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Nordea Warns Of EU Recession And $150 Oil If Russia Retaliates

Submitted by Tyler Durden on 05/02/2014 15:00 -0400

• Crude
• Crude Oil
• European Central Bank
• Flight to Safety
• Global Economy
• Gross Domestic Product
• International Monetary Fund
• Iran
• Iraq
• Recession
• Saudi Arabia
• Ukraine

Authored by Thina Margrethe Saltvedt and Aurelija Augulyte of Nordea Bank,

• Russia as important oil as gas supplier to Europe
• Disruptions to Russian oil flows will have huge impact on oil prices
• Embittered political climate, oil prices at USD 150/barrel and high financial market uncertainty can tip EU back into recession
• Oil price spike and flight to safety a recipe for broad-based USD strengthening and lower global rates: three risk scenarios
• US shale oil or SPR release will not prevent oil price spike

Oil prices have increased by more than USD 2/barrel today as tension in Ukraine has escalated and raise concerns about the risks of disruption in Russian energy exports. There is a risk that the security situation in the east Ukraine will worsen even further ahead of the 25 May elections.

Memories have been awakened of episodes in 2006 and 2009 when Gazprom halted all Russian gas flows through Ukraine, amid pricing disputes, completely cutting off supplies to Southern Europe and partially other European countries. Not nearly as much attention has been paid to the risk of a disruption to the oil flows.

Russia is as important an oil exporter to Europe (of both crude and refined products) as it is a gas exporter, but unlike for gas, only a relatively small portion of its overall oil exports to Europe transit through Ukraine. Oil, in contrast to gas, is easy to store, ship and trade, which means that the markets more flexible and a single customer has less immediate scope for action. Nevertheless, the consequences of a cut in Russian oil supplies could be as rave since the oil global oil market has little back-up capacity to lean on, European commercial oil stocks are low and there is no real substitute for oil in the transportation sector (which accounts for more than 60% of total oil consumption worldwide).

As a result a halt in the oil deliveries from Russia to Europe will spark a sharp spike in oil prices and in a worst case scenario an oil crisis.

A longer-lasting disruption to oil supplies and an extended period with high oil prices will curb the potential for Euro-zone economic growth and slow down growth in the global economy. If the oil price spike is accompanied by a sharp fall in confidence and financial players recede to safe havens, the impact on global growth and financial markets will be even more severe.

The questions are therefore how vulnerable the European oil market is to a halt in oil deliveries from Russia and whether the European economy can withstand a protracted period of high oil prices?

Brent oil and NBP gas prices will react sharply to supply disruptions



Disruptions to Russian oil flows will have big impact on prices

The sabre-rattling and threats will no doubt continue for a while, but so far tensions between Russia and the West over Ukraine have had minimal impact on physical oil balances. What if an escalation of the crisis in Ukraine, in a worst case scenario, leads to disruptions in the oil supplies from Russia to the EU as a consequence of for example a halt in oil deliveries via Ukraine, a halt in deliveries of oil and gas from Russia to EU as a retaliation of stricter sanction imposed by EU/US on Russia and attacks on infrastructure following increasing political turbulence – what would then be the effect on Brent oil prices and economic growth in the current tight oil market environment?

Any disruptions to the oil flows going from Russia to the European market will presumably have a big impact on oil prices, as commercial inventories are low (three major OCED 2013 year-end stock levels lowest in 10 years), the current European supply/demand balance remains tight and the world’s spare production capacity is fairly low. Supply outages remain severe in aggregate at roughly 3.5 mb/d in the MENA region alone, mostly in Iran, Iraq, Libya, Syria and Sudan (PIRA). Commercial stocks are not ample enough to weather significant ongoing physical supply disruptions and definitely not to withstand a curtailment of supply arising from a growing political dispute between Russia and the West.

