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Crimea Names Ruble Currency; Applies To Join Russia, Expects To Become Region Of Russian Federation By Thursday | Zero Hedge

Crimea Names Ruble Currency; Applies To Join Russia, Expects To Become Region Of Russian Federation By Thursday | Zero Hedge.

First, for those who have missed this weekend’s developing story surrounding events in Crimea, here is the 30 second summary, courtesy of Bloomberg:

  • U.S., EU warn Russia not to annex Crimea after 95.5% of voters backed leaving Ukraine to join Russia in referendum.
  • Ukrainian govt, EU, U.S. consider vote illegal
  • Russia said vote  “fully met international norms”
  • Russia deployed about 60,000 troops along Ukrainian border, Ukrainian government said yday; Ukraine closed border crossings and will mobilize as many as 15,000 volunteers in next 15 days
  • Obama spoke with Putin, said referendum would never be recognized by intl community; U.S. prepared to impose “additional costs” on Russia for its actions
  • Putin told Obama Kiev regime unable to curb radical, ultra- nationalists groups that are destabilizing situation, terrorizing peaceful residents
  • EU ministers meet today to discuss sanctions that target Russian individuals rather than businesses; EU leaders to meet March 20-21 in Brussels to discuss further measures
  • “We are all reluctant to impose sanctions because Russia will probably respond and we’ll all suffer as a result,” Poland Foreign Minister Radoslaw Sikorski said on CNN. “But Russia is leaving us with no choice.”
  • Russian lawmakers to consider bill on March 21 that would allow Russia to incorporate parts of countries where residents want to secede, says a Kremlin adviser
  • Russia vetoed UN Security Council resolution declaring referendum illegal; China abstained from voting
  • Crimeans celebrate vote

And here is the latest : just hours ago, Crimea’s parliament officially applied to become part of Russia. The parliament “made a proposal to the Russian Federation to admit the Republic of Crimea as a new subject with the status of a republic,” according to a statement on its website. A Crimean parliamentary delegation was expected to arrive in Moscow on Monday to discuss the procedures required for the Black Sea peninsula to become part of the Russian Federation.

“If everything’s signed we’ll become a fully fledged region of the Russian Federation Wednesday or Thursday,” First Deputy Prime Minister Rustam Termigaliyev says in interview at govt headquarters in Simferopol. Termigaliyev added that Crimea will promptly get $1b aid from Russia in near-term, and that Hryvnia reserves enough for 10 days, then Crimea will switch to ruble. April pensions “most likely” to be paid in rubles. Crimea can be self-sufficient in natural gas after today’s nationalization of Chernomoreneftegaz. Crimea risks 150,000 hectares being left without water if Ukraine shuts off supply, though that’s “not critical,”  says Termigaliyev.

In other news, the west continues dithering and considering just how best to telegraph to the world that it is completely helpless in stopping the annexation of Crimea, which is now a fact, and that it is praying that Putin does nothing to annex any of the other Pro-Russian cities in east Ukraine in the coming days, as once again, it has absolutely no stopping power with Putin continuing to hold all the chips.

Crimea Names Ruble Currency; Applies To Join Russia, Expects To Become Region Of Russian Federation By Thursday | Zero Hedge

Crimea Names Ruble Currency; Applies To Join Russia, Expects To Become Region Of Russian Federation By Thursday | Zero Hedge.

First, for those who have missed this weekend’s developing story surrounding events in Crimea, here is the 30 second summary, courtesy of Bloomberg:

  • U.S., EU warn Russia not to annex Crimea after 95.5% of voters backed leaving Ukraine to join Russia in referendum.
  • Ukrainian govt, EU, U.S. consider vote illegal
  • Russia said vote  “fully met international norms”
  • Russia deployed about 60,000 troops along Ukrainian border, Ukrainian government said yday; Ukraine closed border crossings and will mobilize as many as 15,000 volunteers in next 15 days
  • Obama spoke with Putin, said referendum would never be recognized by intl community; U.S. prepared to impose “additional costs” on Russia for its actions
  • Putin told Obama Kiev regime unable to curb radical, ultra- nationalists groups that are destabilizing situation, terrorizing peaceful residents
  • EU ministers meet today to discuss sanctions that target Russian individuals rather than businesses; EU leaders to meet March 20-21 in Brussels to discuss further measures
  • “We are all reluctant to impose sanctions because Russia will probably respond and we’ll all suffer as a result,” Poland Foreign Minister Radoslaw Sikorski said on CNN. “But Russia is leaving us with no choice.”
  • Russian lawmakers to consider bill on March 21 that would allow Russia to incorporate parts of countries where residents want to secede, says a Kremlin adviser
  • Russia vetoed UN Security Council resolution declaring referendum illegal; China abstained from voting
  • Crimeans celebrate vote

And here is the latest : just hours ago, Crimea’s parliament officially applied to become part of Russia. The parliament “made a proposal to the Russian Federation to admit the Republic of Crimea as a new subject with the status of a republic,” according to a statement on its website. A Crimean parliamentary delegation was expected to arrive in Moscow on Monday to discuss the procedures required for the Black Sea peninsula to become part of the Russian Federation.

