe, Asian countries are using sanctions as the tool of choice - the only tool, in many ways - to confront the atrocities of the invasion that Russia has undertaken. And so right now, the sanctions are intended to punish. They're intended to deny access to capital and goods that Russia needs. Hopefully, they change behavior and deter.
Although, there are limits to what sanctions can do, as we know, and especially when you're talking about a leader like Putin with national identity driving his agenda or even regime survival. There are limits to what sanctions can do. But I don't think this is being driven by a desire to have the Russian people rise up against Putin. Although, maybe some people are hoping for that. This is a use of sanctions to deal with an aggression of unprecedented scale and scope from Russia when we aren't going to put troops on the ground or fight ourselves.
INSKEEP: So you don't think the goal is regime change here, which is something that people talk about on social media. You think the goal is to do something, and this is the thing that is available to do. Do you think, though, that President Putin is likely to feel any pain?
ZARATE: Well, I don't think he personally will feel any pain. Certainly, there's an attempt to target him. He's been now listed as part of the sanctions. There's an effort, I think, a genuine effort, now to go after his assets and those of his cronies and oligarchs around him. You've seen in the private sector a tracking of yachts and private planes. And I think the U.S. government has set up a task force to look for the assets of these kleptocrats. So that's very real. That will hurt him eventually. But he is immune from the effects of this. He is going to continue, obviously, to march forward in Ukraine. And the effects will be felt by the Russian economy, no doubt. And for anybody doubting the effects of sanctions, you just have to look at what's happening already to the Russian economy and the lack of faith in Russian institutions. And I think Putin himself probably calculated that there would be some reaction, perhaps didn't calculate for the massive and quick reaction he's seeing now.
INSKEEP: Let me ask about a couple of possible side effects, one of them being on the United States. We learned, if we did not already know, that the Russian central bank, when they pile up foreign currency reserves, that money is effectively sitting in the United States and available for the United States to freeze. The U.S. has done that. And London has done that. And other countries have done that. If I'm - I don't know - a foreign despot somewhere, thinking of doing something that the world won't like, am I just going to be less likely now to rely on the United States as a place to park my money?
ZARATE: This has always been a potential externality or a side effect of the use of sanctions aggressively, especially when the U.S. uses its dollar dominance, the attractiveness of its capital markets in furtherance of national security. And so I think it's always a possibility that you're going to have despots, autocrats or rogue regimes evading U.S. sanctions, evading the U.S. economy. But what's important here is you have such a widespread, international response. This isn't just the U.S. unilaterally. You have European institutions and even the private sector on its own - whether it's BP and Shell or Maersk, or the Norwegian Sovereign Wealth Fund - all deciding they don't want to do business with Russia. So this is, I think, less an issue in this case now, given the nature of the sanctions response.
INSKEEP: The sheer scale of it. One other question, though, Mr. Zarate. We're dealing here with a nuclear-armed nation, thousands of nuclear weapons, with a leader who's turned out to be less predictable than people thought just a week or two ago. And now the U.S. is economically backing Russia into a corner. Is there a scenario where this goes too far?
ZARATE: Perhaps. And Putin has warned this. In one of his statement, he said, if we are part of the system, we will, you know, feel a part of the system. And that was a veiled warning, I think, that if they are unplugged or feel too isolated, they may feel more willing to put that system at risk, whether it's the financial system, through cyberwarfare or in other measures that they can take. So that is a danger. And Russia can bite back.
INSKEEP: That used to be the argument for trading with authoritarian nations, was to get them inside the tent in some way. Mr. Zarate, thanks so much.
ZARATE: Thank you, Steve.
INSKEEP: He is a former assistant secretary of the Treasury - Juan Zarate.
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