Buck off: US pauses Ukraine aid

0:10Hello and welcome to The Intelligence from The Economist. I'm your host, Rosie Blore. Every weekday, we provide a fresh perspective on the events shaping your world.

0:25Unlike many cryptocurrencies, stablecoins are pegged to the dollar. Our correspondent traveled to the bazaars of Turkey to meet people using the currency to buy goods and even invest their savings in them. and dresses inspired by tapestries and a blazer that mimics a wooden chest. These are just some of the items on display tonight at the Louvre's first ever fashion gala as the museum tries to attract new audiences and new donors.

1:01But first...

1:11After days of angst about the relationship between the US and Ukraine, the White House has confirmed that all military aid to the war-torn country is to be suspended. The move seems to be a bargaining chip to get Ukraine to sign up to Donald Trump's plans. But the president has set a very clear goal for his administration. He wants the killing to stop. And I think that it's very important that President Zelensky and, of course, President Putin, too, They've both got to come to the negotiating table. Before the aid announcement, Vice President J.D. Vance spoke to Fox News about the need for peace talks.

1:44He showed a clear unwillingness to engage in the peace process that President Trump has said is the policy of the American people and of their president. And Marco Rubio, America's Secretary of State, has said that squeezing Ukraine would help get the Russians to a negotiating table. Diplomatically, the decision will have huge consequences for Europe. For leaders in Kyiv, the more pressing issue is what it might mean on the battlefield. American military support is essential to Ukraine. Shashank Joshi is The Economist's defence editor. Of course it covers arms and ammunitions, but I think we can't forget this whole range of other invisible things.

2:25Spare parts, maintenance, repair, guidance, logistics, the air defence that's keeping Ukrainian cities functioning. Starlink, the backbone of Ukraine's military communications, and of course this torrent of intelligence that has made Ukraine such an effective fighting force. Without all of these things, life could get a lot harder for the Ukrainian armed forces. Shashank, before we get to that harder life, do you have any sense of what a pause actually means? It seems to be a halt in pretty much all deliveries of US military aid, arms, ammunition, and it seems to cover more than a billion dollars worth of that stuff.

3:11It includes also things that are in the so-called pipeline, which is to say orders that the American government has placed with American arms companies to build a system for Ukraine that may not appear for months. So some of the impact of this will be very short term. Some of it, if the pause lasts, could be very long term. But at the end of the day, we don't know if this will be reversed quickly. The Americans are saying they want to see a commitment from Zelensky to peace. Trump was clearly very angered by Zelensky's suggestion that the end of the war was far away. But actually, I think I suspect they also want to see an apology from Zelensky for that White House meltdown.

3:52And they may be waiting for a little bit of public grovelling here. Okay, so let's think about the practical consequences today and potentially in the coming weeks if the pause continues. What would this mean for Ukraine? Well, in the very short term, the firepower situation is not too bad. There's parity in artillery fire. And if shells begin to thin out, Ukraine could probably substitute for some of them, not all of them, with drone systems, strike drones of the kind, Rosie, you and I have talked about on this show many times. Often they can actually be even more effective than artillery in some cases, and you would just need to find money to keep building these, and some of that could come from Europe.

4:32But I think over the sort of medium term, over several weeks, if you began to see spare parts for armoured vehicles dry up, or no more precision-guided rockets fired from HIMARS launchers, that kind of thing would be very damaging. You know, a loss of those rockets, for example, would give Russia much greater freedom of manoeuvre 30 kilometres behind the front line, which is a big deal. I think the single biggest concern, Rosie, is if Ukraine begins to run short of interceptors for its Patriot missiles. Those are the systems that have been intercepting the Russian hypersonic and ballistic missiles raining down on cities.

5:09There are European systems, they probably can't do the job as well at this point. And so I think the air defence picture is the bit that Ukrainians are really concerned about. And Shashank, you also mentioned Starlink, the satellite network that is made by Elon Musk's company. Is that likely to be included in this pause in military aid? We just don't know. I don't think so, given that this is framed as a halt in aid. Starlink is a commercial service in much the same way that you might buy a Microsoft email server for your military purposes. It's paid for by Poland, the service, but it is of course controlled by the Americans.

