"Russia's Invasion of Ukraine Declares the End of Globalization"

BlackRock CEO Larry Fink, World's Largest Asset Manager, Asserts in Annual Shareholder Letter

Larry Fink, CEO of BlackRock
Photo by Reuters Yonhap News

[Asia Economy Reporter Park Byung-hee] Larry Fink, CEO of BlackRock, the world's largest asset management company managing $10 trillion (approximately 1,223.5 quadrillion KRW) in assets, declared that globalization has ended due to Russia's invasion of Ukraine. The New York Times also diagnosed on the 22nd (local time) that the COVID-19 pandemic and the war between Russia and Ukraine are causing a retreat in globalization, with repeated observations that globalization, triggered by the collapse of the Soviet Union in 1991, is facing a crisis.

According to CNBC on the 24th, CEO Fink warned in a 10-page annual letter to shareholders that Russia's invasion of Ukraine will reshape the global economy and cause companies to retreat from existing supply chains, thereby stimulating inflation. He stated, "Russia's invasion of Ukraine has ended the globalization we have experienced over the past 30 years."

After the Soviet Union collapsed in 1991 and China joined the World Trade Organization (WTO) in 2001, the global economy rapidly integrated. Russia's gas exports increased eightfold from 1992 until just before the global financial crisis in 2008. However, following Russia's invasion of Ukraine, the United States declared a halt to Russian gas imports, and the European Union (EU) is also exploring plans to completely stop Russian gas imports by 2027.

Major global companies are withdrawing from the Russian market one after another. McDonald's announcement on the 8th to suspend operations at its Russian stores was a symbolic event. Analysts noted that the Golden Arches theory mentioned by New York Times columnist Thomas Friedman in his book Lexus and the Olive Tree has been broken. Friedman argued that countries with McDonald's M-shaped logo stores do not go to war with each other.

Lawrence Boone, chief economist at the Organisation for Economic Co-operation and Development (OECD), warned, "The war between Russia and Ukraine has emboldened forces of deglobalization," adding, "Deglobalization can lead to serious and unpredictable consequences."

CEO Fink assessed that Russia will become completely isolated from capital markets due to this war. He also predicted that companies and governments will more broadly examine their dependence on other countries. As a result, companies will locate their operations domestically or closer overseas to reduce dependence on other countries, which ultimately means companies withdrawing from foreign markets. CEO Fink explained that such large-scale supply chain restructuring inherently increases inflationary pressures.

CEO Fink expects that major manufacturing countries such as Mexico, Brazil, the United States, or key Southeast Asian nations will benefit significantly. He did not specifically mention countries that would suffer losses.

CEO Fink also predicted that the war between Russia and Ukraine will accelerate green policies in the long term. He anticipated that in the short term, the search for substitutes for Russian crude oil and natural gas may delay progress toward carbon neutrality goals. However, in the long term, it will accelerate the green era, emphasizing that rising fossil fuel prices will decisively enhance the competitiveness of green energy.