-- Published: Tuesday, 1 July 2014 | Print | Disqus
By Peter Cooper
Gold spiked to $1,332 an ounce, its highest level in many months, as a cease fire in the Ukraine came to an end yesterday without any progress in resolving the breakaway and insurrection in the eastern states.
The recently elected pro-Western president Petro Poroshenko vowed to remove the rebels by force. Sporadic fighting has continued during the cease fire that his military warned was being used by the enemy to regroup.
Russia faces an escalation of sanctions from the EU and US for not having done enough to de-escalate a crisis that many accuse Russia of planning and implementing in response to a Western-backed coup in Kiev.
A civil war with foreign intervention on both sides is now in progress on European soil for the first time since the break up of the former Yugoslavia in the 1990s. It is not clear what will happen next.
Reuters reported that ‘in the eastern Ukraine’s flashpoint city of Slaviansk, a rebel stronghold since separatists took over the city in April, shelling could be heard, though it was unclear from which direction it was coming from.’
More than 100,000 civilians are said to have fled across the border to Russia as a safe haven. Mr. Poroshenko now goes into his ‘Plan B’ which is a military operation to remove ‘terrorists, militants and marauders’ from lands where the recent presidential election was not held.
Civil wars are always a messy business, with loyalties and families divided and innocent casualties. They can also have serious consequences for financial markets especially when they affect externalities like the price of energy.
The switching to Plan B also means that the gas supply to the Ukraine remains turned off. Moreover the EU and US now have their bluff called over sanctions on Russia. How far will they go?
For the moment global financial markets treat the Ukraine as a non-event. But nobody is thinking much beyond 24 hours except the military planners in Moscow. What is their plan?
Presumably they have not come this far to admit defeat and leave their Russian speaking allies in the eastern Ukraine to their fate. The crushing force promised by Mr. Poroshenko can also come from another direction.
How would the West and global financial markets respond to that? One thing we can be sure about is a much higher gold price and silver and oil too. The markets are sleepwalking into a minefield in the Ukraine…
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-- Published: Tuesday, 1 July 2014 | E-Mail | Print | Source: GoldSeek.com