A joke has been making the rounds on social media about Putin’s fate. I do not know its origin, but it sums up the situation beyond even my most trenchant analysis:

Vladimir Putin dies and goes to Hell but is eventually granted a day off for good behavior. He travels back to Moscow, walks into a bar, orders a vodka, and asks the bartender:

“Is Crimea ours?”

“Yes, it is,” the bartender replies.

“And the Donbas?”

“Also ours.”

“How about Kyiv?”

“Yes, that’s ours too.”

Delighted, Putin finishes his drink and asks, “Wonderful! How much do I owe you?”

The bartender smiles and says, “That will be 20 euros.”

It would be a great historical irony if Putin was ultimately responsible for the unity of Russians and Ukrainians, with which he has so long been obsessed. That unity seems closer by the day, just not quite in the way Putin envisioned. 

The Situation: 

At the end of May, Elvira Nabiullina, governor of Russia’s central bank, disappeared. She missed several critical meetings, including one with Russian President Vladimir Putin, leading to speculation that her replacement—or worse—was imminent.

Nabiullina resurfaced on June 19, claiming that her absence was due to a “cold.” In the same press conference, she announced Russia would cut interest rates 25 basis points to 14%. Just three months ago, she warned the State Duma (the lower house of the Federal Assembly of Russia) of the dangers of prematurely lowering interest rates. Suddenly, the lady doth protest too much.

Nabiullina’s fate is the least of Russia’s problems. Russia’s war with Ukraine, now in its fourth year, is going disastrously. Russia’s greatest advantage against Ukraine is its relative size. After Ukraine’s ill-fated and conceived 2023 offensive, Ukraine’s manpower shortages became acute; meanwhile, Russia continued to grind out the conflict and even welcomed the deployment of North Korean troops to the frontlines. But since then, Ukraine’s approach to the war has transformed from a war of expulsion and reconquest to a war of chaos, with drones the tip of the Ukrainian spear.

Ukraine has been so successful that Russia’s relative size is being negated as an advantage. Today, Russia’s supply of troops is not inexhaustible. There are signs that Russia is facing an imminent manpower shortage. Moreover, in just the last few weeks, Ukraine has escalated its drone campaign against Russia’s energy infrastructure. Ukrainian drones struck an oil refinery in western Siberia—some 1,200 miles from Ukraine—over the weekend. An attack on an oil refinery southeast of Moscow ended with a Russian missile accidentally blowing the refinery up, creating a slew of memes. On Monday, Russia temporarily closed all airports near Moscow due to widespread attacks by dozens of Ukrainian drones.

Last Thursday, Ukrainian President Volodymyr Zelenskyy told journalists via voice memo that while Ukraine desired peace, “If Ukraine burns, then your Moscow will burn as well.” If you’ll forgive the slip into millennial colloquialism: What a g.

Russia’s strategy against Ukraine—after its blitzkrieg toward and decapitation strike against Kyiv failed so miserably in the first months after its invasion—has been to do what Russia does best: outsuffer its opponent. For a while, it seemed to be working. Moscow bet that it could take more losses than Ukraine and keep fighting; that European nations’ resolve would shrivel as soon as winter came and Russian energy supplies were needed; that the rest of the world would tire of Ukraine’s plight long before Vladimir Putin’s regime tired of the fight.

Ukraine’s strategy since the beginning of the year has been to impose costs on the day-to-day lives of average Russians—and since the US-Iran war began, to also threaten Russian energy export infrastructure to keep allies onside.

The Russian economy is now in shambles. When Russia invaded Ukraine in 2022, it had built up a National Wealth Fund via profits from energy exports worth almost 7% of GDP. Today, the fund has liquid assets of just 1.8% of Russia’s GDP. At the beginning of the year, Russia predicted a government deficit of 3.8 trillion rubles. It exceeded that in Q1. Corporate debt is up 34 trillion rubles, roughly $500 billion. Oil and gas revenue is down ~45% year on year as of April. The hope of a reprieve from higher oil prices due to the closure of the Strait of Hormuz has not materialized.

Russia has run its economy on a wartime footing far longer than mainstream economists predicted, but it cannot outrun basic math forever. Moreover, Ukrainian strikes in Moscow, affecting the daily life of citizens in the imperial metropole, change the geography of this conflict. Zelenskyy isn’t just being a g when he threatens Moscow; he is essentially telling Putin that the more he fights in Ukraine, the greater Ukraine’s capacity and resolve to bring the fight to Moscow’s doorstep. Not Crimea’s, not Donbas’s, not Siberia’s, not Rostov-on-Don’s… but Moscow’s doorstep. If Putin cannot defend Moscow, then the emperor truly has no clothes.

And yet: a word of caution. Because historically, Russia has shown the capacity to endure quite a bit of suffering before all hell breaks loose. Yes, Russia can suffer quite a lot, but what that means in practice is that high levels of pressure relative to other societies builds and then explodes onto the global stage.

What happens in Russia never stays in Russia. Its revolutions defined geopolitics of the 20^th century, and Vladimir Putin’s rise to power has arguably defined much of geopolitics this century. In any case, Russia is preparing to deal with its new realities. On Monday, Deputy Prime Minister Alexander Novak held a meeting on the domestic fuel market and promised market stability at all costs. On the same day, influential Rosneft CEO Igor Sechin announced that the company is virtually eliminating petroleum product exports, and that there are no restrictions on gas stations.

