The situation in Kiev

Russia depends on its natural gas exports to Europe. In fact, 50% of Russia’s Federal budget stems from duties on natural gas exports.  European countries, on the other hand, could easily find alternative natural gas supplies – albeit at a higher cost.

From this strictly economic perspective, Russia has much more to lose from cutting off natural gas supplies to Europe. While European countries would probably see a significant reduction in their economic growth if natural gas supplies face disruption, Russia would face a major budgetary crisis. From this perspective we are in the clear, for now.

Embed from Getty Images

To complicate matters, while the aspirations of the Ukrainian people are legitimate, some supporters of the new Government seem to be political extremists. One suspects that this matter is no longer in the hands of the Ukrainian Government, in any case.

As usual, the US is playing its role as international arbitrator. The fact that Ukraine is actually in Europe does not seem to bother the Obama Administration.