“If everything’s signed we’ll become a fully fledged region of the Russian Federation Wednesday or Thursday,” First Deputy Prime Minister Rustam Termigaliyev says in interview at govt headquarters in Simferopol. Termigaliyev added that Crimea will promptly get $1b aid from Russia in near-term, and that Hryvnia reserves enough for 10 days, then Crimea will switch to ruble. April pensions “most likely” to be paid in rubles. Crimea can be self-sufficient in natural gas after today’s nationalization of Chernomoreneftegaz. Crimea risks 150,000 hectares being left without water if Ukraine shuts off supply, though that’s “not critical,”  says Termigaliyev.

In other news, the west continues dithering and considering just how best to telegraph to the world that it is completely helpless in stopping the annexation of Crimea, which is now a fact, and that it is praying that Putin does nothing to annex any of the other Pro-Russian cities in east Ukraine in the coming days, as once again, it has absolutely no stopping power with Putin continuing to hold all the chips.

With 79% Turnout, Exit Polls Confirm 93% Of Voters Back Crimea Joining Russia; White House Rejects Results | Zero Hedge

With 79% Turnout, Exit Polls Confirm 93% Of Voters Back Crimea Joining Russia; White House Rejects Results | Zero Hedge.

With a voter turnout (79.09%) that exceeded every US Presidential election since 1900, the people of Crimea have spoken:

  • *CRIMEA JOINING RUSSIA BACKED BY 93% OF VOTERS: EXIT POLL
  • *U.K. FOREIGN SECRETARY: U.K. WON’T RECOGNIZE CRIMEAN REFERENDUM

Ukraine’s leaders have called up 20,000 men for a newly-created National Guard as despite the so-called “truce” Russian APCs and Tanks are rolling. Pro-Russian supporters are burning books in Donetsk after storming anti-Russian buildings. The White House is already out rejecting the vote (before the final results are released).

Voter Turnout (by region):

As exit polls confirm overhwleming support for Crimea to join Russia…

  • Exit poll by Crimea-based Republican Institute for Political and Sociological Studies released by Kryminform news service.
  • 93% of voters back joining Russia: exit poll

Exit poll: ????? 93% ??????? ????? ????????????? ?? ????????????? ? ??

— ??? ??????? (@riabreakingnews) March 16, 2014

Despite the so-called truce, Russian APC and Tanks are moving…

Pro-Russian supporters are burning books in Donetsk

And Kharkiv is dominated by Pro-Russia supporters carry this huge Russian flag…

White House Statement:

Carney on Crimea referendum: “Russia’s actions are dangerous and destabilizing” pic.twitter.com/pfAmgxLTRG

— Zeke Miller (@ZekeJMiller) March 16, 2014

The US is rejecting the vote:

The U.S. is rejecting the vote in Crimea even before the results are released.

The White House says Sunday’s referendum on succession is contrary to Ukraine’s constitution.

The U.S. says the world won’t recognize the results of a vote held under what it says are “threats of violence and intimidation from a Russian military intervention that violates international law.”

A written statement from the White House calls Russia’s actions in Ukraine “dangerous and destabilizing.”

The U.S. is urging other nations to “take concrete steps to impose costs” against Russia.

Secession was expected to be approved overwhelmingly.

And so is the UK:

  • *U.K. FOREIGN SECRETARY: U.K. WON’T RECOGNIZE CRIMEAN REFERENDUM
  • *U.K.’S HAGUE SAYS CRIMEAN REFERENDUM UNCONSTITUTIONAL
  • *U.K.’S HAGUE SAYS THERE SHOULD BE CONSEQUENCES FOR RUSSIA
  • *HAGUE: `UNACCEPTABLE’ FOR RUSSIA TO TAKE MORE ACTION IN UKRAINE

And The EU:

  • *EU REITERATES CRIMEAN REFERENDUM IS ILLEGAL, ILLEGITIMATE
  • *EU SAYS IT WON’T RECOGNISE OUTCOME OF CRIMEAN REFERENDUM
  • *EU TO DECIDE ON ADDITIONAL MEASURES AGAINST RUSSIA TOMORROW

And the French:

  • *FABIUS SAYS CRIMEA REFERENDUM ILLEGAL, AGAINST UKRAINE CONST.
  • *FABIUS SAYS RUSSIA HAS RESPONBILITIES AS UN SEC. COUNCIL MEMBER
  • *FABIUS SAYS RUSSIA MUST RESPECT UKRAINE TERRITORIAL INTEGRITY

Now it’s up to Putin… to weigh these potential “costs” against his gains…

With 79% Turnout, Exit Polls Confirm 93% Of Voters Back Crimea Joining Russia; White House Rejects Results | Zero Hedge

With 79% Turnout, Exit Polls Confirm 93% Of Voters Back Crimea Joining Russia; White House Rejects Results | Zero Hedge.

With a voter turnout (79.09%) that exceeded every US Presidential election since 1900, the people of Crimea have spoken:

  • *CRIMEA JOINING RUSSIA BACKED BY 93% OF VOTERS: EXIT POLL
  • *U.K. FOREIGN SECRETARY: U.K. WON’T RECOGNIZE CRIMEAN REFERENDUM

Ukraine’s leaders have called up 20,000 men for a newly-created National Guard as despite the so-called “truce” Russian APCs and Tanks are rolling. Pro-Russian supporters are burning books in Donetsk after storming anti-Russian buildings. The White House is already out rejecting the vote (before the final results are released).

Voter Turnout (by region):

As exit polls confirm overhwleming support for Crimea to join Russia…

  • Exit poll by Crimea-based Republican Institute for Political and Sociological Studies released by Kryminform news service.
  • 93% of voters back joining Russia: exit poll

Exit poll: ????? 93% ??????? ????? ????????????? ?? ????????????? ? ??

