Larry Fink, the CEO of Blackrock, the world’s largest asset manager with $10,000 billion in assets, shows dismay about the Ukraine War in his traditional letter to shareholders. He even sees the end of globalization. “Russia’s brutal attack on Ukraine has upended the world order that had been in place since the end of the Cold War” the Blackrock CEO noted. He said Russia’s inclusion in the global financial system had provided a peace dividend. That, he said, is now over. The impact of the Ukraine War will be felt for decades to come in ways we can’t yet predict.
The Economic War
He said that Russia’s invasion of Ukraine would reshape the global economy and further drive up inflation as companies pull out of their global supply chains. “The Russian invasion of Ukraine has ended the globalization we’ve seen over the last three decades.” Capital markets, financial institutions, and companies have gone even further beyond government-imposed sanctions.
The speed and magnitude of company actions to amplify sanctions have been incredible. “Iconic American consumer brands have suspended their operations of non-essential products.” And financial services companies have taken similar steps to further isolate the Russian economy from the global financial system.es.
Russia has been essentially cut off from global capital markets, demonstrating the commitment of major companies to operate consistent with core values. This “economic war” shows what we can achieve when companies, supported by their stakeholders, come together in the face of violence and aggression.
The ramifications of the Ukraine War would not be limited to Eastern Europe. They are layered on top of a pandemic that has already had profound effects on political, economic, and social trends. The impact will reverberate for decades to come in ways we can’t yet predict.
The rise of digital currencies
The Ukraine War would potentially accelerate the rise of digital currencies as it prompts countries to re-evaluate their currency dependencies. Even before the war, several governments were looking to play a more active role in digital currencies and define the regulatory frameworks under which they operate.
Digital currencies can also help bring down the costs of cross-border payments. As Blackrock sees increasing interest from their clients, they would evaluate digital currencies, stablecoins, and the underlying technologies to understand how they can help us serve our clients.
Accelerating the shift toward a green planet
Longer-term, Fink believes that Covid 19 and the Ukraine War will accelerate the shift toward greener sources of energy. The search for alternatives to Russian oil and natural gas “will inevitably slow the world’s progress toward net-zero emissions in the short term.” Higher energy prices will also meaningfully reduce the green premium for clean technologies and enable renewables, EVs, and other clean technologies to be much more competitive economically. However, he again rejected calls to avoid investments in fossil fuels completely.