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Economic war risks over Ukraine

Tuesday, April 08, 2014 - 02:12

Apr.08 - With warnings to Russia over encroachments into eastern Ukraine, Sonia Legg looks at the impact the latest unrest could have on Russia's economy.

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Ukraine's riot police are holding firm in the eastern city of Kharkiv after regaining control from pro-Russians overnight. But protestors remain. (SOUNDBITE) (Russian) OLESYA, PROTESTER, SAYING: "We demand a referendum. But we want it to be a fair one, the parliament should not impose their opinion on us." In Donetsk pro-Russians retain control of the regional administration. Kiev says it's all part of a Russian plan to destabilise the country. It's certainly causing divisions - there were even scuffles IN parliament when MPs debated the crisis. International warnings have been issued too - Russia's Foreign Minister dismissing U.S. accusations that it's behind the unrest. (SOUNDBITE) (Russian) RUSSIAN FOREIGN MINISTER SERGEI LAVROV, SAYING: "We are deeply convinced, and nobody has so far challenged this conviction, that the situation cannot be calmed down and changed into national dialogue if the Ukrainian authorities go on ignoring the interests of the southeastern regions of the country." The unrest again unsettled Russian markets - they were down 2% at one stage. And the central bank, which has already had to prop up the ruble, is now considering raising interest rates. With growth almost stagnant the stakes are high, says Pierre Briancon from Reuters Breakingviews (SOUNDBITE) (English): PIERRE BRAINCON, REUTERS BREAKINGVIEWS, SAYING: "Those are very considerable prices to pay and so I think some people in the Kremlin will show Putin the numbers before he sends his army over there." There's much debate about the impact of the relatively mild sanctions against Russia over its annexation of Crimea. But Nomura's Alastair Newton says it is putting investors off. (SOUNDBITE) (English): ALASTAIR NEWTON, SENIOR POLITICAL ANALYST, NOMURA, SAYING: "The interesting thing about the sanctions that have been imposed on Russia to date are not their direct effect in terms of economic impact but actually the impact it is having on market sentiment." The sentiment in several eastern cities is pretty clear. But unlike Crimea there's no sign of Russian troops. Moscow may not be able to stomach the economic and financial war that could break out with Europe if they did move into other parts of Ukraine.

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Economic war risks over Ukraine

Tuesday, April 08, 2014 - 02:12