Ukraine on the Brink: What Are the Risks?

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May 14 (Bloomberg) -- Columbia University's Timothy Frye and Greylock Capital's Andrey Popel debate whether Ukraine is really on the verge of civil war. They speak with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

-- are we in a situation that will break out into civil war?

Technically, what is going on in the ukraine does not reach the threshold.

There is an actual number?

Yeah, we like to count things.

Is it percentage related?

It's over 40 million people.

But this is the minimum threshold that must people use for civil war.

That said, the potential for greater violence in ukraine is there.

You are from ukraine originally, are you not?


What are your thoughts.

It is very divisive.

There are some with more legions to russia and others with morley just ukraine.

There is no underlying regionreason for the aggression.

Your the first i've heard say that.

There are some who say that there is this underlying discord.

People want decent wages, good work environment.

Economic prosperity.


But what is happening is that russia's propaganda is getting people more radicalized.

On top of that, you have a weak ukrainian government which is basically super corrupt.

The police was made to cover the criminal elements and not protect people.

The local governments are also criminal.

So when you say russia sends certain people who basically try to provoke aggression, then you basically get police form of formal government.

They first tried to do it without guns but they were unable to do it.

Do you think as we listen to lavrov speak and he says we are this close to civil war as you can get, is that motivated by putin?

There is a lot of bargaining going on.

The west is bargaining with financing sanctions.

The russian groups within ukraine are bargaining with force.

They are trying to find a diplomatic solution.

Let's listen to a little bit more of what he had to say.

He spoke about the impact of sanctions on the west's reputation.

If you do this just for the sake of revenge to sacrifice its reputation for the entire world economy and the entire world financial system.

If the united states is willing to sacrifice its reputation as the holder of they key reserve currency, then it is up to them to decide.

Now it's our fault?

Economic sections are our fault?

This seems to be a change in tone.

Now the sanctions are the cause of all the problems.

Might the sanctions in fact be working?

I think the sanctions are working.

You see him on bloomberg tv talking to investors, not on cnn.

The fact that they are basically trying to separate themselves from pro-russian forces, a makes you feel like it is not all business.

We are not really involved but on the ground supporting them.

They are thinking about sanctions.

There are reports today that large russian companies wanting to use rubles as payment from their foreign companies that purchase their services, that's just an idea.

But that they are talking about this suggests that they are looking for ways to insulate themselves.

We have already seen their dead downgraded.

If you are vladimir putin and you're serious about being a world player on the world stage, you don't want to be in a situation where your debt is worthless compared to everyone else out there.

So this is in fact a matter of pride.

Creating a national payment system in russia, which probably doesn't make a lot of economic sense, but from a political want to do, trying to insulate themselves from global economic forces might make sense.

Let's look at what he had to say next.

He talked about the ukraine joining nato and what that would mean for europe.

Attempts to draw ukraine into nato would be very negative for the entire system of european security and we would be categorically against it.

I have nothing to hide.

Negative for the entire system if ukraine were to join nato.

It seems like there is a lot of lyrical standing in all of this -- political standing in all of this, especially for bloomberg viewers who are a little more sophisticated.

I think the investment community can see through all that.

We certainly hope so.

Have you invested in this area?

We have invested in ukraine, not russia the moment given the potential sanctions that will hurt the economy.

There is also an interesting event in the first quarter of this year.

Average russians withdrew $7 billion from their bank accounts.

The first quarter of 2013, it was $130 million.

There is a lot of fear.

And if you are russian that has a lot of money right now, it would make sense that you would look at trying to park that elsewhere.

Maybe we will see manhattan real estate continued to move higher.

[laughter] how do you think this is going to play out over the next couple of months?

There has always been a bargain here between political forces in the east of ukraine and western ukraine of some mix of decentralization of governing power, in terms of culture, perhaps in terms of economic policy, but not in terms of form policy or military policy.

I think there is also some security guarantee that russia is going to demand and ultimately will receive because -- in the meantime, they may find a friend in china.

China is now offering up some money.

This might be there needed forces of cash, somebody to buy their debt.

Are we driving vladimir putin and russia right into china's arms?

Could this have negative effects as we move forward in the next 5-10 years?

We sort of are, but the chinese are not going to buy at the same price that europeans are buying.

So they are looking for a better bargain.

Also, there are a number of things that the ukrainian government is tried to do to consolidate the country.

But at the same time, russia is not being constructive on the ground.

Basically, they need to use force where force is necessary and dialogue with people who don't have arms.

Investment play, stay out of russia?

Don't buy russian debt?

It's not cheap enough yet.

What about the ruble?

It has not moved a lot, i would not buy ruble.

Thank you for being here and more with our exclusive interview with russian foreign

This text has been automatically generated. It may not be 100% accurate.


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