A sharp rise in oil prices – if prices remain elevated for a period of time – will have a negative effect on economic growth and in a worst-case scenario push the EU back into recession. Clearly, higher oil prices and weaker growth in the EU will also have an impact on the growth potential of the global economy. How long a price spike will last, and thus the impact on the EU and the global economy, depends on the volumes held back from the market and the reason for the halt – whether the production/transportation infrastructure is damaged or the taps are turned off.

Three risk scenarios: a halt in oil deliveries from Russia – impact on oil prices and EU GDP growth
We have looked at three different scenarios and the potential effects on oil prices, economic growth, the EUR/USD cross and rates depending on the period and severity of the disruptions.

Oil Price Scenarios: Russian oil export is cut by one-half



In all three scenarios we assume that Russian crude oil exports to Europe are cut by 50% or around 1.5mb/d. The GDP calculations are based on the International Monetary Fund GEM simulations.

Scenario 1: A short-term halt to oil deliveries lasting only two weeks, pushing oil prices up by 10-20% (from Q1 average at USD 108/barrel).

Scenario 2: one-half of Russian oil supplies to Europe is locked in, but this time for two quarters. Global spare capacity will fall to lows last seen in 2008 to 2.2% of global demand from the current 3.9%. We expect that Saudi Arabia’s spare capacity will compensate for some of the losses, but with a lag. Notably the ECB will not act against EUR/USD in this scenario, since it will see the advantages of a weaker EUR towards the USD for energy imports and increasing competitiveness for Euro-zone products and services abroad.

Scenario 3: oil supply disruptions are expected to lead to a cut in oil flows to Europe by 1.5m b/d and push oil prices up to USD 150/barrel. Saudi Arabia will increase production (the spare capacity buffer will fall), and the market situation will call for an IEA Strategic Petroleum Reserve (SPR) release (see box), but with a lag. As the market is concerned that the disruptions will be more severe than in scenario 2, the price spike is followed by a huge spike in risk aversion triggering a flight to safety by financial players away from risky assets, a widening of credit spreads – recipe for broad USD strengthening and we will likely see global rates go much lower. In this case the impact on the global economy would be much larger and the EU will most likely tip back into recession.

Potential impact of the three scenarios



The oil market is global and a sharp spike in Brent oil prices would of course raise prices of other crudes and oil products as well. Since Russia is one of the largest oil producers and exporters in the world with total exports of 7.1m b/d crude and products, it would be close to impossible to compensate for the full amount in the short to medium term if these barrels do not reach the market. Even a smaller volume, say 50% of the crude exported to Europe (the amount used in the scenarios above), would be very difficult to replace as the quality of the replacement needs to match.

Oil Price Spike: Three scenarios and impact on EURUSD


Embittering political climate and higher oil prices can push the EU back into recession

In the absence of Russian barrels, world oil prices would undoubtedly spike – causing economic pain for the large oil import-dependent countries such as the EU and reducing the growth potential of the world economy. An embittering political climate and an oil price spike would most likely be followed by a huge drop in market confidence, triggering a flight to safety in financial markets which in turn would magnify the impact on economic growth and push the EU back into recession.

As Russia and Europe remain closely linked as oil and economic trading partners, we do not see this as the outcome of the crisis. But the recent escalation of the conflict in Ukraine clearly increases the risk of a supply disruption materialising. The shock of the Crimean annexation should speed up the sluggish European decision-making process on energy storage, interconnection in the gas market, diversification of suppliers, liberalisation, shale gas production and efficiency measures especially on the transportation side.

