The citizens of Ukraine rose-up last week and threw out their President. With his escape amid the confusion, he took his pro-Russian leanings with him into exile. A clearly Western-leaning temporary administration was installed and elections have been scheduled for May.
Russian President Vladimir Putin dispatched troops to the border as part of a military exercise. Tensions ran high as Ukraine prepared for a shooting war with its former Soviet overseer.
Putin eventually pulled his troops back from the borders but left soldiers on the Crimean Peninsula to protect Russian speakers. The semi-autonomous region also is home to Russia’s Black Sea Fleet.
Even though tensions may have been reduced to a standoff the world is left to watch and wait as Ukrainian commerce and lives stand in the balance.
Recent protests in the Ukrainian capital of Kiev gave way to deadly riots last week, rooted in the country’s abandonment of pro-western ties. Ukraine, a former Soviet Republic, had sought to strengthen relations with Russia under its now ousted president.
Amidst the chaos, Russian troops rolled into Ukraine’s semi-autonomous Crimean Peninsula early this week, in an alleged effort to safeguard ethnic Russians in the region. The aggressive move was quickly condemned by the international community, while Ukraine’s new interim government classified Russia’s occupation as an “act of war”.
Arseniy Yatsenyuk, Ukranian Prime Minister: “Crimea is the territory of Ukraine. And despite the presence of Russian military…despite the fact that Russian military supports an illegal government, we will tackle this problem.”
The Russian Navy’s Black Sea fleet is strategically headquartered in southwest Crimea with a lease on the base until 2042.
Initially, markets reacted bearishly to the standoff between Russian and Ukrainian forces. Russia’s stock market crashed as the country’s benchmark index fell 12 percent.
The plunging ruble riled up currency markets as Russia’s legal tender dropped 2.5 percent against the dollar, on news that EU members had postponed aid money, pending a review by the International Monetary Fund.
Shockwaves rippled through the commodity markets in reaction to the turmoil overseas. Gold soared to a four month high, pushing the precious metal above $1,350 per ounce. NYMEX crude closed above $104 per barrel at the beginning of the week. And the potential for conflict triggered a 36 cent spike in the March wheat contract.
According to USDA, Ukraine is the fifth-largest grain exporter in the world, responsible for over 6 percent of wheat supplies and 16 percent of corn across the globe. While economists don’t expect worldwide grain supply to suffer in the near term, an eruption of violence in the region could cause significant disruptions for spring planting.
A mid-week rally bolstered economic prospects as Russia appeared to de-escalate the conflict, though no troops were withdrawn. But prospects of a solution were short-lived when days later the Moscow-backed Crimean Parliament put forth a referendum to allow Crimea to secede from Ukraine and become part of Russia.
World leaders responded swiftly, pointing out that the legal move was a violation of Ukraine’s constitution, and international law.
President Barack Obama: "This morning, I signed an executive order that authorizes sanctions on individuals and entities responsible for violating the sovereignty and territorial integrity of Ukraine or for stealing the assets of the Ukrainian people.”