- February 28, 2022
AUTHOR: David Slatter, RF Vice President of Investment Management
With over 20 years of experience in bringing wealth management services to the Caribbean, Mr. Slatter is experienced in wealth creation and managing risk. He holds a Master of Economics degree and a Master of Business Administration degree from York University, and is a Chartered Financial Analyst Charterholder.
What does the Russian invasion of Ukraine mean for Caribbean investors?
The local impact will not be direct but may occur over time in the form of higher inflation. Russian exports of natural gas and oil represent 17% and 12% (Source) global exports, respectively. The key question is how much of these exports will be removed from global supply due to sanctions.
China has refused to call Russia’s invasion an invasion. This leaves the door open for China to be a buyer of Russian oil and gas. China is a major importer of oil and if Russia finds its normal markets cut-off due to sanctions, then Russia will be a motivated seller and China a willing buyer. The cost of production is so low in Russia, that Putin could negotiate prices well below market to ensure foreign reserves continue to flow into Russia coffers. If China replaces oil and gas imports from non-Russian sources with Russian product, then this supply will be redirected back into the global market. This arrangement would lessen the global inflationary impact of such sanctions. Approximately 50% of Russian exports are oil and natural gas products, so the inflationary impact of sanctions on other non-oil exports should be manageable as well.
In the meantime, local investors should remain abreast of global developments, but continue to focus on local company fundamentals regarding investment decisions. Don’t let the noise in the marketplace distract you from the price of the fish. The key risk for local and global investors is if this conflict evolves into a hot war with NATO.