Thinking in scenarios helps contextualize uncertainties – and better assess investment options. Find out how we evaluate the latest trends in the markets and what perspectives are opening up for equities, commodities and other asset classes.

Recording of the live stream (with Q&A)

© Vontobel 2022

For Russia, Frank Häusler, Chief Investment Strategist, initially expects rising inflation as a consequence of the war and the sanctions. But, just how important is Russia for global gross domestic product (GDP)? And, more importantly for investors: how dependent on Russia is GDP in the EU, or USA? What is the level of impact of a weakened Russian economy on imports and exports in individual countries?


Summary of the most salient points

What is the backstory and what potential developments can we expect? What is market-relevant?


Historical/political background

Nowadays, we recognize that the war in Ukraine is an escalation of almost 30 years of past history. For that reason, we need to view it in an overall Eastern European context. After the fall of the Berlin Wall, and the collapse of the USSR, more and more former Soviet States turned towards Europe and NATO. Moscow felt increasingly provoked. Nevertheless, in hindsight it can be said that the west reacted only hesitantly to the war in Georgia (2008) and the invasion of Crimea (2014).

This Eastern Europe scenario is reflected now in Ukraine. If you sketch a political map of Ukraine, you see a divided nation. Split between pro-Russian and pro-European forces as well as between NATO supporters and NATO opposers. This is significant for the understanding of potential scenarios for the further course of the conflict.

“Only recession-triggering geopolitical events are bearish for stocks.”

The five scenarios

  1. Belarus scenario: the conflict ends with victory for Russia
  2. Crimea scenario: the conflict ends in division of Ukraine
  3. “Syria” scenario: over a period of months, or even years, Ukraine slides into a form of civil war
  4. Change of government: a state coup in Russia puts an end to the war
  5. WW III: NATO wades into the conflict

Find out more in the video about the backgrounds of the individual scenarios and the probability rating we allocate to them.


A look back: why have markets reacted so strongly?

Russia is the eleventh largest economy in the world. Though Russia’s share of global gross domestic product (GDP) is less than two percent. No other major economy in the world generates a substantial share of its GDP on the back of Russian exports. These figures throw up the question as to why, then, the markets have reacted so strongly.

The answer is the peculiar status of commodities – namely oil and gas.

“10 percent less Russian gas means 0.7% lower GDP in the EU.”

Over half of Russian oil goes to Europe. It’s a similar picture for gas. Italy gets 50 percent of its gas from Russia, Hungary even gets close to 100 percent. Trading in fossil fuels is therefore almost as important for Europe as it is for Russia.

Find out more in the video about our view for individual asset classes and potential trends.


Will there be another banking crisis?

Overall, the exposure to Russia for individual banks in the EU is not negligible. Relative to the total assets of the overall banking system in an individual country, though, exposure to Russia is only in the order of parts per thousand. In Germany, to give just one example, banks are involved in Russia to the tune of less than 0.1%. Thus, against the current background, the risk of a banking crisis can be evaluated as being slender.