Russian Troops Put On Alert, Hryvnia’s Plunge Continues

War Games Enlarged

Russia has put some 150,000 troops on alert according to media reports, enlarging ‘previously planned’ war games near the border with the Ukraine. Russian politicians naturally continue to complain about the situation in the Ukraine, and their tone of voice has become quite a bit more strident over the past two days.

Part of Russia’s Black Sea fleet is actually stationed in the Crimea, so it is easily conceivable that a pretext for a military intervention could be concocted. However, we tend to think these recent developments are just old-fashioned saber rattling, in spite of the strong interest Russia has in what happens in the Ukraine. Obviously, betting on Yanukovich was a big mistake – he was simply too corrupt and too big of a gangster. Still, markets were slightly rattled early on Wednesday and the Ukrainian hryvnia continued its free-fall. Interestingly though, Ukrainian stocks concurrently kept rising (adjusted for the fall in the hryvnia, the rally is of course not worth mentioning).

According to Reuters:

“Ukraine’s protest leaders named the ministers they want to form a new government following the overthrow of President Viktor Yanukovich, as an angry Russia put 150,000 troops on high alert in a show of strength.

President Vladimir Putin’s order on Wednesday for soldiers to be ready for war games near Ukraine was the Kremlin’s boldest gesture yet after days of sabre rattling since its ally Yanukovich was ousted at the weekend.

Moscow denied that the previously unannounced drill in its western military district was linked to events in its neighbor but it came amid a series of increasingly strident statements about the fate of Russian citizens and interests. U.S. Secretary of State John Kerry warned Moscow that “any kind of military intervention that would violate the sovereign territorial integrity of Ukraine would be a huge – a grave mistake”.

With the political turmoil hammering Ukraine’s economy, the central bank said it would no longer intervene to shield the hryvnia currency, which tumbled 4 percent on Wednesday and is now down a fifth since January 1. Wednesday’s abrupt abandonment of Ukraine’s currency peg sent ripples to Russia where the rouble fell to five-year lows and bank shares fell.”

[…]

Russia has repeatedly expressed concern for the safety of Russian citizens in Ukraine, using language similar to statements that preceded its invasion of Georgia in 2008.

“In accordance with an order from the president of the Russian Federation, forces of the Western Military District were put on alert at 1400 (1000 GMT) today,” Interfax news agency quoted Russian Defence Minister Sergei Shoigu as saying.

Shoigu also said Russia was also “carefully watching what is happening in Crimea” and taking “measures to guarantee the safety of facilities, infrastructure and arsenals of the Black Sea Fleet,” in remarks reported by state news agency RIA.”