Top CEOs react to Russia’s invasion of Ukraine with fears of contagion and hits to GDP

February 25, 2022, 11:45 AM UTC

Good morning.

I can’t begin to explain the stock market’s reaction to the Ukraine invasion yesterday. And neither can Fortune’s most seasoned stock watcher, Shawn Tully.

But I did have the opportunity yesterday to talk with a man whose wisdom, experience, and knowledge of the global economy exceeds that of any other CEO I know—FedEx founder Fred Smith. I interviewed Smith at the Lake Nona Impact Forum in Florida. Some of his comments below:

Europe is a huge part of the FedEx network. We serve every country in the world except the five prohibited by law. We have a daily flight into Kyiv, and triple seven airplanes flying over Russia all the time.

“The actual economic effect [of Ukraine] is pretty small. In large measure, this whole thing is about energy…It’s going to be punishing for European consumers. And oil is fungible, so American consumers will feel it as well. We are going to have a lot higher gas prices.” (Read here how one analyst says the price of oil may hit $140 a barrel.)

“With higher gasoline prices being a de facto tax on the American consumer, you are going to see spending negatively affected. And then the Federal Reserve is going to raise interest rates…So what you will see is a reduction in GDP. 2022 may not be the barn burner GDP growth that everyone was expecting.”

Smith also predicted the war would lead to a revival in interest in nuclear energy.

“Germany shut down all their nukes. So they are either burning coal or burning gas. And the gas is going to come from Russia, or it’s going to come from us.

“Meanwhile, you’ve got a France which has been powered by nuclear since 1958…Nuclear is going to have a renaissance, and France is leading the way.”

After the conversation with Smith, I had the opportunity to speak with a group of about 20 executives over lunch. Some excerpts:

“I am from Armenia, which was formerly of the Soviet Union. I spend a lot of time in Russia…What worries me a lot this morning is that I think this is a much longer-term plan. Putin is having a midlife crisis. This is a plan to go into the history books as a world order leader. I really worry that if there was a .001% chance of a real broadening of this war a week ago, it’s now a 3% to 4% chance, which if it were cancer you would take very seriously…[and] there is a massive governance problem globally. Basically, governments can’t govern.”
Noubar Afeyan, Chairman, Moderna; CEO, Flagship Pioneering

“It’s very unclear how politically we are going to be able to come together and make a difference here.”
Laura Newinski, Chief Operating Officer, KPMG U.S.

“It’s easy to start a war, harder to end one. I don’t think [Putin] has a good plan for ending the war, and that worries me.”
Bob McDonald, former CEO, P&G

“The pandemic resulted in improvements in sleep for almost the entire population…The one group we see that has substantially dis-improved in sleep quality is the Gen Z group. What it feels like to that group, I’m sure, is we have crisis after crisis after crisis…This is yet another crisis. We have to look after that Gen Z group and do something significant to make sure we don’t have a much bigger mental health crisis.”
—Colin Lawlor, CEO, SleepScore Labs

“We know that the majority of the population has suffered some degree of trauma as a result of the pandemic. Climate is a big issue. These end up getting layered one upon one, and what we are facing is just a profound loss of psychological safety…We will spend far more this year treating mental health than we will treating COVID, and yet we are dedicating way less attention to it.”
—Rachel Hodgdon, CEO, International WELL Building Institute

“Short-term, with what happened this morning, we have hundreds of people in Ukraine and Russia, and I want to make sure they are safe. In the medium term, there are going to be significant issues with inflation, the price of gas, and the price of oil. But I believe we should be optimistic about the long term. When you look at science and innovation, I’ve never been more excited. I’ve never seen science and technology coming together like this in a way that we can change the world.”
Adam Schechter, CEO, Labcorp

After lunch, former President Bill Clinton spoke to the Lake Nona group. His take:

“Putin won’t stop until it costs more to do it than he has to pay…World War III would mean that Putin would no longer be the richest person in the world, and wouldn’t have all that money. I doubt that it will go that far.

“He may think we are too corrupt to stay the course. Not financially corrupt, but not believing enough in anything anymore.”

Plenty to think about over the weekend. Meanwhile, I’ll be off skiing next week, leaving David Meyer to carry the load. More news below.

Alan Murray

This essay was corrected on Feb. 25 to note that Smith referred to “every country” rather than “every company,” and again on Feb. 28 to correct Lawlor’s quote from “just another crisis” to “yet another crisis.”


Ukraine latest

Russian troops have begun pouring into Ukraine’s capital, Kyiv. Air raid sirens are sounding, and citizens are sheltering in subway stations. The Ukrainian Defense Ministry has issued machine guns and told people to make Molotov cocktails. President Volodymyr Zelenskyy says there is a Russian plan to assassinate him. Financial Times

Markets recover

European stocks are bouncing back after yesterday’s selloff, with the Stoxx 600 up 1.75% at the time of publication. Russia’s stock market rose as much as 25% at one point. However, it looks like the U.S.’s remarkable rally yesterday (see above) will be followed by a redder opening today. Fortune

SWIFT anger

The U.S. and Europe so far have declined to cut Russia off from the SWIFT payment system. It’s really Europe’s decision to make, as that’s where SWIFT is based. Now, anger is exploding at Germany, Italy, and Hungary for their apparently central role in blocking the heaviest sanctions against Putin’s Russia. Fortune

Musks probed

The SEC is reportedly probing Elon Musk and his brother Kimbal over share transactions that took place just before the Tesla CEO polled his Twitter followers about selling 10% of his stake in the firm. Fortune


Cyber fears

There’s a “high and rising” risk of Russian cyberattacks at least spilling over into the West, if not directly targeting Western facilities, risk analysts warn. So what kind of response could that elicit from the West? There’s no real precedent to go on, but NATO said last year that multiple low-level attacks could be seen as equivalent to a physical attack, so it’s a question people will likely be considering closely in the coming weeks. (Bonus read: The White House has denied an NBC News report that it is considering cyberattacks on Russian infrastructure.) Fortune

Chip embargo

It may still be holding back from sanctioning Putin himself, but one thing the U.S. has done is introduce an embargo on selling semiconductors to Russia. As it happens, Russia gets most of its chips from China, but they’re relatively simple and not of the sort that one might need to, for example, guide a missile. So these sanctions could really bite. Fortune

Soccer call

UEFA, the governing body for European football/soccer, has finally decided to move this year’s Champion's League final from the Russian city of St. Petersburg to Paris. Reuters

Meaty beating

Beyond Meat’s disappointing results yesterday continue a trend of slowing sales for the plant-based “meat” market. The question now is whether this is a temporary phenomenon or not. Financial Times

This edition of CEO Daily was edited by David Meyer.

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