1.What started the tensions between Ukraine and Russia?
While there had been tension between Russia and Ukraine, a former Soviet republic, for a long time, the situation began getting out of control in early 2021. In January last year, Ukrainian President Volodymyr Zelenskyy urged US President Joe Biden to let Ukraine join NATO or the west-led North Atlantic Treaty Organization. Hostilities between the two countries are not new. They go back to February 2014, primarily involving Russia and pro-Russian forces on one hand, and Ukraine on the other. The conflict initially centred on the status of Crimea and parts of the Donbas, which are internationally recognised as part of Ukraine.
2.What was the point of no-return this time?
The consistent requests of the Ukrainian president for entry into NATO angered Russia, which started sending troops near its Ukraine border for `training' exercises in spring last year and increased it during autumn. By December, the US began hyping up the deployment of the Russian troops and President Biden warned of severe sanctions if Russia invaded Ukraine. Slowly, but steadily, it reached a point of no -return.
3. What has been Ukraine's history with NATO?
NATO has become the focal point of Russia’s war on Ukraine. A military response from NATO has been announced. The US promised a NATO response to the Russian invasion of Ukraine on Thursday morning. Ukraine is not a member of NATO. It has been waiting to be a member of this western military alliance since 2008. It was promised membership but that has not materialised so far.
4.What did Putin say his reason for military action was?
Putin said, ostensibly, that the 'military action’ was aimed at protecting Moscow supporters from a supposedly `genocidal’ regime. His detractors, however, say that Putin’s forces are attacking Ukraine by air, land, and sea, and targeting almost all of the major cities, not just the pro-Russian Donetsk and Luhansk enclaves in the eastern corners of the country. The attempt is to re-establish the old Soviet Union empire.
5.What has been Ukraine's, NATO's and EU's response?
The Russian full pronged attack on Ukraine, both of which also border the European Union (EU), has repercussions. And that's why the EU, most of whom are NATO signatories, have joined the US in announcing sanctions against Russian entities. The Ukrainian President Zelenskyy has called for world leaders to rein in Russia or else he stands totally isolated.
6.How has India responded to it?
India has opted for neutrality. Prime Minister Narendra Modi has appealed for an “immediate cessation of violence” in his phone call with President Vladimir Putin this week, calling for concerted efforts from all sides to return to the diplomatic table.
7.What have been the losses suffered by each side, so far?
President Volodymyr Zelenskiy has told his nation that Ukraine suffered "serious losses" in the initial stages of Russia's long-feared attack early on February 24, with an adviser saying at least 40 people had been killed. According to other officials, at least 137 Russians were killed, and 316 injured after Moscow launched its invasion on Thursday, attacking key cities and taking control of the Chernobyl nuclear power plant.
8.What are the sanctions that have been imposed on Russia and its allies? How has it affected them?
The US, the EU, Japan and the UK have unveiled a range of economic and financial sanctions against Russia. The moves came in the wake of Putin ordering troops into the separatist-held regions of Donetsk and Luhansk in eastern Ukraine. The sanctions target different areas, hitting specific financial institutions, Russia's capacity to raise sovereign debt on international markets as well as several individuals. Germany has also indefinitely postponed certification of the controversial Nord Stream 2 Pipeline, a completed but not yet operational Baltic Sea gas pipeline, which connects mainland Russia with Germany. US President Joe Biden said Russian financial institutions VEB and Promsvyazbank would be targeted. The UK has hit Rossiya, IS Bank, GenBank, Promsvyazbank and the Black Sea Bank. The EU says it will target 351 members of the Russian parliament with sanctions, as well as 27 individuals and entities it says are undermining Ukraine's sovereignty. The US and the UK will also target several wealthy individuals. The EU has not yet named the institutions it will hit, but sources familiar with plans told the Financial Times that VEB and Promsvyazbank will be on the list. Promsvyazbank is a military bank and is the only one of those targeted which is on the Russian central bank's list of systemically important credit institutions. Separately, European Commission President Ursula von der Leyen said the EU would ban trade between the bloc and the two separatist-held regions of Donetsk and Luhansk, a move the bloc also made when Russia annexed Crimea in 2014. The US, the EU and Japan have all taken steps to restrict Russia's capacity to borrow on international markets.
