On March 2, I suggested that Crimea might be ceded back to Russia–from whence it came–as part of an Agreement, by all parties involved, to defuse the evolving political confrontation in Ukraine. Instead, it now looks like the Ukraine, European Union and the United State are stuck with Crimea’s recent annexation by Russia. But, I believe that the economics of the situation will now prevail–and stop any further developments of the current national boarders.
This past Sunday, I wrote that I believed the marginal incursion by a small team of Russian Troops, in order to secure the pump station for its gas pipeline, might cause a bit more weakening of Financial Markets; however, that the overall confrontation would probably be short-lived. Instead, most World Markets strengthened over the past two days. Perhaps that was because the Economic Sanctions against Russia appeared to be more metaphorical, rather than actual. Even Russian Markets have strengthened!
Russian President Vladimir Putin declared today that Crimea is now a part of Russia, as it has always been (his words), and that Moscow has no further plans to move into Ukraine. Now, you cannot really take Putin at his word: a few weeks ago, he said that Russia was just carrying-out military maneuvers on its boarder with Ukraine and it had no plans to move into Ukraine. Famous last words, huh?
Logistically, it would be virtually impossible for the West to try to fight Russia, militarily, on its own boarders. Remember, that was Napoleon Bonaparte’s error, when he marched into Russia in 1812, and over-extended his supply lines. Russia burned its own towns, to include food and supplies, and retreated further into Russia. And, as Napoleon followed, he simply could not supply his Army of 500,000 Men.
Going back to the economics of the situation: Russia needs the West as much as Europe needs Russia. Ukraine is dependent upon both. So, I still believe that a political solution will be found, and peace should follow. Moscow really doesn’t have a viable alternative. But, just remember what German Chancellor Angela Merkel said about Putin: “He’s delusional”. In fact, it appears that he still wants to re-build the old Soviet Empire. Once an (KGB) Agent, always an Agent!