Kiev A Sitting Duck as Putin Musters Minions

February 27, 2014 07:04 AM

As the situation in Ukraine continues to unfold, Russian speaking gunmen have accosted the parliament building in Ukraine's southern Crimean region and raised the Russian flag. Uprisings in Ukraine's capitol Kiev over President Yanukovych's refusal to sign a much anticipated association agreement with the European Union were expected to have little impact on export traffic through Ukraine's Odessa port of Yuzhny as the violence was much farther north.caucas5

But Crimea lies on a peninsula that juts out into the middle of the Black Sea and may signal Russian sympathizers within Ukraine are moving in on key export hubs up the shoreline at Yuzhny.

Embattled Ukrainian President Yanukovych meanwhile has reportedly taken up residence in a Moscow safe house, and remains on the run from E.U. supporters in his own nation. Russian military advisors have dispatched 150,000 troops on training and preparedness exercises to western parts of Russia. The United States has weighed in, warning Vladimir Putin against the use of military force, but a foothold in Crimea would give the Kremlin safe harbor in the Black Sea.

Economically, the newly installed government of Ukraine has made appeals to the International Monetary Fund estimating its financial needs around $35 billion over the next two years. Without significant monetary support, Ukrainian finance Minister Oleksander Shlapak believes the country will soon be bankrupt.

Yanukovych had inked an agreement with Moscow for financial support and natural gas relief a few weeks ago, but with Yanukovych now in a position of sanctuary in Russia, the newly installed Ukrainian government will not be privy to those funds. Since the new government's installation, Ukrainian bean counters say $70 billion in national funds have disappeared into offshore accounts, accusing former President Yanukovych of embezzlement.

Russia is poised to invade the sovereign Ukraine and U.S. authorities are currently at a loss as to how to respond to such action. If civil war impacts shipping lanes in and out of the Black Sea, global nitrogen sendouts could be impacted, and a shortfall in product out of Ukraine would have nitrogen buyers in South America, Indonesia and other Asian markets looking to Norwegian and North American suppliers to make up the difference, and that would raise nitrogen prices for American growers. That alone is not enough to muster U.S. troops to the aid of Ukraine and without some skin in the game, the Obama Administration is not expected to do much more than talk.

Dissension in Ukraine in past years have led Moscow to stop shipments of natural gas to Ukraine which transits nearly 80% of Russia's pipeline natgas to southern parts of the European Union. That would punish not just the Ukraine, but also Poland, Slovakia, Romania and other southern E.U. territories. That move would stoke the ire of an already frustrated E.U. and could lead to intervention from international peacekeepers.

Putin wields heavy leverage over Ukraine and with troops and warplanes positioned near the Black Sea, natural gas supply is just another arrow in Moscow's quiver. The situation has the potential to escalate to deadly violence and civil war quickly and with doves in place in Washington DC anxious to maintain the status quo with Putin and an E.U. economically unable to pay to support a military defense of Ukraine, today, Kiev looks like a sitting duck.

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