Read the full story about the Europe/Russian oil interdependency, Ukraine as a traansit country for oil and the US shale oil production /SPR release will not prevent an oil price spike and see all the graphs in the PDF below:

140502 Ukraine Crisis GDP v1

http://www.zerohedge.com/news/2014-0...sia-retaliates

Brzezinski Calls for Sending Weapons to Regime in Ukraine

Global elite have decided to foster a civil war along Russia’s western border

Kurt Nimmo
Infowars.com
May 2, 2014



Zbigniew Brzezinski, Jimmy Carter and Cyrus Vance in 1977. As Carter’s National Security Advisor, Brzezinski orchestrated a covert war against the Soviet Union in Afghanistan. Photo: U.S. National Archives and Records Administration

Top level globalist and Rockefeller confidant Zbigniew Brzezinski has mounted the pages of Politico to call for more pointed U.S. involvement in Ukraine.
“It is more than a month since the Russians annexed Crimea, and recent events have only exacerbated the crisis, with pro-Russian rebels reportedly shooting down two Ukrainian helicopters in separatist-held Slaviansk on Friday. Yet the president still hasn’t laid out a comprehensive statement of what is really at stake,” writes the co-founder of the Trilateral Commission.
Indirectly calling Russian President Vladimir Putin a “thug,” Brzezinski says “we have an obligation to help Ukraine.” He characterizes the crisis as “the most important challenge to the international system since the end of the Cold War” and tells Obama he desperately needs to issue “a comprehensive statement of what is really at stake” and address “the American people on this issue… He needs the support of the American people. Thus he has to convince them that this is important and that his stand deserves both national understanding and support.”
In late April, a Rasmussen Reports poll indicated nearly 60 percent of Americans believe the situation in Ukraine does not concern the United States. On April 28, a USA TODAY/Pew Research Center Poll found Americans overwhelmingly oppose the idea of sending arms or military supplies to Ukraine.
Despite this disapproval by the American people, Brzezinski writes “we should be more open to helping the Ukrainians defend themselves if they’re attacked. The Ukrainians will fight only if they think they will eventually get some help from the West, particularly in supplies of the kind of weaponry that will be necessary to wage a successful urban defense. They’re not going to beat the Russians out in the open field, where thousands of tanks move in. They can only beat them through prolonged urban resistance. Then the war’s economic costs would escalate dramatically for the Russians, and it would become futile politically. But to be able to defend a city, you have to have handheld anti-tank weaponry, handheld rockets and some organization.”
Arizona Senator John McCain has led the call in Congress to arm the junta in Ukraine.
Brzezinski, a notorious Russophobe, employed a similar tactic when he was Jimmy Carter’s National Security Advisor. He was instrumental using U.S. taxpayer money to covertly arm the Afghan Mujahideen to fight against the Soviet Union. Factions within the Mujahideen would eventually become the Taliban and al-Qaeda.
In 1998, he told Le Nouvel Observateur the CIA’s “secret operation was an excellent idea” and “had the effect of drawing the Russians into the Afghan trap” and “giving to the USSR its Vietnam war. Indeed, for almost 10 years, Moscow had to carry on a war unsupportable by the government, a conflict that brought about the demoralization and finally the breakup of the Soviet empire.”
Asked if he regretted lending a hand in the creation of radical and terrorist Islamic groups, the ever testy Brzezinski replied: “What is most important to the history of the world? The Taliban or the collapse of the Soviet empire? Some stirred-up Moslems or the liberation of Central Europe and the end of the cold war?”
The State Department’s less than covert installation of a gang of ultra-nationalists and fascists in Kyiv is evidence enough the “liberation of Central Europe” – apparently, for Brzezinski, Russia is Eastern Europe – is an ongoing project.
Now that Brzezinski has issued a public statement on Ukraine and called for arming Russophobes in that country — many who have long expressed their desire to ethnically cleanse and kill not only Russians, but Jews and Poles (Brzezinski is Polish) — we can conclude the global elite have decided to foster a civil war along Russia’s western border.

This article was posted: Friday, May 2, 2014 at 2:41 pm

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• Ukraine Leader Leaked Recording: 8 Million Russians In Ukraine “Must Be Killed With Nuclear Weapons”
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• A Bit of Ancient History Regarding Ukraine

http://www.infowars.com/brzezinski-c...me-in-ukraine/

Obama Calls Coup Government in Kiev “Duly Elected”

Not a single member of the press challenges blatant deception

Paul Joseph Watson
Infowars.com
May 2, 2014

President Barack Obama made an embarrassing blunder earlier today during his press conference with German Chancellor Angela Merkel when he described the post-coup government of Kiev as “duly elected”.

