The Ukraine crisis: The rising tensions, the IMF aid, and more

The Ukraine crisis: The rising tensions, the IMF aid, and more (Part 1 of 8)

Ukraine and Russia at the brink of war: All major indices affected

Crimea’s annexation

In our earlier update on the Ukraine crisis, Must-know Ukraine crisis update: Annexation of Crimea and more, we had talked about Russia formally annexing Crimea on March 18. Crimea is an autonomous republic within Ukraine’s borders that possesses several natural gas fields, both onshore and offshore, and all connected to Ukraine’s pipeline system. The annexation, a first in Europe since the World War II, has been denounced by both the European Union and the U.S.

Market Vectors Russia ETF (<a href='/quote-page/rsx/'>RSX</a>) price performanceEnlarge Graph

The crises, which hit all major stock market indices, reflected in the dips in the performance of exchange traded funds (or ETFs) like the Market Vectors Russia ETF (RSX) and the iShares MSCI Emerging Markets Eastern Europe ETF (ESR), which track emerging market equities, with repercussions also seen in performance of developed market ETFs like the iShares S&P 100 Index Fund (OEF), whose underlying index tracks the top 100 companies in the U.S.—including Apple Inc. (AAPL) and Exxon Mobil Corporation (XOM).

Russia now seems interested in getting a hold of a greater part of Ukraine, as indicated by the occupation of Eastern Ukraine by pro-Russian militants.

We had also talked about Russia invading mainland Ukraine, beginning with Donetsk where pro-Russian militants had seized government buildings. The Ukrainian army has started a campaign to restore Kiev’s control over Donetsk. Kiev is the capital and the largest city of Ukraine, located in the north central part of Ukraine.

With pro-Russian and pro-Ukraine forces in the field, the situation seems a little short of a battle to begin. Kiev forces are trying hard to regain control of towns in the eastern side of Ukraine, where their opponents, with about 40,000 troops, are gaining ground steadily. Russia is even believed to be stocking fuel, ammunition, and medical supplies at the eastern front, well in advance.

There has also been news of dozens of people dying amidst such clashes in the southern port city of Odessa, the third largest city in Ukraine. While at the eastern side, the situation has intensified. Russians seemed to have created a stronghold on the city of Slavyansk in the Donetsk region.

The next part of this series explains why Russia chose to invade Slavyansk after Crimea.

The Realist Discussions

  • Katherine Vasbenter

    How is raising the gas price back to $485.0/1000m3 a “major gas price hike”? $485.0 was the original “locked-in” price, which was negotiated down in a special agreement between the Yanukovich government and Russia. The Yanukovich government was overthrown presumably along with all its previous agreements. The new, interim, government has not attempted to re-negotiate with Russia. Despite Ukraine’s non-payment of even the lower sum ($268.50) negotiated by Yanukovich, and despite the currency market manipulations intended to hurt Russia’s economy, Russia has continued to supply gas to Ukraine. In now requesting that Ukraine pay $385.5/1000m3 – a level below the original price of $485.0 – Russia can hardly be said to be hiking the price or to have intentions of hitting europe’s economy with “sanctions”.