PATRICIA KARVELAS:
Australia was an early backer of the tougher sanctions, and Treasurer Josh Frydenberg is my guest this morning. Treasurer, welcome.
JOSH FRYDENBERG:
Nice to be with you, Patricia.
PATRICIA KARVELAS:
The Government will send money to NATO to purchase lethal military aid for Ukraine. How much are you committing to, and what kind of weapons will it buy?
JOSH FRYDENBERG:
Well, we're working through those details with our NATO partners in the United States and the United Kingdom, and those discussions are ongoing about the nature of that lethal equipment. Obviously we've made public the non‑lethal support that we're providing, and we have already put sanctions on more than 350 Russian individuals, including Vladimir Putin himself. Patricia, overnight I spoke to my US counterpart, US Treasury Secretary Janet Yellen, and we agreed to continue to cooperate closely in turning the screws on Vladimir Putin and his cronies.
PATRICIA KARVELAS:
Just to get a sense, will we find out the amount of money we're committing to this?
JOSH FRYDENBERG:
Yes, you will.
PATRICIA KARVELAS:
When?
JOSH FRYDENBERG:
We're working the details through. You'll find out probably today. I mean, we're going to start with an initial payment. It will be in the millions. And it's not going to be the same sort of quantum that the United States or the United Kingdom would provide, but, you know, where we can act is in joining the international efforts to put in place sanctions. And, as you alluded to in the introduction to your program, we've been very forthright in calling on the United States and European partners to remove Russia's access to SWIFT, the international payment system, which is so important for Russian companies and Russian banks.
PATRICIA KARVELAS:
I want to go to that in a moment. Vladimir Putin has put his nuclear forces on high alert. In giving the order, the President complained of illegitimate sanctions by Western countries. If he's squeezed too hard, could the unthinkable happen? Could the Ukraine war turn nuclear, which Julie Bishop was warning us about on Friday?
JOSH FRYDENBERG:
Well, no‑one wants to see an escalation in the conflict beyond the boundaries in which it has already started. But this is, these are the dangers of the times, and this is, you know, the insanity of what Vladimir Putin has done. I mean, Russia is the aggressor here. They did not act in self‑defence. There was no reason to go and invade a country, a peaceful country, of 44 million people. And now you've got a humanitarian disaster with hundreds of thousands of people having to cross borders looking for safety. You've got people who are cowering in bunkers in Kyiv as the bombs are being dropped more broadly. And you've got an escalating crisis. And the United States has 100,000 troops across Europe right now. President Biden has already sent another 14,000 in the vicinity of the Ukrainian conflict. And no‑one wants to see an escalation beyond the borders that it's currently occurring.
PATRICIA KARVELAS:
Vladimir Putin may be posturing over his nuclear threat, but how can we be sure, given no‑one really knows the President's state of mind?
JOSH FRYDENBERG:
Well, no‑one does.
PATRICIA KARVELAS:
Are you worried that this could really escalate in that direction?
JOSH FRYDENBERG:
I'm worried that there could be an escalation beyond the borders. And, no doubt, that's what other European nations or neighbouring countries are concerned about.
PATRICIA KARVELAS:
What do you mean by an escalation beyond the borders? Where?
JOSH FRYDENBERG:
Well, the question is for, you know, Vladimir Putin starts with Ukraine, who's next? And that is, that is the question. You see, this is the most…
PATRICIA KARVELAS:
Do you really think he might have ambitions beyond Ukraine?
JOSH FRYDENBERG:
Well, I don't think that's a secret. I think, you know, it's well known that he's got a greater Russia objective here. And let's not forget, Patricia, that this is the first major interstate conflict within Europe since the Nazis were defeated. This is a direct challenge to the international rules‑based order that has underpinned prosperity in Europe for more than 70 years. See, in 1945 you had the United Nations created. This is a complete breach by Russia of the United Nations Charter. The year prior in '44 you had the Bretton Woods Agreement, with the International Monetary Fund and the World Bank, key international institutions that now countries will be questioning how can Russia be a part of that. And this is a very dangerous situation by an aggressor. It's a criminal act and it needs to be condemned by all like‑minded and freedom‑loving countries.
PATRICIA KARVELAS:
On the new economic sanctions which are unprecedented for a country the size of Russia, what's the objective? Is it blow up the Russian economy and make it much harder to wage war in Ukraine? And how quickly could it cripple Russia's economy?
