The Financial Times quotes Igor Yurgens, a former Kremlin adviser:
He added that capital flight was likely to soar. He said his bank had received “a huge number of calls” into his bank’s Swiss offices from Russian clients over the past two weeks and a number of wire transfers into Swiss bank accounts out of Russia. Clients, he said, would prefer to keep money outside the country despite the risk of asset freezes.
Read more at Sanctions nerves ripple through Moscow – FT.com.
Offering the people of Crimea a referendum — on whether to secede from Ukraine and join the Russian Federation — may appeal to Vladimir Putin but he should not expect support from China. For two very simple reasons: Hong Kong and Taiwan. China claims these two territories as part of China, but there are no prizes for guessing the outcome if a similar referendum (to secede) were held in either territory.
Jan Techau of Carnegie Europe writes:
….In recent years, Russian President Vladimir Putin has talked about the Kremlin’s fears of Western encirclement. He has declared that EU and NATO enlargement are part of a conspiracy to destroy Russia, that Ukraine is not really a sovereign nation, and that Western agents provocateurs were behind Ukraine’s 2004–2005 Orange Revolution.
Amid all that rhetoric, the West failed to recognize that Putin was deadly serious. Such talk was dismissed either as cheap propaganda or as the mild lunacy of a handful of overideologized true believers. Nobody imagined that Putin himself really believed his own bluster.
But for the Russian president, the fight over Ukraine is not an imperialistic adventure, it is a fight for survival against a mortal Western enemy. Just because observers in the West know that’s nonsense, that doesn’t mean that others think the same. Such Western projections were finally debunked when German Chancellor Angela Merkel remarked to U.S. President Barack Obama on March 2 that Putin was “in another world.”
Read more at Europe’s Five Deadly Sins on Ukraine – Carnegie Europe.
Lars Christensen at The Market Monetarist writes:
….. sharply increased geo-political tensions in relationship to Putin’s military intervention on the peninsula of Crimea has clearly shocked foreign investors who are now dumping Russian assets on large scale. Just Monday this week the Russian stock market fell in excess of 10% and some of the major bank stocks lost 20% of their value on a single day.
In response to this massive outflow the Russian central bank – foolishly in my view – hiked its key policy rate by 150bp and intervened heavily in the currency market to prop up the rouble on Monday. Some commentators have suggested that the CBR might have spent more than USD 10bn of the foreign currency reserve just on Monday. Thereby inflicting greater harm to the Russian economy than any of the planned sanctions by EU and the US against Russia.
By definition a drop in foreign currency reserve translates directly into a contraction in the money base combined with the CBR’s rate hike we this week has seen a very significant tightening of monetary conditions in Russia – something which is likely to send the Russian economy into recession (understood as one or two quarters of negative real GDP growth).
Read more at Recession time for Russia – the ultra wonkish version | The Market Monetarist.
The Crimean regional government in the Ukraine plans to hold a referendum, to leave Ukraine and join the Russian Federation, amongst its predominantly Russian-speaking population. The Russian parliament has voiced its over-whelming support for the idea.
Gary Kasparov, former world chess champion and member of the Russian opposition, points out that the same principle could apply to Kaliningrad.
Germany should adopt this law & offer referendum to Kaliningrad (Königsberg!) to rejoin Germany. I'd bet on result!
— Garry Kasparov (@Kasparov63) March 7, 2014
Geographically isolated from the rest of Russia, Kaliningrad — formerly known as Königsberg — was part of Germany (East Prussia) until annexed by Josef Stalin at the end of WWII.
Leon Aron at Foreign Policy writes:
The right foreign-policy move at the right time can boost a leader’s ratings and the regime’s popularity. This is doubly true for authoritarian regimes that lack democratic legitimacy, and it is true for Russia today.
In Vladimir Putin’s Russia, as one top pollster told me in Moscow a few weeks ago, “foreign policy is pretty much the only thing that works.” What he meant was that, with the country’s economy slowed to a crawl, and with the regime facing near-universal revulsion over the corruption, thievery, and incompetence of officials at every level, racking up foreign-policy successes has become vital to maintaining Putin’s popularity — which, in turn, is key to the legitimacy of the whole enterprise.
Read more at The Front Lines on Russia's Home Front.
The Wall Street Journal quotes Vladimir Putin’s justification for occupying the Crimea:
Russian President Vladimir Putin said Tuesday that Russia reserves the right to use force in Ukraine to protect Russian-speaking residents there…….”
This was a ploy used by Hitler to assert control of the Sudetenland in 1938. Sudetenland is the name given to the border districts of Bohemia, Moravia, and parts of Silesia, within Czechoslovakia, that had large German-speaking populations. Hitler encouraged Konrad Henlein, leader of the Sudeten Nazis, to rebel, demanding a union with Germany. When the Czech government declared martial law, Hitler threatened war. This led to the September 1938 betrayal of Czechoslovakia by France and Britain. Adopting a policy of appeasement, the two countries agreed to give Hitler the Sudetenland, with Chamberlain describing the crisis as “a quarrel in a faraway country, between people of whom we know nothing”. On his return to London, Chamberlain asserted that the accord with Germany signaled “peace for our time”.
Hitler enters the Sudetenland, Bundesarchiv, Bild | October 1938
In March 1939, German troops occupied the rest of Czechoslovakia. In September 1939, Hitler invaded Poland on a similar pretext of protecting the German minority from persecution. War followed, leaving more than 60 million dead. Almost two-thirds were civilians.
Hopefully Western leaders have learned from history. Appeasement is not an option.
Read more at BBC History and Wikipedia: The Sudeten Crisis.
An appeaser is one who feeds a crocodile, hoping it will eat him last. ~ Winston Churchill
Shannon Tiezzi writes:
China’s ambiguous position reveals its dilemma. Beijing’s instinct is to back Moscow, both to uphold the fruitful cooperation between these two nations and to stand firm against pressure from the West. However, vocally supporting Russia would violate China’s principle of non-interference. More importantly, it could arguably set a precedent of Chinese support for military intervention to protect separatists unhappy with their government—which goes against all China’s instincts, given its own issues with Tibet and Xinjiang provinces. Yet as the Global Times put it, at the end of the day power calculations mean more than principles. China’s geopolitical strategy requires Beijing to at least tacitly support Russia, and at the end of the day that argument outweighs more abstract philosophical concerns.
Read more at China Backs Russia on Ukraine | The Diplomat.
The Euro has held up well despite rising tensions with Russia over the Ukraine. Reversal below $1.365 would warn of a test of primary support at $1.35. Bearish divergence on 13-week Twiggs Momentum suggests another correction. Breakout above $1.38 is less likely at present, but would signal an advance to $1.43*.
* Target calculation: 1.38 + ( 1.38 – 1.33 ) = 1.43
Dow Jones Euro Stoxx 50 retreated below 3100 and is likely to test primary support at 2920/2950. Breach of primary support would signal reversal to a down-trend.
* Target calculation: 3150 + ( 3150 – 2950 ) = 3350
Germany’s DAX is stronger, with rising 13-week Twiggs Money Flow suggesting another attempt at 10,000. But retreat below 9500 would test primary support at 9000.
DAX Volatility spiked above 20, but still reflects moderate risk.
David Rohde at Reuters quotes James Jeffrey, a retired career U.S. diplomat:
Jeffrey said the days and months ahead will be vital. If Putin faces few long-term consequences for seizing Crimea, it will set a precedent for China and other regional powers who may be considering establishing 19th century-style spheres of influence of their own.
“The Chinese,” Jeffrey said, “are in the same position.”
Read more at As China looks on, Putin poses risky dilemma for the West | Reuters.