Kristoff Wild

March 14, 2022 – Charleston, SC, USA

Russia’s Ukraine war has likely been pre-planned since 2014 and possibly even earlier since Putin established the breakaway regions of Abkhazia and South Ossetia in 2008. Both regions were designed to allow for the buildup of Russian combat power in the Caucuses (3,500 troops in Abkhazia and 16,000 in South Ossetia), not terribly large but in the context of military detachments we’re talking multiple brigade level echelons and during the 2008 invasion of Georgia the Russians built up 8,000 soldiers alongside the border prior to invading. The war lasted 5 days before a ceasefire negotiation was agreed upon. 

However, Russia’s greater aim was to secure a larger zone of control in the Black Sea and Greater Caucuses Mountains, an area Russia has claimed was a breeding ground for insurgency. This first foray achieved all the geography and security objectives Russia wanted. The international community was relatively weak and muted, and to this day Georgia has yet to gain accession status to NATO (a process they began in 2008). The next external conflict was Luhansk, Donbas, and Crimea.  Securing Sevastopol as a primary warm water port allowed for a continuation of the corridor Russia wanted in order to have access to the Bosporus. Again, this operation was surgical and met with limited international response. 

The benefit of having Transnistria since the 1990’s as a breakaway province from Moldava  (the largest munitions depot in Eastern Europe with 22,000 tons of armaments and 7,500 troops in the region) means that an amassing of Russian combat power can be directed at pushing east towards Odessa, consolidate on the objective and then ultimately move into Moldova to secure the Bessarabian Pass, which Moscow sees as a primary security concern in their “Defense of the Homeland” doctrine. 

So, Ukraine is likely the first phase of a multi-phase operation to plug the gaps in Russia’s perceived security corridors. Which ultimately means we should continue to see a period of extended hostility into both Georgia and Moldova after Ukraine, none of which are NATO members. Since the United States has already laid out the parameters for intervention as being necessary only in defense of NATO territory, it’s basically open season. And since the international reaction has been so overwhelming on Ukraine, there won’t be much of anything the NATO allied countries can do to deter continued aggression should Russia want those geographies. 

The problem and decision point for initiating the grand plan is Russia’s falling demographics.  According to UN data, Russia achieved peak population in 1993, and has been in steady decline since. The future forecasts post-2022 are nothing but structural decline with the population falling from 145,805,947 today to 126,142, 656 in 2100. The population decline is terminal. This is Russia’s last great war and last attempt to secure all of its objectives at once. If you look at the demographic pyramid for Russia in 2021, only 9.4% of its male population is in prime war fighting age (versus 14% in the US). This equates to Russia having a total call up force of 6.3m, whereas the United States has 22.3m; and that just includes males as we have now integrated females into front line warfighting capabilities. The Russians are effectively out of time to win a conventional war against the US, much less a unified NATO. The data set a stage for them to continue forward through multiple phases of war in order to secure additional demographics and their strategic objectives. 

What this means for the rest of the world – 20.7% of the worlds crude oil export value, 13% refined petroleum, 4% coal briquettes, and 2% of global wheat will remain displaced for the foreseeable future. While we all know the implications of oil and gas, wheat becomes a bigger issue.  The majority of Russian wheat goes to Egypt, then Turkey, Bangladesh, Nigeria, Yemen and Azerbaijan. The last time we had a grain inflation spike in the Middle East, it kicked off Arab Spring. Turkey, being a key NATO member, procures 70% of its wheat supply from Russia with another 15% from Ukraine. With Turkey already having its own internal inflation and monetary issues, this has the potential to knock a key ally off the block as they deal with domestic issues. The problems become even more interesting considering we are a month away from Ukrainian planting season. Top importers are Indonesia (the largest Muslim country in the world by population and 15th largest global economy), Philippines, and Tunisia. Indonesia is already reeling from poor food and energy policies which have backfired on them, leaving them looking for new supply chain partners. This all potentially spells out a greater degree of volatility in commodity markets.  

That said, there are some winners, primarily Argentina if they can get their act together. Turkey has already sourced two large shipments of wheat, with more on the horizon, they are paying a premium for the privilege though. In the same vein, Brazil is also likely candidate for stepping up wheat production, as is the EU. So, it’s not all doom and gloom for food shortages, but this could take a turn for the worse; and if it does, population rancor will likely follow. 

Supply chain stress in the US also increased in February, so the idea that supply chain re-alignment would occur within six to nine months of economic reflation isn’t exactly holding to timeline. And we have a long way to equilibrium on this process. 

  Source:  Oxford Economics 


  • Inflation is persistent and will not moderate in the near to medium term
  • Conflict stressors to continue over the medium term
  • Commodity prices to remain elevated
  • Consumer spending will decline
  • Corporate margins will decline
  • Equity multiples will compress
  • The specter of recession rises (and markets will have to grapple with pricing it in, likely what is already doing to some degree)