Why the war in Ukraine matters to the cannabis industry

This point of view may seem like a stretch until you start connecting the dots and looking out into the future.  Though legal cannabis is mostly local in terms of production it is still part of a global economic system and is not shielded from geo-political shocks.  

Beyond the obvious human and environmental misery, the war in Ukraine war will have a negative on impact on the European and North American cannabis sectors, particularly for firms like Aurora, Bedrocan and Curaleaf with significant operations and investments in the EU.  The war will:

Delay cannabis legalization 
Politicians and bureaucrats in Germany and other emerging legal jurisdictions now have other more important things to worry about than crafting cannabis-liberalizing laws and regulations.  Moreover, these refocused priorities will lead to resources being allocated away from cannabis policy and towards other departments like defence, finance and humanitarian relief.

Exacerbate inflation
Big wars always drive-up global prices, especially when the combatants are two of the largest resource-producing countries in the world.  Cannabis input costs such as energy and water will not avoid this inflation, inevitably leading to higher prices for many cannabis products.  At the same time, inflation erodes discretionary consumer income potentially resulting in lower cannabis consumption.   

Energy and commodity insecurity
Many European nations, including cannabis-producing Germany and Holland, are highly dependent on Russian energy and resources.  This vulnerability could be exploited by Russia, who may choose to use this leverage (by restricting or shutting off gas supplies) for political and military gain.

Unstable supply chain networks
Supply chains and logistics networks, already stretched by Covid effects, may come under greater pressure as many countries look to rebalance away from Russia, Ukraine and the impacted areas. This could result in shipping delays, higher transportation costs and reduced agility.    

This war should worry the entire cannabis industry when one considers second- and third-order effects.  For example, the war could trigger a quicker rise in interest rates, raising the cost of capital for everyone. The disruption of sanctioned financial flows could ripple through the banking system and financial markets, with significant repercussions for affected bondholders, derivatives counterparties, and investors.  Finally, Russia has demonstrated a readiness to use cyber warfare against NATO country institutions.  These attacks could increase in frequency and intensity.

Sadly, the hostiles and misery show no sign of abating.  Keep your seatbelt on.

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