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Could Ukraine trigger a full-blown EM crisis?

With tensions ratcheting up in the geopolitical tinder box of Ukraine over the weekend, could the troubled Eastern European nation trigger a full-blown emerging markets crisis?

Ukraine's shaky new government on Sunday ordered full military mobilization in response to Russia's build-up of its forces on the Crimean peninsula, complicating the country's economic challenges and further raising the risk of a sovereign credit event, according to market watchers. Ukraine's long-term rating was cut from 'CCC plus' to 'CCC' last month by Standard & Poor's, which said the political crisis had put the country's ability to service its debt at risk.

While risks in Ukraine are likely to draw investor attention to still fragile situations in other developing economies such as Thailand, Venezuela, Turkey and Argentina, experts don't see foresee a widespread crisis across emerging markets for the time being.

(Read more: Russian energy minister withdraws from energy conference)

"At this stage, we see the main risks in concentration risks, i.e. losses on Ukrainian assets forcing selling and unwinding of positions elsewhere in the EM space," Michala Marcussen, global head of economics at Societe Generale, wrote in a report on Monday.

A soldier without identifying insignia mans a machine gun outside the Crimean parliament building shortly after several dozen soldiers took up positions there on March 1, 2014 in Simferopol, Ukraine.
Getty Images
A soldier without identifying insignia mans a machine gun outside the Crimean parliament building shortly after several dozen soldiers took up positions there on March 1, 2014 in Simferopol, Ukraine.

Michael Kurtz, global head of equity strategy at Nomura said the weekend's developments have broadened the scope for increased caution around emerging market assets, particularly as their list of "country-specific, idiosyncratic risks" grows.

However, given that emerging markets have already suffered record outflows over the past 12 months – putting the asset class in a position of substantial under-ownership – this may mitigate any dramatic impact, he said.

How important is Ukraine to the global economy?

From an economic standpoint, Ukraine accounts for just 0.2 percent of global gross domestic product (GDP), smaller than Greece, Portugal, or Ireland.

As a result many economists believe Ukrainian economy is too small and its problems too specific to have a direct impact on the global economy or an impact via contagion.

(Read more: G7 condemns Russia Ukraine move, halts G8 prep)

Its trade linkages with countries aside from Russia, such as Germany and Poland are limited, with Ukraine accounting for a minor portion of their exports.

Meanwhile, its financial linkages are also largely concentrated within Russia. Russian banks are estimated to hold just under $30 billion, or 13.5 percent of the country's GDP, in exposure to Ukraine, according to Societe Generale.

While the exposure is significant, it is believed to be manageable, according to Moody's, which says credit losses stemming from Ukraine's crisis could be easily absorbed.

After Russia, Austrian banks hold the most exposure to Ukraine at around $10 billion or a modest 0.25 percent of GDP.

Ukraine crisis: a short-term distraction?

Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors said he suspects Ukraine is just another distraction for markets that will fade in the months ahead.

(Read more: Gold jumps more than 1% on crisis in Ukraine)

"It may take a while to settle down and the uncertainty could get worse before it gets better," Oliver said.

"The best outcome – in terms of reducing market uncertainty – would be some sort of IMF (International Monetary Fund) support for Ukraine to enable it to service its debt supported by Russia, the U.S. and the EU with Ukraine staying out of the EU," he added.

However, Patrick Chovanec, managing director at Silvercrest Asset Management notes that while crisis in Ukraine may not matter much to the average investor, there are symbolic implications of the recent events.

"Although the crisis in Ukraine has little direct impact on the global economy, it does cast a destabilizing shadow," Chovanec said.

(Read more: Volatile Ukraine may now face default risk)

"They symbolize – along with Arab Spring and the Syrian Civil War, rumblings in the South and East China Seas, and political unrest from Bangkok to Caracas – a growing sense of uncertainty and unpredictability in the world that has investors understandably concerned about what will happen next," he added.

—By CNBC's Ansuya Harjani. Follow her on Twitter @Ansuya_H