11 May 2022 EEMEA | Politics & Geopolitics

Podcast Transcript: Tymofiy Mylovanov on Ukrainian Resistance, Russia’s Hidden Economic Weapon and Germany’s Error

This is an edited transcript of our podcast episode with Tymofiy Mylovanov, published 6 May 2022. Tymofiy Mylovanov is the President of the Kyiv School of Economics, advisor to Ukrainian President Zelensky and former Ukrainian Minister of Economic Development, Trade and Agriculture. He is currently focused on humanitarian work for Ukraine. In the podcast, we discuss the three levers of economic power Russia has over the world, the real reason for Russia’s invasion, working with Zelensky, and much more. While we have tried to make the transcript as accurate as possible, if you do notice any errors, let me know by email.

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Introduction

Bilal Hafeez (00:00):

Welcome to Macro Hive Conversations with Bilal Hafeez. Macro Hive helps educate investors and provide investment insights for all markets from crypto to equities to bonds. For our latest views, visit macrohive.com.

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Now, onto this episode’s guest, Ukrainian economist, Tymofiy Mylovanov. Tymofiy is the President of the Kyiv School of Economics. He’s an advisor to the Zelensky administration and former Ukrainian economy minister. We had a hard-hitting conversation and I’m sure you will all learn a huge amount about the Russia-Ukraine war and what it means for the world. Now, onto the podcast.

Welcome Tymofiy to this podcast. I have to say, this is the first time I’ve had a guest who is in a war zone. It’s quite a tragic backdrop that we are having this podcast discussion. First of all, thank you very much for taking the time to join our show.

Tymofiy Mylovanov (03:53):

Thank you. Hopefully it’ll be your last time because we’ll not have any more wars, but this I think is wishful thinking.

Bilal Hafeez (04:02):

Right now, I can see, I think you’re in a hotel room. Where are you at the moment?

Tymofiy Mylovanov (04:07):

I’m in Ukraine, I’m travelling. I run the Kyiv School of Economics and a part of the effort to help defend Ukraine, our foundation. Which in peaceful times, raises money for education and science. Now, it’s raising money for humanitarian and relief and all kinds of needed supplies. And so it’s a pretty big effort. We raised over $23 million now, already, and so I have to travel to secure supplies, talk to donors and ensure a number of other logistical things.

Bilal Hafeez (04:41):

Okay. No, that’s great. Great to know. We’ll talk a bit more about some of those things, but perhaps later on in our discussion. Now, before we go into the meat of our conversation, I always like to ask my guests something about their background so our listeners understand who you are. It’d be good to learn what did you study at university, where? What did you go on to do? And how did you end up where you are right now in terms of your professional role?

Tymofiy Mylovanov (05:03):

Multiple high schools and schools in Kyiv, all of them. Physics and mathematics emphasis as many of Ukrainian scientists and scholars came from this type of Soviet schools. I graduated in the year when the Soviet Union collapsed and that was quite a cultural revelation.

I think there are some parallels to be made with what Russian population or Russians are thinking right now about the world. And that’s the type of… I was in some kind of cultural denial or dismissal and that year was formative for me and helped me become almost cynical about the world. It hurt me quite a bit, but at the same time, I have become very critical and sceptical about everything I learned. I’ve learned that everything I’ve been told in the school for my 16 years, everything was a lie. The world was different. It works different.

So, then I studied in an engineering school in Kyiv about a management engineering degree. Then I went to The Kyiv School of Economics. Actually at that time, it was just a master programme in Kyiv-Mohyla Academy, then Wisconsin Ph.D in Econ. Almost random because there was an emergening markets crisis in 1998. I got kicked out from a… Well, pushed kind of salaries went down in an investment bank I was working for as a director of the back office. Actually, Alpha Bank, The Fremont Bank in Ukraine, which is now is being sanctioned around the world because of their connection with Russia.

I didn’t know what to do. So, I went to the US to try it out, my PhD, and then got stuck there for 20 years in academia. Went to Germany for four years, published a bit, went back to the US Penn State and then University of Pennsylvania. Was a very enlightening experience for me, that Ivy league school. Pittsburgh 2014, Revolution of Dignity, people dying, Crimea annexation. Russia invades the East of Ukraine. So, I get engaged with Ukraine, built a think tank and then a couple of years later, I get appointed to the supervisory board of the Council of the National Bank of Ukraine as an economist.

I’m appointed as the President of the Kyiv School of Economics. I’m developing it for several years. Then Zelensky comes to power. I get invited by his prime minister, Oleksiy Honcharuk, to join as the minister of economy. Resigned from the central bank position, become a minister. It was a short-lived tenure, but I managed to do the land market reform in Ukraine. That was after 20 years moratorium on sales of land. And that cost me almost a political career because everyone attacked me for that kind of vested interest.

I had enough of that, resigned. Don’t join the next government, even though there was an offer to continue. Come back to the KSE, to the Kyiv School of Economics, develop it even more. Move it to a fully-fledged university, open a bachelor programme now and then I get appointed as an advisor back to the administration of Zelensky and also this chair of the supervisor board of the Ukrainian Defence Industry Consortium of State-Owned Enterprises, which have work in producing military stuff. These are my current positions and I still hold the university of Pittsburgh professorship. I teach there and I think there’s the professional career real quick.

