Former Treasury Secretary Larry Summers said price caps on Russian energy should be stiffened up to maximize the impact of sanctions on the country as the war in Ukraine hits a year.
The former Harvard University president said on Fareed Zakaria GPS Sunday, economic sanctions on Russia haven’t bitten hard because a countries making up a significant part of the world’s GDP, like China, India and Turkey, haven’t participated.
Russia’s economy is set to grow by 0.3% this year, the IMF reported, better than the UK or Germany, despite the sanctions and frozen central bank reserves.
Trade with Russia’s neighbors “has ramped up considerably in the last year, which suggests that they’re serving as a way station for goods to get into Russia,” Summers said.
Summers said the conflict has now become a “war of attrition,” meaning a military strategy where one side attempts to wear down the other to the point of fatigue. The way to win the economic aspect of this, Summers said, is to support Ukraine’s economy, which has left bombed cities and millions destitute.
Russian assets should be the ultimate source to pay the bill to rebuild Ukraine, Summers said.
In addition to Ukraine, Russian assets should be used to support “the developing world that have paid and suffered enormously from higher food and energy prices because of Russian aggression,” Summers asserted.
It could set a “healthy precedent” for countries engaged in cross-border aggression like Russia to lose state assets, Summers added.
The Russian funds are held in international baking institutions, “who in turn hold claims back on the treasuries of the major countries, the United States and the Europeans principally.” It gives them the ability to seize assets and spend them as they see fit, with “strong precedent” from cases in the Iraq War.