— ??? ??????? (@riabreakingnews) March 16, 2014

Despite the so-called truce, Russian APC and Tanks are moving…

Pro-Russian supporters are burning books in Donetsk

And Kharkiv is dominated by Pro-Russia supporters carry this huge Russian flag…

White House Statement:

Carney on Crimea referendum: “Russia’s actions are dangerous and destabilizing” pic.twitter.com/pfAmgxLTRG

— Zeke Miller (@ZekeJMiller) March 16, 2014

The US is rejecting the vote:

The U.S. is rejecting the vote in Crimea even before the results are released.

The White House says Sunday’s referendum on succession is contrary to Ukraine’s constitution.

The U.S. says the world won’t recognize the results of a vote held under what it says are “threats of violence and intimidation from a Russian military intervention that violates international law.”

A written statement from the White House calls Russia’s actions in Ukraine “dangerous and destabilizing.”

The U.S. is urging other nations to “take concrete steps to impose costs” against Russia.

Secession was expected to be approved overwhelmingly.

And so is the UK:

  • *U.K. FOREIGN SECRETARY: U.K. WON’T RECOGNIZE CRIMEAN REFERENDUM
  • *U.K.’S HAGUE SAYS CRIMEAN REFERENDUM UNCONSTITUTIONAL
  • *U.K.’S HAGUE SAYS THERE SHOULD BE CONSEQUENCES FOR RUSSIA
  • *HAGUE: `UNACCEPTABLE’ FOR RUSSIA TO TAKE MORE ACTION IN UKRAINE

And The EU:

  • *EU REITERATES CRIMEAN REFERENDUM IS ILLEGAL, ILLEGITIMATE
  • *EU SAYS IT WON’T RECOGNISE OUTCOME OF CRIMEAN REFERENDUM
  • *EU TO DECIDE ON ADDITIONAL MEASURES AGAINST RUSSIA TOMORROW

And the French:

  • *FABIUS SAYS CRIMEA REFERENDUM ILLEGAL, AGAINST UKRAINE CONST.
  • *FABIUS SAYS RUSSIA HAS RESPONBILITIES AS UN SEC. COUNCIL MEMBER
  • *FABIUS SAYS RUSSIA MUST RESPECT UKRAINE TERRITORIAL INTEGRITY

Now it’s up to Putin… to weigh these potential “costs” against his gains…

What Happens After Sunday’s Crimea Referendum Vote? | Zero Hedge

What Happens After Sunday’s Crimea Referendum Vote? | Zero Hedge.

Given this morning’s UN vote declaring the Crimea referendum invalid (and Russia’s obvious veto – along with China’s abstention), and on the heels of Lavrov’s words Friday that Russia would decide how to respond to the Crimean vote after the referendum had been held, it is thought-provoking to consider Putin’s options given the vote’s outcome is a near-certainty voting in favor of accession to the Russian Federation (especially in light of this morning’s images across Crimea). Europe’s Council on Foreign Relations notes “not knowing Vladimir Putin’s strategy makes it hard for Europe and the West to come up with meaningful and workable responses. In a way, we are all speculating and trying to get a glimpse into Putin’s soul. The five points below attempt to reinforce or refute some aspects of the conventional wisdom that has emerged from all this speculation.”

 

Via CEFR,

1. Has Putin always wanted to invade Crimea?  

Russian diplomats (who probably hate their jobs these days) have made elaborate attempts to demonstrate that no international law has been broken in Crimea. But the breach is blatant and the pretext used to justify invasion is thinner than thin – and Moscow knows it.

It is true that some hawkish groups in Moscow probably could not care less about international law. They would approve of any means to reunify Slavic lands. However, the bulk of the establishment has in fact always maintained a different position. For example, the Russian foreign ministry has traditionally adhered to a rigidly legalistic view of world affairs: in effect, post-1945 international law, with its strict emphasis on state sovereignty, non-interference in the internal affairs of other countries, and the inviolability of borders. Newer and softer concepts, such as the responsibility to protect, are alien to them.

Putin himself has always passionately belonged to that legalistic camp, as evidenced by his positions on Libya, on Syria, and on multiple other issues. Therefore, deciding to invade Crimea cannot have been easy for him. He must consider that something extremely important is at stake. The corollary is that in defending his conception of what is at stake, he may well be ready to go further than many of us assume.

2. Is Putin out of touch with reality?

Angela Merkel’s statement that Putin is out of touch with reality, which was leaked to the New York Times, gave rise to a considerable amount of conjecture and comment. Some people concluded that Putin has gone mad. In fact, while he may be living in his own version of reality, it looks like Putin’s world has actually been around for a long time.

Putin seems to sincerely believe that dangerous extremist groups have taken power in Kiev. He may genuinely not realise that the events in Kiev represented a classic popular revolution. As pointed out by Fiona Hill, it is possible that the whole concept of popular revolutions is alien to Putin. In the late 1980s and early 1990s, when Russia was having its own revolution, Putin was not there – he was serving the KGB in Dresden. He did not personally witness the fact that a massive number of people were involved in the overthrow of the Soviet Union. His being abroad for these pivotal events, as well as his KGB schooling and worldview, may have made it easy for him to see the collapse of the Soviet Union as the result of a conspiracy by a few combined with betrayal by others.

