Are America and Russia Creeping Toward a Confrontation Over Ukraine?

America sends fighter jets to NATO states bordering Ukraine. Russia counters with SAMs.

Mar 8, 2014 at 4:00PM

In what looked for all the world like a game of geopolitical chess, with multimillion-dollar pieces of military hardware serving as the pawns, the United States made several military moves to contain the Russian incursion into Crimea this past week. If not necessarily designed to force a military confrontation, these at least seemed to prepare for such an eventuality.

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A visual representation of U.S. forces hemming in a Russian advance. Photo: Wikimedia Commons.

However, let's get one thing clear right up front: The U.S. and Russia are not headed for a military confrontation over Ukraine. But you wouldn't know that from how they're acting.

First, we learned that the U.S. had dispatched a force of six Boeing (NYSE:BA) F-15 fighter jets, plus supporting aerial refueling tankers, to Lithuania. Shortly thereafter, it was revealed that a force twice as big -- a dozen Lockheed Martin (NYSE:LMT) F-16 fighters -- was headed for Poland, with 300 troops accompanying the planes. And no sooner did that news break than the U.S. confirmed that the guided missile destroyer USS Truxtun was en route to the Black Sea to join a guided-missile frigate, the USS Taylor, already on station there.

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Well played. Now watch this. Photo: Wikimedia Commons.

Your move, Mr. Putin
Countering Washington's moves, Russia made a few of its own. First, Russia test-fired an SS-25 Sickle ICBM (!) into a Kazakhstan weapons testing-ground on Tuesday. Then on Thursday, Russia announced the beginning of anti-aircraft defense drills in a testing range 280 miles east of the Ukrainian border. According to RIA-Novosti, this exercise involves "3,500 troops and over 1,000 units of military hardware" -- and will be ongoing for the next month.

Ukrainian government sources report that on Friday, Russian troops began "preparing to install air defense systems" within Crimea itself. And most recently, the Moscow Times reports that Russia's Black Sea fleet has scuttled an old Kara-class cruiser, the Ochakov -- sinking the cruiser in the middle of the channel that gives access to the Ukrainian naval base at Donuzlav Lake. With the channel now blocked, Ukraine's small navy is effectively bottled up and unable to leave port.

Cold War getting hotter ...
Yet despite all the moves and countermoves, I still don't think it likely that this becomes a shooting war. Why not? Quite simply, because the two parties most intimately involved in the Crimean standoff -- Russia and Ukraine -- haven't started shooting at each other. If you agree that the U.S. military moves are designed to back Ukraine's play, it stands to reason that until they start shooting, there's very little likelihood that we would, either.

But that doesn't mean these goings-on have no relevance to U.S. investors.

On Friday, Ukrainian Defense Minister Ihor Tenyuh got on the horn with his U.S. counterpart, Secretary of Defense Chuck Hagel, to discuss the state of affairs in Ukraine and Crimea. Among the talking points, as we learn from Military.com, was a suggestion that the U.S. might assist Ukraine with "technical advice on humanitarian relief and disaster operations." A day earlier, NATO Secretary General Anders Fogh Rasmussen suggested to Ukrainian Prime Minister Arsenii Yatseniuk that NATO, too, might help "build the capacity of the Ukrainian military."

... and defense contracts heating up?
While far from concrete, these developments suggest that defense contracts to beef up the militaries of countries on the Russian periphery may be not far off. Reports that various supporters are lining up as much as $16 billion in financial assistance for Ukraine support this view. I'd bet good money that at least some of this financial assistance finds its way to Ukraine's Defense Ministry.

And not just Ukraine's. In the Baltics, too, folks are getting nervous. Across the whole of Estonia, Latvia, and Lithuania, the combined militaries of the region boast only three L-39 combat aircraft, and a handful of helicopters.

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What you see here is -- literally -- one-half of the entire Estonian Air Force. Photo: Wikimedia Commons.

Recognizing this, Lithuanian President Dalia Grybauskaite explained her request for additional U.S. fighter jets this week thusly: "Russia today is dangerous. After Ukraine will be Moldova, and after Moldova will be different countries." Estonian President Toomas Hendrik agrees, warning that "events in Ukraine show that ... Estonia and the [other] Baltic states ... must invest more in our national defense." 

If such improved military strength helps to dissuade further Russian aggression, and preserve peace in Europe, this is a development we all should welcome. And if it happens that this also opens new markets, and brings new revenues for America's defense companies -- that will just be icing on the cake. 

Conflict is eternal, and defense stocks will never let you down
So long as countries go to war against other countries, defense contractors that protect the one from the other will make money for investors. Over time, generous dividend-paying stocks can make you rich -- and defense stocks are some of the richest dividend payers out there. While they don't garner the notability of high-flying tech stocks, dividend-paying stocks are also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine.

With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now. 

Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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