The current state of the war and why Russia has struggled to make rapid gains

Bilal Hafeez (08:26):

Okay, you’ve done lots of different things, academia policy as well. But obviously there’s something larger going on at the moment with the Russia invasion or attack on Ukraine. And so in the West, I’m based in London, I consume the media here and we hear stories that bombings everywhere. There’s a lot prominence around the Mariupol attacks, in particular, given the strategic importance of it. What we are seeing over here in the west is these stories of bombings and so on. But then it kind of subsided the background. I’m in financial markets and when I look at the behaviour of financial markets, they’ve kind of started to move on from the war. One isn’t quite sure of where we are in the war exactly. So, it’d be useful if you could just give us some context of where are we, what’s the situation like at the moment, how far has Russia come into Ukraine? What’s the fight back like and then so on.

Tymofiy Mylovanov (09:18):

My impression on the financial markets is that in the way they respond to the Russian Ukrainian war is that they overreact to the news and under-react to the trends. Somehow, it’s not surprising because people don’t understand the context. And so it’s very difficult to see the trends. The trends are quite different from what you’re typically averaging out over what the past war or different war would be. So people base their prediction, responses and decisions, market decisions on what they can grasp from the experience from the past history.

I think things are somewhat different here. It’s a structural different war. There’s at least three economic, truly strategic weapons being used by Russia. One is we have seen it is energy and we see how there’s political discussions and war time discussions about embargo affecting the decisions on trade and they will trickle down into the cost structure and supply chain disruptions later.

The second one is there’s been a little bit of discussion about it, but people are not really, in my view, thinking about it yet quite clearly. Not enough attention has been paid to it. It’s food security because Russia and Ukraine are critical for food security in Africa in middle east and some of the Asian countries. And so, any food security disruption of problems will polarise and create political destabilisation in these countries, which will further create uncertainty in the markets.

The third one, almost no one is talking about the China, Northern China to Europe trade is still going through railroads controlled by Russia mostly, and then through the Baltics, Ukraine and of course not going now. So, there’s additional disruption there in logistics in this region through the Central Europe. So, this is in terms of what it might mean for the economy in the longer run.

In terms of the war, we’re in the second phase of the war. The first phase was the battle of Kyiv. This is where Russia was trying to attack from all directions and was trying to grab as much as possible from Odessa to Kherson to Mariupol to the Donetsk Luhansk, to Kharkiv and to Kyiv, but the grand prize was Kyiv.

It made some progress somewhere like in Kherson or Mariupol and it failed in Odessa and Kharkiv, but then it truly failed in Kyiv, in the Northern part of Ukraine. That’s a big deal, but it’s only the first part. Then they repositioned the troops and they have been trying from maybe the different people put different dates. Someone is saying 18th or 20th of April. They was trying to encircle the Ukrainian troops in the East of Ukraine, but they have not been successful.

Ukrainian troops have been able to push back in the north in Kharkiv and in the south. They’re challenging certain areas in Kherson region. That slows down supply lines, distracts Russian military resources and also makes it difficult or impossible, the original plan of encircling the Ukrainian troops. There’s still plans to probably or attempts to encircle at a smaller scale, but it’s a really slow progressing battle.

There is this important date, May 9. For Russia, it’s the Victory Day of the World War II. There is all this rhetoric about this completely baseless story about as if there were some Nazis in Ukraine, even though Russia is actually behaving more like Nazis now, rather than Ukraine. But that was an important date. That is an important date and everyone in Russia was looking forward to some kind of decisive victory by May 9, because this war is as much the war of symbols as the kinetic warfare.

This is not happening and if it’s not happening, there’s no clear symbolic point and I think we are looking at a very long summer in the east of Ukraine where there’ll be a lot of brutality, a lot of slow developments and something is going to give. Either it’s going to be the Russian troops and that will trigger a major Russian political crisis internally or it’s going to be that Ukraine will lose the territory and then there’ll be some kind of separation of Ukraine.

But I don’t think the latter, separation of Ukraine or split is actually feasible. Russia would have to destroy a lot of people and a lot of territory and it’ll take much longer than several months for this to happen. So even if they’re successful, somewhere like in Mariupol or they get much more progress, tens of kilometres or 50 kilometres in certain areas in the East of Ukraine, that doesn’t mean anything.

In a sense that Ukraine will fight, the West and the world will supply, and it’ll continue. People are making a mistake in terms of expecting implicitly or not being pretty open about it, that we are looking at months, if not years of prolonged warfare and it’s not going to be resolved diplomatically, it’s going to be resolved through the field. Unfortunately, for everyone it’s really unnecessary war and we tried that before, as humankind.

We know these wars don’t work, they don’t help, they don’t resolve anything. You have to go back to diplomatic solutions, and you can’t destroy nations. You cannot just announce that Ukraine is not a nation and I’m going to capture it. No. Whatever you like or don’t like, that’s a sovereign nation. You have to keep the territorial integrity of this nation and you have to work through diplomacy and Ukraine is getting involved… Well, it has always been, but Ukraine is expecting that it’ll gain its free February 24 territory back at this point.

We should understand the fact that Russia hasn’t been able to capture Ukraine within three days or a week as many people wrongly predicted.

The state of the Russian army compared to Soviet times

Bilal Hafeez (15:18):

On those three days, at a naive level, people look at Russia, huge military and nuclear weapons. They had a Cold War with the US, where the two biggest armies were lined up against each other. So, one can understand at least from a naive perspective, why people expected Russia to win very easily. Why didn’t they win so easily? Surely, they’ve got huge amounts of military they could just roll into Ukraine and just take over the whole country.

Tymofiy Mylovanov (15:42):

That was the expectation. That’s the same point I was making earlier when I was saying people are trying to average over the past experience, which is not relevant. Russia today and Russia military today is not even the Soviet Union of the ’80s when the Soviet union was collapsing. It’s not even close. There’s some ushering around it, but you see, they cannot get their tanks to move. They cannot resupply their troops.

