Part 5: Supply Chain Intelligence with Dr. Ian Oxnevad

About Riskology

Welcome to the show notes for Season One of Riskology by Infortal™.  

Riskology is a podcast that combines the worlds of geopolitics and intelligence with that of business.  Geopolitical risk threatens global trade, supply chain integrity, and corporate reputation unlike anything seen since World War Two. Riskology by Infortal™ is meant to inform, entertain, and cut through the noise of crisis so business professionals can have a clear understanding of their place in the constantly changing global economy. 

The following is a collected transcript of our podcast episodes from our launch through September 2023.  In this season you will: 

• Gain a summary understanding of geopolitical risk as a problem for business
• Learn about the power of intelligence and “boot on the ground” to supercharge and safeguard your business operations
• Obtain greater insight about intelligence to combat corruption and additional costs 
• Learn about using intelligence to avoid sanctions violations 
• Secure greater understanding of using intelligence to avoid pitfalls related to ESG risks
• Learn about protecting supply chain integrity and flexibility with intelligence-based advanced warning and de-risking
• Take a regional snapshot of the major “regions of risk” today: East Asia, Russia and Ukraine, the Middle East, Latin America, and South Asia
• Learn about how the future of global business is in fact not in China, but in Eurasia as is less commonly understood
• And more!

Please note: These transcripts are noted as spoken, and are dated to early Fall 2023.  As such, this season does not include up-to-date information related to unfolding crises such as the October 7, 2023 attack in Israel, radical electoral outcomes in Europe and Argentina, or the looming war between Venezuela and Guyana.  

Please like, subscribe, and share if you like our content!

-The Riskology Team 

Infortal on Global Risk Outlook: Part 3 – Dr. Ian Oxnevad on Russia and Ukraine

If you're fighting off a major world power, corruption is not going to be at the top of your plate. You're going to be looking at trying to keep domestic production up and national solidarity at high levels, fighting corruption, which requires police actions, legal processes, etc. That's just beyond Ukraine's capacity at the moment because they have bigger things to deal with.

Intro: Companies operating in today's global economy really need to get an understanding of the international geopolitical risk landscape. At Infortal Worldwide, we work with our clients on solving risk before it starts. Welcome to the Riskology podcast. This is a five-part series on geopolitical risk intelligence, where we're looking at managing business risk globally and really understanding the geopolitical risk landscape.

Tom: Hello, everyone. This is Tom Fox back for episode three in our five-part series on geopolitical risk. Joined once again by Ian Oxnevad from Infortal Worldwide. Ian, first of all, welcome back.

Ian: Thanks for having me again. 

Tom: Ian, we're going to take up today Ukraine and Russia. And we've got a lot to digest and just unfortunately a few minutes. I want to maybe preface it with three observations I want to make. Number one, I think we may be looking at the world's largest construction project at some point in the future, which would be the rebuilding of Ukraine. The energy industry and energy for Ukraine will be equally important, but also Ukraine is literally the bread basket of the world if not Europe. So, we've had developments up until today in that area as you might expect. What are you seeing from the geopolitical risk analysis your performing? 

Ian: You have to look at the 10,000 for level first and that Russia, Ukraine war did not occur or unfold the way everyone expected it to. And I would even argue that's the case for Russia and Ukraine itself. The leadership did not get decapitated initially like everyone thought President Zelensky did not run. To NATO himself to get himself out of harm's way he stayed. And uh the Russian military on paper looked amazing in terms of its conventional capacity, but because of corruption they were paying for much higher end goods that they weren't quite getting. And as the result of this, Russia stands to potentially lose a conventional war. 