5:46And I was speaking to a European official yesterday who said it would be operationally disastrous if Starlink was really cut. It is absolutely essential for Ukraine's military communications because they can use it anywhere. It's incredibly flexible. It's very resistant to jamming. The Ukrainians have produced workarounds to Starlink before. when they were fighting in Kursk in Russia, for instance. Starlink didn't work there, so they had to have alternative means. We don't know exactly what these are. Very understandably, the Ukrainians don't want to give away their most valuable secrets. They probably involve some mixture of mobile technology and using drones in the air as kind of relays for communications.

6:26But switching over would leave them, I think, quite vulnerable and would erode one of their important battlefield advantages. And Shashank, you referred to a torrent of US intelligence that Ukraine receives. What would the impact of pausing that be? US intelligence is the most powerful intelligence machine in the world. And it has been used to Ukraine's great advantage. It's partly situational awareness, right? You can give Ukraine the means to see what's happening. You can see a Russian air defence system that's spewing out radio waves that have been picked up by your satellites. You can see Russian military units lining up that have been identified by your surveillance planes.

7:05And you can see intelligence gathered by cyber means using America's huge machinery of signals intelligence. This is also targeting assistance, right? So it allows Ukraine to send rockets and drones to target things inside Russia, deep behind the front lines in some cases. So that is invaluable. Europe can replace some of that capacity. The French have some geospatial capability with satellites. The British have surveillance aircraft. They fly over the Black Sea. But at the end of the day, you know, there's nowhere near as much intelligence that we could provide. It isn't as exquisite. It isn't as granular.

7:42And I think you'd see a slow loss of Ukrainian situational awareness and a slow loss of targeting capacity on the battlefield. Shashank, you've painted a pretty catastrophic picture. How has Ukraine responded to all of this? They're deeply concerned. But the critical thing, Rosie, is they're not making any apocalyptic predictions. First of all, they still think that this pause could be reversed. And just to give you an example, some of the arms that are under contract here are made in important states in America. So there may be some pretty irritated congressmen after this announcement. But there's also a sense of quiet confidence that Ukraine is actually stabilizing its eastern front.

8:24Ukraine's army is in better fighting shape. It's got a new operational commander, Mihailo Drapati. There are quite successful strikes on logistics deep inside Russia. So I think there's no sense that this suddenly causes an unravelling of Ukraine's position within days or weeks or anything like that. Ukraine can last. Ukraine can keep going. But what would happen is, as you saw more Russian airstrikes, more Russian glide bomb attacks, less Ukrainian firepower. I think the balance would begin to tilt and Russian gains could accelerate again. But ultimately, the blow I think right now is as much psychological as material.

9:05Ukraine is looking at America today and it's seeing a state that is throwing concession after concession after concession to Russia and that is tackling Ukraine as if it is the enemy. And I think that that's a really difficult cross to bear. Shashank, thank you so much for talking to me. Thank you, Rosie.

9:46Last month I travelled to Istanbul to visit the Grand Bazaar. Carla Supirana writes for The Economist. It's a chaotic maze of stalls selling everything from bags to spices. The place is buzzing with movement and noise. Yeah, yeah, I want a rug. You want a rug? Yeah, I will buy a rug. But I wasn't really there to buy a rug. I went there to see a lesser-known quieter trade, one that unfolds behind the bustling stalls away from the tourists. So now we're going into sort of like a smaller ally to go to where all of the crypto is traded over the counter to get dollars. Down a narrow, dimly lit alley, I saw men slip in and out of back rooms, holding clutches of dollars.

10:33So all of these places, they trade here in all of these doors? There, I was able to talk with a currency trader. Hello, nice to meet you.

