Breakfast Table Diplomacy: A Personal Anecdote
By Vaughn Woods, CFP, MBA
The Coffee, The Conversation, and The Truth About Peace
The morning air still held a hint of chill, and the quiet hum of the coffee machine was the only sound in the room. I had arrived far too early for my Kiwanis Club breakfast meeting. The chairs were still empty, the projector dark. It was just me and one other older gentleman, already seated with a mug in his hands.
We struck up a conversation, as you do. He was a retired military man, sharp and unassuming, with a quiet wisdom that comes from a life of discipline. I, in my comfortable naiveté, made a well-intentioned but, as it turned out, unfortunate comment. “It’s a good thing,” I said, “that we in the United States aren’t at war now.”
He put down his mug, looked me in the eye, and smiled sadly. “Son,” he said, “we are always at war. There are thousands of young men and women standing guard on the ramparts or fighting for our freedom in parts of the world citizens like yourself will never know about.”
His words hit me like a splash of cold coffee. It was a simple, profound truth that shattered my comfortable notion of peace. He reminded me that for every visible, declared conflict, there are countless unseen skirmishes, diplomatic battles, and proxy wars fought every single day.
He was right. And in today’s world, his words are more relevant than ever. A world where the largest economic and military powers are locked in a sophisticated, multi-front struggle for influence, control, and survival. A war of attrition, alliances, and economic pressure that is fought not with a grand invasion, but with a thousand small, strategic moves. This is the new great game, and it is a world setting up for war.
Strategies for Uncertain Times: War, Peace, and Portfolio Management
The last few years have felt like a constant stream of unprecedented events, but for seasoned investors and hedge fund managers, a larger, more profound pattern is emerging. We are witnessing a fundamental reshaping of global hegemony, a complex chess match where the old rules of engagement are being rewritten in real-time. The central conflict of our time is not a direct, all-out war between nuclear powers, but a sophisticated, multi-front struggle for influence, control, and survival.
This article is for those who seek to understand this new world order, moving beyond the daily headlines to identify the strategic shifts that will define the next decade of investment. It’s an analysis of a world where nuclear deterrents are of little value since no one wants to end life on earth, which, ironically, makes a war of attrition and encirclement the new, devastatingly effective strategy. In this new game, if you cannot compete technologically or by GDP, you can at least try to encircle your opposition with a network of anti-American alliances.
This guide will dissect the recent geopolitical moves of the past few months, weaving together disparate events to form a cohesive narrative. We will show how a number of nations are taking sides, analyze the economic realities of this conflict, and, most importantly, provide a framework for how to position a client’s portfolio in a world where the lines between peace and conflict are increasingly blurred.
The New Great Game: Putin and Xi’s Strategy of Encirclement
For Russia and China, a direct, technological, and economic confrontation with the Western alliance remains a non-starter. The combined GDP, military innovation, and technological prowess of the U.S. and its NATO partners are simply insurmountable in a head-to-head battle. Recognizing this, the strategic response is to forge a new world order by creating a counter-hegemonic block of anti-American alliances, encircling the West with a new network of diplomatic, economic, and military partners. The Russia-Ukraine war, and the West’s subsequent sanctions, are not seen as failures but as catalysts for this strategy.
One of the most recent and clear examples of this strategy in action is the strengthening of ties between Russia, Iran, and Belarus. Just this past month, Iranian President Masoud Pezeshkian and Belarusian President Alexander Lukashenko signed a dozen cooperation agreements, a direct act of defiance against U.S. sanctions. These agreements, covering everything from politics and free trade zones to pharmaceuticals and military cooperation, lay the foundation for long-term bilateral cooperation. President Pezeshkian himself put a fine point on it, stating that “Western countries, led by the United States, are trying to spread unilateralism and dictate their viewpoints on other countries.” He added that Iran and Belarus “can overcome sanctions and problems by working together seriously.”
This alliance is not an isolated event. Both leaders explicitly highlighted multilateral organizations like the Eurasian Economic Union (EAEU), the Shanghai Cooperation Organization (SCO), and BRICS as frameworks to expand cooperation beyond Western-led structures. This signals a concerted effort to build a parallel economic and diplomatic system that can operate outside the influence of the U.S. and its allies.
Similarly, we see this play out with Indonesia, a nation of 278 million people and a rapidly growing economy. Despite its official non-aligned foreign policy, President Prabowo Subianto recently signed a strategic partnership agreement with Russia and joined the BRICS grouping as a full member. This move, celebrated by President Putin, includes a new $2.29 billion investment fund and offers to deepen military, trade, and even nuclear ties with Russia, including the supply of advanced Su-57 fighter jets and S-400 missile systems. This is another piece of the encirclement strategy, as Russia and China seek to bring a neutral and powerful nation like Indonesia into their sphere of influence.
The West’s Counter-Encirclement Strategy
The U.S. and its Western allies are not standing idle. In a series of strategic counter-moves, they are actively working to undermine Russia’s broader regional position and complete a long-attempted encirclement of their own.
A key part of this strategy is the new “Trump Route for International Peace and Prosperity” (TRIPP), which was recently unveiled at the White House by the American, Armenian, and Azerbaijani leaders. This new corridor is essentially the U.S.’ replacement of a Russian-envisaged one, and its implementation removes Russia’s ability to monitor Turkish arms exports to Central Asia. This single diplomatic move threatens to turbocharge Turkish and NATO influence all along Russia’s southern periphery, posing a formidable challenge to Russia’s regional position.
