The Ukrainian people in Kiev have recently overthrown the countries elected leader of their ties with Europe. The country is circled from the North and East by Russia, with links to Europe in the West of the country. Historically there are strong Soviet ties, primarily in the East of the country and the Southern region of Crimea.
The bloody clashes in Kiev have left the country in limbo with Pro Russian and Pro European elements pushing for different allegiance. The situation escalated on Friday when troops in full combat gear, appeared in the southern state of Crimea and took control. It is believed these are Russian troops, who have a large naval base nearby. This move by Putin has been condemned by the West, as it breaches national conventions over border sovereignty, being called an “invasion” by the newly elected Ukrainian Prime Minister.
The provocation and show of force by the Kremlin is reminiscent of the Cold War era, and leaves the region on high alert. At current world leaders have used strong words, and the threat of economic sanctions, and isolation, however the potential of any use of force from the west seems distant.
How have the markets reacted?
In the currency markets, the Ukrainian Hryvnia as weakened, trading at all-time lows, and subsequently regional bourses have sold off on the threat a conflict. Commodities have strengthened, with investors bidding up the price of Gold as a safe-haven. Natural Gas and Crude Oil prices have rallied due to the potential disruption of supply from any escalation, with major pipelines from Russia to Europe pass through Ukraine. All eyes are on the next move of Russia, with tensions high and potentially catastrophic consequences from any Russian aggression.