While Obama himself along with other members of the administration have repeatedly complained about pro-Russian “propaganda” clouding the Ukraine crisis, the President’s characterization of a government that came to power as a direct result of a violent overthrow of the democratically elected Yanukovich administration as “duly elected,” when no democratic vote of any kind took place, is either a huge gaffe or a flagrant act of deception.

Here’s the full quote in context from the transcript (emphasis mine);

“What they cannot accept, understandably, is the notion that they are simply an appendage, an extension of Russia, and that the Kremlin has veto power over decisions made by a duly elected government in Kiev.”

Of course, the government in Kiev is anything but duly elected since it was installed with the aid of the United States itself after a violent uprising that unseated the previous government which actually was duly elected.

The stage was set for the Ukraine revolt to become violent in December when US Assistant Secretary of State for Europe Victoria Nuland announced that the U.S. would invest $5 billion in order to help Ukrainians achieve “a good form of government.”

The true nature of that government was subsequently revealed when leaked phone conversations emerged of Nuland conspiring with US ambassador to Ukraine Geoffrey Pyatt to pick Ukraine’s future puppet leaders, personally recommending Arseniy Yatsenyuk, who soon became interim Prime Minister for the post-coup regime.

Documents also emerged confirming that the Euromaidan uprising was largely financed by the US Agency for International Development (USAID) in concert with numerous American NGOs.

To describe the Kiev government as “duly elected” is almost as silly as saying that North Korea’s Kim Jong-un was voted into office, but not a single member of the press who was at the event picked Obama up on this huge faux pas.

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*********************

Paul Joseph Watson is the editor and writer for Infowars.com and Prison Planet.com. He is the author of Order Out Of Chaos. Watson is also a host for Infowars Nightly News.

This article was posted: Friday, May 2, 2014 at 3:06 pm
Tags: foreign affairs


http://www.infowars.com/obama-calls-...-duly-elected/

Images and Video from East Ukraine that the Corporate Media Will Never Show You

02.May.2014 | SCG


Today the provisional government in Kiev launched a military offensive against the eastern city of Slavyansk using tanks and helicopters, but the mainstream media will never show you what actually happened.

After having made statements this past week indicating that they were abandoning their attempts to crush the rebels in the east, today Kiev has made a surprise about face, launching a third military offensive against the separatist uprising in the eastern Ukrainian town of Slavyansk. So far it hasn't been going very well. All reports coming out of the city show that the rebels are still in control. Between 2 and 3 helicopters were shot down (reports vary), and the armored vehicles have been obstructed by crowds of unarmed civilians who met the soldiers outside the town. The photographs and video of the situation on the ground right now are quite striking, but you can rest assured that the corporate media in the West won't show you these.

Video at the Page Link:

Unarmed civilians put themselves in the path of armored vehicles in their attempt to stop the Ukrainian military from entering Slavyansk. Below is the view from the side.



A view from another angle:

Related: Kiev Admits it isn't in Control as Donetsk Announces Independence Referendum



And up close (the woman's sign reads "We are peaceful people"):

Related: Russia and China Announce Joint Naval Drills as NATO Declares Russia an Enemy


So why is Kiev making this hail Mary now? Because the IMF warned them that they will lose the $17 billion dollar bailout if Kiev loses control of the east.

