Events in the Ukraine are on everyone’s mind this week, with the Russian stock market falling as much as 10% yesterday morning.

The rouble is also in freefall and the authorities have been forced to raise interest rates to support it. There weren’t many regional exchanges to escape the aggressive selling, with most indices down at least 1%. Chief beneficiaries of the flight from risk were gold, which hit a four month high, German government bonds, and the Japanese yen and other currencies considered a safe haven.

The euro also had a bad morning, because the eurozone economy is seen as vulnerable due to its dependence on gas supplies from Russia, part of which go through Ukraine.

There were the inevitable worries that Putin could act to restrict supplies if the situation escalates and, with the prospect of a typical run up in demand for oil should war break out, crude oil prices moved higher.

There appears to be a feeling in the Press that Russia has all the cards while the West will stand around meekly. To a certain extent this is probably true, in that there is no chance of military intervention. What the West has is the power of business, with the Russian budget reliant on one or two state energy giants to provide it with funds.

At the moment the US doesn’t need Russian gas or oil, neither does the UK, and even Germany has reduced its reliance. Hence the idea that threats about G8 status are weak are actually well wide of the mark. Russia’s economy can ill-afford to be cut off from world markets.

Putin would not be popular with his fellow oligarchs if businesses face severe sanctions. Russia is no economic superpower and cannot win a victory except by militarily bullying weak neighbours.

: : Charles Sylvester is an investment manager with Charles Stanley & Co in Ipswich.