Russia appears to be pulling back military forces from its border with Ukraine, potentially a sign of de-escalation that equity markets have welcomed with a rally. One political economist has a message for market participants: Look beneath the headlines, and if the situation re-escalates, there could be implications far beyond eastern Europe — including potential cyberattacks against the U.S.
“If you’re really in a warfare scenario with Russia, the ability for Russia to pull a trigger on some cyberattacks, not just against Ukraine or even Europe, but against the U.S. — depending on how aggravated [Russian President Vladimir] Putin gets — they could do some real lasting damage,” said Douglas Rediker, nonresident senior fellow in the Global Economy and Development program at Brookings.
Indeed, U.S. government agencies are warning operators of critical infrastructure in the U.S. to prepare for potential cyberattacks. Participants in a call with the Federal Bureau of Investigation and Department of Homeland Security told Yahoo News they were alarmed that more people on the call didn’t already know the process for flagging suspicious activity.
One threat, Rediker said in an interview with Yahoo Finance Live, is that the U.S. and Russia each have the ability to “shut off” the other’s utilities. This would be far from the first time that Russian hackers have targeted U.S. systems. They reportedly tried to breach American utilities and energy companies in 2016 and 2017, aiming at contractors who worked with those companies. In 2020, Russian hackers attacked a broad swathe of government agencies, including the State Department and Pentagon.
Rediker said investors logically react to headlines as they see them, but warned that it’s a fast-moving situation that isn’t always as clear as it appears. Stocks rallied and oil fell Tuesday on reports that Putin was pulling back troops, but Rediker cautioned against sounding the all-clear.
“Let’s be clear, this is not the end,” he said. “What the analysts will tell you is we’re going to look at what Putin does, not what Putin says. The intelligence community in Washington, which has both the intelligence we know about and presumably a lot of intelligence we don’t know about, they themselves don’t know what’s going on with a high degree of confidence.”
Further drawing out of the anticipation of a conflict could trigger more volatility in U.S. stocks. The CBOE Volatility Index, popularly known as the VIX, was down but trading at a still-elevated level around 25 on Tuesday, after spiking to 31 on Monday.