"We've cut off Russia's government from Western financing," President Biden said, adding, "It can no longer raise money from the West and cannot trade in its new debt on our markets or European markets either."
US investors have been banned from buying new dollar-denominated Russia debt since the Crimean annexation in 2014, while US banks have not been allowed to take part in Russia's primary market for non-rouble sovereign bonds and rouble-denominated bonds since 2019 and 2021 respectively.
The US Treasury said the new measures would prohibit US banks taking part in Russia's secondary market for bonds issued after March 1.
Moscow is not unduly bothered. In terms of the efforts to hit Russia's sovereign options, experts say Russia is in a far different place as compared to 2014. The country has pivoted away from US dollars, and from foreign sources of revenue as a whole. The foreign share of ruble debt holdings, known as OFZ, is just 18% according to analysts at VTB.
The new US measures simply extend restrictions which have been in place for years now. Russia has hard currency reserves of more than $600 billion (€529 billion). Experts have added that sovereign debt sanctions would have very little effect.
"Russia's fiscal position is in surplus and Russian authorities are overfunding," an official said, partly explaining Russia’s confidence.
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9.Who are Russia's allies, and who are Ukraine's allies?
While most big countries in Europe have opposed the Russian invasion, some heavyweight global powers like China have not come out explicitly in support of Ukraine. China called for peace between the two countries and said the US and its allies were worsening the conflict.
“China is closely following the latest developments,” Foreign Ministry spokesperson Hua Chunying told reporters at a daily briefing. “We still hope that the parties concerned will not shut the door to peace and engage instead in dialogue and consultation and prevent the situation from further escalating.”
Russia's neighbour Belarusian leader Alexander Lukashenko said the country would use nuclear weapons and more as conflict escalated against its ally Russia, according to AFP.
"If such stupid and mindless steps are taken by our rivals and opponents, we will deploy not only nuclear weapons, but super-nuclear and up-and-coming ones to protect our territory," Lukashenko threatened last week.
Other Russian allies and neighboring countries like Armenia, Kazakhstan and Azerbaijan have remained quiet in light of the country's attack.
Azerbaijani President Ilham Aliyev did not comment on the conflict while visiting Moscow to speak with Putin on bilateral relations. Officials in Kazakhstan also remained quiet on the growing conflict and Moscow’s recognition of Donetsk and Luhansk.
Most of the world’s and Europe’s big powers are behind Ukraine, even if it has not helped the situation much, at least at this stage. Ukraine is the second-largest country by area in Europe after Russia, which it borders to the east and north-east. It also shares borders with Belarus to the north; Poland, Slovakia, and Hungary to the west; Romania and Moldova to the south; and has a coastline along the Sea of Azov and the Black Sea.
10.What are the military strengths of Russia and Ukraine?
Russia has overwhelming military power. Putin had been deploying a massive arsenal of missiles and rockets along the Ukraine border for weeks. Russia is a world leader when it comes to missile technology. It can use its missiles to incapacitate Ukraine’s air defence systems as its land forces move in, capture important installations like ports and airports, and overwhelm Ukraine’s forces and infrastructure. According to the Stockholm International Peace Research Institute (SIPRI), which tracks global arms trade, at $ 61.7 billion, Russia’s military expenditure in 2020 was over ten times of $5.9 billion, which Ukraine spent.
In a head-to-head comparison of the military capabilities of the two nations, Russia outnumbers Ukraine in almost every aspect. According to Global Fire Power, which has been analysing the military capabilities of countries across the world since 2006, while Russia is the second most powerful country militarily, Ukraine is ranked 22 out of 140 nations.
11.What are the global trade risks that arise from this conflict?