Similarly, Putin may see current events in Ukraine as a conspiracy by the West, which was definitely his view of the Orange revolution of 2004. Or he may see the situation as the result of recklessness: actions along the same lines as Western involvement in Libya and Syria. As Putin sees it, in both places the West has supported marginal and extremist groups against legitimate leaders, in a naïve hope that democracy will somehow take root in the ruins of the old regimes. It may well be that he saw the West applying the same logic to Ukraine and decided that he could not allow anything of the kind to happen in Ukraine.

Added to this, he likely feels a sense of betrayal over the West’s (as he sees it) geopolitical incursion into Ukraine, and over the West’s failure (as he sees it) to support Viktor Yanukovych after the agreement of February 21. All this comes together to form the reality in which Putin lives.

This means that what we are seeing as Putin’s revisionism may still be inspired largely by his conservatism. Also, much of his reality is indeed based on false premises. But understanding this does not make it easier to set the record straight and make Putin see sense – as multiple Western interlocutors have by now discovered.

3. Does Putin want to use Crimea as leverage over Ukraine? 

Some analysts assume that Russia will stop short of incorporating Crimea, but will instead keep it in a Transnistria-style legal limbo in order to use it as leverage over Kiev. It seems likely that obtaining leverage over all of Ukraine, as opposed to just Crimea, is Moscow’s real goal. But it is hard to predict exactly what Moscow will see as sufficient and reliable leverage.The government that came to power in Kiev in late February is weak. Contrary to Moscow’s claims, it is not illegitimate – it is as legitimate as it can be under the circumstances. However, it still does not represent the whole of society in the ways that a government should. In theory, it would have been easy for Moscow to gain leverage over the new government by using a mixture of legitimate and more shady means. But Moscow did not even make the attempt.

By now, it is unclear just how much the “Transnistrianisation” of Crimea would add to Moscow’s leverage. Kiev is now considerably less amenable to making a deal with Moscow than it would have been less than a month ago. Many in the nationalist camp may be secretly relieved to see Crimea go, taking with it its two million Russian voters and Russian base.

As recently as a week or so ago, Russia could probably have counted on the West to put pressure on Kiev. The West is terrified by what Moscow is doing and it does not know how to respond. So, many would have been relieved if, instead of annexing Crimea, Russia stopped at “Transnistrianisation”. The West would have been ready to put pressure on Kiev to accept Moscow’s conditions – thereby, of course, contributing to prolonged bad governance in Ukraine and, consequently, to more trouble down the road. But Moscow did not try to use the West either – and now it could be too late for that as well. The build-up of Russian troops at Ukraine’s borders has probably made the West more determined to counter Russia and less likely to go for unholy compromises. And, likewise, the massing of troops could indicate that Moscow is not interested in making use of Western pressure. The sort of control over Kiev that the Kremlin has in mind may be of a much harder sort than mere co-option and coercion.

4. Is Putin acting only in response to domestic pressures?

Some analysts claim that the whole Crimea affair was begun in order to impress the domestic public, who have increasingly fallen out of love with Putin. Others, even those who do not share that interpretation, claim that Putin cannot back down because of domestic pressures. It is true that the invasion has boosted Putin’s ratings. And the domestic media-propaganda machine has created a powerful momentum for annexation, which has the support of many in Russian society. But it is still hard to believe that any of this constitutes serious limitations of action for Putin, especially given that he does not have to face the ballot box any time soon.

Russian society has no capacity for an informed and critical discussion about foreign policy. The state-controlled media is masterful in justifying the regime’s actions, whatever they may be. Portraying a climb-down as a victory would be easy. (This kind of method is described well in an old Soviet joke about a 100-metre race between Ronald Reagan and Leonid Brezhnev: after Reagan’s win, the Soviet news agency reported that “in yesterday’s race between the heads of state the General Secretary of the Communist Party of the USSR achieved a precious second place. The president of the Imperialist United States finished second-last.”)

In short, for the moment at least, Putin is in no way hostage to his domestic constituency. But that does not mean that he will want to de-escalate or back down.

5. Will sanctions stop Putin?

Different people see different logic behind Western sanctions on Russia. Some hope that sanctions, or the threat of them, will force Moscow to back down. Others hope that sanctions will alienate Russian elites from Putin and leave him with little domestic support. Others simply believe that people who were instrumental in acting against sovereignty and territorial integrity deserve to be punished. And some look at the situation from a long-term perspective and think that sanctions should be applied to erode the economic foundations of an increasingly aggressive regime.

Much of this reasoning seems accurate and justified. But even so, the calculation that sanctions will make Putin reverse course does not ring true. Ever since the domestic protests of 2011-2012, Putin has lost trust in the members of his elite who keep their money in the West and so are vulnerable to Western pressures. Losing their support, therefore, does not really matter to him. They have no leverage over him. In any case, “repatriating money” has been an unofficial policy for quite a while.

Sanctions, as well as Putin’s growing alienation from Russian elites, may well have effects in the medium term. But they will not stop Putin on Sunday or in the days ahead. Even so, this does not mean that sanctions are futile or unnecessary – especially because it seems more and more likely that we are now facing a longer-term battle between Russia and the West.

What Happens After Sunday's Crimea Referendum Vote? | Zero Hedge

What Happens After Sunday’s Crimea Referendum Vote? | Zero Hedge.

