Ukraine: What the West Must Do. Now.

Given the actions of the Rada in Ukraine and the flight of the regime leadership to Harkiv, it is evident that (a) the Russian financial assistance that barely kept the country aloft financially will end, and (b) Russia will engage in economic warfare against the country (even if it does not engage in armed warfare).   Thus, Ukraine faces economic collapse.

This is something that the west-the EU and the US-and international organizations-notably the IMF-can prevent. It’s only a matter of money.  Emergency economic assistance is imperative.

Concerned about the cost? Don’t be penny-wise, and pound foolish.

And one hopes that after its bitter experience in the past, that Europe has contingency plans in place to respond to a Russian cutoff of gas.  Not just gas going through Ukraine, but through Nordstream as well. For Russia is blaming Europe for what is happening in Ukraine. A full cutoff would cut against Gazprom’s interests (and hence the interests of the Russian power structures which feed off it), but the stakes in Ukraine are big enough for Putin that he could well consider that a price worth paying if he believes it will stampede the Europeans into abandoning the opposition-or, I should say, the new government in Ukraine.

Putin is playing for keeps, and this setback to his schemes will only enrage him and steel his resolve to prevail. He will pull economic levers to do so. The west should pull the economic levers of its own.

About Craig Pirrong 238 Articles

Affiliation: University of Houston

Dr Pirrong is Professor of Finance, and Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business of the University of Houston. He was previously Watson Family Professor of Commodity and Financial Risk Management at Oklahoma State University, and a faculty member at the University of Michigan, the University of Chicago, and Washington University.

Professor Pirrong's research focuses on the organization of financial exchanges, derivatives clearing, competition between exchanges, commodity markets, derivatives market manipulation, the relation between market fundamentals and commodity price dynamics, and the implications of this relation for the pricing of commodity derivatives. He has published 30 articles in professional publications, is the author of three books, and has consulted widely, primarily on commodity and market manipulation-related issues.

He holds a Ph.D. in business economics from the University of Chicago.

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