Good morning.
Lots of coverage this weekend on how the Ukraine war has changed the world. Check out this in the Wall Street Journal, this from TIME, and this from Chatham House. But let’s narrow the frame a bit: How has the war changed business? Still pretty profound. We’ll leave aside the continuing tack away from globalized supply chains—that was going on before the war started, and was only accelerated by Russia’s invasion. Same for inflation—the war worsened a preexisting problem. But beyond that, consider:
—Companies can no longer ignore geopolitics. This isn’t just because of far-reaching sanctions, of the sort the U.S. had already imposed on Iran. It’s because investors, customers and society at large now expect companies to take a stand, and are holding them accountable. There is some precedent for this in the anti-apartheid movement of the 1970s, but the anti-Russia reaction was much faster, bigger, stronger and pervasive, and driven in part by the relentless flogging from Yale professor Jeffrey Sonnenfeld.
—The China risk/reward equation has changed dramatically. The Russian invasion highlight the “What if?” question around China and Taiwan in a way that couldn’t be ignored. Virtually every big company with sizable interests in China has done war gaming with their board on this question in the past year—if they hadn’t done it before.
—The role of oil and gas in the energy transition is being rethought. BP is probably the most climate-forward of the oil majors, and had promised a 40% reduction in fossil fuel investment prior to the invasion. But Russia’s action made clear that a socially responsible oil company can’t focus on climate alone, without considering the reliability, affordability, and geopolitical implications of producing the oil and gas that the world will need during the transition. You can listen to BP CEO Bernard Looney or Occidental CEO Vicki Hollub talk about the challenge with Fortune here and here.
—War is big business. It’s not just that the U.S. has provided tens of billions of dollars in aid to Ukraine, but that virtually every country in the world has upped its planned spending on defense. Just look at the stock prices of Lockheed Martin, Northrup Grumman, Raytheon or General Dynamics to get a sense of the move. (Boeing’s civilian problems outweigh any defense benefit.)
And a bit late here, but kudos to the Biden Administration for picking former Mastercard CEO Ajay Banga to head the World Bank. CEOs are not this administration’s go-to demographic. But Banga is the best of the new breed of CEO statespeople, delivering huge returns for shareholders while also spending considerable time and energy advancing financial inclusion.
Other news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
