Russian Rates Up 1.5% After Putin Goes Into Ukraine

Comments Off Written on March 3rd, 2014 by
Categories: General

Russia has raised interest rates 1.5% after the state invaded Ukraine’s Crimea region, which is seen to be pro-Russian. This rate hike and the tension around war has taken the Russian stock market down around 9%, with the RTS Index at 1143, down 124 points.

RTSI INDEX (RTS.RS)

The ruble, too, has fallen about 1.5%, and is at record lows of 36.35 rubles to a dollar.

Will this affect India? If it escalates into a world war kind of situation, it will. The invasion of Crimea isn’t that big a deal by itself, but everyone is concerned about moral hazard - if you let this slide, what about all those other countries that believe they can invade territories they want to control? If there is a coordinated reply, this may result in a larger war and India will have to take sides. There are no good choices - just a bad choice and a worse choice.

The issue is also about gas supply to Europe. Ukraine is an important middle stage but gets supplies from Russia. And Ukraine is close to bankruptcy, and has a political hole after a coup recently.

I don’t see this as a big problem yet because:

  • Crude is up just 1%. Should have been up more if there was a fear of global war.
  • Gold is up only 1%. (again, fear of capital flight)
  • There’s no real opposition - a weak statement by the US shows they might not interfere just yet.

But the biggest problems come when you least expect them; so this could easily balloon into something you just didn’t wish for, or imagine. Let’s hope it gets defused. Meanwhile, we have enough on our own plate to take care of.

Related Posts Plugin for WordPress, Blogger...
About the Author:
http://www.capitalmind.in
The man behind Capital Mind. Deepak is a co-founder at MarketVision, a financial knowledge company. Deepak also provides data research and consulting services, and now lives in Bangalore. Connect with him at deepakshenoy@gmail.com.