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Crimea referendum: Why it’s so important

On Sunday, the people of Crimea go to the polls in a referendum on whether to stay part of Ukraine. They are widely forecast to back rejecting Ukrainian rule – but many of the most powerful international forces are discrediting the results before they come in.

"Seems to me that this referendum is already pre-ordered and we can easily predict the outcome of this referendum," Ukrainian Prime Minister Arseniy Yatsenyuk told CNBC Thursday in New York.


A man walks past a poster in Sevastopol on March 11, 2014 depicting Crimea in the colors of the Russian flag.
Victor Drachev | AFP | Getty Images

Crimea is already an autonomous region within Ukraine, but a yes vote would in theory mean full independence. In practice, of course, it is unlikely to be recognized by the Ukrainian government or its international supporters.

Crimea, a peninsula the size of Maryland, is of extreme strategic importance to Russia because of its geographical location. Since Kremlin-backed Viktor Yanukovych was deposed as Prime Minister of Ukraine, Russian troops are suspected to have entered Crimea, although the country's President Vladimir Putin and other officials have denied this.

Critics argue that the presence of such troops would discredit the poll.

(Read more: Why Crimea matters)

How is the vote likely to be split?

The Crimean population, if they go to the referendum, is likely to vote along ethnic lines, which would mean that the majority Russian-speaking population would dominate. However, around a quarter of the population is Ukrainian-speaking and there is also a substantial minority Crimean Tatars, Muslims who were deported en masse under Stalin and who are anti-Russian influence, so it could be pretty close.

(Read more: Run on banks in Crimea)

What will Russia do?

The real tension and worry rests on whether Russia decides to enforce the referendum results with military action or an immediate annexation of Crimea.

Kerry to Russia: 'There will be consequences'
VIDEO3:0403:04
Kerry to Russia: 'There will be consequences'

The Ukrainian region of Donetsk, on the Russian border, is likely to become the next flash point for the growing tensions between Russia and Ukraine. The region, now run by oligarch Serhiy Taruta, has seen violent clashes between pro-Russian and pro-Ukrainian forces in recent days.

The Ukrainian government has asked for the international community to address "unprovoked acts of aggression against Ukraine from the Russian Federation and its attempt to annex" Crimea. This is likely to mean sanctions against Russia.

(Read more: Ukraine enlists billionaires to take on Russia)

How are markets likely to move?

The retreat away from riskier assets will continue if this referendum results in Crimea leaving the Ukraine. A yes vote, and subsequent Russian military occupation, could move economic sanctions against Russia by the U.S. from possibility to reality, which would send Russian stocks and the rouble spiraling further downwards.

"Real money is finally waking up to the realization that this stuff is serious," Timothy Ash, head of emerging market research at Standard Bank, said.

- By CNBC's Catherine Boyle. Twitter: @cboylecnbc.

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