Their discipline and their training is subpar. It’s not a major military anymore. Yeah. There is brutality and they’re willing to sacrifice people and they have a lot of people, but it’s truly, truly very mediocre. I think people should have studied Ukraine rather than Russia to try to understand what’s going to happen. I think there’s also an element of this West-splaining or Russia-splaining kind of when we only focus on Russia versus the West living out of the picture, the Ukrainian people.

And first of all, there 140 million people in Russia and there are 40 million people in Ukraine, so it’s not a small country. Even compared to Russia. If we mobilise… And we have much higher stake to survive than they do to attack us. We can mobilise millions of people, several millions of people. For them, it would be a major deal to mobilise several million of people.

Furthermore, if you look at the history in World War II, Russia, we’re thinking about Russia as the Soviet Union, but Ukraine was a part of the Soviet Union and Ukraine, military and military capacity there was the part. Even if we look at World War II, a lot of the size of battles where fought in Ukraine with Ukrainian people being on the side of the Soviet union, against the Germans, against the Nazis. So in that sense, somehow Russia has managed to capture the Soviet Union legacy, but it’s only one of the republics.

They’re not sending most of the people from Moscow. They’re sending people from remote and sometimes very poor area, so they’re behaving as a colonial power. What they’re doing is they’re sitting in Moscow and they’re robbing people, let’s say in Siberia of the taxes they should pay for gas and oil that they develop there. So people are truly poor there. The wells gets accumulated in Moscow and then they recruit those people, put them in tanks and send to die in Ukraine fighting another nation.

And then later they capture some of the areas in Ukraine like Luhansk and Donetsk and then mobilise people there who before 2014 were Ukrainians. And now they send them to fight against Ukrainians. This is really a colonial behaviour. It’s like Romans did or Alexander the Great. They would conquer an area and then force those people to fight the next area.

That’s what they are doing. This is pretty outdated. It’s pretty brutal of course, but it’s not working in the modern world. So in that sense, I think anyone who paid any attention to what was really happening with the history of these places would understand that Russia is probably going to… It’s like the beginning of the end for Russia when they decided to attack Ukraine full scale.

Bilal Hafeez (18:45):

And in terms of the Ukrainian side, what is the state of the Ukrainian military before this war? Before 2014 and since 2014, one could say since the initial attack from Russia.

Tymofiy Mylovanov (18:56):

We can look at the history. In 2014, Crimea was annexed and there was not a single shot fired by the Ukrainian military. That time, just before that, the government which fell was very pro-Russian. Corruption was widespread. The military was weak. Morale was not there, there was no ideology.

And so Russia attacked. And then in 2014, right after the annexation, they annexed Crimea in the spring and then in the summer, they moved on Donetsk and Luhansk. I remember videos where people were stopping troops. They were stopping…

Ukrainian people were stopping troops because you shouldn’t be fighting anyone. It’s like Russian brothers and something. The attitude completely changed. You’ve seen now videos where Ukrainian people, Russian speaking Ukrainian in very Eastern regions, they come out, they’re in demonstrations, in protest against Russian occupying troops, risk in their lives.

You’ve seen that in Kherson, you’ve seen that in Melitopol, you’ve seen that elsewhere. So the public attitude, the citizen attitude has changed dramatically over the last eight years. Now, in terms of military, there were two decisive battles, Debaltseve and Ilovaisk after which were lost there in 2015, 2016 in those years, in the East of Ukraine, a lot of people, a lot of military died. By today’s standards or today’s scale. This was very minor. There’s like a tank battalion coming from Russia, destroying our battalions. We’re having a humanitarian corridor, 300 military being evacuated, all being shot at by Russians and killed or losing 100 people or 200 people in Donetsk airport.

This is all, by today’s measures where we are talking about thousands of people and sometimes with tens of thousands of losses on Russian losses and we don’t reveal Ukrainian losses. They’re not public.

But losses are substantive on both sides. That was just a little episode. But then at that time, Russia was able to secure it. One and two, two decisive battles was essentially one or two battalion tactical groups. Now, they have 100 and they couldn’t take Kyiv.

So that answers the question, how much Ukrainian military evolved. They have 50 times more troops today and they cannot secure any decisive battle in Ukraine. In that sense, it’s a very different military. It’s a different world. If they scaled up their attack capacity 50 times since 2014, and they cannot do much with that, they probably need to scale it up another 10 times and they don’t have that resource.

In that sense, they’re stuck. Strategically, they have lost because they have demonstrated to the world and to Ukraine their weakness and domestically. Now they are scrambling to find a way out and their strategy is to double down, which is an okay strategy if it is a strategy and not a sign of desperation, but it looks like it’s just a typical dictatorship move where I’m going to be stubborn, and you know how it ends. Dictatorships implode at a high cost for everyone, for Russians, for Ukrainians, for the world, but it will implode.

The real reason for Russia’s invasion

Bilal Hafeez (22:07):

One thing that many of us were kind of scratching heads was why did Russia start this war? Timing-wise, it was why now and why not back in 2014, did they do the full manoeuvres that they’re doing now? But if you said even further back, what is Russia’s issue with Ukraine? The Russian perspective is that there was an encroachment of NATO, EU into Ukraine, which was then on the borders of Russia. That’s a challenge to Russian security. And then the other thing that Russia’s mentioned is how Ukrainians were treating the Russian speaking population, Eastern Ukrainians, that was in some way, they were mistreating a part of the population. And so hence Russia had this need to come in. So, in terms of that context, that’s Russian, what they’re presented, motivation to do these incursions.

