President Obama condemned the ongoing violence in Ukraine today, as the European Union and the U.S. consider sanctions. What the repercussions for the country and the rest of the world will be — we’re still finding out.
David Gordon, chairman of the Eurasia Group, says the protests and clashes started after the Ukrainian government abruptly ended talks to move toward E.U. membership, just as Russia offered finacial support for the country. But now that Russia has put the $15 billion bailout package on hold — pending the outcome of the unrest — Gordon says the economic issues are no longer the central focus:
I thing the economic issue becomes a victim here. The main driver now is really about who’s governing Ukraine, and under what set of rules. What in December looked like a sort of technical issue between the European Union and Ukraine, now has turned into much more of a sort of post-Soviet replay of some of the tensions of the final years of the Cold War.
For investors looking at the instability in Ukraine, Gordon says he wouldn’t advise making any direct investments any time soon, but: “I do think that the likely outcome is that we get through this without a default.”
That sounds optimistic, but Gordon says that if Western powers believe Ukraine is still on a trajectory toward E.U. membership, then there will be pressure to put a financial floor underneath the country before a total collapse.
Gordon also says the sanctions the E.U. are considering probably won’t fix the problems in Ukraine, but could push the country in the direction of electing a new leadership.
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