At the time of this writing, tensions in Ukraine are escalating, with the US asking Russia to withdraw armed forces from Crimea and Europe on red alert.
While Ukraine never had a simple political/geopolitical/economic situation for many centuries (Kiev is considered to be the first capital of Russia since the middle ages), the latest escalation took place in November 2013, when the now dismissed President, Mr. Janoukouvitch, decided to stop (economic) discussions with Europe.
It chose to rely on Russia for help (financial help in addition to lower gas prices).
The current Ukrainian crisis is between Russia and Europe, and it could have profound consequences.
Ukraine is mostly divided by the Dnieper river (dividing the country from north to south), with pro-Russians on the east side and pro-Europeans on the west side. Around 25% of its population is of Russian ethnicity.
The country is geopolitically extremely important for Russia, as the south (Crimea) has an access to the Black Sea, and Sebastopol is home of a very influential Russian naval fleet.
During Stalin's reign and in only two years (1932-1933), between 2.5 million and 7.5 million Ukrainians died from starvation (mainly on the west side of the country), while during the second world war, another 8 million people died.
The Ukraine holocaust (holodomor) was a direct consequence of Ukrainian nationalism, which saw the country declaring its independence in 1917. In 1922, the country was once again annexed by Russia.
These events are still well anchored in Ukrainians' minds and are seen as the main explanation for today's divide between pro-Russians and pro-Europeans.
During the weekend, German Chancellor Angela Merkel said that we could look at the past in order not to repeat the same mistakes. This statement highlights the fears Western countries (notably Europe) have with the current situation in Ukraine.
Here at Seeking Alpha, we focus our attention on the economic implications of this crisis rather than the political ones.
Ukraine is one of the world's most important exporters of grains (from wheat to sunflower to maize, etc.) It is also one of the greatest suppliers of feed wheat to the world markets and the 5th world's largest exporter in the overall wheat market.
According to the USDA, by the end of 2013/2014, Ukraine will be the second largest grain exporter in the world market after the United States.
Much of the wheat and maize are exported in North African (roughly 25% of total exports) and Asian (50% of its exports) countries as food wheat, and as feed wheat in Europe (20% of total exports).
According to the latest Ukrainian Ministry of Agrarian Policy and Food data (January 29,2014), since the beginning of the 2013/2014 Marketing Year (MY, July 2013 - June 2014), 20.9M tons of grain were supplied to the foreign markets (up 33.5% Y/Y).
The main export crop is still maize and accounted for the largest share of grain exports (11.7M tons or more than half of total exports), while wheat was second with 7M tons.
The current escalation might have repercussions in many of the soft commodities' markets, as grain shipments through the Russian seaports might be obstructed, notably impacting shipments to Asia and North Africa. In our view, this is the single biggest risk for Ukrainian grain's exports. As most of the North African countries rely on cheaper Ukrainian grains, any disruption might have direct consequences to those countries, which are already fragile (notably Egypt).
Aside from the grain markets, we think that the current Ukrainian situation is not positive for future European/Russian relationships. The EU is the first trading partner of Russia, while Europe is the third trading partner of the EU.
Most of the exports to the EU from Russia are in the form of energy (mainly gas, as 34% of European gas imports comes from Russia), and represent almost all (only 6% going to Asia) of the Russian gas exports.
With the ongoing North American unconventional gas revolution and the resulting global access to liquefied natural gas ((NYSEMKT:LNG)), the US has a great card to play with Europe as on one side, it would allow Europe to divorce from Russian gas dependence, and on the other side, it would open up a new market for the US.
Europe, though, has to find other ways of energy diversification (Angola might be a fit here) and increase its LNG infrastructure (here Portugal might benefit due to its ties with Angola and its geographical location).
Bottom line: The current Ukrainian crisis might have profound political and economic consequences, not only for the Ukraine, but for Europe, North Africa and the US.
This crisis might have profound consequences on the prices paid by North African grain importers, resulting in higher food prices, which would add to the current turmoil in some of the North African countries.
Concerning Europe, it would result in higher gas prices from Russia as most of the Russian gas still transits through Ukraine, but at the same time, it would harm Russia's exports and economy, as Europe is the biggest financial provider for many of the Russian corporations.
For the US, it might play favorably as they might take this opportunity to seal ties concerning LNG exports to Europe (companies such as US-based Cheniere Energy (LNG) might benefit from this), and it might also change the geopolitical situation between Africa and Europe.
In short, the economic and geopolitical impact is rather huge for the world as a whole if the current Ukrainian problem escalates further.