Swiss Re Economist Forecasts Ukraine Standoff Stalemate

The tensest standoff since the end of the Cold War, provoked by the rebellion in Ukraine, will end in a stalemate without further escalation as Europe and Russia seek to preserve their economic ties, according to Swiss Re Ltd. Chief Economist Kurt Karl.

“Russia needs to keep its revenue coming from the oil and gas exports to Europe, its biggest market for exports,” while Europe also exports to Russia, Karl said in an interview in Rueschlikon, Switzerland today. “Europe and Russia have a lot of interest for it not to escalate.”

U.S. Secretary of State John Kerry yesterday demanded Russia pull its forces back from Ukraine’s border as Russian Premier Dmitry Medvedev arrived in Crimea in the first visit by a top government official since his country seized control of the Black Sea peninsula, home to its largest naval base outside its borders. Kerry expressed U.S. concerns that what it estimates to be 40,000 troops massing on Ukraine’s eastern border may signal Russia is ready to invade its neighbor.

“I have a forecast of stalemate -- I think they will just stop here,” Karl said. As the U.S. only has political interests there since it has little trade with Russia, Karl sees “no further escalation.”

Karl added a deepening of the Ukraine crisis could “kill” growth in Europe, which he forecasts at 1 percent for 2014. “The Ukraine crisis could broaden to Russia cutting off gas exports, hurting European economies.”

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