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'The Russians are not finished': Sanctions won't stop Putin, says Eurasia Group's Sparks

Daily Ticker

Global markets rallied Monday after briefly falling on Sunday's news that citizens in Ukraine's Crimea region voted overwhelmingly to join the Russian Federation. Nearly 97% of Crimeans voted to break away from Ukraine, a referendum that Western nations and government officials in Ukraine have publicly condemned, calling it illegal and illegitimate. On Monday the U.S. and European Union announced sanctions against 11 Russian and Ukrainian leaders that include asset freezes and travel bans. Speaking to reporters at the White House, President Obama ordered Russian President Vladimir Putin to remove his troops from Crimea and urged Putin to start a dialogue with Ukraine's new government in Kiev. 

“Further provocations will do nothing except to further isolate Russia and diminish its place in the world,” Obama said. “We can calibrate our response on whether Russia chooses to escalate or de-escalate the situation.”

"Crimea is a done deal," says Willis Sparks, director of global macro at Eurasia Group. "Russia doesn't care about sanctions, Ukraine is too important to them. Sanctions are a sideshow."

Washington and Europe want the new government in Kiev, Ukraine's capital, to join the European Union, Sparks explains, but this is a "journey that requires lots of political change and is a long process." Europe, with help from the U.S. and the IMF, has to produce enough money to prevent Ukraine from defaulting on its debt. This Friday, Ukraine's lawmakers could sign a trade agreement with Europe, the first step toward EU membership. The deal also has the potential to stir more unrest in the country. Ukrainians who support EU membership have been clashing with opposing forces since November and former Ukrainian President Viktor Yanukovych fled the country after he said a coup was underway to topple him from power.

Even as the U.S. and Europe are desperate to stabilize the situation in Ukraine, Russia will continue to cause trouble for Kiev, says Willis. Eurasia Group puts the odds of a Russian military invasion at 40% and, short of armed conflict, there's "still plenty" Russia can do to sow more unrest, notes Willis.

"They can encourage local governments and local ethnic Russians to demand secession," Willis adds. "The Russians are not finished...this was not simply about grabbing Crimea. Ukraine is crucial to Russia's idea of its own future."

Have international markets priced in Russia's next move? Watch the video to find out!

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