On Russia, Crimean Referendum and Trade

Yes, the referendum in Crimea is happening this Sunday, March 16, when the residents of Crimean region will vote whether or not to join Russia. The new Kiev government already called the referendum illegal, there will not be any Western observers and, as news suggest, it is more likely the Crimeans will vote yes. Just look at the map.


Source: the Economist

From which you can see that the majority of ethnic population of Crimea is Russian, the prevailing spoken language is Russian, Sevastopol has been the base of the Russian Black Sea Fleet since its inception. You might not know, but there has been a long standoff between the Western and Eastern parts of Ukraine, reminiscent of Germany before the Berlin Wall fall, with West looking towards Europe, and the East dreaming of the Soviet past. Both sides notoriously dislike each other. Nevertheless the Crimean peninsula belongs to Ukraine. And the sovereignty of any country must be respected, no matter how divided the country is at present moment. I’m deeply against any war, especially with our brothers Ukrainians. We share a lot in common, and Ukraine is equally important to Russia as Russia to Ukraine.

No one likes the rule of power. People in both countries earn for the justice, and recognition of basic human rights. What started as peaceful trade negotiations with the EU turned into a blood-bath, and the repercussions are still to come.

At the same time, no matter what the results of the referendum would be, the EU and the US have already condemned the annexation of Crimea. Angela Merkel used the extremely harsh language in the recent interview to tell the Russian government about the consequences that might follow. Despite the fact that Germany benefits tremendously from the trade with Russia: it imported a third of Russian oil and gas and sent €48 bn worth of German cars in Russian direction last year. UK decided not to support the much talked about European sanctions for now worrying about Russian investments in London.

Overall Russia is #1 trading partner of the EU according to BBC news and accounts for 41% of trade. As you notice from the graph the EU- Russia’s trade was worth €267 billion in 2012, while with the US the trade is ten times less, which means the US doesn’t have much to worry if Russia retaliates, the same goes for Russia. However with European sanctions, things are getting more serious, both sides have much to lose.


Russia has a lot to think about before it decides to do anything drastic. The prospect of visa bans, asset freezes, locking out Russian banks and financial institutions out of international financial system as well as probable Russia suspension from G8 are serious measures and should not be taken lightly._73423310_russia_eu_states_trade_balance_464gr Ukranian preference of EU to the Euroasian Union clearly dented Putin’s dream of “re-sovietizing the region” as Hillary Clinton put it in one of her comments.

Now, Russia faces a further possible alienation, a falling ruble and losing trading partners. Such a big country with ties to global market can’t go back to autarky existence. I don’t believe Crimea is worth paying such an expensive price. I also don’t believe that Putin wants it for the sake of power and empire, it is inhabited by Russians, whose interests he is protecting. However, Crimea belongs to Ukraine, and all governments must be respectful of borders.







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