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Investing in Russia - Crimea Fallout Part 1
The Russian Federation has annexed part of a neighboring country. Anyone interested in investing in Russia will do well to keep up with the news. In this first article of a three part series, we look at the historic backdrop to events in Ukraine and the annexation of Crimea by the Russian Federation. In our second article we will look at the Crimea fallout in the short term as it will effect investing in Russia, the value of the Ruble and political and economic relations with the European Union and the USA. In the third article we will try fundamental analysis of how to proceed at investing in Russia in a potentially more hostile world. All of this started with political unrest in Ukraine.
Ukraine, Crimea and Russia
Ukraine is an independent nation, the largest by land mass of nations located totally within Europe. The nation is bordered by the Russian Federation to the east and northeast, Belarus to the northwest, Poland, Slovakia and Hungary to the west, Romania and Moldova to the southwest, and the Black Sea and Sea of Azov to the south and southeast. Ukraine is a former member of the Union of Soviet Socialist Republics. Its Eastern regions contain many ethnic Russians and Russian speakers. Crimea was a semi-autonomous region of Ukraine jutting out into the Black Sea. This region has strong historic ties to Russia itself and a majority of its population speaks Russian and identifies with Russia. Crimea is also the home of the Russian Federation’s only warm water naval base. A major economic factor in this equation is that virtually all of the oil and natural gas pipelines that send Russian supplies to Europe pass through Ukraine. Anyone investing in oil and natural gas will be interested in how all of this turns out.
Unrest in Ukraine Leads to Loss of Crimea
Months of recent political unrest have led to the overthrow of an apparently corrupt president of Ukraine. The man fled to Russia. A new government in Ukraine wishes closer ties with the West although it has made no move to reduce ties with the Russian Federation. However, the Russian Federation led by Vladimir Putin seems to have provoked a bloodless coup d’état in Crimea. The new government put the matter of where to belong to a vote and Crimea ended up picking the Russian Federation. Russia has obliged and with Russian troops massed on the Eastern border of Ukraine Mr. Putin says that he is taking Crimea because of its large Russian ethnic population and because it wants to be part of Russia. He says that he has no other interest in parts of Ukraine although Russian troops are still present on Ukraine’s Eastern borders.