Some more thoughts on the Ukraine:
1. There are claims that there was a Russian "invasion" of the Crimea. I have yet to see any evidence that there are more Russian troops, other than those regularly stationed on the Crimea, involved. Sure the Kiev coup-government claimed that dozens of huge Russian transport planes landed but how come that there is not even one picture of them available? To me it seems that the troops usually stationed on Crimea, which include various Marine infantry and Marine special forces units ,who obviously also have the support of the population are quite sufficient to secure the island. No shots were fired and the Russian navy, one might argue, is simply securing the larger perimeters of its bases.
2. The Europeans, unlike the U.S. do not want make much hassle about the Russian move. Britain is against financial sanctions on Russian politicians and oligarchs because their money feeds the City of London. Forty percent of the oil and gas used in the EU is coming from Russia. No one will sanction that stream. For the German industry Russia is one of the biggest foreign markets. Other then some symbolic "We are miffed" sanction will not be done.
While Merkel and other EU politicians seems to want to calm the situation down the White House feels domestic political pressure to do more of "something". That is likely why we see this "leak" in today's New York Times:
Chancellor Angela Merkel of Germany told Mr. Obama by telephone on Sunday that after speaking with Mr. Putin she was not sure he was in touch with reality, people briefed on the call said. “In another world,” she said.
This does not sound like typically Merkel but rather strange for her. I doubt that she said that the way the "people briefed on the call" told it to the Times stenographer. It is rather an attempt to discredit Merkel and to make it more difficult for her to find a solution with Russia outside of U.S. control. That interpretation would indeed fit with this bit from the same piece:
Working from the Oval Office over the weekend, wearing jeans and a scowl, [Obama] called several of his G-8 counterparts to “make sure everybody’s in lock step with what we’re doing and saying,” according to a top aide.
3. There is some hyperventilation about reactions in the Russian stock markets and the price of the ruble:
The stock market has been absolutely pummeled: as of the time that this piece was written (around 7:30 am on Monday the 3rd) the MICEX was down by 11.2% and the RTS was down by 12.8%. As the Financial Times noted, the sell-off did not spare the companies that function as bastions of the Russian state: Gazprom was down 10.7% and Sberbank was down by 9.8%.
The activity in the currency market might have been even worse. The ruble reached all-time lows against both the dollar and the euro, falling by 2.5% and 1.5% respectively.
First: Unlike the U.S. government the Russian government simply does not care about stock market numbers. There is a lot of volatility now because a lot of people want to make money out of it. But the stock prices will recover soon especially as oil prices, and thereby the profits of many big Russian companies, have risen. Besides that all stock markets in Europe are down 2-3% today. So what? Second: The Russian government and its central bank were already following a policy of devaluation of the ruble to help the local industry towards more exports. From late January:
Economy Minister Alexei Ulyukayev sounded an upbeat note about the decline that is likely only to spur ruble selling.
"I am not a proponent of stimulating the economy through an artificial weakening of the ruble," Ulyukayev told Moscow's Prime business news agency.
"But since what we have now is not an artificial but a natural weakening … then why not enjoy its positive effects?" he asked.
"This will help improve the competitiveness of a range of industries," the economy minister stressed.
Today's downward move of the ruble will make the Kremlin more happy than concerned. "Western" analysts seem to not understand that ant are just following the anti-Russian propaganda line.
4. The very smart coup government in Kiev is doing what everyone on the Maidan demanded (not):
The office of President Oleksandr V. Turchynov announced the two appointments on Sunday of two billionaires — Sergei Taruta in Donetsk and Ihor Kolomoysky in Dnipropetrovsk — and more were reportedly under consideration for positions in the eastern regions.
The people in eastern Ukraine, who may already be inclined to rather go with Russia, will be very happy to now have Kiev friendly oligarchs ruling over them (not). This idiotic move plays right into the hand of the Russian strategy as announced by Medvedev today:
"Yes, the prestige of President (Viktor) Yanukovich is almost negligible but this does not nullify the fact that under the Constitution of Ukraine he is (still) the legitimate Head of State. If he is guilty before Ukraine carry out a procedure of impeachment in accordance with Ukraine's Constitution (Article 111) and put him on trial. All the rest is arbitrariness. A seizure of power. And this means that such a procedure will be utterly unstable and will end with a new coup, and a new bloodshed," Medvedev maintains.
Both sides can play the coup game. There are pro-Russian demonstrations all over the eastern and southern Ukraine and there will soon be more of them. Occupation of government buildings will follow. The coup government dissolved the Berkut riot police and as now nothing to put up against demonstrators but some fascists gangs. Should those threaten Russia friendly demonstrators in eastern Ukraine Russia would have a good reason to intervene. But that again could ignite a bigger war:
The real and urgent issue now is what happens across the eastern and southern Ukraine, and it is essential that neither side initiates the use of force there. Any move by the new Ukrainian government or nationalist militias to overthrow elected local authorities and suppress anti-government demonstrations in these regions is likely to provoke a Russian military intervention. Any Russian military intervention in turn will compel the Ukrainian government and army (or at least its more nationalist factions) to fight.
The West must therefore urge restraint—not only from Moscow, but from Kiev as well. […] In the longer run, the only way to keep Ukraine together may be the introduction of a new federal constitution with much greater powers for the different regions.
Russia would win any fight against the coup government in Kiev and its military. The Ukrainian armed forces are not loyal to the government and anyway ill prepared for war. They are easy targets to hit. But fighting against fascist gangs would escalate into a guerrilla war. Russia could win that too but only at high costs. It should keep the Crimea and should try to find an agreement with the "west" that will keep the Ukraine, along these lines, mostly finlandized and neutral between two somewhat competing economic blocs.