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Conflict in Crimea intensifies as Russia demands expulsion of Ukrainian military

Pras Subramanian

Vladimir Putin’s land grab in the Crimean region of Ukraine has sent European (^STOXX50E) and emerging markets (EEM) spiraling lower. With fresh claims from Kiev that Russian troops have now seized border posts in Crimea and are demanding that Ukrainian forces abandon Crimea entirelely, the situation is stoking fears of further escalation.

U.S. markets (^GSPC, ^DJI) are acting negatively as well, sliding further on reports of the Russian demands. Zachary Karabell of Envestnet doesn’t doubt there are real concerns, but questions how much we can read into it this complex situation.

“A lot of us have become accustomed over the past decade or more for geopolitical events to have immediate market impact,” he says in the attached video. He notes we’ve had wars going on for years, both in Vietnam and the Middle East, and it is clear that “not everything is a market event.”

In this situation, Karabell warns “we should be careful what we extrapolate from the deep, dark, Soviet-Russian history and inter-relations between the Soviets and Ukrainians.” Indeed, the area is rich with history, with the Russians claiming ownership of the Crimean region for generations prior to Nikita Khruschev transferring it to Ukraine in 1954.

Karabell believes the lack of a strong U.S. response to Moscow’s move doesn’t convey accommodation on the part of the U.S. “The Soviet Union controlled that entire area, and acted with impunity there until the 1990s, that was not perceived as a sign of American weakness, that was perceived as they were going to act as they wish within their sphere.”

That being said, further developments in Ukraine “could be deeply destabilizing,” as stated by President Obama, but Karabell notes “you have to deal with probabilities. We’re not about to invade the Crimea, and the European Union and NATO is not going to invade western Russia,” however real the economic concerns are to Germany and Western Europe.

Karbell advises you might have a temporary buying opportunity here with stocks, concluding that he’s “not discounting the fact that this is a crisis that’s real, it’s just a question of where it becomes a market event,” where investors would have to seek protection.

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