Russia's stealthy invasion of Crimea gave markets a nasty fright on Monday, but by mid-week the slump had mostly been reversed. Investors were relieved when Russian president Vladimir Putin said Russia would only use military force as a last resort.
The EU and the US rushed to shore up the new pro-Western government in Kiev, with the former promising an €11bn aid package.
Achieving international agreement on any punitive measures looks "difficult to impossible". Germany wouldn't even sign up to abandoning the G8 summit in Sochi. "If mere gestures can cause dissent, think what more potent, economic sanctions would do."
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In the absence of such measures, the knock-on impact on the rest of eastern Europe from turmoil in Ukraine provided Russia doesn't restrict gas exports looks small. "The prospects for economic recovery [in eastern Europe] will hinge much more on developments to the region's west," said Capital Economics.
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Eastern European export exposure to Russia and Ukraine is small, while sales to the eurozone account for over half of exports. Similarly, less than 5% of overall eurozone exports go to Russia.
The one place that will suffer badly, of course, is Ukraine itself. Capital Economics pointed out that similar instances of unrest and political transition have knocked 4%-8% off GDP growth in the following year. That would be very bad news, as the economy has been shrinking at an annual pace of 1% since the middle of 2012 in any case.
Years of poor governance, endemic corruption, distaste for reform and recent over-reliance on commodities, notably steel, have been key problems, as Economist.com's Free Exchange noted.
As a result, since independence in the early 1990s, Ukraine's GDP per head has only risen from around $5,000 to $7,000. Poland's has soared from $6,000 to $21,000 in the same time frame. The latest crisis means Ukraine won't start to close that gap any time soon.
