Week Beginning 17th Mar - Crimea Special Report

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Week Beginning Mar 17 2014 Crimea Special Report.

This Sunday saw the referendum held in Crimea to establish whether they were to repatriate themselves with Russia. Unsurprisingly at the latest count almost 95% of the people who voted, voted to re-join the former USSR.

With the EU and the United States both criticizing the vote as unlawful we are now waiting to see what pressure Russia, and more importantly Vladimir Putin will be put under. Mr Putin was with President Obama this weekend and the two visibly looked uncomfortable sitting next to each other. The US and EU have already placed sanctions on certain Russian politicians restricting their travel and have made motions to freeze assets at the same time. Further sanctions have been discussed however the EU is definitely treading a thin line with how far they can push their relationship with Russia.

Brussels has already suspended talks with regards to an economic pact with Russia and the easing of visa restrictions, this was seen as a forerunner to further efforts if the referendum went ahead, now it has, the EU has to decide what action to take next.

Considering EU exports to Russia in 2012 reached €123Bn further economic sanctions would not only affect Russia. Also needing consideration is the fact Russia exports almost 30% of the EU's natural gas requirements. Totaling almost $100bn a year, this would be a major hit to the Russian economy however concerns are over how the EU could replace the flow of natural gas should Russia decide to turn the taps off in retaliation to any imposed sanctions. The US is in a position to take advantage of this by exporting is huge surplus of the gas over the Atlantic however there are limited trade agreements in place for the US to export out to Europe and this would take time to arrange.

With the Ruble being trashed almost 25% year to date there are major concerns over the Russian economy however the exposure to foreign business is such that even if the US pushed for severe sanctions many believe that its European partners simply wouldn't be able to add their weight behind them for fear of serious financial repercussions for themselves. There has already been a run by Russian firms pulling their cash from western banks in a effort to protect their interests and this is expected to continue until the west makes it decision on how it will respond.

Brussels is due to discuss the crisi later today and no doubt there will be more posturing before any real decisions are made. Acting Ukrainian PM Yatsenyuk is to meet with President Obama later today and no doubt will be asking how far Obama is prepared to go to help his countries predicament.

This week Asian indexes opened poorly on the news and this is expected to move across the markets as they open up for business Monday morning. Both the Nikkai and Hang Seng opened lower and have continued to post losses due to the uncertainly of this weekend's outcome.

On a lighter note, investors in the safe-haven that is Gold have seen steady improvements. Since the crisis Gold has held persistent gains and at the close of trading last week had reached a YTD high of $1,391.76 and finally ended up the week's trading at $1,383.11 a 3% gain to add to the current run for the week.

Oil too has held up well with initial concerns causing a short run that was corrected a day later. Since the beginning of last week it has held strong and fears of serious economic sanctions on Russia no doubt will see the cost per barrel rise. Closing out at $108.37 (+1.4%) for the week it is only a matter of time according to some analysts before we see the commodity rise towards the $120 mark.

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