SAMUEL BURKE: With the United States placing up to 8,500 troops on alert to possibly be sent to Eastern Europe given the tensions between Russia, Europe, and the United States over Ukraine, there is nobody we wanted to talk to more than entrepreneur, economist, and former special assistant to the US President, Dr. Pippa Malmgrem.
Pippa, the reason I really wanted to talk to you as well is because you and I were in Las Vegas at The Takeover event for Real Vision in November. And you really called this to a T, what you said about what to look for in 2022 now sounds extremely prophetic. Before we talk about the effect that this could have on the markets, I really just want to take a step back and really ask you, how did we get here? Is this just simply Putin not liking the West having increasing power? He wants that buffer around the former Soviet Union. And is he just testing a new US President? Tell us how, in your view, we got to this point.
PIPPA MALMGREM: Yeah. And by the way, Samuel, at the Real Vision event, you asked me and several others on stage, what was the word we predicted for the year 2022? And I remember I hesitated. I really hesitated. And eventually, I said "NFT." But the reason I hesitated is because I was thinking the word is going to be "war." But it was such a good party and the mood is so upbeat. I didn't want to like land that on everyone.
And this is part of the problem and why I decided to start writing about this recently, because it has to land at some point, that this is for real. And it's not a bluff. There are real events occurring. And people are not seeing them, because they're only focused on Ukraine. And Ukraine is only one piece of a very large puzzle. There are all kinds of events happening across Scandinavia and other parts of Western Europe. So bottom line is there are going to be multiple interpretations of what's driving this.
In my own view, Putin has long, long expressed his deep frustration that the border states keep being pulled into NATO. I think he could live with neutrality, but he can't live with border states being NATO members. Because for him, that's like the Cuban Missile Crisis. There's also the interpretation that he's just taking advantage of the fact that we have a president right now who looks disinclined to respond in any way.
And there's a limited window of opportunity, from his point of view, to act, because Congress is about to go Republican again. And then it looks like we're going to face the real possibility of Donald Trump running for the presidency again, and he's likely to be a lot more belligerent than the current president. So there is a whole bunch of drivers. I've only named some of them for why this is happening now.
SAMUEL BURKE: Another time frame that people have talked about is the equipment that Russia has only really working when the ground is frozen in Ukraine and that that time frame is February to March. Are literally things on the ground-- I mean, on the ground also driving what we're seeing right now?
PIPPA MALMGREM: So I don't buy this. And again, I've been recently writing on Substack, and I pointed out that we're seeing a lot of Russian amphibious vessels in the Baltic Sea now. They are around the critical Islands that are at the mouth where you transfer from the Baltic into the North Sea. And those are literally amphibious-landing vessels, so they can rock up with a battalion of troops-- let's call it 500 special ops people-- in minutes. So, yeah, ground, hard not hard, this is not the point.
The second thing is this is a little bit like-- and I'm going to make the analogy for the Real Vision audience. So we make fun of people who are TradFi, because we're all DeFi. Right? So now, I'm going to make fun of people who think in traditional military terms that there are going to be tanks that roll over a border. Not necessarily. This is a world where militaries everywhere have pushed a lot of their operations off balance sheet.
Both the US and Russia have now got privatized armies. In the US, we have Academi, which is to be known as "Blackwater." In Russia, not that they're exactly the same kind of thing, because they're not. But in Russia, you have the Wagner Group. So again, when you start counting how many troops, how many Russian troops are on the Ukrainian border, I'm like, how many Russian military officials are already in the West somewhere but they're not wearing a uniform?
But that doesn't mean they don't work for a boss. It's basically Putin's private army. And so this business of thinking about how a military incursion will look is so old fashioned. The right way, in my opinion, to think about this is what we've had, I think, four months is a lot of space warfare going on, which the public can't see. And there's very little in the public domain about it.
But we most recently, only a few weeks ago, saw that cable the internet cable that connects pretty much every satellite that's less than 500 miles high to Earth is in a place called Svalbard in Norway. It's the fastest internet cable in the world in the middle of nowhere. The International Space Station depends on this cable. It's a double cable, and one of the two cables was suddenly cut. And it wasn't just like in one place. Like a mile and a half of it is suddenly missing.
Now, that was interpreted in the West as a very serious and deliberate act. And the new chief of the defense forces in the United Kingdom, who's an Admiral, came out and said, this could be interpreted as an act of war. So we've had a lot going on as just the public is only able to catch up now. Because it's gotten, I think, a little bit beyond what militaries can control themselves. And so now, they're starting to have to alert the public. This is real, and things have been happening for a while that you might not have been aware of.
SAMUEL BURKE: And one thing that you've been so vocal about in your writing and your speeches is the cyber warfare going on. And of course, many, many governments have attributed what happened in Ukraine previously with many types of connections from internet connectivity to electricity, attributed that to the Russians. What have you been seeing play out there, not just in those big cables that you're talking about in Norway?
