The first part of the title above  – meaning “I came, I saw, I conquered” – was pronounced by Julius Caesar in 47 B.C. when he emerged victorious over Pharnaces, the king of Pontus. The second part is taken from Virgil and means “Why should fear seize the limbs before the trumpet sounds?” In the last commentary titled “Kiev calls Belgrade” I wrote: “When internal economic weaknesses are handled with nationalistic eyeglasses, a lethal cocktail may be produced that may seek the deus ex machina solution.”

The markets (especially the European ones) seem to be trembling in the face of Russia’s invasion into Crimea. We estimate that the fallout will be short-lived and could be an opportunity to buy some equities at lower prices. Having said that, we also believe that the US cannot repeat the mistakes it committed in August 2008 when it froze in the face of Russia’s invasion into Georgia. Temporarily, oil prices and some oil-related stocks may gain, but we consider that in the medium and long-term this will prove to be a pivotal/inflection moment for a long-term decline in oil prices (let’s not forget that Russia went bankrupt when oil prices dropped to about $12/barrel in 1998). Should we be surprised then if oil drops below $74/barrel within a year? If Russia needs oil prices to stay above $82/barrel – given its shaky finances – then, we can comprehend what a geopolitical strategy of lower oil prices would mean for Russia. Moreover, if the US is able to leverage Chinese interest in Ukrainian grains, leverage the opening in Iranian politics, and also implements trade and especially financial sanctions (through the SWIFT system), then we can start becoming more optimistic that this might be an opportunity for a cleaner slate in the global chess -board called asset acquisition and collateralization. A failure to re-ignite the collateralization machinery with real assets – and not the toxic ones that generated the financial cancer – in the next two-three years, may prove to be lethal.

Russia is already feeling the heat. Its markets are trembling (rightly so), and its currency became even shakier, forcing an increase in interest rates on Monday in order to stop capital outflows. We would not be surprised if in the short term, Russia disrupts gas supplies to Ukraine, an action that will affect Germany, Netherlands, and other EU countries. Once again, this disruption will become an opportunity to reinforce the notion that alternative gas routes are needed throughout the EU. In addition, and taking into account the fact that Ukraine is bleeding in terms of foreign reserves, and its need to make payments as well as import vital goods, it is our estimate that Ukraine would need about $22 billion soon. In the medium-term Ukraine would need over $140 billion (roughly 80% of its GDP, and this might be a conservative estimate). Who will pay for this? And even if the money is found (e.g. through guarantees, the IMF, and other credit facilities) what will happen when the Eurozone starts shaking again and some other emerging markets require bailouts? Again, we have to refer the reader to our claim that we need to be careful and prepare for what might be at work a couple of years from now.

Russia is trying to “protect vital national interests” in the Crimea region. Its fleet needs access to the warm waters of the Mediterranean, while Moscow cannot lose face and thus needs to show that it can still shape outcomes in Ukraine. It’s a power play to see who will blink first (meanwhile the truth is that Russia has already lost Ukraine and its best bet is to create a fuss in order to keep its influence in Crimea). NATO involvement seems to be out of the question. Hence, the solution will be an economic one. Putin estimates that by cutting off gas supplies to the EU, financial dislocations will take place, starting with Germany. The US hopefully comprehends that given the circumstances, there is no long-term solution for Ukraine, and thus its policy should target leveraging up Russia’s weaknesses while exploring alliances (China) that need Ukraine and its agricultural exports.

Vladimir Putin may want to be seen as influencing global outcomes (like in the case of Syria), but his ultimate dream is called Eurasia. Without Ukraine, that dream becomes a nightmare that haunts a slowly bleeding leader.

Unless realism prevails on both sides, something which could be used as a cathartic device has the potential of destabilizing geopolitics and geoeconomics. In the face of this some portfolio hedging sounds like the proper route.