This new route is seen as a means of encouraging nations like Kazakhstan and Kyrgyzstan to defect from the Russian-led Collective Security Treaty Organization (CSTO), which they are members of, and work more closely with NATO. Moreover, it justifies Armenia’s official withdrawal from the CSTO, which it has already suspended. The most aggressive potential outcome of this geopolitical chess match would be if Azerbaijan and Turkmenistan are emboldened to unilaterally construct the long-discussed Trans-Caspian Gas Pipeline, which would allow the West to tap into Turkmenistan’s gigantic gas reserves and completely bypass both Russia and Iran. The threat of Ukrainian-like military support for Azerbaijan and Turkmenistan in the event of a conflict is a powerful lever the West is now using.
A War of Attrition: The Economic Realities of a Modern Conflict
The new great game, with its webs of alliances and encircling strategies, is fundamentally a war of attrition. The paradox of modern warfare is that the nuclear elephant in the room has made a direct confrontation between superpowers unthinkable. Since no one wants to end life on Earth, the conflict shifts from a nuclear one to a protracted struggle of economic capacity, technological dominance, and national resolve.
On this front, Russia’s economic capacity to sustain its war in Ukraine is facing a significant and accelerating challenge. Russian military spending has soared to nearly $150 billion a year (up from $50 billion in 2022), consuming a staggering 41% of its entire 2025 federal budget. This massive spending has created a budget deficit of around $61 billion for the first eight months of 2025 alone, and Russia has been forced to make deep cuts to health care and education spending. Its main source of hard currency, oil, is being sold at a discount due to Western sanctions, and its sovereign wealth fund is being rapidly depleted.
The idea that BRICS countries could replace Russia’s losses is a fallacy. While nations like India and China are buying Russian oil, they are doing so at a discount, and they are not providing the advanced military supplies or financing needed to sustain a massive war effort. In a clear sign of economic distress, Russia recently offered to supply the U.S. market with metals and rare earths, a move that is a pragmatic pivot for survival, not a sign of a strong anti-Western alliance. In the long term, without substantial new income, it’s highly unlikely Russia could sustainably fund its war for another four years.
Meanwhile, the West is exercising its economic and diplomatic power to enforce sanctions and pressure Russia’s allies. The U.S. has imposed harsh tariffs on Indian imports, with duties jumping to 50% in late August 2025, specifically to punish and pressure India for buying Russian oil. This is a direct message to other nations in the Global South and BRICS that ignoring Western sanctions will come with a steep economic cost.
The Investment Landscape: Peace vs. Threat
This new world order presents a unique challenge for investors. The lines between “peace” and “war” are blurred. We are not in a full-scale global war, but we are also far from a period of stability and peace. This demands a new approach to portfolio construction, one that is built to thrive in both scenarios.
- Investments for a Time of Peace (Economic Growth & Stability): These are investments that thrive on open borders, global trade, and economic cooperation. In a peaceful, growing world, you would favor:
- Growth Stocks: Technology companies, consumer cyclicals, and innovative startups.
- International Markets: Exposure to global economies, particularly those in Europe and Asia, that benefit from free trade.
- Real Estate: Both domestic and international, which benefits from economic stability and strong consumer confidence.
- Investments for a Time of Threat (Conflict & Uncertainty): These are investments that thrive on geopolitical tension, rearmament, and supply chain fragmentation. In a world of threat, you would favor:
- Defense & Aerospace: As the U.S. and its allies build out their defenses (satellites, drones, missile systems), this sector is a clear and direct beneficiary of rising defense spending. The tens of billions of dollars in European weapon purchases from the U.S. is a clear tailwind.
- Cybersecurity: As the conflict moves into the digital realm, cybersecurity and data security (including post-quantum cryptography) become paramount for governments, militaries, and businesses.
- Traditional Energy & Commodities: In a world of sanctions and supply chain risks, traditional energy sources (oil, gas, coal) and commodities like copper and rare earths become strategic assets. Their prices are often driven by scarcity and geopolitical risk, which benefits producers.
- U.S. Treasuries: As a traditional safe-haven asset, U.S. Treasury bonds are a go-to hedge for capital preservation during times of global uncertainty.
Conclusion: A New Era of Investment
The world is not setting up for a nuclear war, but for a new, multi-front war of attrition, alliances, and economic pressure. The actions of Iran and Belarus, Indonesia, and the U.S. are not isolated events; they are all pieces of a larger geopolitical chessboard. The paradox of the nuclear deterrent has shifted the conflict into the economic and technological arenas, creating an environment of constant change and uncertainty.
It is the job of the portfolio manager to understand these new rules and to strategically position clients’ portfolios to navigate both the risks and the unprecedented opportunities they present. In this new world, a clear-eyed view of geopolitical realities is just as important as a sound balance sheet, and a portfolio that can thrive in times of both peace and threat is the ultimate safeguard for enduring prosperity.
We’re honored to help you build a brighter financial future, while filtering out the noise. And when the noise gets a little crazy remember we are just a phone call away to add perspective, answer your questions and listen and teach and listen and understand.
Sincerely,
Vaughn Woods, CFP, MBA
Vaughn Woods Financial Group, Inc.
2226 Avenida De La Playa
La Jolla, CA 92037
858-454-6900
Email your questions to vw@vaughnwoods.com. In addition, we are never too busy for your referrals.
Sources
Russia-Indonesia at 75: A New Strategic Status, But What Next?, A Zahkarov; Observer Research Foundation July 14, 2025
The Big Tactical Error in the Russia-Ukraine Negotiations, Politico, N Toosi, 08/21/2025
The Tripp Corridor Threatens to Undermine Russia’s Boarder Regional Position, Zero Hedge, T Durden/A Korybko, 08/09/2025
Iranian president inks defense treaty with Belarus during Minsk visit, Derila Ergo, The Cradle.co, August 20, 2025
“This anecdote is drawn from my personal experience (Vaughn Woods).”
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