Tymofiy Mylovanov (22:54):

So let’s discuss this two motivations and then go to the reasons. One motivation is with the Russian speaking, people being abused, their rights being abused. I’ll give you date and then I’ll give you an anecdote or maybe the other way around. I am what they call an ethnic Russian. I am an as ethnic Russian as it gets. Part of my family is from…

I’m quarter Lithuanian, quarter Ukrainian and half Russian ethnically in terms of Soviet Union passports. Yeah, I have original Ukrainian roots through those Russians, but they’ve moved during Stalin times to Siberia, so we’re considered to be Russian. We are victims of all of this strategic population designed by Stalin. But I’m ethnic Russian they’re trying to defend. I switched to Ukrainian. I became extremely pro-Ukrainian in 2004, when they tried to poison our president, our candidate.

People might not remember that, but there was this Yushchenko election, and he was poisoned. And against him, Yanukovych ran, who then later was ousted in 2014. So they have been trying to put this Yanukovych in power since 2004, even poisoning the opposition candidate who won anyway. There is a story behind that. We, ethnic Russians have nothing to do with Russian need to protect. They don’t own Russian language. Russian Federation is not equal Russian language, Russian culture or Russian history.

These are different people in different culture. What Russia is doing has nothing to do with Russian culture. Today, it’s not Russian culture. It’s some other culture. It’s really awful. It’s a dark place. There’s nothing written there about killing kids, destroying cities, taking land by force. There’s nothing about that. That’s not that culture.

They cannot claim the good culture and then deny bad using excuses. They are as responsible for the atrocities, which are happening now. If that’s their culture, the war crimes, that’s their culture. They’re not Russians in the sense that they’re trying to portray, those great Russia.

That’s one point, I think. That’s all a false reality construct. Now, if we look at the data, there’s no data supporting any abuse of Russian speaking people. Not any systematic evidence, not anecdotes, not stories. Let’s look at the number of people who died because a part of this Russian abuse story is that, “Ukraine has been bombing people in the East.” That’s the argument. “And we came to protect them.”

That’s actually not true. A lot of people died in 2014, 2015, but that’s exactly when Russia invaded the East of Ukraine. At that point, they denied it and said, it’s a civil war. But later we showed to the world, the evidence that this formal troops regularly, troops of Russia and they still kept saying that it was a civil war. But 2014, 2015, 2016, people were dying. 14,000 people overall died in the areas where there was active military fighting on both sides.

And then 2018, ’19, ’20, ’21, almost no people dying there. Like two, three, 10, 15. This is the numbers. More people die from traffic accidents in Kyiv on a given day than people were dying from military fighting in the East of Ukraine. So this is absolutely not true that there was anything happening with respect to any kind of population, minority or majority in the East of Ukraine. That’s a manufactured conflict by Russia that provided indecisive moments. They provided regular troops to keep the balance of the conflict in the favour of the Russian interest.

So that’s on the ethnic Russians and I am an ethnic Russian, and I represent them. I have nothing to do with that Russian Federation, which it has become. That’s not Russian culture.

Now, the second argument was NATO, but it’s not NATO that invaded Georgia. It’s not NATO that generated atrocities in Chechnya. It’s not NATO that have done anything in Moldova, in Istria. It’s not NATO engaged in the conflict between Armenia and Azerbaijan. It’s not NATO in Kazakhstan entering troop and it’s not NATO suppressing protests in Belarus.

There is a pattern of using violence to achieve geopolitical goals. NATO, there was no support for NATO in Ukraine until 2014. And even then it was controversial how many people were in for it. But of course, after 2022, everyone is supporting joining NATO. So if anything, the opposite is true. NATO didn’t want to take Ukraine. Never wanted to take Ukraine.

After 2014, after invasion in the Eastern of Ukraine, Ukraine wanted really badly, at least part of the people. And we put it in our constitution that we want to join NATO and NATO was not given us any reasonable, any realistic, any constructive framework to reach them. Not even some form of association or enhanced membership, enhanced partnership nothing.

So, in that sense, there’s no evidence and there’s no reality that NATO has ever been an option for Ukraine. Of course, now everyone similar to Finland, Sweden and other non-native countries, everyone is running to NATO because excuse me, you really need protection from Russia.

Bilal Hafeez (28:33):

What was the underlying motivation of Russia then? Why do they want Ukraine?

Tymofiy Mylovanov (28:37):

I think they’re collectors of lands at this point and they’re not thinking in the Western world realities, they’re not measuring it in GDP, in wealth and prosperity, in values and human rights, in longevity, life expectancy, environmental terms. They’re not concerned about this. It’s just the land they control. They’re collectors of land.

Furthermore, I think their logic is really in a sense for them, Russian people also don’t have agency. Russian people are serves. They don’t have a say, it’s the same president who cares how they vote. If someone says something against the political leads, they go to prison or they get poisoned like in London or assassinated. So you don’t have any say. You shut up. You don’t have any agency as the people of Russia. At best, we can let you immigrate, run away if you are not loyal and you are lucky if you do that.

That’s their attitude towards Ukrainians too. It’s not a state, because they cannot be a state. People don’t have a say they could be elites, but these are not our elites. So there must be Western elites or there must be some kind of regime and if only we take it we overtake it, we remove it. Then things will be good because we will finally get loyal regime to us, like in Belarus and people would support because people don’t have any say. In their mindset, people out to be controlled.

