Week Beginning Mar 24 2014 Crimea Special Report - Updated

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Week Beginning Mar 24 2014 Crimea Special Report - Updated.

With Russian troops already in control of several major military installations in Crimea we are now seeing the fall out of sanctions and further issues arising due to the crisis.

As of Monday Ukrainian military have been ordered out of their barracks in Crimea for fears of military action from Russian troops. With more troops amassing on the boarder the acting Ukrainian President, Olexander Turchynov expressed concern over the safety of both the troops and their families as the situation progressed and further installations were taken over by Russian soldiers.

Since the referendum, which took place over a week ago, Russian troops have taken control of almost all military and government buildings in the region with little or no retaliation even amidst threats of sanctions from both the EU and the United States.

Also this weekend, the Russian Foreign Minister Sergei Larov and his Ukraine counterpart, Andriy Deschchytsia met for the first time since the crisis began, at the Hague. The meeting took place whilst a Nuclear Security Council gathering was being held. The Russian said that they wished to set out good guidelines for dialogue over the issues and that Ukrainians should not lose their voice due to the situation. Speaking on the move by the G7 to remove Russia from the group the foreign minister said that it was of no great tragedy that they have been expelled with the scheduled June meeting being cancelled, and there was no hard feelings or concerns. The UN had decided a few weeks ago to cancel the G8 Summit in Russia as part of its initial reaction to the incursion. The meeting is now set to be held in Brussels on the same date and will now be reduced to 7 countries.

As the situation wears on and the first round of sanctions begin to take affect there are general concerns that they may not have enough weight behind them. Since the crisis began both the EU and the United States have imposed travel bans on several officials close to Vladimir Putin and who are believed to be the cause of the annexation. This along with asset freezes was seen as rather tame at the beginning and further sanctions were soon to follow. Credit card companies Visa and Mastercard have halted their services and several banks have been lined up to feel the full force of any economic sanctions that could be placed on Russia. The EU is still being cautious with its comments, European markets have experienced serious investor trepidation over the past few weeks with the larger economies in northern Europe being very wary with their comments due to the financial ties they have with Russia.

How Europe plays this crisis is maybe more important due to the close proximity of Russia with the EU's more easterly members just on their border. Concerns from countries such as Poland and  Hungary who are both worried about the Iron Curtain coming closer to their boundaries obviously play a part in how the EU will respond to the situation however they also have to take into account the financial implications of serious economic sanctions may have to their own members.

Speaking about the Russian economy, Andrei Klepach, the Deputy Economy Minister said that sanctions had not really taken effect yet and that it would be a  while longer before they noticed any real impact. His comments come as data was released that suggested that there could be as much as $70bn removed from the Russian economy in the first three months of this year. Considering that 2013's entire outflow was closer to $63bn it is hard to see how anyone could say that the Crimean encounter hasn't, and wouldn't affect the local economy in Moscow. There were already concerns over the stagnation of the Russian Economy and with a growth rate of only 1.3% last year these are not unfounded. With the country's main source of exports being under threat, fears of a run on the index is not without reason however any such move will no doubt be dealt with very quickly by the Russian Central Bank.

Many analysts have expressed concerns over the crisis and how it could have major effects on the global economy, whilst admittedly the news hasn't been great, the markets have reacted rather mutedly to the updates that have come out of the region and it is generally felt that until Europe makes a move to show its intentions, Putin has almost got away with the repatriation of Crimea, or at least he has got away with it for now rather unscathed.

Major Indexes as of 24th March:

Index          % Change          Close/Current

MICEX          (-0.72%)          1,297.91

DOW Jones          (-0.16%)          16,276.69

NASDAQ          (-1.18%)          4,226.38

FTSE 100          (-0.56%)          6,520.39

CAC 40          (-1.36%)          4,276.34

DAX          (-1.65%)          9,188.77

Nikkei 225          (-0.01%)          14,473.21

Hang Seng          (-0.53%)          21,730.69

SSE          (+0.91%)          2,066.28

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