PIPPA MALMGREM: Well, again, it's a lot of activity in the Baltics. In Sweden, we've seen drones flying over nuclear facilities and the private residence of the king and queen of Sweden. The Danes and the Swedes are so worried about a Russian incursion into their physical territories that they have put tanks and troops on the Island of Gotland, which is, again, in that space in the Baltic the Russians have to pass to get to the West.
Gotland is a very ancient military garrison. It's always had tremendous strategic importance. And what we've been seeing now for probably the last five years is a huge amount of submarine activity in that part of the world. And of course, the suspicion is that it was a submarine that cut the internet cables. And we've had more than one of this cable-cutting exercises in recent years.
It was only a year ago, in fact, that a British military vessel got into a tangle with a Russian submarine that it was trying to track. And the only reason it became public is because there was a camera crew on the HMS Northumberland. So basically, you've got NATO vessels trying to track Russian submarines and they wouldn't be doing that if there weren't any Russian submarines.
So I've been seeing a world where most of this military action is exactly where the public can't see it, so I've referred to it as a "hot war in cold places." So it's happening in space, in cyberspace, on the high seas. Right? This is not about land and army territorial operations. This is about navy, and this is a big transition.
We've been in a world where it's been the army that we've been focused on. But now, the navy. And it's been submarines, and it's also been in places the media gives a cold shoulder to, like Africa. And there's an enormous amount happening with Russians in Africa as well. This is not at all restricted to Europe, let alone just Ukraine.
SAMUEL BURKE: Pippa, the first part of 2022, it felt like the US was only talking about sanctions. But Russia has somewhat signaled that their sanctions-proof. Now, whether that's true or not is one question. But really, what I want to focus on is the fact that the US has said, well, we'll figure out ways around that. Not the traditional sanctions, we'll go to semiconductors. Not just semiconductors made in the United States, we'll stop semiconductors with US patents from being sent in. We'll cut off consumer electronic goods. Will that hurt the Russian economy, and will that hurt the global market?
PIPPA MALMGREM: So again, the way to answer this is to step back for a moment. So in my opinion, first of all, Russia is not acting alone. We are now seeing Russia and China acting in concert. And so when you talk about chips, for example, we have this recent situation in Lithuania where the Lithuanians recognize Taiwan and chip production is occurring in Lithuania and the Chinese totally shut down all exports from that country to China.
And so this is very consistent with how the Russians and Chinese view modern warfare, which is there are no limits, that anything goes. It's all usable. So commercial sanctions, we won't be the ones to commence that. That's already begun. And again, what I'm fearing is that people are so myopically focused on Ukraine, they're not understanding how this is going to roll. In my opinion, you're going to see Russian action and Chinese action at the same time.
And it will be military and it will be commercial and it will be financial. It's literally all things simultaneously, which, frankly, is the one thing the US and NATO are totally unprepared for. Having two fronts at once is already tricky. Having it spread across, not just military, but commercial. And so this is a whole different way of looking at the field of action than you're going to get from traditional media, I think.
SAMUEL BURKE: Well, it's interesting because you're talking about NATO preparedness. And conventional wisdom has been that NATO's not going to react here, because Ukraine is not a member of NATO. So has the conventional wisdom changed in the past week?
PIPPA MALMGREM: No. But it is very important to note that, only a few months ago, NATO added a new category to an Article V trigger. So just to remind everybody, Article V is the section of the NATO treaty that requires that, if one is attacked, all the rest will come to their aid. So never before were space and cyberspace incidents included. Now, they are.
So actually, technically, I think we have already triggered Article V, but they don't want to say that. Because the one thing is clear, I don't think any of these parties want to actually end up in physical conflict-- or I should be clearer, in visible physical contact. They are perfectly fine if it's all happening in space, which, again, the public can't see. And then it can be very kinetic.
And we've had a number of incidents where the Chinese used a satellite to attack debris in space, but they define "debris" to include American satellites. So that created some incidents. And the Russians used their satellites to actually create a debris field, which turned out to be so severe that even the International Space Station astronauts almost had to evacuate.
So we are having, I think, space warfare. It technically triggers Article V. They just don't want to say that, because nobody wants to end up in an outright conflict. So it's kind of like two gangs taunting each other. Right? The problem is that, the more they do it, the greater the risk that it gets out of their control.
SAMUEL BURKE: And these are all things that you've actually said on Real Vision before, at Real Vision events. The thing I really want to know is, what's Putin likely to do then? Most people think that a full invasion is unlikely. Maybe an occupation of the Russian-speaking parts of Ukraine. Maybe more cyber attacks.
What do you see is the most likely course of action in the coming weeks and months? Or do you think it will just stay in the areas that you were just talking about, that every effort will be made by leaders to keep it up in space and not be visible? Though it's looking more and more visible. We see those Russian troops building up at the border with Ukraine. We see the message from the Pentagon about preparing 8,500 troops, putting them on alert. Where is this going?