Given this morning’s UN vote declaring the Crimea referendum invalid (and Russia’s obvious veto – along with China’s abstention), and on the heels of Lavrov’s words Friday that Russia would decide how to respond to the Crimean vote after the referendum had been held, it is thought-provoking to consider Putin’s options given the vote’s outcome is a near-certainty voting in favor of accession to the Russian Federation (especially in light of this morning’s images across Crimea). Europe’s Council on Foreign Relations notes “not knowing Vladimir Putin’s strategy makes it hard for Europe and the West to come up with meaningful and workable responses. In a way, we are all speculating and trying to get a glimpse into Putin’s soul. The five points below attempt to reinforce or refute some aspects of the conventional wisdom that has emerged from all this speculation.”

 

Via CEFR,

1. Has Putin always wanted to invade Crimea?  

Russian diplomats (who probably hate their jobs these days) have made elaborate attempts to demonstrate that no international law has been broken in Crimea. But the breach is blatant and the pretext used to justify invasion is thinner than thin – and Moscow knows it.

It is true that some hawkish groups in Moscow probably could not care less about international law. They would approve of any means to reunify Slavic lands. However, the bulk of the establishment has in fact always maintained a different position. For example, the Russian foreign ministry has traditionally adhered to a rigidly legalistic view of world affairs: in effect, post-1945 international law, with its strict emphasis on state sovereignty, non-interference in the internal affairs of other countries, and the inviolability of borders. Newer and softer concepts, such as the responsibility to protect, are alien to them.

Putin himself has always passionately belonged to that legalistic camp, as evidenced by his positions on Libya, on Syria, and on multiple other issues. Therefore, deciding to invade Crimea cannot have been easy for him. He must consider that something extremely important is at stake. The corollary is that in defending his conception of what is at stake, he may well be ready to go further than many of us assume.

2. Is Putin out of touch with reality?

Angela Merkel’s statement that Putin is out of touch with reality, which was leaked to the New York Times, gave rise to a considerable amount of conjecture and comment. Some people concluded that Putin has gone mad. In fact, while he may be living in his own version of reality, it looks like Putin’s world has actually been around for a long time.

Putin seems to sincerely believe that dangerous extremist groups have taken power in Kiev. He may genuinely not realise that the events in Kiev represented a classic popular revolution. As pointed out by Fiona Hill, it is possible that the whole concept of popular revolutions is alien to Putin. In the late 1980s and early 1990s, when Russia was having its own revolution, Putin was not there – he was serving the KGB in Dresden. He did not personally witness the fact that a massive number of people were involved in the overthrow of the Soviet Union. His being abroad for these pivotal events, as well as his KGB schooling and worldview, may have made it easy for him to see the collapse of the Soviet Union as the result of a conspiracy by a few combined with betrayal by others.

Similarly, Putin may see current events in Ukraine as a conspiracy by the West, which was definitely his view of the Orange revolution of 2004. Or he may see the situation as the result of recklessness: actions along the same lines as Western involvement in Libya and Syria. As Putin sees it, in both places the West has supported marginal and extremist groups against legitimate leaders, in a naïve hope that democracy will somehow take root in the ruins of the old regimes. It may well be that he saw the West applying the same logic to Ukraine and decided that he could not allow anything of the kind to happen in Ukraine.

Added to this, he likely feels a sense of betrayal over the West’s (as he sees it) geopolitical incursion into Ukraine, and over the West’s failure (as he sees it) to support Viktor Yanukovych after the agreement of February 21. All this comes together to form the reality in which Putin lives.

This means that what we are seeing as Putin’s revisionism may still be inspired largely by his conservatism. Also, much of his reality is indeed based on false premises. But understanding this does not make it easier to set the record straight and make Putin see sense – as multiple Western interlocutors have by now discovered.

3. Does Putin want to use Crimea as leverage over Ukraine? 

Some analysts assume that Russia will stop short of incorporating Crimea, but will instead keep it in a Transnistria-style legal limbo in order to use it as leverage over Kiev. It seems likely that obtaining leverage over all of Ukraine, as opposed to just Crimea, is Moscow’s real goal. But it is hard to predict exactly what Moscow will see as sufficient and reliable leverage.The government that came to power in Kiev in late February is weak. Contrary to Moscow’s claims, it is not illegitimate – it is as legitimate as it can be under the circumstances. However, it still does not represent the whole of society in the ways that a government should. In theory, it would have been easy for Moscow to gain leverage over the new government by using a mixture of legitimate and more shady means. But Moscow did not even make the attempt.

By now, it is unclear just how much the “Transnistrianisation” of Crimea would add to Moscow’s leverage. Kiev is now considerably less amenable to making a deal with Moscow than it would have been less than a month ago. Many in the nationalist camp may be secretly relieved to see Crimea go, taking with it its two million Russian voters and Russian base.

As recently as a week or so ago, Russia could probably have counted on the West to put pressure on Kiev. The West is terrified by what Moscow is doing and it does not know how to respond. So, many would have been relieved if, instead of annexing Crimea, Russia stopped at “Transnistrianisation”. The West would have been ready to put pressure on Kiev to accept Moscow’s conditions – thereby, of course, contributing to prolonged bad governance in Ukraine and, consequently, to more trouble down the road. But Moscow did not try to use the West either – and now it could be too late for that as well. The build-up of Russian troops at Ukraine’s borders has probably made the West more determined to counter Russia and less likely to go for unholy compromises. And, likewise, the massing of troops could indicate that Moscow is not interested in making use of Western pressure. The sort of control over Kiev that the Kremlin has in mind may be of a much harder sort than mere co-option and coercion.

