Is it war if no shots have been fired? The Ukrainians say so but Moscow, its grip on Crimea now pretty much complete, says it is merely protecting its people. The rest of the world and its financial markets watch on very uneasily.
There is virtually no chance of any western military response after Vladimir Putin declared he had the right to invade his neighbour – NATO expressed “grave concern” but did not come up with any significant measures to apply pressure on. But there will be a diplomatic and economic price to pay.
The rouble tumbled by 2.5 percent at Monday’s open and the central bank has already acted to try and underpin it, raising its key lending rate by 1.5 percentage points although the Russian economy is already in poor shape. The main Russian stock index has plunged by about 9 percent with Gazprom doing worse than that and safe haven German Bund futures have jumped.
Already the talk is of shunning Russia’s G8 summit later in the year. America’s John Kerry, who will visit Kiev on Tuesday, has put visa bans, asset freezes and trade isolation on the table, saying U.S. business may well want to think again about involvement in Russia. Putting pressure on Russia’s oligarchs could be one way of exerting leverage.
But sanctions will only work if the EU, some of whose members have much deeper economic ties with Russia, follow suit.