Investing in Russia - Crimea Fallout Part 1

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Investing in Russia –
Crimea Fallout
Part 1

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INVESTING-TIPS/INVESTING-IN-RUSSIA-CRIMEA-FALLOUT
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.

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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.

What Are The Stakes in
Ukraine, Investing in
Russia and the Crimea
Fallout?

Take a look at the map. Huge amounts of
natural gas and petroleum pass via pipelines
from oil fields in the Russian Federation to the
European Union. The stakes are enormous if
the situation in the region does not settle down.

An important part of this is that the current
Russian leader, Vladimir Putin, believes that
the breakup of the USSR was the worst
disaster ever for Russia.

The USSR was a huge trading block, military
power, economic power and trading zone.

The Russian Federation is large but
substantially smaller than the USSR.

The USSR suffered unimaginable losses 1 in
World War II in fighting the German army.

A big part of why the Russians wanted to
control Eastern Europe was that they never
wanted to fight again on the soil of the
Motherland.

The Ukraine was one of Soviet Republics with
substantial agricultural and industrial
resources.

The Crimea is historically Russian and a naval
asset.

It is unlikely that Russia will ever want to give
the Crimea back to Ukraine.

With these thoughts and figures as a
background we can see that this is a deep
seated issue that links into international
commerce and power politics.

Anyone interested in investing in Russia needs
to pay attention.

This especially applies to those with sufficient
assets and expertise for foreign direct
investment in the Russian Federation.

Battle of Stalingrad
1 Estimates of total dead in the USSR due to the Second World War range
from 26.5 million to 40 million, with military deaths anywhere from 8 to 14
million.

Investing in Russia - Crimea Fallout Part 1

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Investing in Russia - Crimea Fallout Part 1