Russia officially recognized the self-proclaimed "DPR" and "LPR" republics

Yesterday, the Russian Federation officially recognized the self-proclaimed republics of the "DPR" and "LPR" and signed an agreement with them on mutual, including military, cooperation. Later that day, Putin ordered the Russian Ministry of Defense to deploy troops to the "LPR" and "DPR." Thus, Russia once again violated international law and the Minsk agreements. As a result, Russia and Ukraine are automatically withdrawing from the Minsk agreements, which could further inflame the situation in the east since there are now no treaty restrictions. Moreover, Russia recognizes the "DPR" and "LPR" within the borders of their actual regions of Ukraine, while the line of demarcation is much smaller. This could lead to a real war. This shows how Russia, the guarantor of Ukraine's security when signing the Budapest Memorandum, has become an aggressor against Ukraine and has now declared this on a new global scale.

The world's reaction to this news was immediate. The heads of the European Commission and the Council of Europe called Russia's recognition of the "LPR" and "DNR" a violation of international law and Ukraine's territorial integrity. The head of the UN considers Russia's recognition of the "LPR" and "DPR" as a violation of the territorial integrity of the sovereignty of Ukraine, incompatible with the UN Charter. Dutch Prime Minister Mark Rutte said that the EU would decide tomorrow or the day after tomorrow on imposing sanctions against Russia for recognizing the two republics. French President Emanuel Macron called for European sanctions against Russia. The issue of a summit between Russia, the US, and France will no longer be discussed. Nord Stream 2 will most likely not be launched.

US Secretary of State Blinken said Russia's decision to recognize the two republics means Moscow's complete rejection of its obligations under the Minsk agreements and encroaches on Ukraine's sovereignty. The UK will announce new sanctions against Russia today. Turkey strongly condemned Russia's recognition of the "LNR" and "DNR." The Turkish Foreign Ministry said that Turkey firmly supports the sovereignty and territorial integrity of Ukraine. The foreign ministers of Japan, Canada, and Australia said they would work with the international community to coordinate sanctions against Russia. After Putin's statement, several European countries and NATO convened an emergency meeting of the Security Council on the situation between Russia and Ukraine.

Yesterday was a bank holiday in the US, so the stock and futures exchanges did not work. But at the opening of the futures exchange today, the reaction of the US index futures was restrained. European indices, on the other hand, began to decline sharply. Only the Russian stock market experienced a more significant drop. The critical question for investors now is how far the US and its allies will move on sanctions in response to Putin's decision.

Yesterday, European stock indices closed in the red zone even before Russia recognized "LNR" and "DNR." The German DAX (DE30) decreased by 2.07%, the French CAC 40 (FR40) fell by 2.04%, the Spanish IBEX 35 (ES35) decreased by 1.18%, and the British FTSE 100 (UK100) lost 0.39%. European countries will begin to impose sanctions against Russia, which will also lead to Europe's suffering, as Europe is very dependent on Russian gas and oil supplies due to the energy crisis. Russia, in turn, said it is not afraid of sanctions. Moreover, Russia is confident that sooner or later, its opponents will come to Russia with a request to return to the negotiating table on all issues because this is inevitable given Russia's role in international relations.

Oil rises in price as the Russian-Ukrainian crisis worsens. Moscow's actions drew international condemnation. As a result, oil prices are likely to rise to $100 per barrel amid upcoming sanctions against Russia, the world's largest oil supplier. Oil prices may only fall if sanctions are lifted from Iran and Iranian oil returns to the market.

Gold and silver continue their upward trend. The precious metals rose in price against the backdrop of the crisis in Eastern Europe. Investors are buying gold as a hedge against market turmoil.

Asian markets were trading in a downward trend on Monday. Japan's Nikkei 225 (JP225) decreased by 0.78%, Hong Kong's Hang Seng (HK50) lost 0.65%, and Australia's S&P/ASX 200 (AU200) increased by 0.16%. At the opening on Tuesday, Asian indices accelerated their fall. China has not yet commented on the situation in Europe. However, according to preliminary information, China will support Russia, which may already lead to an Asian crisis, given China's appetite for Taiwan.

Main market quotes:

S&P 500 (F) (US500) 4,348.87 −31.39 (−0.72%)

Dow Jones (US30) 34,079.18 −232.85 (−0.68%)

DAX (DE40) 15,042.51 −225.12 (−1.47%)

FTSE 100 (UK100) 7,513.62 −23.75 (−0.32%)

USD Index 96.11 +0.31 (+0.31%)

Important events for today:
  • – Eurozone Germany Ifo Business Climate (m/m) at 11:00 (GMT+2);
  • – US Manufacturing PMI (m/m) at 16:45 (GMT+2);
  • – US Services PMI (m/m) at 16:45 (GMT+2);
  • – US CB Consumer Confidence (m/m) at 17:00 (GMT+2).

by Justforex, 2022.02.22

We advise you to get acquainted with the daily forecasts for the major currency pairs.

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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