Ultimately, the Russia-Ukraine conflict will not be settled in Moscow or Kyiv. It will be settled in Paris, Berlin, Warsaw, and other European capitals. Because as long as Europe is uninterested in pressuring Ukraine into a settlement (and latest signals suggest it isn’t, despite everything happening in the Middle East), Ukraine can keep fighting. Indeed, after deliberating with Zelenskyy last week, the European Council reiterated its “firm and unwavering” support for Ukraine, as well as its support for Ukrainian accession to the European Union.

Reforming Ukraine’s politics and economy to meet the EU’s “merit-based approach” will be Zelenskyy’s hardest task, but he is not one to bet against. After all, the EU does not just want to welcome Ukraine into the bloc; it wants the contracts to rebuild Ukraine when the war is over, as well as the tech and military savvy Ukraine has developed in its war. Hence why investors like former Google CEO Eric Schmidt are investing tens of millions in Ukrainian real estate.

Not so from the US government, it would seem. This is the same White House that got upset when Zelenskyy wouldn’t put on a suit to visit President Trump in the White House. (UFC fights on the White House lawn are cool, but war-time presidents declining to wear a jacket and tie are not.) A new book by New York Times reporters Maggie Haberman and Jonathan Swan published this week catalogued some off-color remarks from Treasury Secretary Scott Bessent, who tried to strong-arm Zelenskyy into signing a critical minerals deal in return for American support. Leaving aside how silly that deal always was, the reality today is that Zelenskyy has:

1. Repulsed an initial Russian attack

2. Survived his own failed counteroffensive strategy

3. Pivoted to a drone-heavy approach that is imposing significant costs to Russia

4. Secured firm support from Europe to replace US support in the years ahead

Not bad for, in Mr. Bessent’s words, “a special-needs child for the Europeans, like Mr. Bean on crack.”

Map/chart of the week:

This chart is from a shipping event I spoke at last week. I was making the case for how AI could disrupt the industry—a tough sell to a room full of people who own big ships and shipyards, i.e., physical assets AI can’t replicate.

The argument: Physical containerization led to the importance of scale in a globalizing world. Digital containerization—what AI delivers—does the opposite. It strips out the costs that made small-scale shipping uncompetitive, and that matters in a world that’s deglobalizing and where growth is increasingly powered by the top ~10% of earners.

It’s more of a thought experiment than a data-driven graphic, but I think it’s a valuable one.

Side note: It is becoming increasingly clear that AI is a messy tangle of physical assets, local energy grids, and national security. Because no single country controls the entire stack, energy access and semiconductor supply chains are turning into blunt geopolitical weapons. If you want to survive the next phase of this trade, you have to look at it through a macro lens.

Which is why it’s good timing for the team here at Mauldin Economics to launch a field guide called The AI Playbook: A Guide for Your Portfolio, Business, and Life. And yours truly is part of it—I had a great conversation with Ed D’Agostino about geopolitics and AI. As you can imagine, there was a lot to say. You can take a look at everything in the course right here. 

Blind Spot: 

On June 21, Colombia appears to have elected Abelardo de la Espriella, a flamboyant criminal-defense lawyer who has never held office, by the thinnest margin in the history of its two-round system: 49.7% to leftist Iván Cepeda’s 48.7% on the highest turnout in three decades. President Trump endorsed him (“He Won, BIG!”); Marco Rubio called to congratulate him within hours; and de la Espriella, who spent a decade in Florida and naturalized as a US citizen in 2023, has promised to enlist Colombia in a new US-led military coalition against the cartels he calls, borrowing Trump’s word, “narcoterrorists.” Mainstream media is filing this under the headline they used for Bukele and Milei: Latin America swings right. The reality is a little more complicated.

Rather than framing this as a rightward move across Latin America, the more useful lens is the one I have been using all year: The Trump administration’s first-order foreign policy is the reconsolidation of the Western Hemisphere. The problem is: Colombia is the easy one. It is one of the few countries left in South America whose largest trading partner is the US rather than China. The US can, and I think will, assemble an increasingly imperialist influence over countries like Cuba, Panama, and even the territory of Greenland. But that does not mean the US will be able to project power in influence over countries like Brazil, Peru, or even Argentina, which has batted its eye lashes at Washington whilst maintaining pragmatism toward China and other multipolar forces.

Also: de la Espriella’s victory is not a landslide. It’s a paper-thin mandate in a deeply divided country that, under outgoing President Gustavo Petro (who has cast doubts about the legitimacy of the polls), bumped against the US despite the historical closeness between the two countries over the past few decades… and despite US leverage over Colombia.

From an investment perspective, Colombia is an intriguing frontier-type opportunity to consider as part of this new geopolitical American sphere of influence. The relative change from the anti-business and anti-energy policies of the previous administration might outweigh the concerns over governability and polarization going forward, but one should approach it with a healthy appetite for risk, and with an understanding that this is not a formula that can be replicated across the region.

Reader Question:

Finally… 

What I’m watching: House of the Dragon, HBO

What I’m reading: Endgame: The State of the Russian Economy, Kiel Institute

What I’m listening to: “From Undervalued to Opportunity: Inside the Rise of Women’s Sports Investing,” Faster Forward podcast

I’m curious: What are you watching, reading, and listening to right now? I’m always looking for new recommendations. Let me know!