10:45He said he trades millions of dollars every day, mostly for stablecoins, which are a type of cryptocurrency tied to other assets, usually the dollar. Carla, when we talk about crypto, we're normally talking about things like Bitcoin, which are quite volatile, but you're saying that stablecoins are pegged. So tell me a bit more about that. So like Bitcoin, every transaction is recorded publicly, but unlike Bitcoin, which swings widely in value, they're designed to stay steady. So for example, Tether, which is the biggest one, which accounts for around 70 % of all stablecoin transactions, it almost always trades at$1.

11:25And they're usually backed by real world assets, so normally government bonds. And that's why they become incredibly popular in recent years. Now they account for 40 % of all crypto transactions, which is double what it was in 2020. So Carla, why did you go to Turkey to find out about all of this? So stable coins are mostly known as a means to trade other crypto. So they act as a stable bridge between more volatile coins. But the interesting thing is that stable coins are increasingly used for real world purposes. So this is why I traveled to Turkey to see how they're being used, because in recent years, many developing countries have suffered from soaring inflation and depreciation, and people have started using them as a store of value.

12:09So in In Turkey, I spoke to many people who said they had put all their savings in stable coins.

12:18And the trader I spoke to also told me that shopkeepers in the Grand Bazaar pay suppliers with the coins. So to them, they are the fastest option because they help bypass the delays and fees of the traditional banking system. And then migrants also use them for remittances. So Turkey is a huge example of this trend. relative to its size, it's the country where stablecoins are used the most. And stablecoins are also huge in other places like Africa and parts of Asia. In absolute terms, they're biggest in America because they're huge for crypto trading. And are stablecoins actually safe? Well, Tether insists that its model is secure because it holds most of its assets in American treasuries around 72%.

13:01But analysts I spoke to worry about its lack of transparency. So, for example, it doesn't undergo independent audits. So we can't be absolutely sure that its reserves are as safe as they say. So the worry is that Tether has become so big that if there was a loss of confidence, it would shake the market. And this has happened before. For example, in 2022, Terra Luna and other stablecoin collapsed and this wiped billions from the market. Governments are sometimes wary about cryptocurrencies. How have they responded to stablecoin? Well, governments are becoming stricter. So when I went to the Grand Bazaar, everyone was talking about this.

13:40Apparently, there's just been a raid recently, so people are going to be a bit nervous to speak to journalists, but hopefully they will talk to us. And the main worry is that Tether is being used for illegal activities. So, for example, Iran and Russia have used it to evade sanctions. And then a UN report said that it was used to launder money in Southeast Asia. Our recent podcast series, Scam Inc., explored this. And Tether says that it works closely with law enforcement, freezing wallets linked to illicit activities and complying with official requests. But governments can't regulate the company itself because it's based in El Salvador and it was previously based in the British Virgin Islands.

14:24None of these places are known for overintrusive regulation. So what they're doing is tightening the screws in other ways, mostly targeting the exchanges. So in January, European exchanges had to delist Tether because it did not comply with requirements set by the European Union. And Turkey also just started requiring exchanges to be licensed, which will make it harder for Tether to operate there. And what about the US? As you said, America is the biggest market and Trump's a fan of crypto, isn't he? Yes, exactly. He said that he wants America to be the crypto capital of the world. And in January, he signed an executive order telling officials to draft legislation.

15:00and he explicitly mentioned stablecoins. He said he wants to use them to increase the dominance of the dollar abroad. So the industry is hoping that the American approach will be a bit more friendly than in Europe. I think that more regulation doesn't have to be bad for stablecoins. So it could make it easier for banks to use it, for example. Visa has already built a platform to help banks issue stablecoins and BBVA, a Spanish bank, will be the first to use it. The challenge for stablecoins now is convincing regulators and big players in Wall Street of their world. Thank you so much. Thank you.

15:36But in places like the back rooms of the Grand Bazaar, stablecoins have already proven that they can be useful and they will continue to be so. Great to talk to you, Carla. Thank you so much. Thank you, Rosie.