Related: NY Times "Photos Link Masked Men in East Ukraine to Russia" Debunked



http://scgnews.com/images-and-video-...never-show-you

Ukrainian Troops Strike Rebel-Held City as Fighting Spreads to Black Sea Port

By C. J. CHIVERS and NOAH SNEIDERMAY 2, 2014

VideoPLAY VIDEO|2:51

A Divided Country

As the separatist movement in eastern Ukraine grows, the divisions within Ukrainian society become deeper as both sides prepare for a potential confrontation.
CreditKirill Kudryavtsev/Agence France-Presse — Getty Images

SLOVYANSK, Ukraine — Two days after Ukraine’s interim government declared itself all but helpless to control events in the eastern part of the country, Ukrainian military and police forces on Friday resumed their effort to retake this rebel-controlled city, forcing armed separatists from the city’s outskirts with armored vehicles, helicopters and ground troops — and seemingly pushing ever closer to a confrontation with Moscow.
The assault began before dawn, and by early morning church bells sounded a general alarm. With helicopters flying along the city’s edge, troops and armored personnel carriers approached the city from multiple sides. The fighting was brief and then sporadic, however, and clashes subsided by early afternoon, before resuming at night. When movements stopped the Ukrainian troops had advanced, capturing and holding separatist checkpoints and posting infantry and armored vehicles on a bridge overlooking rail lines by the city’s southern border.
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Violence also erupted Friday in the previously calmer port city of Odessa, on the Black Sea, where dozens of people died in a fire related to clashes that broke out between protesters holding a march for Ukrainian unity and pro-Russian activists. The fighting itself left four dead and 12 wounded, Ukraine’s Interior Ministry said. Ukrainian and Russian news media showed images of buildings and debris burning, fire bombs being assembled and men armed with pistols.
Photo

A pro-Russian villager argued with Ukrainian soldiers after troops were blocked by residents at a checkpoint in Andreyevka.CreditMauricio Lima for The New York TimesThe deaths expand the increasingly violent struggle for control over Ukraine’s Black Sea port, which had been quiet until last week, when seven people were wounded in a roadside bombing.
The government’s actions in Slovyansk drew an immediate and indignant protest from the Kremlin, which said Ukraine had effectively destroyed a plan negotiated last month with the United States, Russia, Ukraine and the European Union intended to de-escalate tensions.
Blaming the authorities in Kiev, Ukraine’s capital, a spokesman for President Vladimir V. Putin of Russia, Dmitri S. Peskov, told Russian news agencies that “the Kiev regime ordered combat aircraft to fire at civilian towns and villages, launching a punitive operation.”
Moscow repeated its warning that it reserved the right to intervene to protect its interests and Russian-leaning residents of eastern Ukraine. But there were no signs of an imminent move across the border.
The Russian ambassador to the United Nations, Vitaly I. Churkin, speaking in New York, described Ukrainian military operations as “punitive” and said there were English-speaking foreigners among what he called “ultranationalist groups” in Slovyansk. He accused his Western rivals of double standards, noting that while they had called on Ukraine’s former president, Viktor F. Yanukovych, to exercise restraint, they condoned the use of force by the current leaders in Kiev.
The United States ambassador, Samantha Power, accused Russia of spreading lies, and described Ukraine’s reaction to Russian provocation as “reasonable.”
“The Ukrainian people and government have embarked on an effort today to reclaim one city in the eastern part of their country,” she said. “Their response is reasonable, it is proportional, and frankly it is what any one of our countries would have done in the face of this threat.”
Continue reading the main story
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The Ukrainian army units in Slovyansk did not seem eager to engage the militants fully, and appeared to limit their activities for the day to tightening a cordon around the militant stronghold. The city’s center remained under the control of antigovernment militias, who manned barricades as streets fell nearly silent ahead of what residents feared could become a general assault.
“They are coming at us from all sides,” said one fighter in camouflage and sneakers, who gave his name as Sergei, and who held a Kalashnikov assault rifle and said he was a veteran of the Soviet Army.
Both the government and the separatist forces said two helicopters were brought down in the fighting, with at least one crew member killed. These reports could not be verified, and hours later the wreckage had not been found by independent observers.
Late at night, the Ukrainian government said two members of an airborne brigade had been killed, apparently in the brief but intense evening clash at the bridge, which by day had been held by airborne troops.
Earlier, as the first round of fighting died down, Ukrainian troops were posted at their newly captured positions in the villages of Bylbasovka and Andreyevka on the city’s perimeter, where residents flocked to argue with them and urge them not to fight.
In Bylbasovka, a Ukrainian serviceman who identified himself as a staff officer for one of the battalions participating in the operation stood with troops facing about 75 angry residents who demanded that they leave.
“We came to prevent further destabilization of the situation,” said the officer, who gave a first name, Vitaly. “We have nothing against peaceful citizens.”
Continue reading the main storyUkraine Crisis in Maps