4. Is Putin acting only in response to domestic pressures?

Some analysts claim that the whole Crimea affair was begun in order to impress the domestic public, who have increasingly fallen out of love with Putin. Others, even those who do not share that interpretation, claim that Putin cannot back down because of domestic pressures. It is true that the invasion has boosted Putin’s ratings. And the domestic media-propaganda machine has created a powerful momentum for annexation, which has the support of many in Russian society. But it is still hard to believe that any of this constitutes serious limitations of action for Putin, especially given that he does not have to face the ballot box any time soon.

Russian society has no capacity for an informed and critical discussion about foreign policy. The state-controlled media is masterful in justifying the regime’s actions, whatever they may be. Portraying a climb-down as a victory would be easy. (This kind of method is described well in an old Soviet joke about a 100-metre race between Ronald Reagan and Leonid Brezhnev: after Reagan’s win, the Soviet news agency reported that “in yesterday’s race between the heads of state the General Secretary of the Communist Party of the USSR achieved a precious second place. The president of the Imperialist United States finished second-last.”)

In short, for the moment at least, Putin is in no way hostage to his domestic constituency. But that does not mean that he will want to de-escalate or back down.

5. Will sanctions stop Putin?

Different people see different logic behind Western sanctions on Russia. Some hope that sanctions, or the threat of them, will force Moscow to back down. Others hope that sanctions will alienate Russian elites from Putin and leave him with little domestic support. Others simply believe that people who were instrumental in acting against sovereignty and territorial integrity deserve to be punished. And some look at the situation from a long-term perspective and think that sanctions should be applied to erode the economic foundations of an increasingly aggressive regime.

Much of this reasoning seems accurate and justified. But even so, the calculation that sanctions will make Putin reverse course does not ring true. Ever since the domestic protests of 2011-2012, Putin has lost trust in the members of his elite who keep their money in the West and so are vulnerable to Western pressures. Losing their support, therefore, does not really matter to him. They have no leverage over him. In any case, “repatriating money” has been an unofficial policy for quite a while.

Sanctions, as well as Putin’s growing alienation from Russian elites, may well have effects in the medium term. But they will not stop Putin on Sunday or in the days ahead. Even so, this does not mean that sanctions are futile or unnecessary – especially because it seems more and more likely that we are now facing a longer-term battle between Russia and the West.

Merkel Warns Putin Of “Massive Damage”, Russia Continues Piling Troops, Pro-Russia Oligarch Arrested, Gazprom Speaks | Zero Hedge

Merkel Warns Putin Of “Massive Damage”, Russia Continues Piling Troops, Pro-Russia Oligarch Arrested, Gazprom Speaks | Zero Hedge.

It’s crunch time for Ukraine.

With just over two days to go until the Crimea referendum, all the actors are stepping up the diplomacy to a fever pitch in a desperate attempt to talk Putin out of formally annexing the peninsula following results which are well-known in advance will show the population’s allegiance to mother Russia. But while the generic rhetoric is well-known, one surprising place of escalation over the past 24 hours has been Germany’s Angela Merkel, who for the most part had been willing to stay on the sidelines in the war of words, has suddenly stepped up her own phrasing, and warned Moscow on Thursday that it risked “massive” political and economic damage if it refused to change course on Ukraine, saying Western leaders were united in their readiness to impose sanctions on Russia if necessary.

Reuters reports that the chancellor, using her strongest language since the start of the crisis and removing any suspicion that Germany might seek to avoid a confrontation with President Vladimir Putin, said his actions would lead to “catastrophe” for Ukraine and much more.

“We would not only see it, also as neighbours of Russia, as a threat. And it would not only change the European Union’s relationship with Russia,” she said in a speech in parliament. “No, this would also cause massive damage to Russia, economically and politically.”

Merkel has acknowledged that her efforts to persuade Putin to negotiate via a “contact group” with the transition government in Kiev – which he accuses of ousting Russian-backed president Viktor Yanukovich unlawfully – have failed and time is running out.

“To be absoultely clear, none of us want it to come to such measures but we are all ready and determined to if they are unavoidable,” said Merkel.

Germany receives over a third of its gas and oil from Russia and over 6,000 German firms are active there. A poll last week showed that a majority of Germans oppose sanctions against Russia. So is Merkel doing the Western thing, and bluffing in a last-ditch effort to convince Putin she isn’t, or does Putin still believe he has all the trump cards, and can bring the German economy to a crawl if Merkel acts out on her threat? We will known as soon as Sunday night.

Elsewhere, John Kerry headed out to London for some last ditch Russia talks on Ukraine. Expect this “effort” too to lead exactly nowhere.

In the meantime, Russia’s response is well known, which is more of the same – and the Russian Ministry of Defense made it quite clear what the next steps are when it announced that the large-scale maneuvers near the Ukraine border now involve some 8,500 troops, 270 tanks and 180 APCs.

An indication of how “seriously” Russia takes the diplomatic threats was the news that it is ready to impose counter-sanctions. WSJ reported that Russia’s economy ministry is looking at what the consequences of possible sanctions from the West would be and stands ready to impose similar penalties, deputy economy minister Alexei Likhachev said Thursday.

We are ready for any developments, all options are being considered. But we hope that it will impose specific political sanctions but not a wider range of some trade and economic decisions,” Mr. Likhachev said.

