Over the past several months, Russia has steadily built the number of troops and military hardware along its border with Ukraine. Recent intelligence reports indicate that Russian troop levels, including those stationed in neighboring Belarus, total over 150,000. Tensions in the area have been rising as this massive military buildup has expanded. In the past several weeks, the United States and its allies have been ramping their diplomatic efforts in an attempt to find a diplomatic off-ramp to the escalating situation.
The response of the West has been as anticipated. The US and the UK have announced additional incremental sanctions, but not the "full package" threatened before yesterday's Russian troop movement into the Donbas. In addition, the German government stated that Nord Stream 2 is now officially suspended. Undoubtedly, Putin has anticipated each of these moves. His actions yesterday were undoubtedly designed to assess the West's resolve and possibly cause division in NATOs ranks.
It is improbable Putin would be willing to risk additional sanctions and the suspension of Nord Stream 2 simply to put more troops in the Donbas. Our view is that Putin intends to extend his control over the entirety of Ukraine, driven by a perceived need to keep Ukraine within Russia's sphere of influence and retain control of pipelines traversing Ukraine into Europe.
If this is the case, then the question becomes – what would be the economic/energy-related consequences of a full-scale invasion of Ukraine?
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More: Research Notes, Ukraine Crisis