What’s behind Russia’s invasion of Ukraine? What does this mean for the market? FIU experts answer your questions.

Following Russia's invasion of Ukraine, FIU News reached out to experts Tatiana Kostadinova and Deanne Butchey to help the university community understand the crisis and what may come. 

Kostadinova is a professor in the Department of Politics and International Relations at the Steven J. Green School of International & Public Affairs; Butchey is a teaching professor in the Department of Finance at the College of Business.

Putin seems to have acted on his threats of war. How far can we expect him to take this?

Kostadinova: It's hard to say but there are several scenarios for the end game. One, help the two separatist states — Donetsk People’s Republic (DPR) and Luhansk People’s Republic (LPR) — establish full control over the territory of their regions and secede from Ukraine; two, cut off Ukraine's access to the Azov Sea and the Black Sea by invading the coastline and the cities of Mariupol and Odesa; three, replace the government in Kyiv with people loyal to Russia.

Permanent occupation of Ukraine does not seem likely, at least at this point. It would be too costly to keep.

People in Ukraine have been living with this dispute since 2014. Can you explain how the recent escalations suggested a departure from what was happening before?

Kostadinova: The southeastern Ukrainian regions of Donetsk and Lugansk remained an "uncompleted project" since 2014, after the annexation of Crimea by Russia. Putin is in a new situation now, having secured constitutionally to stay in power for a long time. The high prices of natural gas and petrol helped accumulate revenues and offset the losses incurred from the previous regime of sanctions.

What is NATO’s role?

Kostadinova: NATO cannot directly (with troops, etc.) help Ukraine defend its territory, as the latter is not a NATO member. What NATO is currently doing is sending troops and military aid to its members that form its Eastern border (Poland, the Baltic states, Romania) to strengthen their defense capability.

Is there a path back to peace?

Kostadinova: Right now, diplomacy seems to have been silenced. President Putin declined to talk with Ukraine's President Zelensky. Talks with the West have also been canceled.

Is the threat of nuclear war real?

Kostadinova: Yesterday there was fighting around the Chernobyl nuclear plant where there is still nuclear waste stored. The fear was that a missile strike might hit there and cause an explosion. Pollution could spread over Ukraine and Belarus but also over Europe. The Russian forces have the site under their control now.

How are countries neighboring Russia and Ukraine reacting to the Russia-Ukraine conflict? Are they afraid Russia will invade more countries? Are they preparing to defend themselves from a future invasion?

Kostadinova: Yes, there are serious concerns and fear of a possible Russian invasion there. These countries have a history of becoming targets of Russian/Soviet aggression; this was the reason why they so anxiously strived for NATO membership in the 1990s. Those who are in NATO hope that the potential for application of Article 5 of the treaty would prevent such a development. They alone cannot do much against the Russian leadership's military ambitions. [Article 5 provides that if a NATO Ally is the victim of an armed attack, each and every other member of the Alliance will consider this act of violence as an armed attack against all members and will take the actions it deems necessary to assist the Ally attacked.]

What does Russia’s invasion of Ukraine mean for U.S. markets?

Butchey: We will continue to have a lot of volatility in the markets. Yesterday's recovery was probably algorithmic trading and investors who have a fear of missing out — plus the possibility of ongoing diplomatic discourse. Since investors believe that the United States will use oil reserves to stabilize the market and the Federal Reserve may not be in such a hurry to raise rates, we started with a recovery in tech stocks that expanded to the broader markets. However, if the war extends beyond Ukraine to the rest of the former USSR countries, the volatility will be magnified.

What impact could sanctions have?

Butchey: Right now the sanctions are not as extensive, but if it spreads to other commodities like corn and wheat that are used to make bread it can lead to higher inflation. Higher oil and gas prices will also affect inflation.

How could this affect the price of goods going forward, such as gas at the pump?

Butchey: Gas at the pump prices will continue to be higher especially as we don’t know how long the war will extend and how much reserves will be depleted. Also, increases in the cost of transportation will affect food and other goods.