Now the biggest risk that nobody is really talking about is the possibility of tactical nuclear weapons being used in Ukraine. Right now, Ukraine is prepping for a counteroffensive, which is great for the West because it could actually drive Russia not only out of Ukraine, but also push them to the negotiation table, which would end this and potentially kick start the post-COVID may lays that the economy worldwide is in. Alternatively, if tactical nukes are used and Russia is afraid that Russia itself may get invaded or it's going to be too humiliating of a loss, if they use tactical nuclear weapons, then I think the risk could be catastrophic, not only from just complete instability in Europe and potentially the Middle East depending on what kind of material is used in those nukes that could affect radiation and half-life, etc. And Russia supposedly trained for these things. They have manuals going back to the 1970s on how to run a conventional war in a post-nuclear environment, whether or not they're capable of doing that remains to be seen. Hopefully we don't have to see that. But the big thing from a geopolitical standpoint geopolitical risk is that the war between Russia and Ukraine is now a proxy war between Russia and the West on one hand and also China and the West on the other as China increasingly supports Russia economically as Russia is trying to slog its way through this. 

So, from an opportunity standpoint, obviously if this war ends, it depends on who remains in power in Russia because Ukraine needs rebuilding, but Russia is going to need rebuilding as well. And this is going to be investment opportunities if those sanctions disappear. Sanctions are obviously a bigger problem and potentially elsewhere for companies where they're not necessarily expecting it because a number of countries such as China, such as India and others did not sign on to the anti-Russian sanctions, that creates the possibility of violating Russia sanctions even if you're doing business in another country. So, from a risk standpoint at the moment, that's one of the biggest things that Western companies need to worry about is whether or not they're going to violate sanctions even if they're just doing a deal in India or another part of the world as it could relate to Russia, and they may not even be aware of it. 

And that requires screening suppliers, buyers, partners, etc. Not only from a due diligence standpoint but understanding if those entities have any ties to Russia and that requires geopolitical risk intelligence and boots on the ground knowledge, which is something that we're familiar with here at Infortal. But in terms of rebuilding, Ukraine needs to be rebuilt, obviously. And this has ramifications far beyond Europe and Ukraine. On the one hand in Europe itself, this is shrunk the European economy considerably as the result of higher energy costs. And in other parts of the world, like in Africa and parts of the Middle East, what you're looking at is how they're going to get their food supplies. So combined Russia and Ukraine supply most of the food, most of the grain for Africa and other parts of the world. And because of sanctions and also just lost production as the result of the war, this has put those food supplies at risk. 

So, you're having Egypt, all of a sudden on the brink, they're looking at getting alternative grain sources elsewhere. But this is driving a food cross as well as energy costs around the world. And because energy and food are baseline things, Russia's created a massive inflationary pressure far removed from Russia and Ukraine itself. 

Tom: Ukraine was, I won't say traditionally, but somewhat viewed as a high-risk corruption country. Certainly, we had FCPA enforcement actions out of Ukraine, the shenanigans during the Trump administration were well known, but lots of other incidents. Do you see president Zelensky being able to address these concerns or do American companies need to be really seeing Ukraine if business opportunities become available as a high-risk jurisdiction that they need to tread carefully in?

Ian: Well, Ukraine is still a high-risk country for corruption, and the war makes them more difficult in the sense that by sheer necessity and national survival, there's a greater incentive for corruption to exist, first of all, because of chaos and the emergency that the country's in. And at the same time, there's no guarantee that, that corruption is going to disappear even if the war stopped overnight. So, between the added chaos from the war, and that uncertainty about afterwards, yeah, that corruption exists. I don't think Zelensky can get a handle on it. And fighting corruption, I mean, if you're fighting off a major world power, corruption is not going to be at the top of your plate. You're going to be looking at trying to keep domestic production up and national solidarity at high levels. Fighting corruption, which requires police actions, legal processes, etc. That's just beyond Ukraine's capacity at the moment because they have bigger things to deal with. 

