Ukraine: West Ups Sanctions After Putin Invades

Russia's morning invasion of Ukraine roiled energy markets and world capitals as the West rushed to formulate sanctions to counter President Vladimir Putin's goal of regime change in the neighboring Eastern European country.

"Peace on our continent has been shattered," said NATO Secretary General Jens Stoltenberg. "We now have war in Europe on a scale and of a type we thought belonged to history."

Stoltenberg stated that the alliance has no plans to deploy troops to Ukraine, which is not a member country.

Instead it will increase troop counts in eastern Nato member states and leave further resistance to Russia to coordinated economic measures taken by the US, EU and UK.

Kremlin spokesman Dmitry Peskov said Russia's attack "has its goals and they need to be achieved," including "neutralization" of Ukraine's military capability following widespread air strikes and a ground assault.

But it would be up to Putin alone to decide when those objectives had been realized, he said.

In an address to the nation, Putin said the assault was needed to protect citizens of the breakaway republics of Donetsk and Luhansk in eastern Ukraine, which had petitioned Russia for help after it formally recognized their independence.

While military action by Nato is off the table, the EU and its member states along with the US have promised a swift and coordinated set of sanctions aimed at crippling Russia's economy.

Ukraine's President Volodymyr Zelensky tried to rally world leaders to enact the toughest sanctions possible, while warning Russia that his country would defend itself.

"We are creating an anti-Putin coalition," Zelensky said on Twitter, adding that he had spoken with the leaders of France, Turkey, Austria and the EU "about concrete sanctions and concrete assistance for our military."

Earlier, European Commission President Ursula von der Leyen previewed a package of proposed measures aimed at the financial and technology sectors. It notably did not include measures aimed specifically at Russia's energy exports.

"Russia's economy has already faced intensive pressure in the recent weeks, and these pressures will now accumulate," she said.

Later in the day, US President Joe Biden unveiled stiff restrictions on Russian banks and restrictions on imports of a range of Western technology, while saying energy payments would be permitted under the sanctions.

"As a result of Putin's choices, Russia will now face immediate and intense pressure on its economy and massive costs from its isolation from the global financial system, global trade, and cutting-edge technology," said White House press secretary Jen Psaki.

Russia’s Goals

In his address to the nation, Putin said the decision to start a "special military operation" was a preventive measure to stop further development of military infrastructure in Ukraine and growing western military supplies to Kyiv.

He said the West had been supporting the creation of an "Anti-Russia" project in Ukraine, referring to militant groups of ultra-nationalists in Ukraine and accusing Kyiv of harboring ambitions to acquire nuclear weapons.

Putin said he wants to eliminate any Ukrainian military capability and end what he sees as ultra-nationalist, anti-Russian sentiment in the country by toppling Zelensky's government.

He said that Russia does not want to occupy Ukraine, but western security officials warned that Kyiv could fall quickly.

Analysts said Russia could take control of Ukraine's entire territory to bring about regime change and make sure whoever leads the country is friendly to Russia and will recognize Crimea — annexed by Moscow in 2014 — as Russian territory.

High Costs

Russian leaders have said they understand the military campaign will come with high costs, but they see this as acceptable to address their national security concerns.

Russian equity and currency markets tumbled on Thursday as investors tried to digest the impact of the conflict on energy flows from Russia to the world and the impact of sanctions on Russia's economy.

The Russian stock market fell more than 30% on news of the invasion. The ruble sank to record lows against the dollar and the Euro forcing the Central Bank to launch hard currency interventions to arrest its fall.

Anticipating tough Western sanctions, foreign directors started leaving the boards of Russian state-controlled banks and corporations that were expected to be sanctioned.

Putin held a meeting with Russian business leaders and sought their understanding for the invasion, calling it "a forced measure."

It was agreed at the meeting that Russia should not take any retaliatory measures that would have a negative impact on global markets, because Russia remains part of those markets, unless it is ousted from them at some point.

The country's foreign ministry had previously promised a "verified and sensitive" response to sanctions.

Oil and Gas Markets Jump

Benchmark Brent crude climbed above $100 per barrel for the first time since 2014 and European natural gas prices traded up as much as 40%

Brent rose above $105 and US West Texas Intermediate traded above $100 but both handed back much of their gains, with front-month Brent eventually settling at $99.08 and WTI ending the day at $92.81.

The month-ahead March Dutch TTF gas futures contract opened at €120/MWh ($39.83 per million Btu) and continued to rise, touching €144/MWh before settling at €118.5/MWh.

Nevertheless, Russia's Gazprom said gas transit volumes — including gas shipped via Ukraine — were continuing as normal.

The daily transit nomination through Ukraine actually rose to 83 million cubic meters, from 60 MMcm on Wednesday, as customers chose to buy contracted volumes from Gazprom that were cheaper than the prevailing spot prices.