Whether Russian oligarchs can influence Putin

Bilal Hafeez (30:04):

What about the oligarchs in Russia? Obviously the west has imposed sanctions on the oligarchs and I wonder, do the oligarchs have any influence on Putin?

Tymofiy Mylovanov (30:13):

I don’t think so. In Ukraine, we have the same problem. We have oligarchs and Putin have put them under much control. When Zelensky tried to put the oligarchs under control, he got a lot of pushback in media and in courts and in economics. In that sense, we have a similar problem. Oligarchs there, oligarchs here. But it’s very clear that oligarchs don’t have much say neither in Ukraine at this point nor in Russia. They are enablers in Russia of the regime, of course, because that’s the mode. I think part of the problem in Ukraine is and maybe that’s partly why they thought that they would be successful because they thought, this is your political realm too. The system is run partly through oligarchs.

Some of these oligarchs feel that they’re more powerful than ministers. I’ve seen those multiple times when an oligarch would put themselves above the president. They would try to discipline the president of Ukraine. It doesn’t work with Zelensky. That’s a separate story.

But I think in Russia, oligarchs are disciplined and they are kind of a part of the system in which you can steal. You can rob. You can exploit the public. That’s the same story, how you become an oligarch because you kind of steal. In colloquial language, you steal, but in practise you get really cheap assets. You build a monopoly and then you exploit your monopoly, political and market power to continue to earn rents at the expense of everyone else. That’s the same attitude where you don’t take, you don’t respect the people, you don’t respect the agency of the people, you don’t respect the notion of competition, you don’t respect the notion of one person, one vote.

You put yourself above the law, you put yourself above the people. And so that’s the notion of oligarchs. And then you build around yourself a fortress with media, with capture judges, with paid politicians to maintain the system, to kind of reproduce it. So we have the same problem, but to a much lesser extent. Our public is truly against the oligarchs. They have been fighting against the oligarchs all the time. So in that sense, it’s a very different scenario. I think it’s paradoxical why out of the post Soviet Union republics, I’m not counting the Baltics because they haven’t been in the Soviet Union long enough, but Ukraine is the only one which is democracy plus Moldova. But fundamentally, everything else went back to normal.

Oligarchs and the political elites are ruling and oppressing people. That’s a very simple model and whoever disobeys or tries to compete, they either disappear or have problems or get arrested or pushed out to exile and you name country after country, that’s the story. Ukraine somehow is different. That’s a puzzle. But once you understand that Ukraine is different, then something fundamentally is at play in Ukraine. And so, the role in Russia should have been alert to it, that there are…

It’s not individuals, it’s the gravity forces, the fundamental sociological geopolitical forces at played there in Ukraine and I think it’s a much bigger deal what’s happening because there are truly two models of running the societies at play, the Russian model and the European model. Ukraine has chosen the European model consciously or subconsciously and has been successful.

The successful case of the Soviet Union culture, which has become European culture or maybe has simply been oppressed. And so now, it’s standing alone, standing sober and standing independent. In that sense, it’s threatening… I don’t necessarily think that they view it from the strategic perspective. But it’s definitely annoying for the Russian elite that the Ukrainian president can put under arrest a pro-Russian oligarch, because it’s the right thing to do and it wouldn’t budge negotiations and it would demand the sovereignty and integrity, territorial integrity of Ukraine.

Wouldn’t submit to Russia. That is annoying. From their perspective, it cannot be the people, right? Because if it is the people, then there is a problem, the Russian people can rise. No, that cannot be. So it must be the regime. So let’s remove Zelensky and let’s solve the problem. But it’s not working like that. It’s not Zelensky per se. Zelensky is the leader, but he leads the people.

When China will intervene

Bilal Hafeez (34:30):

Just coming back to Putin, I’m trying to understand the pressure points on him. Do you think he’s got a selection of advisors that can influence him? Can China influence him or is he just makes his own decisions and he’s erratic and he just does whatever he wants?

Tymofiy Mylovanov (34:46):

He’s not erratic. He’s probably poorly informed, but he’s rational in his own way. He has his own rules that we in the West don’t want to learn. I’m not saying we should, but I’m saying that in order to understand the enemy, we should understand his logic. He does have the logic and this is the logic of force. It’s a little bit of mediaeval, or maybe 19th century logic.

Bilal Hafeez (35:09):

It sounds like he’s like the mediaeval colonial empires. Say you have a central figure, they get a lot of value from owning more and more land. They want sort of expansive feudal structures or surface structures, different versions, ineffective de facto slavery of different kinds. That kind of viewpoint. It’s like going back 500-600 years or something.

Tymofiy Mylovanov (35:28):

Yes. And so if you want to break throughs, it has to be done by force, not negotiations. There’s nothing you can order on the table through diplomacy, through trading you. Whatever you offer me, if I’m stronger than you, I can take it.

Bilal Hafeez (35:41):

Can China influence Russia? I mean, there’s a lot of expectation that China could bring them to the table and tell them to stop.

Tymofiy Mylovanov (35:49):

Not yet. Russia has to get weaker. China will milk this conflict to its benefit. I think China will come out the real winner here because they are the pivotal player, but they’re not going to play their hand in my view frivolously.

They wait to see who’s going to get weaker and then they will come and try to maybe mediate in the interest of the winner, but the rents will have to be paid by the loser. I think Russia will in the end. So the tragedy of Russia, it’ll become dependent on China.

