 "Explaining the Ukraine crisis as war threats loom")
If you've skimmed through the newspapers of late you would have noticed that a political crisis, now threatening to blow up into a full-fledged war with Russia has engulfed Ukraine, a strategically positioned country roughly the size of France and formerly part of the Soviet Union.
Wondering why the conflict is taking up so much newsprint? Read on -
In a nutshell...
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It is a fight that broke out as a result of Ukraine's government announcing in November 2013 that the EU Association Agreement, a long standing effort at integration with Europe had been dumped in favour of stronger ties with Russia. This led to widespread civilian protests in the capital Kiev, use of brute force against protesters by the police and the passage of a draconian anti-protest law by the Ukraine government. The conflict escalated to its most awful on 20th February when according to the BBC, 77 people were killed and nearly 600 civilians wounded. In the midst of this President Viktor Yanukovych, seen as being backed by Moscow fled the presidential palace and was ousted.
A pro-Western Arseny Yatseniuk was subsequently appointed Ukraine's Prime Minister and Oleksandr Turchynov considered the right-hand man of Yulia Tymoshenko, the former prime minister who was convicted for abuse of power in 2011, its interim president.
This is a scary conflict because...
It is being seen not merely as a civilian squabble in a smallish ex-Soviet country, but as a battle for supremacy between the West and Russia. The latest is that Russian President Vladimir Putin has garnered parliament support to invade Ukraine and seized control of installations in Ukraine's Crimean peninsula, threatening as some western media have put it, to lay the groundwork for the biggest showdown between Russia and the West since the Cold War. According to Reuters, Ukraine troops have been put on high alert and the country has appealed to NATO for help.
President Obama is said to have had a 90 minute phone conversation with Putin over the weekend, warning Russia of serious repercussions if it went ahead with military operations, while the threat of sanctions has also escalated. US Secretary of State John Kerry who is expected to visit Kiev tomorrow to show his support was quoted by the Washington Post as saying that “American businesses may well want to start thinking twice about whether they want to do business with a country (Russia) that behaves like this. These are serious implications.” The Post also reports that economic sanctions and travel restrictions on individual Russians and a U.S. and European boycott of planning meetings this week for the upcoming summit of the G-8 in Russia are possibilities in the offing.
Possibility of sanctions to isolate Russia has spooked the markets and...
Oil and natural gas prices have risen as Ukraine is the main conduit for Russian gas to European consumers. Asian markets have also plunged. “The market will be incredibly nervous, and that caution should push prices higher,” Ole Hansen, a strategist at Saxo Bank A/S told Bloomberg. "We're witnessing the most seismic geopolitical events since 9/11," Ian Bremmer, president and founder of Eurasia Group told CNBC, pointing up the nervousness among traders. Experts are expecting demand for safe haven assets like gold and the dollar to go up.
There are also worries that European and world trade could be impacted and food prices would rise if tensions escalate because of Ukraine's position as among the world's top exporters of corn and wheat. This would impact other emerging markets who've benefitted from lower commodity prices of late.
Ukraine itself is at the threat of being torn apart into two halves geographically and economically. It is in debt and desperately in need of a bailout. With Yanukovych ousted, Moscow has frozen a $15 billion lifeline it had offered, while the West, or rather the IMF is yet to freeze in on the help it could extend to the beleaguered country. Continuing instability could delay that decision. An allegiance to both sides rather than an either/or scenario is seen to be in Ukraine's best interests as if it moves closer to the EU, it could benefit from larger access to the European market for trade. But moving away from Russia could threaten Kiev's industry which depends heavily on Russian gas.
Meanwhile India should be worried because...
Apart from the spillover effects of the geo-political situation on global markets, as of 2013, there were as many as 3500 Indian students enrolled in various Ukrainian medical/technological universities.