Ukraine's President Replaces Head of Armed Forces, Military Intervention Feared; Financial Crisis Threatens Russia; What's in Store for the Ruble?
Courtesy of Mish.
The situation in Ukraine grows more desperate by the hour. President Viktor Yanukovic had already replaced the head of the army. Today Yanukovic replaced the head of all armed forces.
Given that lower ranks are divided in support, calling out the military could start an all-out civil war.
“If there is a decision to use force to clear the protesters, it can be done but will start a civil war,” said Ihor Smeshko, former head of Ukraine’s SBU security services. “The army is so far neutral, but if it is pulled into this conflict it will be a point of no return. Army personnel are themselves split 50/50 in their views of Ukraine.”
The government prepared the way for using the army on Wednesday, when the defence ministry said the military could be deployed in “antiterrorist” operations. Authorities and legal experts had previously said the army could only be used within Ukraine if a state of emergency was imposed.
Mr Yanukovich on Wednesday night also replaced the head of all Ukraine’s armed forces with the former navy chief – just weeks after he already replaced the head of the army – in what appeared to be a move to ensure loyalty in the top ranks.
“[The Yanukovich government] have put their placemen into the army,” said James Sherr, a Ukraine scholar at London’s Chatham House think-tank. “But still the question is what proportion of units would obey such orders?”
Financial Crisis Threatens Russia
The Telegraph reports Financial crisis threatens Russia as Ukraine spins out of control
The dramatic escalation of Ukraine’s civil conflict and fears of Russian military intervention have sent financial tremors across Eastern Europe, turning the region into the new fulcrum of the emerging market crisis.
“This has suddenly gone from a domestic Ukrainian story into a geopolitical clash,” said Lars Christensen, from Danske Bank.
The Russian ruble has fallen to a record low against the euro, with contagion reaching Poland, Hungary and Romania in recent days. “The moves in Russia are very like the events during the war in Georgia in 2008. Markets are pricing in the risk of Russian intervention,” he said.
Regis Chatellier, from Societe Generale, said there is a “high risk” that Ukraine will be pushed into default on its €60bn sovereign debt, triggering a credit shock for Russian banks. Sberbank and VTB are both large holders of Ukrainian bonds. Global emerging market bond funds hold 3pc of their portfolio in Ukrainian debt. “The spillover effect of a Ukrainian default would be significant, but not systemic,” he said.
The decision by the Ukrainian nationalist stronghold of Lvov this week to declare “independence” from Kiev has upped the ante, creating a volatile climate in which the Ukrainian army may be forced to intervene to head off civil war.
…
