It is not the war per se between Russia and Ukraine that investors should be concerned about, according to Professor Stephen Kotkin, but the destabilising effects of Russia’s actions that could impact globalisation and harm the west.
“The big geopolitical risk is not the war but that Ukraine gets broken up,” Kotkin, the John P Birkelund Professor in History and International Affairs at Princeton University, said in an interview shortly before hostilities broke out. “A lot of what Russia could do could be very destabilising for investors.”
Kotkin who is a Russia expert and was shortlisted for the Pulitzer Prize for his book “Paradoxes of Power” said investors should not be looking at the tension itself but what could be done by either side, in particular Russia breaking up Ukraine.
“Things like making their cities unliveable and poisoning the air and rivers, using cyber war to shut down the utilities and repercussions beyond Ukraine because everything is interconnected,” he said. “99% of the world’s communication goes through under sea cables. They are mapped and Russia knows where they are, they could cut them. Globalisation is worth a lot more to the west than it is to the Russians.”
Speaking before the sanctions and Russia’s SWIFT ban were put in place Kotkin warned: “The pressure can be as long as Putin wants it to be… I don’t think it makes sense for Europeans to go without heat and shut their industry down by cutting off gas. It doesn’t make sense for Russia to be excluded from the SWIFT banking system. The international financial system is worth a lot more to the west than it is to Russia.”
He said one option with regards to the economic sanctions, which was effective during the cold war, could be technology transfer limits.
In the interview Kotkin also discusses the tension between Taiwan and China and reminded investors that the big problems are always perverse and unintended consequences.
Kotkin will be speaking at Investment Magazine’s chair forum on March 28. For the agenda and to register click HERE