 

Mr. Likhachev said Europe is unlikely to impose harsh sanctions against Russia as both sides have strong business and trade ties.

 

Unlike Europe, which is Russia’s major trading partner, the U.S. has more room to impose sanctions, he added.

 

“Our sanctions will be symmetric,” Mr. Likhachev said.

But it wouldn’t be a Russian response if Gazprom didn’t make an announcement or two. Which it did:

  • Gazprom CEO: Ukraine’s Failure to Repay Gas Deliveries Debt Puts Company Dividend Policy At Risk
  • Gazprom CEO: Ukraine Debt for Gas Deliveries Now at $1.8 Billion, Keeps Growing
  • Gazprom CEO: Ukraine Political Crisis Detrimental For Company’s Investment Program
  • Gazprom CEO Seeking Clarity On Gas Payments From Ukraine
  • Gazprom CEO Doesn’t “Want A Gas Crisis”
  • Gazprom CEO Doesn’t Address Cutting Off Gas Supplies In Statement

And while diplomacy is failing all around, and a trade and all too real war are potentially on the horizon, the real issue was and continues to the money. Which is why it was surprising to learn that earlier today the a Ukrainian oligarch, Dmytro Firtash, was arrested in Vienna this week at the request of U.S. authorities, the Austrian government sources said on Thursday.  Reutersreports that Firtash, 48, is one of Ukraine’s richest men,an oligarch whose close links to Russia and involvement in the gas, chemicals, media and banking sectors gave him substantial influence,notably during the administration of recently ousted, Moscow-backed President Viktor Yanukovich.

The Federal Criminal Office, had identified the man taken into custody only as Dmitry F. and said he had been under investigation by the U.S. Federal Bureau of Investigation since 2006.

As a reminder, Stratfor’s take on the richest Ukrainians was that they would play a “decisive role” in the conflict:

With presidential elections set for May 25 and parliamentary elections likely to be held later in the year, Ukraine’s current administration will need the continued support of the oligarchs. More immediately, with Crimea on the verge of leaving Ukraine, the new government’s urgent challenge is to keep mainland Ukraine together. Eastern Ukraine is crucial to this — the region is a stronghold for pro-Russia sentiment and the main site of opposition, after Crimea, to the Western-backed and Western-leaning government.

 

The oligarchs are key to keeping control over eastern Ukraine, not only because Ukraine’s industrial production is concentrated in the east — thus anchoring a shaky economy — but also because many of the oligarchs have a stronger and more manageable relationship with Russia than the current government, which Moscow sees as illegitimate. Many of these business leaders hail from the industrial east. They have business ties to Russia and decades of experience dealing with Russian authorities — experience that figures such as Klitschko and Yatsenyuk lack.

 

So far, the new government has been able to maintain the support of the country’s most important oligarchs. In general, the oligarchs want Ukraine to stay united. They do not support partition or federalization, because this would compromise their business interests across the country. But this support is not guaranteed over the long term. There have been recent complaints about the new government, for example over the arrest of former Kharkiv Gov. Mikhail Dobkin. Akhmetov came out in Dobkin’s defense, saying the government should not be going after internal rivals right now, but rather focusing on concerns over Russia. This can be seen as a warning to the new administration: The oligarchs’ loyalty to the current regime is conditional and should not be taken for granted.

 

Ultimately, the biggest threat to the oligarchs is not the current government, over which they have substantial leverage, but Russia. The oligarchs stand to lose a great deal if Russia intervenes in eastern Ukraine. If Russia takes over eastern territories, it could threaten the oligarchs’ very control over their assets. Therefore they have an interest in bridging the gap between Russia and Kiev, but it is Moscow they fear more. The oligarchs have substantial power to shape the Ukrainian government’s decision-making as it moves forward. Their business interests and the territorial integrity of the country are at stake.

As always, follow the money, especially when some of the richest money ends up directly in prison in a country far away, under the orders of that global moralizer, the United States.

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Merkel Warns Putin Of "Massive Damage", Russia Continues Piling Troops, Pro-Russia Oligarch Arrested, Gazprom Speaks | Zero Hedge

Merkel Warns Putin Of “Massive Damage”, Russia Continues Piling Troops, Pro-Russia Oligarch Arrested, Gazprom Speaks | Zero Hedge.

It’s crunch time for Ukraine.

With just over two days to go until the Crimea referendum, all the actors are stepping up the diplomacy to a fever pitch in a desperate attempt to talk Putin out of formally annexing the peninsula following results which are well-known in advance will show the population’s allegiance to mother Russia. But while the generic rhetoric is well-known, one surprising place of escalation over the past 24 hours has been Germany’s Angela Merkel, who for the most part had been willing to stay on the sidelines in the war of words, has suddenly stepped up her own phrasing, and warned Moscow on Thursday that it risked “massive” political and economic damage if it refused to change course on Ukraine, saying Western leaders were united in their readiness to impose sanctions on Russia if necessary.

Reuters reports that the chancellor, using her strongest language since the start of the crisis and removing any suspicion that Germany might seek to avoid a confrontation with President Vladimir Putin, said his actions would lead to “catastrophe” for Ukraine and much more.

“We would not only see it, also as neighbours of Russia, as a threat. And it would not only change the European Union’s relationship with Russia,” she said in a speech in parliament. “No, this would also cause massive damage to Russia, economically and politically.”

