12th September 2014 - Ukraine Crisis - New Russian Sanctions

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12th September 2014 - Ukraine Crisis - New Russian Sanctions

Major Global Indexes:

FTSE 100          6,810.25 (+0.16%)

Dax          9,687.41 (-0.04%)

Nikkei 225          15,948.29 (+0.25%)

Hang Seng          24,633.92 (-0.12%)

Dow Jones          17,049.00 (-0.12%)

S&P 500          1,997.45 (+0.09%)

Today see's the start of new sanctions being imposed on Moscow by the EU. The next round of sanctions are far more specific and deal with halting access to financial markets for the five large state banks and several energy companies along with additions to individuals either facing visa bans or asset freezes. This together with the bans on certain dual purpose items such as defense and some technologies is designed to squeeze Russia into a prolonged ceasefire in the Ukraine as the EU openly stated should the cease fire hold, the sanctions would be eased.

The US confirmed it would ramping up its stance on Russia with additions to its sanction program which will be released later today.

President Putin has already placed a ban on certain fruits and vegetables from Europe and food items coming in from the US and Canada just to name a few. It has also been said that should further pressure be placed on Russia that they will retaliate in a more targeted approach. Initial responses suggested a possible ban on European passenger planes over Russian airspace. This would have a huge effect on many European airlines and could see several low cost companies forced to close. What is now expected is a more calculated response from Mr. Putin with a potential ban on imported EU cars and light machinery more likely being the first response.

All the while this is going on Poland has seen its natural gas supplies significantly reduce this week as Moscow stemmed the flow in their direction. Poland supplies the Ukraine with a large portion of its gas supplies, so much so that the Polish government had to stop the outflow to the Ukraine to ensure it had enough for its own requirements. Seeing a drop of 20% Monday and 24% on Tuesday Poland has now seen a reduction of about 45% of its gas needs.

Many believe this is in direct response to the pressures being placed on Russian energy companies as they look to ways of keeping ties with their major European customers' whilst towing the government line with the situation in Ukraine. The Kiev government is disputing the amount of money it owes to Gazprom and this has been a bone of contention since the crisis began almost 6mths ago.

European markets are starting to factor in the implications of a sustained conflict right on its borders and the potential for an energy drought in some of its eastern members. Volatility has started to return and caution will be needed on all sides if a resolution can be hoped for any time soon.

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