March 2022

Posted by Anton Murray Consulting on . Posted in 2022

After two years of uncertainty and chaos associated with Covid-19, Europe has been pushed into further turmoil. The horrible human toll of the conflict in Ukraine is shocking to say the least, and the global ramifications of Russia’s invasion are likely to be felt for the next decade.

The conflict has brought Europe’s reliance on Russian energy to the fore and has presented Vladimir Putin with a militarily united NATO block that has begun increasing individual nations’ defence budgets; undoubtedly the opposite of Putin’s aspirations. Interestingly, if Russia is to achieve what it appears to seek, that being a subjugated Ukraine with a Russian proxy government, it would then have a border along Europe with a defensive military arsenal not seen for decades.

Further to the military conflict itself, Russia is reeling from global sanctions placed on its economy. Notably the Rouble has fluctuated wildly, the stock exchange has remained closed from the outset of the conflict and now it looks as though Russia will likely default on its foreign debt, unable to pay down the liabilities with US Dollars. In a piece for Livewire Markets, Christopher Joye of Coolabah Capital highlights the, “large lazy longs in Russia and China because assets located in these regions appear superficially cheap”. Joye goes on to describe some of the large exposures that global asset managers have in Russian emerging debt.

There is no doubt that a Russian debt default will have global ramifications. Further, a tightening of ties between Russia and China, both militarily and economically, could result in fresh tensions for the global geo-political environment. A further tightening of China-Russia relations could potentially draw the West and primarily the United States into further action. Regardless of which side of the fence one sits, the consequences of this growing tension is high for both global investors and nations, even those without a geographic footprint in Europe.

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