Just what a vulnerable world economy didn't need a conflict in a pandemic-driven age, that accelerates inflation, rattles markets and portends trouble for everyone from European consumers to indebted Chinese developers and families in Africa that face soaring food prices. Russia's attack and retaliatory sanctions from the West may not portend another global recession. The two countries together account for less than 2% of the world's gross domestic product. And many regional economies remain in solid shape, having rebounded swiftly from the pandemic recession. Yet the conflict threatens to inflict severe economic damage on some countries and industries that could mean hardships for millions of people. Russia is the world's third-biggest producer of petroleum and is a major exporter of natural gas. Ukraine's farms feed millions around the world. And financial markets are in a precarious spot as central banks prepare to reverse years of easy-money policies and raise interest rates to fight a resurgence of inflation. Those higher rates will likely slow spending and raise the risk of another downturn.
12. Why could this trigger an energy crisis?
Russia's attack could slow Europe's economic recovery by sending already elevated energy prices ever higher. Europe, an energy importer, receives close to 40% of its natural gas from Russia. A cut off of that energy source could undercut the continent's economy. High natural gas prices have already led to higher home utility bills for both natural-gas heat and electricity generated from gas, crimping consumer spending. And even India would find it hard to escape the dragnet.
“Gas prices in Europe are already crushing households and consumers, especially low-income households," said Adam Tooze, director of Columbia University's European Institute, in an interview. Tooze’s book Crashed, on the history of the last decade's financial crisis, explored tensions over Ukraine.
Costly gas has forced production cutbacks at producers of fertilizer and some other heavy industrial users. Annual inflation hit 5.1% in January in the 19 countries that use the euro, the highest rate since record-keeping began in 1997.
13.How have the markets worldwide reacted to the act of aggression so far?
President Putin of Russia has already rattled stock, bond, and commodity markets around the world. On Tuesday, U.S. stocks stumbled, with the S&P 500 falling 1 percent, into what Wall Street calls a correction — a decline of least 10 percent from the most recent high.
The escalating conflict has shifted the value of mutual funds and exchange-traded funds in millions of retirement accounts, even for people who have not thought deeply about Eastern Europe and who have never invested directly in oil, gas or other commodities.
According to one expert, energy prices will keep rising, and equities will keep falling. Not all stocks have been falling, of course. Rising oil and gas prices have bolstered the S&P 500’s energy sector, the best performer this year, with a return of 21.8 percent through Monday. This came even as the overall index, which often serves as a proxy for the entire stock market, has fallen 8.8 percent.
The price of oil is already steep: approaching $100 a barrel, from about $65 a year ago. It is likely to soar higher, with a full-scale invasion and, in return, faces harsh financial sanctions by the United States and its allies. Oil prices are already painful for consumers. They are reflected in the most salient marker of inflation in the United States, the cost of gasoline, which already averages $3.53 a gallon. Inflation is already 7.5 percent, a 40-year high in the US.
14.Is there a threat of inflation/stagflation from this crisis?
Investors rushed to buy bonds that shield them from the prospect of accelerating inflation. It drove the price of key commodities sharply higher, pushing gauges of near-term inflation expectations in the U.S., Britain, and Europe to a record. U.K. 10-year real yield fell the most since 2018 while the equivalent German rate had the biggest slide since 2011. In the U.S., five-year real rates trimmed their decline by more than half after tumbling as much as 38 basis points earlier on Thursday.
Rising inflationary pressures were combined with concern that they add to risks for a global economic slowdown, and environment dubbed as stagflation. That’s especially true as surging energy prices put even more pressure on central banks to tighten policy. While money market traders pared back slightly, the degree of central bank policy hikes expected this year, overall they remain well intact with the Federal Reserve seen doing just under six quarter-point increases in 2022.
15.How do expert observers see this ending and by when?
It is still too early to say how it will end. All will depend on Russia’s future plans. If the war is restricted just to Ukraine, countries may arrive at an international consensus, but if Moscow decides to enlarge the war on to the European continent, namely the NATO states, the conflagration could engulf large parts of Europe as NATO’s 30-member independent countries are under oath to fight back if attacked.
16.What are the chances this will end in a Third World War?
One can only hope that is not the case. At the moment, it is confined to Europe, but so was World War 2, until it took swathes of Asia and Africa into its ambit with devastating results. It is difficult to imagine what nuclear powered nations like China, India and Pakistan will do in such an eventuality.
