Inflection Point Reached In Crisis
BMI View: Russian President Vladimir Putin's call for the postponement of May 11 referendums on independence in east and south Ukraine marks a step towards a de-escalation of tensions in Ukraine.
Russian President Vladimir Putin's call for the postponement of the planned May 11 referendum on independence in south-eastern Ukraine is a major step towards a de-escalation of tensions in Ukraine since the annexation of Crimea. We believe the chances of a military invasion by Russia have declined significantly. Despite the deaths of dozens of pro-Russian separatists over May 3-5 in Odessa, Russia did not intervene militarily, even though events over the weekend represented sufficient pretext to do so. Furthermore, if Putin's comments are sincere, Russia's efforts to destabilise Ukraine may subside ahead of Ukraine's May 25 presidential election, representing a substantial improvement to our base case scenario.
The motivation behind Putin's announcement is not immediately clear. The West has been discussing the possibility of strengthening sanctions against Russia recently, which may have prompted Putin to re-evaluate his position in Ukraine. Equally, violence between pro-Kiev and separatist protestors in Odessa indicates that the situation in Ukraine is rapidly spiralling out of control. The prospect of a civil war so close to Russian borders may have spooked Putin into attempting to contain the situation.
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