PIPPA MALMGREM: Yeah. So we could talk about a bunch of scenarios. I'll just give you the one that I personally think is increasingly likely, and that is this. We will all be watching Ukraine, but the real focus of Russia's attention is the Suwalki Gap. And for those who don't know the Suwalki Gap, this has been the number one most vulnerable pinch point, as far as NATO is concerned, for many decades.
And it's the space between Kaliningrad, which is a Russian-- I keep saying "enclave," but people keep correcting me. It's an "exclave." But the point is it's Russia owns territory in Western Europe, and it is called "Kaliningrad." And it sits on the Baltic, and it's only 64 miles to Belarus. So that 64-mile gap is called the "Suwalki Gap," and that has been the number one focus for NATO literally for decades.
Today, I believe that remains the number one focus, even though most nobody has ever heard of the Suwalki Gap. But I wouldn't be at all surprised if what Russia is doing is building up their capability in Kaliningrad, in Belarus, in the Baltic. And while we're all watching Ukraine, they take control of that Suwalki Gap. And then suddenly, Belarus and Kaliningrad are connected.
And remember, Kaliningrad is where the Russian naval fleet is also based in Western Europe. And this would literally cut off Scandinavia, and that is why everyone in Scandinavia is getting very nervous and starting to deploy troops and tanks in their countries.
And I think at the same time, we're going to see a scenario in Asia, which is everybody is watching Taiwan. But the real action is at the 38th parallel in Korea, on the Korean Peninsula. And for those who haven't been paying attention, we have recently seen North and South Korea formally end the war, begin the reconciliation.
And if those two are no longer at war, if the armistice is now fully over, then why do we have 30,000 American troops defending South Korea from the North on the 38th parallel? Answer, they're not required. And what Russia and China both want is to get those 30,000 out of there. And if they can succeed at that, then it becomes much easier for them to push for other things.
Like the Russians have been really pushing for control of the Kuril Islands and other islands in the Pacific, in the South China Sea, like the Chinese have been pushing for islands and control. So I just think it's literally a situation where we're watching the wrong stuff.
SAMUEL BURKE: You see things on a lot of fronts and certainly fronts that a lot of mainstream media are not covering, part of it is the short attention span of the audience, part of it's the short attention span of much of the media. The front where I really want to focus now, Pippa, and draw on your other expertise as an economist and as an astute observer of markets is the market's front.
I live here in Europe. We've already felt the squeeze from natural gas prices coming from Europe, coming from Russia, of course. Could an increased or more volatile situation at the Russia-Ukraine border send Europe into a recession? I mean, I was just making a list with some of the Real Vision editors. You've got the Black Sea region, one of the biggest growers of wheat. Ukraine, a huge exporter of corn. The US and Europe both have loan exposure to Russia. What could be the impact on markets here?
PIPPA MALMGREM: So again, if we go to my more extreme scenario. Right? Let's, for a moment, move away from tanks roll over a border into Ukraine. Because that scenario, frankly, it would be the second time we've seen it. Right? They've already done it once. And my guess is the markets will literally not react. They didn't react before.
SAMUEL BURKE: It's a shrug.
PIPPA MALMGREM: They're not going to react now. It's a shrug. The bigger scenario is that you end up with what I've described, which is Scandinavia is now in a more precarious position and the Russians have a physical foothold that runs from Kaliningrad into Belarus into Ukraine and then through all the other Russian exclaves all the way to Transnistria, which, again, nobody will have heard of.
But there are lots of these little pockets of Russian presence on that Eastern European border. And so if they connect the dots between all of them, then suddenly the border of Russia will have moved west effectively. And that will have enormous implications for value in Scandinavia, in a number of Eastern European countries. But the question is, will the market get this? Will the market even notice?
Will the White House do anything about it? And the answer is President Biden's already been crystal clear. He basically said, well, we wouldn't respond to a small incursion. Now, what's the definition of "small"? And what if the public doesn't even realize what has happened in the way I'm describing? Because as you said, the mainstream media is not reporting this, which I find kind of amazing. Basically, could you have these events occur and have the market go, hmm? Yeah, you could.
And similarly, in Asia, if it reached a situation where the US was effectively forced to withdraw the troops from the 38th parallel and China and Russia now had a lot more influence in that region, would the markets really respond? I suspect the market response is going to be, well, that means there's less risk going forward. This was the risk. Then it happens.
And here's the fundamental question. Are there any American families and households that are going to support spilling treasure or blood for Ukraine or Belarus or Lithuania? And I wish I could say the answer is yes, but I honestly think the answer is no. Because most Americans won't even know where Lithuania is, which is shocking but true.
And same thing, will they care about North and South Korea and be willing to defend South Korea from peace talks? No. No one will be willing. So basically, the White House won't be able to do very much about any of this. All they're trying to do right now, by positioning those very few people on the borders, is to create a tripwire that will slow the Russians down. It's not designed to fight the Russians. It's just designed