Russia–Ukraine War Casts a Global Shadow on the Post-Covid Landscape

It is hard to overestimate how the continuing conflict will dictate global politics and the economy throughout 2023. Ukrainian territory under Russian occupation amounts to roughly 0.02% of the globe’s landmass. Yet this conflict has profoundly affected almost every country in the world.

Uncertainty and polarization – Buzzwords of the 2020s

A warm balm of relief coddled the world when we finally managed to learn to live with Covid and step outside our front doors again. For a few brief months, we reveled in the chance to return to a semblance of normality. Economists were preparing for an unpredictable but manageable period of inflation tempered by a surge in growth due to the post-pandemic return to work. Big challenges loomed but having managed the pandemic, there was optimism that they weren’t insuperable.

But that was so 2021. 2022 wasn’t having any of it. Just when everyone thought it was safe to venture forth again, Russia’s President Vladimir Putin ordered his troops into Ukraine, plunging the world into the next phase of what some now call the ‘Age of Uncertainty’.

This is not a repeat of the Cold War, which was characterized by stable relations between the West and the Soviet Union, who instead engaged in proxy wars mainly in East Asia and Africa. The Russo–Ukrainian war is a brutal ground war in which one combatant possesses more nuclear warheads than any other country on the planet.

Furthermore, the Russian and Ukrainian economies exert a huge influence over two vital sectors of the global economy — energy and agriculture. This has been reflected in steep price rises, turning a manageable inflationary struggle into a dangerous one.

Beyond this, the conflict has sharpened the existing political polarization within countries and between them. The Russian president is banking on growing popular dissatisfaction in the EU with the bloc’s support for Ukraine. At the same time, he has become progressively isolated as support from his international friends such as China and India cooled.

Beijing and Washington – Co-operating behind the scenes

Overlooked by many was one piece of good news. In a series of quiet backchannel negotiations, the USA and China agreed they did not want to see the conflict escalate to the nuclear level and, by all accounts, Beijing informed Moscow of this in no uncertain terms. Since then, Russia’s threat to go nuclear last September has stopped. Nonetheless, most governments are preparing for this war to be a long affair, ensuring that uncertainty will continue for many months to come.

USA – Stability restored (for now)

So where are we now? The Democrats retained control of the Senate after last November’s mid-terms, so Biden’s last two years in his first presidential term will be relatively stable. The USA continues to be the great center for high-net-worth individuals, very attractive both as a place to live and to do business. The high tech and arms sectors are enjoying a huge boom, in large part due to the Russo–Ukrainian war.

EU – Changing dynamics at play

The EU by contrast looks less stable. Underneath the initial unity in the face of Russia’s aggression against Ukraine, divisions are brewing. Most interestingly is the growing influence that Central European member states, especially Poland, are playing within the Union. In the next five years, Poland and Czechia will become net contributors to the EU and their voices will get louder within the decision-making process, shifting the locus of power from the south and west to the east and north.

Poland’s election later this year will be a critical event. A win for the opposition will be a blow against populism across the EU and a victory for liberals and social democrats. It will also further isolate the recalcitrant government of Viktor Orban in Hungary, which is now locked in a game of chicken with Brussels over the disbursement of billions of euros in funds. The outcome of Türkiye’s presidential election in June will also have a significant geo-political impact. President Erdogan is waging a no-holds barred campaign to remain in power.

Europe and Australasia – Golden visa and digital nomad hotspots

Nonetheless the European south remains very attractive to high-net-worth individuals as there are still great deals to be had on golden visas, especially in Portugal and Greece. The former in particular is gaining a reputation for its great quality of life, combined with political stability. Like Estonia in the north, Portugal is now also becoming popular with young and wealthy digital nomads with one of the most dynamic start-up cultures anywhere in the world. The other two most desirable destinations will be Australia and New Zealand.

China – Living with Covid in 2023

China is facing a year of uncertainty. Last year’s unprecedented protests, caused primarily by a population fed up with draconian anti-Covid measures, occasionally morphed into pro-democracy protests. The result was an astonishing u-turn on Covid policy that is now placing the country’s health service under immense strain. Combine President Xi’s diminished authority with China’s growing internal debt crisis and the country’s relentless rise looks set to falter. Although China continues to produce more billionaires than anywhere else on the planet, events like the crackdown in Hong Kong have also led to a surge in money leaving both the island territory and the mainland. Over 100,000 Hong Kong citizens have fled to Britain alone in the past 18 months, including many influential people involved in finance.

Global South – A mixed bag

In the Global South, expect a surge in investment in Brazil as newly elected President Lula (who served eight years in the post until 2011) brings a sense of feel-good back to South America’s largest economy. Mexico and India also look set for good years too but trouble is brewing in South Africa as the ANC prepares for a round of blood-letting in the wake of President Cyril Ramaphosa’s troubles. Caught up in an embarrassing scandal over money found on his farm, the president has nonetheless prevented his enemies inside his own party, the ANC, from defeating him. But the country’s infrastructural problems, notably its electricity system, remain an immense challenge. Africa in general will continue to see sustained growth and foreign investment even if February’s general election in Nigeria provides its usual surprises.