A financial nuclear threat
Cutting Russia off from the international financial system over its invasion of Ukraine has been referred to in recent days as a financial nuclear option. What does that mean?
- Plus, Biden’s historic Supreme Court nomination.
- And, the American employees who are happiest working from home.
Guests: Axios' Felix Salmon, Sam Baker, and Erica Pandey.
Credits: Axios Today is produced in partnership with Pushkin Industries. The team includes Niala Boodhoo, Sara Kehaulani Goo, Julia Redpath, Alexandra Botti, Nuria Marquez Martinez, Alex Sugiura, Sabeena Singhani, and Lydia McMullen-Laird. Music is composed by Evan Viola. You can reach us at [email protected]. You can text questions, comments and story ideas to Niala as a text or voice memo to 202-918-4893.
NIALA BOODHOO: Good morning! Welcome to Axios Today! It’s Monday, February 28th. I’m Niala Boodhoo. Here’s what we’re covering today: Biden’s historic Supreme Court nomination. Plus, the American employees who are happiest working from home. But first, today’s One Big Thing: a financial nuclear threat.
NIALA: Cutting Russia off from the international financial system over its invasion of Ukraine has been referred to in recent days as an economic nuclear option. First, let me catch you up on how this has been playing out. U.S. Treasury action means that Russia's largest banks are already unable to operate in the dollar-based financial system. And the U.S. and EU also say they'll be targeting the Russian central bank’s currency reserves. Every G7 nation has now committed to banning Russia's biggest banks from the dollar and euro-based international banking transfer system known as SWIFT. How effective can this be? And if we're carrying the nuclear analogy further, how devastating is this also economically? Axios’ chief financial correspondent, Felix Salmon is here to answer that. Hello, Felix.
FELIX SALMON: Hi, Niala.
NIALA: Everyone's heard about SWIFT all weekend. First, can you help us understand why this is so important?
FELIX: It's the way that every single bank in the world talks to each other. Imagine like the universal language of international banking. And basically, what the world is doing is saying: oy Russians, we're not going to let you speak our language anymore. If you want to move money around from one bank to another, or from like a Russian bank to foreign bank, or the other way around, you're going to have to find some other way of doing it rather than the really, really easy and cheap and quick way of going through SWIFT. The more important thing, honestly, came a couple of days earlier, when the American said the big Russian banks, Sberbank and VTB, they wouldn't be allowed to have correspondent banks in the United States. And so basically that means at least for those two banks that they're completely cut off from the dollar system and virtually everything still happens in dollars. So that's a really big deal. And then add onto that the central bank thing, Putin had $630 billion in central bank reserves. Well suddenly if he can't get at those reserves, then that's a really big deal.
NIALA: How is it that the EU and the U.S. could prevent Vladimir Putin from accessing $630 billion of reserves in their own central bank?
FELIX: Some of the reserves, he still has access to. And he's literally sitting on physical piles of gold in the central bank in Moscow. And he can take it down to his local goldsmith and try and, you know, sell it for dollars or something. But, if you look at how central bank reserves work in terms of dollars, all dollars ultimately sit in America. And the Americans, as a result, can just freeze those accounts.
NIALA: Is this like the nuclear option economically?
FELIX: It depends how far they go. So the Europeans and the Americans have already said that they want to continue to allow Russia to sell gas to Europe to get some kind of hard currency that way. And we're talking about quite a lot. So those kind of flows of cash are still going to keep on going. But the one thing we know for sure is that the ruble has collapsed and that's just going to make it much, much more expensive for Russia to buy anything at all. And it's going to be incredibly bad for the Russian economy, which was weak to begin with, is going to become extraordinarily weak after all of these sanctions are in place.
NIALA: Okay, Felix, so we heard President Putin say yesterday that he was readying a nuclear deterrent level of combat troops. Is there any danger that these economic sanctions could lead to an actual nuclear threat?
FELIX: When Putin fights back, he's not going to fight back with financial weapons. He doesn't have financial weapons. He's going to fight back with the weapons where he has the most advantage and guess what? That means nuclear. I'm not saying he's going to use nuclear weapons, but that is absolutely what he’s threatening.
NIALA: Felix Salmon is Axios’ chief financial correspondent, and I should add came back from his book leave temporarily to join us for this conversation. Thank you, Felix.
FELIX: Cheers, Niala.
