With his launch of an all-out war against independent and democratic Ukraine, Wladimir Putin failed with his «Blitzkrieg» strategy to conquer and occupy. He miscalculated in all dimensions – militarily, politically, economically and financially, Beat Wittmann writes in an essay on finews.first.
This article is published on finews.first, a forum for authors specialized in economic and financial topics.
The Russian leader keeps doubling down on his military attacks, following the traditional ways Russia operates military warfare – destruction by air force, artillery and tanks reducing cities and critical infrastructure to rubble, and then murdering who is left regardless of their ethnicity and nationality.
The longer this war lasts the harder Putin will fall and leave deep and lasting scars to the standing of Russia in the world. I see three scenarios of how Putin’s war will end:
1. Putin Neutralized and Russia Withdrawing
Putin gets neutralized and sent to court in Moscow or Den Haag by his inner power circle realizing there is no prospect of an imperial future but rather isolation, misery and demise, personally and collectively.
However, replacing Putin with the next autocrat will not suffice. The Kremlin’s Red Square will not have its own Maidan Revolution if Russia cannot escape its rogue state methods. The likelihood of this happening, unfortunately, is very low, with no more than 10 percent to 15 percent probability. The international capital markets, however, would rally with European risk assets in the lead.
2. Russian Escalation Leading to NATO Involvement
The current escalations continue on all fronts with Russian forces deploying all methods and instruments committing war crimes resulting in an ever-mounting death toll and refugee flow.
In response, the West will then impose North Korea-type sanctions including an embargo on all Russian goods, while accelerating the supply of heavier weaponry to Ukraine. It is only a matter of days, perhaps weeks until Western public opinion will tilt towards establishing a NATO no-fly zone over Ukraine. That in return could prompt Putin to introduce martial law in Russia in an attempt to contain the risk of rising domestic Russian opposition to the war.
I would assign a 45 percent to 55 percent probability to this scenario. In investment terms, capital markets will sell off sharply in the short term and global economies will be impacted significantly. Favored investments would remain energy, aerospace and defense while suppliers of natural resources would shift to Latin America and the Middle East.
3. East and West Ukraine Split by the Dnieper River
Russia is hardly capable of taking and occupying the whole of Ukraine militarily. Should they achieve to seize the capital of Kyiv, however, Putin could proclaim victory, possibly discontinuing his military advances to focus on the occupation East of the Dnieper River – de-facto splitting Ukraine into a Russian occupied East and a free and independent West.
I see the probability of this scenario at about 30 percent to 40 percent, resulting, to some extent, in a historic repeat of the North Korea vs South Korea and East Germany vs West Germany situations. In other words Cold War 2.0 between the West and the East.
Yet this time, the EU and NATO directly bordering the ever more impoverished Russia’s West. The consequences: Russia reduced to a natural resource supplier to China and the global capital markets in turmoil, albeit offering selective investment opportunities on weakness.
And Putin? All three scenarios will eventually lead to his name being engraved on the tombstone of Russia’s passed Soviet and Czarist imperial ambitions.
Beat Wittmann is chairman and partner of Zurich-based financial advisory firm Porta Advisors for over six years now. His more than 30-year career in Swiss banking includes stints at both UBS and Credit Suisse as well as Clariden Leu and Julius Baer. He operated his own firm from 2009 to 2015, first independently and more recently under the Raiffeisen Group.
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