Merkel has acknowledged that her efforts to persuade Putin to negotiate via a “contact group” with the transition government in Kiev – which he accuses of ousting Russian-backed president Viktor Yanukovich unlawfully – have failed and time is running out.

“To be absoultely clear, none of us want it to come to such measures but we are all ready and determined to if they are unavoidable,” said Merkel.

Germany receives over a third of its gas and oil from Russia and over 6,000 German firms are active there. A poll last week showed that a majority of Germans oppose sanctions against Russia. So is Merkel doing the Western thing, and bluffing in a last-ditch effort to convince Putin she isn’t, or does Putin still believe he has all the trump cards, and can bring the German economy to a crawl if Merkel acts out on her threat? We will known as soon as Sunday night.

Elsewhere, John Kerry headed out to London for some last ditch Russia talks on Ukraine. Expect this “effort” too to lead exactly nowhere.

In the meantime, Russia’s response is well known, which is more of the same – and the Russian Ministry of Defense made it quite clear what the next steps are when it announced that the large-scale maneuvers near the Ukraine border now involve some 8,500 troops, 270 tanks and 180 APCs.

An indication of how “seriously” Russia takes the diplomatic threats was the news that it is ready to impose counter-sanctions. WSJ reported that Russia’s economy ministry is looking at what the consequences of possible sanctions from the West would be and stands ready to impose similar penalties, deputy economy minister Alexei Likhachev said Thursday.

We are ready for any developments, all options are being considered. But we hope that it will impose specific political sanctions but not a wider range of some trade and economic decisions,” Mr. Likhachev said.

 

Mr. Likhachev said Europe is unlikely to impose harsh sanctions against Russia as both sides have strong business and trade ties.

 

Unlike Europe, which is Russia’s major trading partner, the U.S. has more room to impose sanctions, he added.

 

“Our sanctions will be symmetric,” Mr. Likhachev said.

But it wouldn’t be a Russian response if Gazprom didn’t make an announcement or two. Which it did:

  • Gazprom CEO: Ukraine’s Failure to Repay Gas Deliveries Debt Puts Company Dividend Policy At Risk
  • Gazprom CEO: Ukraine Debt for Gas Deliveries Now at $1.8 Billion, Keeps Growing
  • Gazprom CEO: Ukraine Political Crisis Detrimental For Company’s Investment Program
  • Gazprom CEO Seeking Clarity On Gas Payments From Ukraine
  • Gazprom CEO Doesn’t “Want A Gas Crisis”
  • Gazprom CEO Doesn’t Address Cutting Off Gas Supplies In Statement

And while diplomacy is failing all around, and a trade and all too real war are potentially on the horizon, the real issue was and continues to the money. Which is why it was surprising to learn that earlier today the a Ukrainian oligarch, Dmytro Firtash, was arrested in Vienna this week at the request of U.S. authorities, the Austrian government sources said on Thursday.  Reutersreports that Firtash, 48, is one of Ukraine’s richest men,an oligarch whose close links to Russia and involvement in the gas, chemicals, media and banking sectors gave him substantial influence,notably during the administration of recently ousted, Moscow-backed President Viktor Yanukovich.

The Federal Criminal Office, had identified the man taken into custody only as Dmitry F. and said he had been under investigation by the U.S. Federal Bureau of Investigation since 2006.

As a reminder, Stratfor’s take on the richest Ukrainians was that they would play a “decisive role” in the conflict:

With presidential elections set for May 25 and parliamentary elections likely to be held later in the year, Ukraine’s current administration will need the continued support of the oligarchs. More immediately, with Crimea on the verge of leaving Ukraine, the new government’s urgent challenge is to keep mainland Ukraine together. Eastern Ukraine is crucial to this — the region is a stronghold for pro-Russia sentiment and the main site of opposition, after Crimea, to the Western-backed and Western-leaning government.

 

The oligarchs are key to keeping control over eastern Ukraine, not only because Ukraine’s industrial production is concentrated in the east — thus anchoring a shaky economy — but also because many of the oligarchs have a stronger and more manageable relationship with Russia than the current government, which Moscow sees as illegitimate. Many of these business leaders hail from the industrial east. They have business ties to Russia and decades of experience dealing with Russian authorities — experience that figures such as Klitschko and Yatsenyuk lack.

 

So far, the new government has been able to maintain the support of the country’s most important oligarchs. In general, the oligarchs want Ukraine to stay united. They do not support partition or federalization, because this would compromise their business interests across the country. But this support is not guaranteed over the long term. There have been recent complaints about the new government, for example over the arrest of former Kharkiv Gov. Mikhail Dobkin. Akhmetov came out in Dobkin’s defense, saying the government should not be going after internal rivals right now, but rather focusing on concerns over Russia. This can be seen as a warning to the new administration: The oligarchs’ loyalty to the current regime is conditional and should not be taken for granted.

 

Ultimately, the biggest threat to the oligarchs is not the current government, over which they have substantial leverage, but Russia. The oligarchs stand to lose a great deal if Russia intervenes in eastern Ukraine. If Russia takes over eastern territories, it could threaten the oligarchs’ very control over their assets. Therefore they have an interest in bridging the gap between Russia and Kiev, but it is Moscow they fear more. The oligarchs have substantial power to shape the Ukrainian government’s decision-making as it moves forward. Their business interests and the territorial integrity of the country are at stake.

As always, follow the money, especially when some of the richest money ends up directly in prison in a country far away, under the orders of that global moralizer, the United States.

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