A visual survey of the continuing dispute with maps showing political, cultural and economic factors in the crisis.

Dolina

Krasnyi Lyman

Khrestyshche

Slovyansk

Bylbasovka

Bridge taken

Andreyevka

Malynivka

Kramatorsk

Airport

10 MILES





The residents argued with the troops standing at the front rank, at one point chanting, “Shame! Shame! Shame!” Three more busloads of troops stood behind sandbags and watched warily.
The scene was similar at the bridge in Andreyevka, though on a larger scale. Roughly 10 Ukrainian armored personnel carriers and a few trucks had captured the bridge, where they were met by 200 or more unarmed residents who came out to defy them or urge them to defect.
The front rank of troops faced verbal abuse but held its position, looking weary and under stress.
One woman scolded the soldiers unrelentingly. “You came with weapons and tanks!” she shouted, her face only a few feet from theirs. “What, you can’t talk to us like normal people?”
Nearby, a man demanded to know who had ordered the operation. “Who called you here?” he asked.
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“There are illegal weapons being used here,” the soldier replied.
As the day progressed, residents created new checkpoints, many that appeared under the control not of militias but of angry citizens with wooden rods.
There were signs as well that the dark undercurrents of suspicion that can accompany civil war had gripped some of the populace and the militias.
At one checkpoint, a man who had arrived on foot to watch the fighters was angrily ordered at gunpoint against a fence facing the street and was handcuffed to a wall. One militia member punched him twice in the stomach, and another slapped his head and clapped his hands over his ears.
The fighters said they had seen and searched the man the day before, when he was found with no money and no phone.
Now, on a day of fighting and with the Ukrainian Army at the city’s edge, he had reappeared and been found with a new cellphone and about $350 worth of Ukrainian currency — evidence, they said, that he was an informant. One fighter went through recent activity on the man’s phone, at one point striking him to speed up an answer. “He is a spy,” said another fighter, Dima.
The fighters left the man handcuffed to the wall for nearly four hours, the last 45 minutes in drenching rain, before abruptly returning his phone and his money and releasing him.
Much of eastern Ukraine slipped beyond the control of the authorities in Kiev as pro-Russian militants began taking control of a string of official buildings more than three weeks ago. The separatists have also captured a German-led team of military observers affiliated with the Organization for Security and Cooperation in Europe. Both sides gave competing accounts about the fighting on Friday, agreeing only on the unverified claim that at least two Ukrainian helicopters had been hit by ground fire. The Defense Ministry in Kiev said two Mi-24 attack helicopters had been shot down, killing at least two airmen.
CONTINUE READING THE MAIN STORY285COMMENTSThe Ukrainian domestic intelligence agency, S.B.U., said that one helicopter had been brought down with a heat-seeking, shoulder-fired missile, and suggested that the presence of such a weapon in the conflict showed the separatists had outside support.
By night in Ukraine, neither side had shown clear evidence of heat-seeking missiles or downed aircraft, although one pro-Russian television station showed footage of what it said was a captured pilot.
Vyachislav Ponomaryov, the self-appointed mayor of Slovyansk, said four or five members of the city’s antigovernment militias had been killed, and at least three others wounded. His figures could not be corroborated.

http://www.nytimes.com/2014/05/03/wo...aine.html?_r=0

Hagel To NATO: Increase Defense Spending

May 2, 2014 by UPI - United Press International, Inc.

