MacroScope

Breakneck speed of events in Ukraine

 

An extraordinary weekend. Ukraine’s President Yanukovich is gone and is probably at large somewhere in the pro-Russian heartlands of the east.

There’s no prospect of his return given how fast events have moved and after his people saw the shameless opulence stored within his country retreat.

Ukraine’s parliament named its new speaker as acting head of state on Sunday and is working to form an interim government by Tuesday, ahead of May 25 elections.

Oleksander Turchinov, who was elected speaker on Saturday, is an ally of newly freed opposition leader Yulia Tymoshenko, so she may well come back into the frame despite a blemished record when she was premier. She says she doesn’t want to be prime minister. But president?

The EU and Russia are still vying for influence and Washington and London warned Moscow not to think about sending forces in. Turchinov said he wanted European integration while maintaining good relations with Russia.

A glimmer of hope in Kiev

A glimmer of hope in Ukraine?

Let’s not count our chickens after 75 people were killed over the past two days but President Viktor Yanukovich’s people are saying an agreement on resolving the crisis has been reached at all-night talks involving the president, opposition leaders and three visiting European Union ministers.
A deal is due to be signed at 1000 GMT apparently although no details are as yet forthcoming. There has been no word from the EU ministers or the opposition so far.

Even if the violence subsides and some sort of political agreement is reached (a huge if), there is potential financial chaos to deal with despite Russia’s only partially delivered pledge of $15 billion to bail its neighbour out.

Standard & Poor’s has cut Ukraine’s sovereign rating for the second time in three weeks, saying the political situation has deteriorated substantially, posing an increased risk of default. The rating is now deep in junk territory at ‘CCC’ and with a negative outlook, meaning further cuts are likely.

Cold War chill over Ukraine

Dramatic twist in the Ukraine saga last night with a conversation between a State Department official and the U.S. ambassador to Ukraine posted on YouTube which appeared to show the official, Assistant Secretary of State Victoria Nuland, deliberating on the make-up of the next government in Kiev.

That led to a furious tit-for-tat with Moscow accusing Washington of planning a coup and the United States in turn saying Russia had leaked the video, which carried subtitles in Russian. A Kremlin aide said Moscow might block U.S. “interference” in Kiev.

Nuland is due to give a news conference today after her visit to Kiev.

Vladimir Putin is likely to meet Ukrainian President Viktor Yanukovich in Sochi as the Winter Olympics get underway. It could be awkward for Yanukovich’s opponents if they look like western pawns.

Iran and Japan in focus at Davos

Lots of action in Switzerland today with the annual get-together of the great and good at Davos getting underway and Syrian peace talks commencing in Montreux.

On the latter, few are predicting anything other than failure, a gloom that Monday’s chaotic choreography did nothing to dispel.
U.N. chief Ban Ki-moon Ban first offered Iran a seat at the table, prompting a threat to pull out by Syrian opposition groups which led to Washington demanding the invitation to Tehran be withdrawn. In the end, Ban did just that.

The release of thousands of photographs apparently showing prisoners tortured and killed by the government reinforced opposition demands that Bashar al-Assad must quit and face a war crimes trial. The president insists he can win re-election and wants to talk about fighting “terrorism.”

Timber!

A deal on European banking union was finally struck overnight. Already the inquests have begun into how robust it is.

As we exclusively reported at the weekend, EU finance ministers agreed that banks will pay into funds for the closure of failed lenders, amassing roughly 55 billion euros which will be merged into a common pool in 2025. Yes, 2025.

Until then, if there is not enough money, a government will be able to impose more levies on banks. If that does not suffice, it would put in public money and if that is unaffordable, it could seek a bailout from the euro zone’s ESM bailout fund with conditions and stigma attached.

Game of chicken in Kiev

No sign of tensions calming on the streets of Kiev, in fact today we could have a new flashpoint.

Prime Minister Mykola Azarov’s cabinet is holding its weekly meeting in the government building which protesters have blockaded since Monday, paving the way for a possible showdown.

Popular pressure, following President Viktor Yanukovich’s decision to reject an EU trade deal and turn back to Russia, is being matched by the markets, and it is from there that the potential tipping point could come.