Saturday, November 22, 2014

Is The Breakup Of Ukraine Inevitable?

Ukraine is the very definition of the word “inevitable” — that which cannot be avoided. Ukraine is going broke. It may lose more of its territory. Investors are running for the door, betting that things are going to get worse. All of this is now unavoidable. The market used to think the Ukraine crisis would cool down by the December. All bets for that outcome are now off the table.

Ukraine is shrinking, in more ways than one.

On March 16, 2014, Ukraine saw a large chunk of its territory annexed by Russia. The Crimea peninsula, then an autonomous region of the country, voted to secede after a perceived anti-Russia government took over Kiev. Crimea is dominated by ethnic Russians. Now, two regions continue to keep Ukraine in the news: Luhansk and Donetsk. Leaders there have decided it is best to become autonomous republics too. Like Crimea, this may very well be another way of saying goodbye to Kiev, if not Ukraine altogether.

Even if territorial integrity remains, Ukraine’s finances are deteriorating. The nation’s currency, the hryvnia, has lost 46.92% of its value so far this year, falling rapidly after the Central Bank decided on Nov. 4 to abandon its 12.95 peg to the dollar. The BNY Mellon Ukraine Index is down 40.18% year-to-date, much of it coming after the Bank’s decision. It’s panic time for Ukrainian money.

“Economically, Ukraine is being transmogrified into a failed state,” says Vladimir Signorelli, co-founder and senior international economist at Bretton Woods Research in New Jersey.

Complete story at - Is The Breakup Of Ukraine Inevitable?

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