Hello everybody, welcome to C&F Talks. It's my pleasure today to have with me Marcus Thompson, who's a Partner at Kirkland & Ellis, and Marcus is going to be speaking at our forthcoming summit on Economic Sanctions, which is being held in London on the 20th of March. Welcome, Marcus.

Thank you, thank you for having me.

Great to have you with us. Let's turn to the first question.

There's been a lot of speculation about Trump's future plans in relation to sanctions against Russia. He's made some very strong pronouncements about taxes, tariffs and sanctions in a bid to force Putin to the negotiating table. How do you think this will impact UK and European entities' sanctions strategies?

It's been an interesting question I think since President Trump won the election, and announced famously that he was going to resolve the war in Ukraine within a day of taking office, and that was obviously a little bit of political hyperbole, and that's now been amended to say within six months there will be a plan.

Sanctions are obviously a tool of foreign policy and US, EU, UK, Canadian and other G7 Western powers have all implemented sanctions in an effort to influence behaviour in Russia. Nobody, I think, thought that sanctions was going to bring the war to an end, but the intention was to do really two things.

One, to hurt the Russian economy in certain respects so that it would limit its ability to wage war. And secondly, to send a signal to those associated most closely with the Putin regime that the West was displeased with the activities of individuals and companies associated with Putin. Now, there's a big debate about the extent to which those sanctions have been effective.

But when it comes to some sort of settlement, which people anticipate and hope for, obviously, in many ways in the next six months, that the acid test will be the extent to which Putin considers those sanctions to be an important bargaining chip on both sides. If he comes to the table and says, I don't care about sanctions, that tells us something. If he comes to the table and says, I do care and this is why and this is what I require, then that will be another thing. And The New York Times wrote an article on precisely that point yesterday.

I mean, my own view for what it's worth is that there are 300 billion reasons currently frozen in the European Union in Russian Federal Bank reserves. And however aggressive Putin's negotiating stance is that plus all of the other restrictions are such that I'm sure it will have a bearing.

And the key thing in relation to President Trump and his pronouncements is going to be alignment. So, the greater that the US, the EU and the UK can be aligned with each other when it comes to negotiating whatever the settlement will be, in particular in relation to sanctions, the more effective that settlement will be. If there is a lack of alignment between the US, the EU and the UK, that will help Putin.

Yeah, absolutely. Although one has to suspect that there will be a fair degree of alignment on this issue.

One hopes so. And perhaps with previous US regimes, it would have been easier to predict and anticipate such alignment for all sorts of reasons I think it's become harder to predict.

Yeah, I think that that's absolutely true.

When we look at his actions against Israel, he's also threatened sanctions against Israel if they don't come to negotiate a settlement over Gaza. And of course, he came up with some pretty radical ideas over the last few days. Do you see the Middle East as an issue which should trouble financial institutions? Or are they relatively immune from the effects of the hostilities in the region?

Well, as you say, we're recording this less than 24 hours after an announcement that surprised many. I mean, that's an understatement of Olympic proportions, I think, essentially upended however many decades of international diplomatic thinking and approach to the issues in the Middle East and the prospect of a two state solution. Apparently, that is no longer US government policy as of less than 24 hours ago. And it really links back to what we were talking about a moment ago about alignment and predictability.

Your specific question was on does the situation in the Middle East, where does that rank in terms of an issue for global businesses, global investors? I mean, obviously, the answer, the obvious answer is it depends on your proximity to the region in lots of ways and to trade in that region. But as a general point, I think any instability in a region which is geographically central to the world, and contains a lot of the world's oil is bad for everybody. I mean, not least the individuals who are suffering as a result of conflict, but for the wider world as well.

Yes, it matters. And it continues to matter. And what again, becomes very hard to predict now is what happens as a consequence of the announcement within the last 24 hours and how other countries in the region will react because the issues in Gaza aren't confined to Gaza and Israel.

Trump has specifically made them much wider than that, and has cited Egypt and Jordan in particular, but then other countries in the region. And crucially, Saudi has already come out and said what they've said about this last night. So, short answer to your question is, yes, it matters how it gets resolved and what happens in the next 24 hours, I honestly don't know.

Yeah, I agree. I think we're in absolutely uncharted territory here. And people have to think pretty hard as to what they're going to do. I mean, given that, do you think that China is likely to be a bigger headache? We've seen a slightly milder approach thus far from Trump since he's been elected to office.

I think the approach from lots of countries, whether you're the Panamanian government, the Danish government or the Chinese government acting to various pronouncements, either in the form of executive orders or just press statements from the US now, most of the consensus seems to be don't say much or anything and see if it blows over.

And is this just a negotiating position from President Trump? Or is it more serious than that? And let's wait and see. And Chinese diplomacy generally has always tended much more towards a wait and see approach on things than the Europeans, for example. And I can't remember which Chinese foreign minister is credited, apocryphally, probably when asked what the view of the Chinese government was on the French Revolution said a few years ago that it was too early to tell.

And so Chinese diplomacy historically has always taken a longer view. And I think at the moment, everyone is just trying to calibrate how to respond to whether it's the threat of tariffs or further sanctions or building new real estate in Gaza.

Yeah, yeah, yeah, I agree. I think they take a much longer-term view.

I mean, in the UK, sanctions enforcement is obviously overseen by the OFSI and more recently by OTSI as well. Does this complicate issues for companies at risk of sanctions breaches? And what advice would you give to companies dealing with them?

I don't think it doesn't necessarily complicate things.

Obviously, if you're dealing with two agencies rather than one, to some extent, then there are two sets of bureaucracy rather than one. But I am cautiously optimistic that lessons will be learned, have been learned by OTSI and Department of Business & Trade from the setup and establishment of OTSI, which itself is a pretty new agency, really, in government terms.

And I know from my own experience, there's been pretty close cooperation and sort of lessons learned exchanges between the two departments. So, I think that, I don't think it will unnecessarily complicate things. But obviously, the proof will be in how OTSI in particular moves forward over the next year. And it's still less than a year old. So, hopefully, it won't add complication.

I mean, in theory, it really ought to make things all much easier because OFSI now is very specifically focused on financial sanctions and OTSI is on trade sanctions. And I think one of the complications in the past was that no one quite knew what to do if you were dealing with trade sanctions issues and it's a sanction.

So, you phone OFSI and OFSI would say, well, no, that's not really us because we're financial. And HMRC, which is historically superintended. So, trade sanctions issues. So, it's not really us either. So, I think hopefully it ought to make life a little easier. But the history of sanctions enforcement generally in the UK and more widely in Europe has not been a particularly glorious one.

Probably best summarised in two words as limited and mixed in terms of its success, a limited number of cases and a sort of mixed bag in terms of results and outcomes. The Americans have been doing sanctions enforcement for a lot longer and I think are generally more effective at it, not just because they're a bigger economy, just because they've got more experience. And so, you know, last year was supposed to be the year of enforcement, OFSI said, didn't really pan out that way. Let's see how 2025 goes.

Yeah. OK, wait and see, I think, is your answer to that. Hopefully some clarity. This is such a fascinating area, Marcus, and we could talk about this for a very long time.

Sadly, we don't have more time today. But for our viewers, we're very much like you to come along in person to the Economic Sanctions Summit, 20th of March, central London. More information on our website, www.cityandfinancial.com.

Marcus, thanks so much for coming on today and look forward to seeing you at the event.

Thank you very much. Look forward to the conference.