As Indian Stock market tanked around 5% on Thursday 24th Feb 2022, amidst Russia – Ukraine war situation, most investors are looking to understand the key reason for this current crisis. of course, understanding the key reason for any crisis gives you better control on your emotional decisions related to such event.
There are many political and expert comments available in free media which are providing live updates on the situation. Still, I am trying to present and share some important facts related to this War situation, which may help you analyse it better.
As you know Russia is one of the world's largest producers of oil and natural gas, accounting for 17% of the world's natural gas and 12% of its oil. Russia’s state-backed energy giant Gazprom has laid down several pipelines to make its Gas reach in Germany and other parts of Europe. The pipeline carry gas from western Siberia to Lubmin in Germany’s north-east, is called as Nord stream 1 – Pipeline.
In 2015, Gazprom (Russia’s state-backed energy giant) announced that they will double this pipeline from $11bn (£8.3bn) of existing capacity to $22bn, keep 26m German homes warm at an affordable price. This was Europe’s most divisive energy project, known as Nord Stream -2 Pipeline, which by-passes the traditional gas transit nation of Ukraine by running along the bed of the Baltic Sea.
First Major issue of conflict - Nord Stream Pipeline :
European Union, United States as well as Ukraine shown resistance to Nord Stream -2, on the grounds that it increases Europe’s energy dependence on Russia, denies Ukraine transit fees and makes it more vulnerable to Russian invasion.
Second Major issue of conflict - Ukraine's application for NATO membership :
A key source of the friction has been Ukraine’s desire to join NATO – something President Putin strongly opposes.
What is NATO ?
North Atlantic Treaty Organization are members themselves. UKRAINE is not the member of this 30 member NATO countries- and is also known as the North Atlantic Alliance.
Here are the NATO member countries, along with the year they joined :
It was born from the Treaty of Dunkirk, which was signed by the UK and France in March 1947 as an alliance against any possible German or Soviet Union attack in the wake of the Second World War.
Its stated purpose is to guarantee the freedom and security of its members through political and military means.
It uses a system of collective security, whereby its independent member states agree to mutual defence in response to an attack by any external party. It may also ally with external forces.
Why is Ukraine not part of NATO?
Ukraine is applying to become a NATO member, but it is yet to be formally admitted. However, it is one of the body’s “enhanced opportunity partners”.
This status is afforded to non-member nations that have “made significant contributions to Nato-led operations and missions”, such as Australia and Sweden.
A new country has to be unanimously approved by NATO members and factors taken into account will include, among others, “unresolved external territorial disputes”.
In 1997, NATO established a Ukraine-NATO commission, which allowed for discussion on security issues and enabled the furthering of the NATO-Ukraine relationship without a formal membership agreement.
Alastair Kocho - Williams, professor of history at Clarkson University in the US, says NATO membership would “significantly increase Ukraine’s international military backing, allowing for NATO military action within Ukraine and alongside members of its military”.
Without membership NATO’s support is limited. For example, it does not commit to deploying troops to non-member countries. However, it has sent troops to neighbouring countries and has publicly backed Ukraine.
Why doesn’t Russia want Ukraine to join NATO ?
Russia vehemently opposes NATO’s expansion to include Ukraine, and has demanded a formal veto on it ever becoming a member.
President Putin has made clear that he sees the country’s aspirations to join the group as a threat to Russia’s borders and its sphere of influence.
Five Nato countries currently border Russia after former Soviet states Latvia, Estonia and Lithuania became members.
In December last year, President Putin said Russia will seek “reliable and long-term security guarantees” from the US and its allies “that would exclude any further NATO moves eastward and the deployment of weapons systems that threaten us in close vicinity to Russian territory”.
And on Monday in an angry televised address from the Kremlin, President Putin said: “Ukraine is an inalienable part of our own history, culture and spiritual space. These are our comrades, those dearest to us – not only colleagues, friends and people who once served together, but also relatives, people bound by blood, by family ties.”
As a writer, I don’t want to put any suggestion or conclusion to this story. This should just be read as an informative blog which can be utilised to get better hold of the situation. As a trader, any good or bad event is an opportunity to sell or buy respectively. However, as an investor you should focus upon the investment part only; buy on every dips as a lumpsum or take SIP route to get better cost averaging of your units.
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