How Putin and Ukraine Affect U.S. Retirees

"The only thing new in the world is the history you don’t know."

--Harry Truman

Vladimir Putin's hostile incursion into Ukraine is making headlines and rattling markets around the world.  Oil is approaching $100 a barrel, inflation is the highest in 40 years, and the stock market is down nearly 10% for the year.  Investors have much to be concerned with these days.

While the Ukraine situation may seem like a new development to Americans, it is not.  It is but one chapter in a complicated story of shifting territorial boundaries and alliances.  And Putin is not at all satisfied with the current lines on maps.

A Recent History

Today's events in Ukraine are part of a complicated timeline:

  • 1917 - Ukraine declares itself independent state during Bolshevik revolution
  • 1922 - Ukraine becomes founding member of the Soviet Union
  • 1954 - Crimea transferred from Russian control to Ukrainian control
  • 1991 - Soviet Union collapses.  Ukraine shifts politically to Pro-Russian Eastern Ukraine and Pro-European Western Ukraine
  • 1999 - Vladimir Putin becomes President of Russia
  • 2008 - Russia invades independent state of Georgia
  • 2014 - Russia invades and annexes Crimea from Ukraine
  • 2022 - Putin surrounds Ukraine in largest European military action in years.  Russian troops pour into Eastern Ukraine, possibly intending to overthrow all of Ukraine.

Putin's Beliefs

Putin is a well-read historian and former head of the Russian secret service (KGB).  He was in Germany for the fall of the Berlin Wall.  He watched Gorbachev preside over the collapse of the Soviet Union.  He has tremendous pride in the glories and accomplishments of Mother Russia and seeks to return Russia to its place of significance on the world stage.  The past 40 years have been an embarrassment in his eyes, and he seeks to reset the narrative.

In a famous speech Putin delivered in 2020, he laid out his very clear beliefs that the post World War II world order, led by the United States, was in danger and needed new direction.  He stated:

  • "The United States, having declared itself the winner of the Cold War...had decided to pressure events and reshape the world to suit their own needs and interests."
  • "this is the way nouveau riches behave when they suddenly end up with a great fortune, in this case, in the shape of world leadership and domination."
  • Putin goes on to say that the United States has become a bully who practices "use of force, economic and propaganda pressure, meddling in domestic affairs, blackmail, toppling regimes" and even suggests the United States sponsors Islamic terrorism.

Putin understands there are literally millions of people in this world who believe the United States to be a threat to their safety, and he knows how to push their buttons.  Putin has been playing geopolitical chess for years, while various US administrations sometimes acted as if we didn't even know there was a match being played.  When a Presidential candidate in 2012 can be celebrated for saying "And the 1980s are now calling to ask for their foreign policy back. Because the Cold War has been over for 20 years." this suggests a lack of understanding of the intricacies of global threats.  

Putin's End Game

The Soviet Union didn't die in 1991.  It went into retreat.  Putin seeks to rebuild it, brick by brick.

He's building a buffer zone around Russia.  The same buffer zone Russia lost to NATO during the fall of the Soviet Union.  In a speech this week, Putin said “Russia has every right to take retaliatory measures to ensure its own security.  This is exactly what we will do.”  Putin wasn't speaking about security threats from little old Ukraine; he was referring to the entire Western alliance and balance of power in Europe.

Putin also understands the economic and military importance of access to and control of international waters linking the Black Sea to the Mediterranean.  His 2014 annexation of the Crimea was key to strengthening Russian naval presence in the Black Sea and ensuring Russia cannot be cutoff from major international trade.  Russia needs to export raw materials like coal, timber, natural gas and oil in order to finance its economy and military buildup.  Putin intends on keeping strategic access open.

Putin is playing a very long game.  We ignore the implications at our peril.

What Can the West Do? 

Western leaders have given many speeches in recent weeks.  There have been discussions of vague sanctions should Putin do something the international community doesn't like.  Exactly what would constitute a violation of the global order has not been precisely defined.  And possible sanctions are only popular as long as they don't backfire on those countries supporting them.  More than 60% of energy needs in the European Union are met by imported energy, with Russia being the #1 supplier.  How long will Germany support sanctions when Russia turns off its heat in the winter?

The United Nations and NATO are in discussions about how to protect Ukraine.  NATO is likely the lead actor if only because it is a true military alliance that was created to counter the Soviet threat after World War II.  But even NATO can't seem to agree on how to proceed.

Alliances are like marriages.  They need to be nurtured or someone might begin to look elsewhere for companionship.  Without a common high-level threat to unite it in recent years, the NATO alliance has weakened.  Going forward, the traditional NATO powers (United States, England, France, Germany) will likely hang together and seek to counter the current threat.  But what about "lesser" NATO members who joined the alliance after 1991?

Countries that joined NATO after 1991 include:

  • Estonia, Latvia, Lithuanic (all former Soviet republics)
  • Poland, painfully aware of what it means to be a Central European state caught between warring superpowers
  • Czech Republic/Hungary/Croatia - war still raged in 1995

Interestingly, all the countries above either share a border with Russia or are within easy reach of conventional missiles.  And Ukraine, while interested in NATO membership and protection, has been denied entry thus far.

While the former Soviet sphere countries might appreciate Western-style freedoms, many are still more culturally aligned with Russia.  And free market capitalism hasn't always been kind to these former Soviet satellites; you can see how a promise of support from Putin, both financial and militarily, might be at least tempting to look at.  Could some NATO members leave the alliance and side with Russia?

What's A Retiree to Do?

These are complicated times, and stock markets will be impacted.  Smart investors build portfolios in anticipation of volatility, not in reaction to it.  This is what we preach in Power of 5 Investing.

We've been helping clients prepare for, and thrive in retirement for over three decades. Our clients' continued financial success is exceeded only by their success at the game of life.

When we build retiree portfolios at Oxford, we seek a balance between Stability and Growth following the principles outlined in our proprietary Power of 5 Investing system. Our goal is to help clients achieve inflation-beating growth in their wealth, while managing through market downturns, ultimately helping clients leave a legacy to the people and places they love. Our system has been battle tested in 25+ years of market ups and downs and is ready for whatever the market can throw at it.

If you're concerned about how your retirement portfolio may be impacted by events in Ukraine, we can help.  Click the button below to setup a free Get Acquainted meeting.