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Ukraine tensions simmer, neighboring countries feeling the pressure

FXStreet (Łódź) - Tensions remain high in the Ukrainian crisis with the fighting in the eastern part of the country escalating and the controversial Russian aid convoy persistently trying to enter the region.

Neighboring countries have been expressing their worries about the situation and Finnish president Sauli Niinisto is due to hold a meeting with Vladimir Putin on Friday to discuss it. No breakthrough is expected however and the main subject of the talks will be bilateral relations, specifically trade. Finland is among the EU countries suffering the biggest setback after the imposition of sanctions on Russia, with almost half of Finnish companies hurt by the move.

According to recent reports, EU agriculture ministers will hold a meeting at the beginning of September to consider ways of managing the oversupply of fresh produce which could accumulate due to the Russian ban of food imports from the West. The US is not expected to feel much impact, but countries such as Poland, Norway or the Netherlands - the biggest exporters to Russia - could suffer considerably.

Meanwhile, the commander of US ground forces in Europe suggested on Thursday that the US should boost military presence in Poland, according to reports. On the other hand Putin announced that a military task force would be established in Crimea, although "it will not be excessive, it will not be expensive," as the Russian president signaled.

According to Adam Narczewski: "In the closest perspective, if the Russian humanitarian aid will not be just a pretext for the presence of Russian in Ukraine (or a military intervention later on), emerging markets should remain stable. The possible depreciation of currencies and stock market declines should not be drastic."

"If the conflict is not resolved soon and the situation worsen, we will certainly see a flow of capital to safe heaven assets like gold and U.S bonds. Emerging market currencies like the Zloty, Forint or Czech Crown (which are much dependent upon geopolitical factors) could depreciate dramatically. In summary, the strongest blow would receive countries that geographically are close to Russia and Ukraine."

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