Of all the headlines this week about Russia’s invasion of Ukraine, one story, written by my colleague Brian Sozzi, caught my attention: “The Russo-Ukrainian War Is Now a ‘Financial War’.” This line comes from Deutsche Bank strategist Jim Reid, who has emphasized that global economies are also struggling.
Before I get into this financial war, I must admit that for Ukrainians who fight and die for their country, this is a real war. Some Ukrainians are outraged that their allies are not sending troops to fight. This is what happens when a megalomaniac maniac armed with a nuclear weapon keeps the rest of the world in suspense.
Putin still has a few friends. Belarus, Myanmar, North Korea, Venezuela and Cuba support Russia (not to mention a few third-tier celebrity buddies). And, of course, there is Russia’s main ally, China, which may now feel the remorse of the buyer. India, Pakistan and Brazil are sitting on the fence.
Apart from these few big players and outsiders, the rest of the world has united against Putin and his tenacious neo-Stalinism. I was surprised by the huge amount of weapons supplied to Ukraine from NATO, the US and other countries. This, and the amount of humanitarian aid, is significant (see here), and certainly speaks to why the Ukrainians are hanging on there. Yet, despite the fact that Ukraine is fast becoming the most militarized zone in the world, we all fear that a Russian victory is only a matter of time.
Which brings us back to the financial war. First, of course, the massive and countless economic sanctions imposed on Putin and his gang of oil oligarchs. (Forgive the Pravda-esque rhetoric of the 1950s, but if Khrushchev’s old shoe fits, then why not?) The implications of these moves seem significant and escalating. Yes, innocent Russians will suffer (though not in the same way as Ukrainians), but, unfortunately, what choice do we have? To do nothing? Go to war with Russia? (On the other hand, who knew that this would be the week when Russian yacht hunting became a global sport.)
The story goes on
The 140-meter superyacht Lloyd Werft Solaris, owned by Russian billionaire Roman Abramovich, is moored in the port of Barcelona on March 1, 2022. (Photo by Josep LAGO/AFP) (Photo by Josep LAGO/AFP) via Getty Images)
To get some insight into the US government’s reaction, I spoke with SEC Chairman Gary Gensler.
“SPK [is] market monitoring,” Gensler told me. “We maintain close ties with the rest of the Financial Stability Oversight Board agencies, as well as banking and securities regulators around the world.”
“If you look at the funds under management, they add up to multiples of tens of trillions of dollars of assets under management here in the US. Only a part of 1% is invested in Russian securities or ADRs. We are going to be on the lookout for any cyber risks or any other risks to the functioning of the market. At least during these few days, the market functions worked relatively well. But what will happen tomorrow? What will happen in the future?
This is the opinion of the government, but to me the more noteworthy actions were in the private sector.
Before I start joking with you, I know some companies seem to be jumping on the “I love Ukraine” bandwagon. (Note to CEOs and other top managers: this is “Ukraine”, not “Ukraine”. And Kyiv is pronounced “Kiv” and rhymes with Steve.) Also, we should be careful about statements by companies “intending” to leave Russia . Namely: we applaud you, Shell, but save the champagne until you exit your Russian joint ventures. (Knowing that finding buyers will not be easy. Hello PetroChina? Sinopec?)
Tech companies, it turns out, could actually benefit from exiting Russia, as Dan Hawley points out here, as the move bolsters employee and regulatory goodwill. There’s nothing wrong with a little enlightened selfishness.
An empty display case with Apple products at an electronics store in Omsk, Russia, March 2, 2022. REUTERS/Aleksey Malgavko
As a result, the list of companies opposing Putin is long and getting longer by the hour. Check out this constantly updated story from the ubiquitous Sozzi and Alexandra Semyonova. This is a huge diverse group; American Express, Apple, Nike, Goldman Sachs, DirectTV, GM, Disney, Harley-Davidson, Boeing, Mastercard, Visa, BlackRock, Warner Media, Dell, NYSE and Nasdaq. And these are just a few big American names.
The thing is, I can’t remember ever seeing the private sector set up like that.
I talked about this with Bill Browder (the last name rhymes with chowder), a very interesting guy, CEO of Hermitage Capital Management and head of the Global Magnitsky Justice Campaign. To say that they have a history with Putin is to say nothing.
Brief background: In the late 1990s and early 2000s, Browder’s firm did a brilliant job of exposing corruption in large Russian companies, reshuffling companies, and driving up stock prices. In 2005, he said, Browder was denied entry to Russia and later fell victim to a plan by the Russian government to undermine his firm. Sergei Magnitsky, a lawyer hired by Browder to investigate corruption in Russia, was arrested and died in custody in Russia.
Here is what Browder told me about the private sector uprising against Putin:
“If all Western companies stop doing business with Russians, it will be really dramatic. When I started my entire campaign for justice for Sergei Magnitsky, one of the first people I met was a South African woman named Helen Zille, one of the anti-apartheid movement. We talked about how they ended apartheid. She said that the whole point is that the US and Western Europe refuse to invest in South Africa. When they were financially isolated, it became too much.”
“And so I think it’s very, very important. When we watch these atrocities unfold in Ukraine, I think this is just an attempt to put pressure on every Western business, sell it, stop doing business, stop supplying goods, stop supplying services to Russia.”
Thanks in part to the then financial war, the private sector helped end apartheid. Let’s hope he can somehow do away with Putin.
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This article was featured in the Saturday Morning Brief, March 5, 2022. Get the Morning Brief straight to your inbox Monday through Friday until 6:30 AM ET. Subscribe
Andy Server is the editor-in-chief of Yahoo Finance. Follow him on Twitter: @server
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