The news agenda moves on and the Ukraine crisis has moved off the front pages. However, it unfortunately it has not gone away. The shooting down of MH17 has led to further sanctions being implemented by the EU and the US. At the moment both sides are avoiding energy sanctions but how much longer this will continue we cannot say. The news reported that Russia is suggesting today that they may stop overflying rights by Western airlines, something that would push up airfares that fly around the globe very considerably. Today it definitely stopped agricultural imports from Western countries. However, if relations get worse than energy sanctions from one side or the other could happen. Its also interesting to note that whilst Ukraine has no oil, it still has a lot of gas, albeit its production has peaked, Where is this gas? Largely in the Crimea and Eastern Ukraine.
The effects on the West of energy sanctions could be fairly significant. We are looking at $200/barrel oil prices with much higher gas prices and energy prices in Europe. However, the Russians would find things worse. Europe after a couple of previous Ukraine crises has lowered its dependence on Russian gas. The transition to renewable energy is in full flow in Germany and other countries. But Russia has not lowered its economies dependence on selling fossil fuels. It makes up 80%+ of Russian GDP. Russia’s economy would rapidly be brought to its knees.
To solve the Ukraine crisis everyone needs to talk and compromise. Ukraine needs to allow the Eastern part more autonomy, settle the dispute as peacefully as possible and recognise Russian as a legal recognised language. Russia needs to clear out of Crimea and stop interfering in Eastern Ukraine. At the very least we need a proper referendum in Crimea. As I know at the moment its difficult to get people to engage in such a campaign in over 2 years much less 2 weeks, the referendum was a farce. We also need a proper investigation into MH17 with if necessary Russia accepting a degree of responsibility. I personally couldn’t care less whether the Ukraine is in Russian or European sphere of influence, but whatever the majority want, couldn’t it be in both?