Present tense, future imperfect

With Western powers and Russia engaged in a nasty conflict, the Ukraine crisis does not seem like ending anytime soon

Ukraine's domestic crisis has become a regional exigency since people in Crimea voted in a referendum to join Russia in March and Russia legalized the accession. The West has denounced Russia's move and imposed sanctions on Moscow, leading to a standoff between Western powers, led by the US, and Russia.

Since Russia's takeover of Crimea, mass protests have spread to eastern Ukraine with armed groups occupying public buildings and even demanding that some provinces be declared autonomous states through referendum. In some eastern provinces like Donetsk and Luhansk, pro-Russia people make up a considerable percentage of the population.

To ease tensions and restore peace, Ukraine, the European Union, the United States and Russia jointly issued the Geneva Statement on April 17. The same four parties had signed the Budapest Memorandum in 1994 to honor Ukraine's territorial integrity in exchange for Kiev giving up the nuclear weapons it had inherited from the Soviet Union.

By taking over Crimea, Russia has got permanent possession of the strategic port of Sevastopol, home to its Black Sea Fleet, as well as unilaterally annulled the deal signed with ousted Ukrainian president Viktor Yanukovych in 2010 which required Moscow to pay a substantial amount to Kiev as rent for the facility.

So far, the West has been avoiding a direct military confrontation with Russia, hoping that the sanctions would compel Moscow to change its stance. Indeed, sanctions - including those on trade, gas prices, exchange rate, sovereign debt financing - could hurt the Russian economy. They can prove effective especially because the US can sell part of its oil and gas reserves to the EU at lower than market rates to bring down energy prices. Since Russia is heavily dependent on revenue from oil and gas, a drastic fall in fuel prices can deal a severe blow to its economy and prompt major rating agencies to downgrade its debt financing rating.

The currencies of quite a few emerging economies, including Russia, have been depreciating because of the end of quantitative easing in the US. And since international energy prices are quoted in US dollars, a sharp fall in energy prices combined with the devaluation of the ruble can greatly reduce Russia's fiscal revenue.

But the sanctions, even if combined with a forced drop in energy prices, could still be ineffective considering the EU's high demand (and China's potentially high demand) for Russian energy supplies. Besides, the EU cannot take a rigid stance against Russia until it is ensured of getting gas from an alternate but reliable source.