Roberto Abraham Scaruffi

Friday, 7 March 2014

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March 7, 2014

1 Crimea, Ukraine or Crimea, Russia?

Putin and Obama had what sounds like a tense and unproductive phone conversation Thursday evening. Compare the Kremlin's and White House's statements on the exchange. 
Both houses of the Russian parliament will support the annexation of Crimea and the decision "will be legitimate," Federation Council Chair Valentina Matviyenko said Friday. On Thursday, the Supreme Council of Crimea unanimously voted to join Russia and moved up the date of the schedule referendum on Russian annexation up to March 16. The Crimean capital city of Sevastopol announced it would also participate in the scheduled referendum. Russian lawmakers are already working on making annexation go as smoothly as possible. 
Ukrainian Interim President Oleksander Turchynov issued a statement declaring the illegitimacy of the referendum vote. Turchynov said the Crimean Supreme Council is being "totally controlled by servicemen of the Russian Armed Forces" and explained that the vote violates the constitution of Ukraine. "This will be a farce, this will be falsity and this will be a crime against the state organized by servicemen of the Russian Federation," Turchynov said. 
President Obama said yesterday that the referendum vote could not take place without the "legitimate" Ukrainian government. "In 2014, we are well beyond the days when borders can be redrawn over the heads of democratic leaders," Obama said. The E.U., Baltics, and Scandinavian countries also do not recognize the referendum
Kiev announced its terms for negotiations with Moscow regarding Crimea on Friday. Interim Prime Minister Arseniy Yatseniuk said Ukraine will negotiate with the Kremlin if Russia first removes its occupying troops, honors previous agreements with Ukraine, and stops supporting separatists, the Kyiv Post reports"We are ready to build relations with Russia," the prime minister said. "But Ukraine will never be a subordinate or branch of Russia," said Yatseniuk. 
UN Secretary General Ivan Simonovic will visit Ukraine, just two days after UN peace envoy Robert Serry was forced out of Crimea

2 On The Ground, Conflict Continues

There are now 30,000 Russian troops in Crimea according to the Ukrainian border serviceRIA Novosti reports that Russia has begun large-scale air defense drills at a base 280 miles from the Ukrainian border. Dmitry Timchuk, a soldier in the Ukrainian army, explained the conditions on the ground in a Facebook post: "The situation is not getting better...From multiple sources we received information about the expected night assaults of our military units...tension is high." He also wrote that Russian riot police had entered Crimea. In Kerch, where Russia will soon build a bridge between Russia and Crimea, Ukrainian Marines have refused to surrender
Pro-Ukraine demonstrations in Kharkov continued with protesters holding signs reading "Kharkov loves Crimea" and "Today is the seventh day of Russian occupation."

3 What Does This Mean for The Economy? 

Gazprom says it might shut off gas pipelines through Ukraine. "Either Ukraine repays its debt and pays for current deliveries or the risk of returning to the situation at the beginning of 2009 will appear," Gazprom CEO Alexei Miller said, according to the Kyiv Post. Gazprom cut oil deliveries to Ukraine in 2006 and 2009 after Ukraine failed to repay debt to the company, and Europe. Ukraine now owes Gazprom almost $2 billion.
Danny Vinik explains what the U.S.'s sanctions will mean for Russia and why European sanctions are a much bigger threat. 
The E.U. will send $15 billion in aid to Ukraine and continues to withhold sanctions. There will also be a political element to Ukraine's agreement with the E.U., which is still being negotiated. The E.U Ambassador to Russia said it is "waiting for Moscow to start negotiations with Ukraine," Lenta.ru reports. If that does not happen in the next few days, the E.U. will consider imposing travel bans and freezing the assets of certain individuals. In the meantime, the E.U. halted talks with Russia over visas and trade
On Thursday, the House approved a $1 billion loan to the interim Ukrainian government. Republicans are threatening Ukrainian financial solvency and American credibility by refusing reforms to the IMF, Vinik explains. "Republicans are tripping over themselves to propose ideas to hit Russia for its invasion of Ukraine. But at the same time, they are limiting Ukraine’s ability to borrow money from the International Monetary Fund." That will make it much harder for Ukraine to pay back $16 billion of national debt. Think Progress explains how debt is driving the crisis.
Ukrainians are choosing to boycott Russian commercial goods.
Crimea will suffer from the crisis's impact on its $5 billion tourism industry, the Kyiv Post reports.  

4 Media Wars

Crimea has stopped broadcasting the Ukrainian TV channel "Inter" and replaced it with Russian national channel NTV, Ukrayinska Pravda reports.  
Citing concerns that the "media war" over public opinion of Russia's invasion of Crimea is threatening national security, the Ukrainian National Security and Defense Council has asked for a review of the licensing rights of Russian broadcasters in Ukraine. Ukraine's largest internet and television provider already suspended three major Russian news channels from broadcasting in the country because they are "aggressive propaganda," Echo Moscow reports.

5 Reading The American Press

"Why does Obama believe that Putin is not willing to endure economic punishments for his military provocations?" Leon Wieseltier asks in The New Republic. "Putin is acting on the basis of a belief system."
Forbes is tied up in a corruption scandal linked to fugitive Ukrainian politician Sergey Kurchenko. Buzzfeed's Max Seddon has the story
Thomas de Waal argues that one novel explains the Crimean situation in Politico Magazine.
The New York Times reports on the relative shortage of American Russia experts: "There is a belief that a dearth of talent in the field and ineffectual management from the White House have combined to create an unsophisticated and cartoonish view of a former superpower, and potential threat, that refuses to be relegated to the ash heap of history."

6 Sochi's Paralympic Games Begin

The XI Paralympic games in Sochi are now underway. Putin toured the Olympic Village yesterday, and the Ukrainian delegation said it was prepared to pull out if the situation escalates.