Of all the headlines this week on Russia’s invasion of Ukraine, one story in particular, written by my colleague Brian Sozzi, caught my eye: “Russia-Ukraine war is 'a financial war now’.” The line comes from Deutsche Bank strategist Jim Reid who was making the point that the world’s economies are doing battle too.
Before I get into this financial war, I should acknowledge that for the Ukrainians who are fighting and dying for their country, this is very much a real war. Some Ukrainians are angry that its allies are not sending troops to fight. This is what happens when a megalomaniac armed with nuclear weapons has the rest of the world over a barrel.
Putin still has a few friends. Belarus, Myanmar, North Korea, Venezuela and Cuba all support Russia (never mind a few third-tier celebrity pals.) And then of course there’s Russia’s greatest ally, China, which may be experiencing a bit of buyer's remorse right now. India, Pakistan and Brazil sit on the fence.
Besides those few large players and the outliers, the rest of the world is united against Putin and his grasping neo-Stalinism. I was surprised at the sheer volume of weaponry being shipped to Ukraine from NATO, the U.S. and other countries. That, plus the amount of humanitarian aid is significant (see here), and surely speaks to why the Ukrainians are hanging in there. Still, while Ukraine is rapidly becoming the world’s most militarized zone, we all fear it’s only a matter of time before the Russians triumph.
Which brings us back to the financial war. First of course are the massive and myriad economic sanctions being leveled against Putin and his gang of oily oligarchs. (Forgive the 1950s Pravda-like rhetoric, but if Khrushchev’s old shoe fits, why not?) The consequences of these moves appear to be significant and mounting. Yes, innocent Russians will suffer hardship (though nothing like the Ukrainians), but unfortunately what choice do we have? Do nothing? Go to war with Russia? (On the somewhat lighter side, who knew that this would be the week that Russian yacht hunting would become a global sport.)
To get some perspective on the U.S. government response, I spoke to SEC Chair Gary Gensler.
“The SEC [is] monitoring markets,” Gensler told me. “We're staying close with the rest of the Financial Stability Oversight Council agencies and as well as to regulators in the banking and the securities fields across the globe."
“If you look at funds under management, they total multiples of tens of trillions of dollars of assets under management here in the U.S. Only a fraction of 1% are invested in Russian securities or ADRs. We're going to stay alert for any cyber risks or any other market functioning risks. At least for these handful of days so far, the market functions have been operating relatively well. But what comes tomorrow? What comes in the future?”
That’s a take from the government side, but to me the more remarkable action has been in the private sector.
Before I go all corporate gaga on you, I know it may be the case that some companies seem to be jumping on the “I love Ukraine” bandwagon. (Note to CEOs and other C-Suiters: It’s "Ukraine," not "the Ukraine." And Kyiv is pronounced "Keeve," rhymes with Steve.) Also we should be careful with statements from companies "intending" to exit Russia. To wit: We applaud you Shell, but save the champagne until you are actually out of your Russian joint ventures. (Understanding that finding buyers won’t be easy. Hello PetroChina? Sinopec?)
Tech companies as it turns out may actually benefit from disengaging from Russia as Dan Howley points out here as the move builds goodwill with employees and regulators. Nothing wrong with a little enlightened self-interest.
Bottom line though, the list of companies standing up to Putin is long and getting longer by the hour. Check out this ever-updating story from the ever-present Sozzi and Alexandra Semenova. It’s a huge diverse group; American Express, Apple, Nike, Goldman Sachs, DirectTV, GM, Disney, Harley-Davidson, Boeing, Mastercard, Visa, BlackRock, Warner Media, Dell, the NYSE and Nasdaq. And that’s just a handful of big American names.
Fact is, I can’t recall ever seeing the private sector so aligned.
I spoke about this with Bill Browder (last name rhymes with chowder), a super-interesting guy, who’s CEO of Hermitage Capital Management and head of the Global Magnitsky Justice Campaign. To say he and Putin have history is an understatement.
Quick backstory: In the late 1990s and early 2000s, Browder’s firm delivered stellar returns by exposing corruption at major Russian companies, bringing about company shake-ups, and boosting share prices. In 2005, Browder was denied reentry to Russia and later became the victim of a Russian government scheme to undermine his firm, he says. Sergei Magnitsky, a lawyer hired by Browder to investigate Russian corruption, was arrested and died in Russian custody.
Here’s what Browder told me about the private sector going up against Putin:
“If every Western company stops doing business with the Russians, it's really dramatic. When I started my whole campaign for justice for Sergei Magnitsky, one of the first people I met with was a woman in South Africa named Helen Zille, one of the people involved in the anti-apartheid movement. We talked about how they ended apartheid. She said it was all about the U.S. and Western Europe disinvesting from South Africa. When they became financially isolated, it became too much."
“And so I think this is really, really important. When we watch these atrocities unfold in Ukraine, I think it's just to pressure every single Western business, to divest, to stop doing business, to stop supplying goods, to stop supplying services to Russia.”
Thanks in part to a financial war back then, the private sector helped end apartheid. Let’s hope it can somehow do the same to end Putin.
This article was featured in a Saturday edition of the Morning Brief on March 5, 2022. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer