Mike Shedlock

The civil war in Ukraine took a bloody turn for the worse today as separatists killed six Ukrainian soldiers and wounded eight others in an ambush near Kramatorsk in the Donetsk region.

In response to the ambush, the Ukrainian defense minister proclaimed Ukraine in "Undeclared War" With Russia.

“In our eastern regions we have an undeclared war,” acting Defense Minister Mykhaylo Koval told reporters in Kiev today. “Our neighboring country unleashed the war, sending special forces and saboteurs into our territory.”

If Donetsk and Luhansk secede, Ukraine would lose about a fifth of its economic output, Bank of America analyst Vadim Khramov wrote in an e-mailed report today. As for Russia, the tension may cost it $115 billion, or about 3 percent of annual output, and exacerbate recessionary pressure, said Nariman Behravesh, chief economist at consultancy IHS Inc. (IHS), said in an e-mail today.

“While Russia could end up paying a very heavy economic price for its annexation of Crimea and its ongoing conflict with Ukraine, the negative impacts on other parts of the world, notably Europe, will also be hard to avoid,” Behravesh said.

A majority of Ukrainians, or 56 percent, believe their country is at war with Russia, according to a poll by the Kiev-based Razumkov Center published today.

About 53 percent want to join the EU -- ousted President Viktor Yanukovych’s refusal to sign an EU association agreement triggered the crisis -- whereas two thirds see Russia as “brotherly” and “friendly” according to the April 25-29 poll of 2,012 people. It had a margin of error of three percentage points.

Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.