16:03No one is quite sure how the Louvre got its name. Alexandra Sewitch-Bass is our culture editor. It could be named after an ancient hunting ground for wolves, loupi in Latin. But today, the Louvre is also a hunting ground for donors. The museum needs around$800 million for a renovation. That may seem like a lot, but the museum itself is massive.

16:35According to one estimate, it would take 18 eight-hour days to see the more than 400 rooms of the Louvre if you were to stop at each work for 15 seconds. Although most visitors just go there to see the Mona Lisa. set. Currently, the Louvre is hosting its first fashion exhibition in the museum's 231-year history.

17:00Around 100 outfits and accessories from 45 fashion houses are on display in the museum, and they're positioned amongst the collection of decorative arts objects, so furniture, relics and more that the Louvre hosts. The Louvre sees it as a way of bringing in new visitors and highlighting a part of the museum that maybe people don't see often. I walked through a few times and saw some delightful pairings. There were Hermes leather gloves next to reliquaries of saints' hands from the 1300s, a Balenciaga chrome-plated dress that looks like armor next to a real suit of armor from the 1500s.

17:48The pairings make you smile and, of course, were extremely photo-worthy. People were taking lots of selfies next to the collection. I love the dress because it's come from a collection which was very inspired by Deborah Deborah Midtford, the Duchess of Devoncher, and Erdem went to Shastrow's house and digged into the archives of the family and got the textiles from the archives. And you know that it's one of the most extraordinary castles of the 17th century and early 18th century. Olivier Gabet is the curator of the exhibition. He told me that the show's aim is to entice people to discover a different wing of the museum after they've elbowed their way for a selfie in front of Leonardo da Vinci's most famous work.

18:39The Louvre is very diverse, much more than only one painting and a few other antiques. Fashion is very universal. Everybody's projected himself or herself on fashion. We have a body, we are dressed. So even if it's haute couture, you can't project yourself in this field. The show is part of a broader strategy to attract new audiences, but also new donors. Tonight, the Louvre will host its first fashion gala, modeled after the Met Gala in New York, which brings together celebrities and fashionistas to raise a huge amount for the New York-based museum. Every fashion house involved in the Louvre show, and even some that were not, have bought pricey tables.

19:27Fashion shows have become the blockbusters of the museum world, bringing in audiences in droves and selling out tickets. But I think what really works about the Louvre show is it's not nakedly commercial. It feels authentically and thoughtfully put together. And many of the objects that are in the show really correspond to the Louvre's permanent collection. So you see dresses inspired by the tapestries that are there. You even see a blazer that is mimicking the design of a chest that's in the Louvre's collection that Karl Lagerfeld, a visitor to the museum, had asked his team to help replicate when it comes to the pattern.

20:16The Louvre Show is an example of how fashion and museums can be a dynamic pairing. But of course, it can also go very wrong. If you walk across the Tuileries Gardens and Place de la Concorde to the Grand Palais, you can see another show focused on Dolce & Gabbana, which does not transcend in the way that the Louvre show does. It's an odd cross between a shrine and a stage. Each room has spotlights and its own soundtrack. There are huge numbers of crowds taking pictures, but it feels very nakedly commercial. You have Botticelli paintings embroidered onto garments, sequined mosaics of Jesus stitched onto sweatshirts.

20:58And it's all a bit deceptive because anyone who's buying tickets to the show would assume that this show is being staged by the Grand Palais. In fact, Dolce & Gabbana rented the space. And so it really is an ode to the brand and part of its branding efforts in a way that perhaps the audience does not understand.

21:22Having at last conquered the Louvre, fashion is likely to strut into even more museums. Fashion, even though it's often dismissed by some as commercial and an example of the consumer culture, it is a mainstream part of culture today. And so museums, as they are trying to be of service and interest to a broader swath of the public, I think are going to be more likely to stage fashion shows in the future.

22:15That's all for this episode of The Intelligence. We'll see you back here tomorrow.