E17 - Putin in Context: Geopolitical Poker [PODCAST]

Michael Edwards

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In 1996, the columnist Thomas Friedman said that no two countries that both had McDonald's had fought a war against each other since each got its McDonald's. Unfortunately, that theory, known as the Golden Arches Theory of Conflict Prevention, hasn’t aged well. Indeed, economics and trade may still matter in many parts of the world, but when it comes to analyzing the situation in Ukraine and understanding Vladimir Putin's motives, the Western playbook may not be of much use anymore. In this episode of In Search of Green Marbles, G3 speaks with Weiss's deputy CIO, Mike Edwards, to learn how he's analyzing this very tense situation that has the world, and the financial markets in particular, on edge. 

 

Mike believes one of the most important aspects to focus on when analyzing the unfolding crisis between Ukraine and Russia is the global context. Why attack now? Some of the key issues that make this an advantageous time for Putin include Germany’s energy vulnerability, political divisions in the United States and Boris Johnson’s tenuous hold on his job. This may mean that Russia has a strong macro hand right now, given the widespread global uncertainty and the fact that it is a key swing producer of oil. All in all, Putin’s comfort with chaos is far greater than what we would normally assume leaders to have and the absence of resolution may give Putin the stronger hand.

One of the biggest challenges market analysts face is their tendency to create a stochastic set of possible outcomes based on rational assumptions. This complicates things as it is very hard to play a structured game against someone who is playing by a completely different set of irrational rules. Indeed, we believe reductionist thinking and a projection of rationality are currently inappropriate given the political climate.

Resources:

  1. Nord Stream 2
  2. Germany’s former Chancellor Gerhard Schröder to join Gazprom board 
  3. Trump Administration lifts sanctions on aluminum giant Rusal
  4. The Joint Comprehensive Plan of Action (JCPOA) at a Glance