NIALA: A few important things to know about Ukraine this morning: Despite five days of assaults, Ukranians have been so far able to repel major advances by the Russian invasion. But several news outlets are reporting a 3-mile long column of Russian military vehicles headed to Kyiv. A Ukrainian delegation is meeting its Russian counterparts on the Belarus border this morning, but President Volodymyr Zelensky made it clear his officials would be asking for peace, not surrendering. And in New York the United Nations holds a rare emergency special session of the 193 member-General assembly today. In 15 seconds, Biden’s pick for the Supreme Court.
NIALA: Welcome back to Axios Today. I’m Niala Boodhoo.
PRESIDENT JOE BIDEN: For too long, our government, our courts, haven't looked like America. I believe it's time that we have a court that reflects the full talents and greatness of our nation with a nominee of extraordinary qualifications.
NIALA: That's President Biden on Friday, making good on his promise to nominate a Black woman to the Supreme Court, Ketanji Brown Jackson, who is 51 years old.
KETANJI BROWN JACKSON: Justice Breyer, the members of the Senate will decide if I fill your seat, but please know that I could never fill your shoes.
NIALA: This is the first time in U.S. history that a Black woman has been nominated to our nation's highest court. Axios’ Sam Baker is here for more – Sam, good morning. What do we need to know about Jackson herself?
SAM BAKER: Well, the most important thing to know in the short term is that she has a pretty good shot of getting confirmed. Judge Jackson was, for a couple of years, a federal public defender. She will be the first justice since Thurgood Marshall with any experience, whether it's as a public defender or not, defending poor people who've been accused of a crime and have entered the criminal justice system. That is a very real form of legal expertise that is not on the current court, and that she would bring to the court.
NIALA: Sam, so she's been a public defender and a criminal defense attorney. What else do we need to know about her background?
SAM: In a lot of ways, other than the public defender bit, she has a very standard sort of Supreme Court resume. Harvard Law, clerked at the Supreme Court, actually clerked for Justice Breyer who she would be replacing. So she has sort of all the traditional qualifications to sort of be perceived as, you know, not too far outside the box, but at the same time, has this really relevant experience that has been seen as really controversial in the past.
NIALA: I’m sorry, why was that controversial in the past?
SAM: When you’re a public defender you defend guilty people who committed sometimes pretty bad crimes. I think it’s fair to say it’s a bit of a double standard, there are lots of people who defend corporations who do terrible acts and nobody really bats an eye, but, being a public defender, usually you have some very unsavory clients.
NIALA: What's the timeline here?
SAM: Democrats have plenty of time because Justice Breyer isn't leaving until the end of the court's term, which would be late June, early July. The typical time is about 70 days, I think, between nomination and confirmation. So you know, Democrats don't want to wait. It doesn't look like Republicans are going to jam up the works too much. So we're probably looking at something in about that range. But she would not be seated until the end of this term, which means she won't start hearing cases until the court’s next term begins in October.
NIALA: Axios’ senior editor, Sam Baker, who's our resident Supreme Court expert. Thanks, Sam.
SAM: Thanks, Niala.
NIALA: The Biden Administration wants to accelerate the pace of federal workers returning to the office, according to scoop by the Axios politics team. But - we all know that some people have been happier working from home through the pandemic, while others have been itching to go back to in-person work. Axios’ Erica Pandey has new data on this, and Erica: it looks like we’re learning just WHO prefers working from home?
ERICA PANDEY: That's exactly right, Niala. So these Harris poll numbers clearly show that it's women workers and people of color who feel generally more happy working from home and who want to continue doing so after the pandemic. So here’s just one stat: 63% of Black workers and 58% of women say they feel more ambitious when working from home versus the office. And just 46% of men feel the same way. So what's happening here is that a lot of the office politics, office dynamics tend to favor white men. So you see a lot of people who fit into that demographic eager to get back to the office for that comradery, for that water cooler talk, and other workers like women and workers of color feel actually liberated when they're separated from that office dynamics and can just do their jobs from their homes. Maybe they're more productive, but they're kind of out of sight out of mind. So as companies start to formulate their return to work plans, they really need to think about who gained what from remote work and how do we preserve some of those diversity, equity, inclusion gains that these numbers clearly show we made when everyone went home and did their jobs from there.
NIALA: Axios’ Erica Pandey covers the future of work for Axios. That’s it for us today! I’m Niala Boodhoo - thanks for listening - stay safe and we’ll see you back here tomorrow morning.