The West has made a huge bet on Ukraine’s political stability, despite massive uncertainty and corruption.
What about Russia? In 2012, Russian GDP growth was still 3.4 percent, but it more than halved to 1.3 percent last year. In May, Putin’s approval rating still soared to 83 percent, a six-year high. But the real question is how long Putin can sustain his strong domestic support amid a severe sanctions scenario.
Moscow’s impending contraction would penalize growth by 0.8 percent, while capital outflows could climb to more than $100 billion. If inflation will exceed 8 percent in 2014, new rate hikes will deepen economic pain.
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