[ANALYSIS]: RUSSIAN ROULETTE: A major risk to markets (UPDATED FEB 22)

SITUATION REPORT:

DONETSK AND LUHANSK INDEPENDENCE

Russian President Putin recognised the independence of two separatist-held regions of Donetsk and Luhansk (part of Donbas) in eastern Ukraine.
Russian President Putin ordered Russian troops to Ukraine after recognising breakaway regions; troops were sent as peacekeepers.
The recognition of the republics' independence paves the way to give the Russian-backed separatists military support and provides a pretext for Russian troops to cross the border.
Russian President Putin said Ukraine is an integral part of Russian history and they are ready to show Ukraine what genuine de-communisation looks like, while he accused Ukraine of stealing Russian gas in the past and using energy to blackmail Russia.
Russian President Putin thinks the West will impose sanctions anyway, while he added that Russia has the right to take retaliatory measures and has every right to protect its security which is what they will do.
Russian Energy Minister said Europe will be unable to replace large volumes of Russian natgas with other regions' LNG.
Under the new agreement with separatist leaders, Russia has the right to build and establish military bases in eastern Ukrainian regions.
Ukrainian representative to the UN said their border have been and will remain unchanged regardless of the steps announced by Russia. They requested to activate security and cooperation mission in Ukraine to prevent any future escalation.

WESTERN REACTION

An emergency UN Security Council meeting was conducted overnight (requested by Ukraine).
US President Biden signed an executive order prohibiting new investment, trade and financing to the DNR and LNR regions of Ukraine, while he will soon announce additional measures which would be separate and in addition to the swift and severe economic measure it has been preparing.
Furthermore, the White House said the US will announce fresh sanctions against Russia on Tuesday in which it will coordinate with allies on the announcement.
US Ambassador to the UN said Russian order to deploy peacekeepers in eastern Ukraine is nonsense and Russian recognition of eastern Ukraine is clearly the basis for an attempt to create a pretext for a further invasion of Ukraine.
The UK will announce Russia sanctions on Tuesday and the UK government said sanctions will go further if invasion happens, so will not go as far as the full package prepared, according to The Guardian.
"The EU is likely to impose limited sanctions — such as listing more individuals and cutting trade with the separatist “republics” — largely a symbolic move given those regions are already sanctioned.", three diplomats told Playbook.
UK sanctions on Russia will include the defence industry, oil and gas companies, banks, financial institutions and chemical companies, according to Sky News Arabia
Dutch PM Rutte said a limited package of EU sanctions agreed against Russia and that the sanctions will target those responsible for the move to recognise the independence of Ukraine rebel regions.
Austria said the EU sanctions package on Russia includes the Nord Stream 2 gas pipeline, according to Reuters.
EU heads said they will react to Russia's recognition of Ukraine separatists with 'firmness', while EU's Von Der Leyen said the recognition of the two separatist territories in Ukraine is a blatant violation of international law, the territorial integrity of Ukraine and the Minsk agreements.
Consultations are going on at the top level of the EU institutions, while there will be consultations with US and UK on whether tonight should be the trigger point for sanctions, according to WSJ.

EASTERN REACTION

"China calls on all parties relevant on the Ukraine situation to continue dialogue and consultation and seek reasonable solutions to address each other's concerns on the basis of equality and mutual respect", according to The Global Times.
Senior Chinese Diplomat Yi said China is concerned about the evolution of the Ukraine situation.
Japanese Foreign Minister said they will coordinate with the international community on sanctions against Russia.

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UPCOMING EVENTS

UK PM Johnson will conduct a COBRA meeting at 06:30GMT on Tuesday.
EU ambassadors meet at 08:30GMT in Brussels today to discuss Russian sanctions. EU affairs ministers will meet from 09:00GMT for the General Affairs Council, where they will continue the discussion, according Politico.
Russian President Putin's decree on the regions' independence is expected to be ratified by Russia's parliament on Tuesday.

TROOPS AND DRILLS:

It is reported Russia has amassed over 150k troops alongside tanks, airpower, artillery, and rocket batteries on its 1,200-mile border with Ukraine.
Reports suggest Russia has three main routes for an invasion: 1) the Northern Route via Belarus, 2) Central Route via Donetsk or 3) the Southern Route via Crimea.
Russian Deputy Foreign Minister called reports of possible US THAAD missile systems being supplied to Ukraine as a provocation, via Reuters citing Ria.