On Topic: Dollars and sea ports

Michael Chevy Castranova
Published: March 16 2014 | 6:30 am - Updated: 1 April 2014 | 9:40 am in

If you look at it as clear-eyed as a straightforward business story — not as an ideological nor political nor geographic dispute — then you pretty much can see almost all sides of the thing.

And that’s truly how the latest troubles in Ukraine began to unfold — as an issue of economics that involves assets, investment and market protection.

Here’s what I mean.

On Nov. 21, 2013, President Viktor Yanukovych proclaimed that his government had pitched any and all thoughts of a trade arrangement with the European Union. A better idea, he declared, would be to become BFFs with Russia.

As good as its word — for once — Russia claimed it would pony up some $15 billion to purchase a chunk of Ukraine’s debt. It also said it would drop the price tag for what it was charging Ukraine for natural gas.

Keep in mind, this huge amount of cash wouldn’t shepherd Ukraine completely out of the woods. By some calculations, another $10 billion would be required for it to remain economically viable.

Many Ukrainians, however, were having none of this. (For Ukrainians, read: disgruntled stakeholders.) Not long after Yanukovych announced his intentions, anti-government protesters swarmed the city hall in the nation’s capital in the north, Kiev.

By late January, demonstrations had sprung up across much of the country. The violence worsened in February.

Yanukovych didn’t so much step down as CEO — more as if he decamped, on Feb. 22.

Russia, protecting its investment, moved troops to the Ukrainian border and, soon after, a reported 30,000 soldiers onto the Crimean peninsula.

Crimea is where the Russians have been since Catherine the Great annexed it in 1783, wanting a warm-water port for trade. That’s where the Russian Navy docks its Black Sea fleet today.

Russian President Vladimir Putin, speaking in terms that would suggest it’s still 1946, claimed his country’s action wasn’t an invasion, nyet, but part of Russia’s honorable support of Crimea against “fascists” and “neo-Nazis” from the west.

A key element to this plot line is that not all Ukrainian stakeholders want to cozy up to western Europe. In eastern Ukraine — particularly in Crimea, Donetsk and Luthansk — 50 percent or more of the population speaks Russian as its native tongue.

Indeed, in 1954 the Union of Soviet Socialist Republics “gave” Crimea to Ukraine as a gift. Russia wants it back now that their guy, Yanukovych, is no longer calling the shots.

Many Ukrainians of a certain age — as well as the Crimean parliament — are fine with that.

If Crimea does realign with Russia, history will decide whether to describe it in the ledger as a divestiture for the well-being of the rest of Ukraine, or as a hostile takeover by a foreign power. (I say “hostile” takeover rather than “friendly” because, after all, your friends generally don’t bring guns when they invite you to visit. Mine don’t, at least.)

How does all this affect the business world? U.S. companies — especially oil corporations — continue to invest and endeavor to sell goods in Russia despite the risks, Rich Smith of investment adviser Motley Fool pointed out to Voice of America’s Jim Randle earlier this month.

“… Big things happen in Russia,” Smith said, “and they look very big in the short term, but then things get back to normal.”

Smith was considering the situation strictly through a business lens. And the World Bank's promise of $3 billion this past Monday will reassure some investors.

But geopolitical observers — taking into account the dangers to Ukrainian sovereignty and to its citizens, and from resurrected Cold War tensions, among other very real and wide-reaching concerns — aren’t quite so calm.

It’s a complex and still-fluid scene. It began being about money, and likely will come to be about that again.

Catherine the Great would agree, if she were still around.

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