JOSH FRYDENBERG:
Well, the first thing to say is it is already having an impact on Russia's economy. We saw their stock market fall by more than 40 per cent in the last week alone. We've seen their currency devalued by more than 10 per cent. They have built up significant foreign reserves, over $500 billion, and they will use that money in this crisis to sort of buffer some of the impacts of that. And that's why the Europeans and the Americans put out a statement just yesterday alluding to the work that they may do to try to restrict the ability of Russia's government and central bank to use those foreign reserves. This situation with the economic sanctions that Western nations and others are putting in place are designed to isolate the regime. But it does have an impact on the global economy. The International Monetary Fund has already said that this poses significant risks to economic growth and a headwind to the global. We've seen wheat prices go up by 16 per cent in just the last week. That will flow on to a range of countries around the world. And then, of course, fuel prices have gone up very significantly. European gas price is up by more than 50 per cent in just the last week alone. And in Germany and in other European nations they rely very heavily on Russian gas.
PATRICIA KARVELAS:
Treasurer, the international payment system known as SWIFT that you mentioned, obviously, the blocking of Russian banks from that, but not all Russian banks will be banned from SWIFT. Does that mean Russia will still be able to sell its oil and gas, which is obviously a big export earner?
JOSH FRYDENBERG:
It does, because, you're right, there's just been a number of Russian banks but not all of them that have been removed from accessing SWIFT. And so this is where it gets really difficult, Patricia, because you've got such a heavy dependence by the Europeans on Russian energy supplies…
PATRICIA KARVELAS:
What's your instinct, Treasurer. Do you think that the oil and gas should be banned?
JOSH FRYDENBERG:
Well, again, I do think that we need to isolate Russia from the financial system. So we would have supported their access being removed entirely. But for those, it's a different situation for Australia where we have very limited economic exposure to Russia. I mean, Russia and Ukraine combined represent less than 0.2 per cent of our total trade. But if you're sitting in Europe and you're a manufacturer and you've seen your gas price triple in just the last year alone, you're wanting to continue to see energy supplies being provided. So this is where, and this is a much bigger, broader, longer term issue that Australia and other countries are going to have to consider. This is about supply chain resilience and how we can provide for ourselves in an era of heightened geopolitical risk. There are countries like Germany whose ability to act are constrained because they're so heavily dependent on countries like Russia for their energy supplies.
PATRICIA KARVELAS:
Okay. If reserves are frozen or quarantined, the Russian financial market could be sent into a free fall, the ruble could collapse, unemployment and inflation could soar. Domestic panic and turmoil would likely follow. Is that the grand plan, Treasurer? Turn the Russian people against Vladimir Putin?
JOSH FRYDENBERG:
Look, I don't think it's as grand as that. What it is, is about isolating Vladimir Putin and his cronies from the international financial system and making them pay a very heavy price for this act of aggression. Vladimir Putin does look, you know, to be in control of his own country, there's no doubt about that. I mean, just look at what happened in recent days when, you know, the Duma unanimously signed off on his troop deployments and now he's sending more troops there. But this is a very serious situation. It has a risk of escalating. We're working with our like‑minded partners. I'll be speaking later this morning with my UK counterpart. As I said, I spoke to my US counterpart…
PATRICIA KARVELAS:
Well, let me ask you a question about the UK. The UK Foreign Secretary Liz Truss has given her blessing to foreign fighters who might want to go to Ukraine. Will Australia do the same? Do you give your blessing to Australians who want to go and fight for Ukraine?
JOSH FRYDENBERG:
Well, we have very clear travel advice – do not travel to Ukraine. And that's to protect Australian citizens and residents because it is a conflict zone. And that's our very clear advice.
PATRICIA KARVELAS:
So you do not, you do not support Australians leaving to go and join this mission?
JOSH FRYDENBERG:
Well, we have very clear travel advice – do not go into the conflict zone. Now, under Australian law people, Australian citizens cannot go and fight in conflict zones unless they're fighting with a foreign government and a foreign army. That is under Australia's law, but we have very clear travel advice, which is recommending to everyone please do not travel into a conflict zone.
PATRICIA KARVELAS:
Treasurer, thanks for joining me this morning.
JOSH FRYDENBERG:
Always a pleasure.