Bilal Hafeez (36:20):

Yeah. It’ll become a client state of China, ironically. Now, you did mention Chechnya in part of early discussion. Obviously, there were two Chechen wars like Russia sort of attacks Chechnya, the first version of it in the ’90s, the mid ’90s, Russia lost. It took like three or four years or something. Are there parallels with what we’re seeing now with Ukraine in terms of an expectation like Russia thought they could just go in and take full control of a province or region and it just turns out it ends up being this intractable gorilla warfare where they can’t win.

Tymofiy Mylovanov (36:52):

I think Russia got annoyed by Ukraine becoming ever more ferocious and cocky. It’s a different story. It’s not that we need to finish the business. It’s like okay, we kind of… In 1994, we took away the weapons and so they have to rely on us. So I think the logic from the Budapest memorandum is also colonial logic. And they probably don’t even think that they betrayed and they said, “We guarantee your sovereignty, but we guarantee, as you are state now. You don’t have sovereignty now of the Budapest memorandum, you’ve given up your weapons, we paid you off and now there are four parties which guarantee your sovereignty. So basically you are our serve. And the four of us decide your fate.”

And then there was this Crimea and Black Fleet and Ukraine has been pushing for sovereignty. There is a notion. There is a notion of pseudo sovereignty with Russia. So that notion states that you can do whatever you want, but foreign policy, internal affairs, meaning policing and military policy is decided or coordinated with the Kremlin.

We are seeing that right now in Belarus. Belarus is a sovereign, but in fact, pseudo-sovereign state. They don’t have a say over their foreign policy. They must side with Russia. They don’t have any disagreement with Russia on anything, not a single disagreement. They’re really not controlling their foreign policy. They could have been pro-Russian, but they would have a tweak. No, they don’t have any.

Now, their military policy… They lost sovereignty there. It’s an area for resupplying of Russian troops and staging attacks on Ukraine. And then internal policy, the policing of the state, it was also done clearly. Brutal Russian style suppression of any opposition.

You can say that this is Lukashenko making decisions, but I think whoever is not in denial would agree that Lukashenko, it was not in his best interest ever to allow the Russian troops to launch air force or attacks, ground attacks or missiles from Bela-Russian territory. That’s not his decision. He didn’t make it. So he doesn’t have a say there. So he lost sovereignty in these area. So that’s the notion of pseudo-sovereignty, I think that was expectation about Ukraine and Yanukovych did that.

If you remember 2014, what was the trigger for the conflict where Yanukovych said, “We’re not going to have an association agreement with the EU. We’re going to stick with Russia.” Russia position was you don’t get closer, you don’t have an association agreement with the EU. That was also a pseudo-sovereignty concept, that your foreign policy have to be approved by the Kremlin and the people disagreed with the president in Ukraine.

That’s why we had protests in 2013 and 2014. And that’s when Russia went in to take Crimea and engage in the east to punish Ukraine for daring to run an independent foreign policy. If you take a perspective of pseudo-sovereignty, the way Russia looks at Ukraine is that Russia is a betrayer.

It betrayed Russia by violating the rules of pseudo-sovereignty. That it doesn’t view it in the way that there’s some sovereign nation, the people and they have the right for self-determination. No, they never had the right. In 1996, we signed to put the past memorandum. So, you have to… Now, your faith depends on the countries, including Russia.

Russia has the right to what you do. But we do disagree with that. That’s not the deal from our perspective. So, I think this is the culture clash of visions of the Western world and the Russian world and the Western world didn’t want. Or some of people don’t want even today to understand and admit that Russia live according to a different cultural quote.

Germany’s error in dealing with Russia

Bilal Hafeez (40:39):

You mentioned the West. Let’s focus a bit more on the Western response. We have the US, which has been fairly aggressive. For me, what’s more intriguing is Germany and Europe. There’s been some sanctions obviously on certain assets and markets, etc, and reserves. But the key thing is that Europe, notably Germany, are reluctant to shut off the importing of Russian gas. If you don’t shut off in imports from Russia, then Russia still has some revenue coming in. What’s your thought on the European response to the war?

Tymofiy Mylovanov (41:12):

Ukraine also did not diversify away from Russia until the war started in 2014. After 2014, we diversified. It’s delay of the real politic. Really costly for politicians to… You really have to change politicians to change the policies. We cannot convince politicians to change their policies. They come with certain policies. It has always been an easy policy to get cheap gas or lower…

What really gets me about Germany, Germany is so prudent that… I don’t know if it’s the case now, but when I was in Germany as a post-doc, as a junior professor, you really have to have, I think either, I don’t remember, insurance on your dog or insurance on your bike. Everything has to be according to the rules.

Everything has to be prudent, extremely prudent. If something goes wrong, no, we can’t afford this. How is it this culture allows to get itself so dependent on one country? But you require insurance for a vehicle, for a dog and yet you completely dependent on one country. Your industry is dependent on this. This is I don’t understand. This is really a big scandal. It’s a strategic loss. Maybe there is corruption. Maybe there is compromise.

Remember, Putin understands Germany very well because the beginning of his career, he spent in Eastern Germany. So he operated as a KGB officer, that’s where the beginning of his career was. He knows the culture. He understands the culture. In that sense, he hacked, he socially designed the hack to Germany. Do we blame Germany? Probably, we should. Because national security trumps the economic security, at least according to the Western values where if we value freedom above prosperity, right?

But the problem if you don’t value freedom, you won’t have prosperity either. We know that and it’s trivial kind of, but that’s what’s going to happen anyway. We did the same. We used to have cheap gas from Russia and we had pro-Russian presidents. Did it help us? No. This is a false promise that if you are nice to Russia, they will somehow be nice to you. We have been nice to Russia, many of our presidents, first president, second president, third president, they were all very friendly to Russia and we were getting cheap gas, we were getting good deals, we were getting investment.