WASHINGTON, May 2 (UPI) — U.S. Secretary of Defense Chuck Hagel warned NATO members Friday to increase their defense expenditures in light of challenges posed by Russia.
“Leaders across our governments must understand the consequences” of lagging defense spending by the 28 member nations of NATO, he said in an address at the Wilson Center in Washington. Noting the disproportionate burden of defense spending by the United States, he added, “Today America’s GDP (gross domestic product) is smaller than the combined GDPs of our 27 NATO allies, but America’s defense spending is three times our allies’ defense spending.”
Hagel’s speech reinforced the Obama Administration’s appeals to NATO nations to raise their defense spending. In March President Barack Obama urged “every NATO member state… to step up and carry its share of the burden by showing the political will to invest in our collective defense.”
Obama has said only the strength of the alliance would push Russia toward a diplomatic solution in Ukraine, and NATO and U.S. officials have called for renewed emphasis on the NATO budget when its next summit is held in Wales in September.


http://personalliberty.com/hagel-to-...ense-spending/

EU Commissioner Warns "Any 'Sensible' Person Should Oppose Further Russia Sanctions"

Submitted by Tyler Durden on 05/02/2014 13:19 -0400

• European Union
• Finland
• Germany
• Poland
• Ukraine
• Vladimir Putin

Obama won't be happy! "It would harm everybody, the Europeans and the Russians," warned Olli Rehn, the European Commissioner for Economic Affairs, adding that "any 'sensible' European Union citizen should oppose further sanctions on Russia because of the economic cost for Europe." As Merkel and Obama cozy'd up for discussions this morning, we can only imagine the promises being made if only she will support his crusade (which she clearly was unwilling to judging from the press conference). Perhaps she should check in with her nation's CEOs (who have vociferously demanded no more sanctions) and, as Rehn acknowledges, the slowing Russian economy is already having a “negative impact” on Finland and Austria, and "that economic fallout probably will spread to Germany, Poland and the Baltic countries."

As Bloomberg reports, Europe should shun Russia sanctions on economic cost, according to Olli Rehn...

Any “sensible” European Union citizen should oppose further sanctions on Russia because of the economic cost for Europe, EU Commissioner Olli Rehn said.

“It would harm everybody, the Europeans and the Russians,” Rehn, the European Commissioner for Economic Affairs, said in an interview in Vienna today. Yet “it can only be avoided if Russia is committed to avoiding aggravation and escalation of this crisis,” he said.

As EU governments weigh economic sanctions on Russia for failing to stop separatists in Ukraine, the slowing Russian economy is already having a “negative impact” on Finland and Austria, Rehn said. That economic fallout probably will spread to Germany, Poland and the Baltic countries, he said.

Ukraine’s conflict escalated as the army sent armored vehicles and artillery today in a bid to retake the eastern town Slovyansk, a stronghold of pro-Russian separatists. Russian President Vladimir Putin had demanded Ukraine pull back troops as his forces remain massed across the border.

Everybody should try to reduce tension in eastern Ukraine and thus try to prevent an escalation of this regional crisis into a European-wide crisis,” said Rehn, who is on leave from his EU post while running for a seat in European Parliament elections starting May 22.

And there it is... with Ukraine now operating its anti-terrorist campaign, any Putin reaction will leave the West useless as Europe is broadly and loudly against further sanctions... pitting the US against the rest.
Merkel confirmed that economic sanctions are unlikely before May 25th elections.


http://www.zerohedge.com/news/2014-0...ssia-sanctions

Ukraine suffers deadliest day in months; 34 killed in Odessa

Washington Post

- ‎4 minutes ago‎

DONETSK, Ukraine - Ukraine suffered its bloodiest day in three months on Friday, with at least nine people killed when the army launched its first major assault on a rebel stronghold in the east of the country and 34 killed in clashes between pro-Ukrainian ...