But from an outsider standpoint, yeah, corruption is a massive risk in Ukraine. And it's going to stay that way, particularly as rebuilding occurs, because the rebuilding is going to take place before any existing EU institutions move in there to sort of curtail that corruption. So, if European Union and Eurozone type institutions move into Ukraine after the war, that will mitigate that corruption, but not in time to capitalize on rebuilding opportunities. So, from a geopolitical risk standpoint and also from a due diligence standpoint, corruption is a risk that American companies and others are going to have to grapple with in Ukraine. 

Tom: I think the last round of sanctions entered by the United States and EU were the 11th round of sanctions on Russia, I May be off one or two on that. Do you see if a resolution, there will be a resolution to this war one way or the other, but if there's a resolution, do you see the lifting of sanctions more quickly than more slowly or how would you anticipate sanctions against Russia playing out if there's a resolution satisfactory to Ukraine in the United States? 

Tom: I think it's going to depend on whether or not Putin stays in power. I think if Putin remains in power, those sanctions will probably stay in place. If that's the case geopolitically, you're looking at China filling that void, that Western investment could potentially help fill. If Putin is deposed, however, and replaced with a more pro-Russian or at least neutral government, depending on instability in Russia that ensues, sanctions could be lifted, as just a matter of how quickly and in what sectors. And that requires screening everything again. 

So, if you go back to 1990, 1991, there were articles you know in the New York Times, Washington Post, Time Magazine about geopolitical risk in Russia, and these companies from the US and elsewhere just went in completely blind. They didn't care. And now they're paying the price. You have hundreds of billions of dollars that have been lost as the result of this war and the sanctions coming down. You're going to have to screen everything going in again because the makeup of Russia's economic landscape and political landscape could be completely different depending on who gets assassinated or falls down stairs, or something in Russia like it happens or who eats the radioactive sushi or who decides to retire to you know the Caspian sea. Any of those things can affect Russia's political economic landscape. 

So, from a due diligence and risk standpoint, after the Ukraine war ends, you're looking at a business etch a sketch in terms of risk and opportunities. This is just a matter of screening everything beforehand and whether or not Putin remains in power. 

Tom: You've alluded to, actually didn't allude you directly talked about China and the EU or Europe. And so far, listeners, we're going to get to both of those geopolitical areas because I'm going to tie them to risks or perhaps rewards and opportunities as a result of the Russian invasion of Ukraine as well. Really the last weight I wanted to ask you about was you mentioned the EU coming in to assist Ukraine if there's an end of the war, reestablish a real of law, put policies, procedures, all of those things in place. Do you see truly international effort either by the UN, by NATO, by the EU, by some larger body to help lead what I see as once again one of the biggest rebuilding efforts, at least since World War II? 

Ian: I think you're going to see a rush of people trying to capitalize on the Ukrainian rebuilding everything from major US corporations to the EU, whether or not joins the eurozone remains to be seen. You're going to see food exports probably increase again. China will want to have a hand in it whether or not the UN plays a role. My guess would be probably not because Russia still has its national security council seat and veto power. And it carries enough weight, especially if it works with China to blunt some of that. But from a Western standpoint in China as well, a lot of people are going to be trying to get into Ukraine. And that increases incentives for corruption, obviously, and other geopolitical risks as well because your competitors from different countries will be there. You'll have different laws you may have to work with. It may not be settled yet. So, if you're looking at jumping into Ukraine and you’re a Western company from the US are new EU laws going to impact your existing knowledge of the Ukraine? How is that going to affect things? are Chinese state on enterprises going to try to purchase up all the grain production capacity? Any of those things could take place. And that requires obviously ongoing due diligence and monitoring from an intelligence standpoint of who you're up against. You're not only opportunities who your competitors are present and things of that nature. So, from just a pure business screening standpoint related to intelligence and due diligence, it's going to be a necessity because you're going to have so many people trying to capitalize on the rebuilding. 

Tom: Ian unfortunately we are near the end of our time for this episode. But I hope our listeners will join us for our next episode where we take up risks and opportunities in the EU and Europe. I look forward to continuing this conversation. 

Ian: Thanks for having me.