The moment we dared to do something differently, Russia came down on us with all its wrath. And so it is going to do to other countries, which somehow in living in a fantasy world that you can benefit from cheap gas from Russia. You’re not going to benefit. The price will be higher. What Germany has to do now is to diversify and construct, build infrastructure to become independent or less dependent on Russian gas and talk to Russia from the position of strengths, meaning that they have outside options and they don’t have to rely on Russia, not from the position of weakness.

Bilal Hafeez (44:10):

Now, Germany has talked about this diversification, but it’s going to… In their view, it will take a number of years for that to happen. Germany is being prudent in its own way, but by doing so, it’s also, I suppose, helping Russia right now. From a timing perspective, Germany has stated they do want to diversify away from Russia, but it’s really a question of timing. Do you immediately cut Russia off now or do you say, “Okay, it’s a multi-year transition programme.”

Tymofiy Mylovanov (44:36):

I’ll give you a Ukrainian perspective and of course Germans will not like it, but this is the truth whether we like it or not. The EU overall paid something like 50 to 60 billion euros to Russia. For that money, Russia has imposed and I’m not counting death and suffering, just around a hundred billion direct damages on Ukraine. That’s a good investment. It’s doubling. They created the double the damage for what you are paying, or you can count it’s the other way around. You can say okay, they have paid 60 billion to Russia, the EU all together. And Ukraine is asking for support of 20, 30, 40 billion dollars and is not yet receiving there are some commitments, but the commitments are half of that or a third of what’s needed and it’s definitely much less than what has been paid to Russia.

And finally, you can also make kind of opportunity cost calculation. Okay, you’re going to lose 5% of GDP. That’s I think as large as the estimates have or maybe you’re going to lose 2% of GDP. How much is it per person per capita? We’re going to talk about I’m just going to round out, even if it were 100,000 euros, we’re going to talk about 2,000 euros per person, 3000 euros per person. So how much is human life in Ukraine worth?

We’ve probably lost tens of thousands in Mariupol. We just need to be honest, that we’re not willing to pay 2,000 euros a year, which is 200 per… It’s okay. Those people die. Okay, fine. Fine. That’s fine. Let’s just be honest about it.

Understanding China trade routes through Russia

Bilal Hafeez (46:14):

That’s very sobering words there. Now to round off this discussion, earlier you had mentioned three of the weapons Russia has. There’s energy, there’s food, but you also mentioned a third one, which was the logistical trade routes, especially between China and Europe. Can you talk a bit more about that sort of leverage that Russia has because I haven’t heard many people talking about that?

Tymofiy Mylovanov (46:35):

Almost no one is talking about it. Some of the North and China, not everything is shipped through the sea, although a lot, most ship through. But there’s still some which has been shipped through the railroads.

If you destabilise and I mean, if Russia can control the degree of destabilisation in the region from the Baltics to Turkey, which it currently does, then it is in the driver’s seat on how expansive and how reliable these routes are. So it can actually destabilise the economy of the EU, not only through energy, but also through other supplies.

Bilal Hafeez (47:08):

Okay. Yeah. That’s a really interesting point. Tymofiy, we’ve talked a lot about the war and the conflict and I do want to talk about other things as well. And I was looking at your research and I stumbled across a blog, I think you must have written for your students or for your audience that you have entitled Five Types of Behaviours That Can Help Get You to the Future. Can you tell us about why you wrote that and why you have that on your homepage?

Tymofiy Mylovanov (47:33):

Yeah. It’s good that you bring it up. I’m looking at it right now. In some sense, it aged well because it says rule number one is do not be afraid. Here’s the phrase. “The people in Ukraine often do not believe that they can become successful. Invent a new top world product to build a new mega corporation.

If a person doesn’t believe that he will succeed, he has already lost in the race called competition of humans in the 21st century. However, new inventions, new business practises, successful startups are created by people like you and me. They essentially genetically identical to us. Perhaps they have had better education or have more resources, but success requires just one idea. Just one idea during the entire life. The key to success is how you implement this idea. It has to be done very well.”

I think if I look at this from the perspective of the war now, it’s about agency and sovereignty of individuals. We can say Ukrainians can win this war. These wars are won by people who are more committed. It’s not given that Russia is stronger. Don’t be afraid of Russia. I think the entire world is afraid of Russia. And here we say, do not be afraid of Russia. Do not be afraid of Russia.

Actually, let’s do this exercise. I’m going to reinvent or reapply of these five rules for the West. Do not be afraid. So I will say, “Do not be afraid of Russia. Russia is just like us and maybe inferior in so many ways.” Then the second one, be ethical. Integrity and values are critical. This is what’s going to…

In an attempt to become successful, do not become unethical. Because success requires support and resources provided by others. But without trust, there will be no help. And let’s apply it to our discussion earlier about Germany. Do not put the immediate economic benefit above the values of life because that’s going, in the longer run, destroy the standing of Germany in the Western world. That’s going to hurt Germany more.

Be patient. Be patient means that the war is… Here, it says success is a marathon. Here, we say, the war is a marathon. You need to win, but it’s going to take time and you cannot do it overnight. You can’t win over Russia overnight. It’s going to be a series of small steps that brings you ahead of Russia.

Many of these steps will be failures, but this is normal. And this I’m just reading from the blog, but applying it and then specialise and become the best. Everyone, whoever is now fighting, you have to be the best in something. If all of us want to win the war, then we have to specialise. I’m good at fundraising. You are good at supply chains. Someone is good at shooting. Someone is good at intelligence. We all have to be and build a public profile. Here, it means have a reputation.

Be accountable, be transparent and I think these are the five rules, which apply to the governments and apply to individuals to be successful in today’s world.

Books that influenced Tymofiy

The Strategy of Conflict (Schelling) and Save the Cat: The Last Book on Screenwriting You’ll Ever Need (Snyder)

Bilal Hafeez (50:27):

No, they’re great. They’re great five points actually. And you’re right, they could apply equally to us in the West and are we sticking toward the values we say we have and are ethic? Are we scared? It’s really good. I’ll include a link to this in our show notes as well. Now I do like reading books as well. I always ask my guests books that they like or have influenced them. Do you have any books that you sort of cite as influential for you?

Tymofiy Mylovanov (50:53):

One book, which influenced me a lot is probably one of the most influential, Strategy of Conflict by Thomas Shelling. He worked in the state department during the Cuban missile crisis. He developed the notion of strategic deterrence. I truly subscribe to that, the ideas of commitment and threats out of equilibrium and I think a lot of people don’t understand it.

Here, you have to be strong so that you can’t respond to Russia by weakness. You cannot be afraid to escalate. It’s just the opposite. If you commit to escalate, then you are going to be able to deescalate because then Russia knows that if they do another step, then the consequences for them would be worse. I think Biden was making this mistake in the beginning of the war, the administration of Biden saying, “We’re going to put sanctions in, but we don’t know which one. We’re not going to tell you.”

So of course, it’s an invitation to be tested. You really have to say, if you’re going to do A, they’re going to be B and B is much worse than A. I think that’s one book which has been extremely useful for me. And then in politics, I think I love the book Save the Cat by Snyder.

This is the book for drama, for script writers for Hollywood. It explains what should be a proper movie script. I think politics today is about movies. It has to be a movie that everyone wants to watch because those people, those politicians who control the narrative, they will win.

But to control the narrative, you need to attract attention and to attract attention and maintain attention, focus on you, you have to be dramatic. You have to script the narrative, political narrative in a drama way. Once I’ve read that book, it became much easier for me to understand Zelensky, to understand Boris Johnson, to even understand Trump. It kind of opened up to me a different angle of design of emotion and perception. So I think that’s the second book I would recommend reading.

Working with Zelensky

Bilal Hafeez (53:00):

You mentioned Zelensky and I haven’t actually asked you this and I should ask you, what’s your views of him? You obviously have interacted with him as an advisor and so on. Any thoughts on his leadership style and his psychology?

Tymofiy Mylovanov (53:11):

It’s kind of a startup style. It’s a group of creative people who decide what to do and come up with unusual decisions and are not afraid to test anything. This is really that feeling. And he’s also very likeable as a person. He’s an outsider and so for me as an economist, sometimes it is frustrating because he doesn’t accept my usual supply-demand mesh arguments or… He thinks very differently, but yeah, I think he’s very charismatic, comes across as a person to be liked and he’s not afraid to lead in very creative ways.

Bilal Hafeez (53:48):

Now, the final thing I wanted to ask was obviously you are involved in lots of humanitarian efforts. So if people in the West or people who listen to this podcast, which is people all over the world, if they did want to provide some support to the various humanitarian causes in Ukraine, what’s the best way for them to do that?

Tymofiy Mylovanov (54:05):

Please go to our page or to my Twitter and I have a tweet with a link to our foundation.

Bilal Hafeez (54:12):

Okay. I’ll add a link as well.

Tymofiy Mylovanov (54:14):

Yeah. There are several foundations, there’s the government account and The National Bank of Ukraine. There’s Come Back Alive, which is military foundation. I wouldn’t recommend any international organisations because they’re overheads and their speed of decision making is really… They deliver things by the time they are not needed. And so it’s really out of…

I think it makes everyone feel good to donate to the Red Cross at the counter, but I’m not sure it is reaching or it’s been used effectively. I would say, find the Ukrainian NGO and make sure that they satisfy certain principles and these are the principles I’m thinking about. One is the bottleneck is money. In other ways, they know what they are doing and they know how to source things, how to deliver them, everything is done. They just need money.

So your dollar, your pound, your euro will matter. Second one is they’re delivering it to way it’s needed. Most likely it’s front lines or recently liberated areas, or depending on your cause, it could be shelters of refugees in Poland, but it depends on what your pose is. But they are in the coast. They’re operating there exactly. It’s not some agents.

They keep low inventories, meaning that they don’t sit on stuff and they’re formal. Formal meaning the money is collected in the formal way. Finally, the governance is clear. They have boards and they have some history. You need to get someone who is a…

It’s almost contradictory because usually you have one or the other. You either have guys who operate with zero overheads on the ground, but then it’s total mass because they’re not institutionalised. Or you have institutionalised organisations, they take 50% of overhead and take two months to make a decision, find those, which are both. They’re institutionalised and they make quick decisions and they work with the end user and we are one of them, but there are others.

Bilal Hafeez (56:04):

Okay. No, that’s great to know that there are organisations that can put the money to good use. So with that, thanks a lot for coming on as a guest, obviously it’s a very tragic sort of backdrop. Hopefully, when we next connect things have eased up in a way that’s beneficial to people on the ground, ultimately.

Yeah, let’s stay in touch. I urge people to go to the sites that Tymofiy sort of recommended and do indeed sort of follow what’s going on in the conflict and provide whatever support people can.

Tymofiy Mylovanov (56:31):

Thank you.

Bilal Hafeez (56:34):

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