Europe's winners and losers from Russia trouble

Russia's incursion in Ukraine and worsening relations with the West have caught neighboring countries in the cross-fire.

Some, like the former Soviet satellite states of Lithuania, Estonia and Latvia, have been hit hard by declining trade with Russia, as well as investor uncertainty-particularly since Russia announced this week that it might need to tap its reserve fund in 2015 for the first time in six years.

Other countries-particularly those viewed as ideologically closer to Russia, like Belarus-may benefit economically, as Western Europe and Russia vie to keep them onside.

Read on to learn more about the winners and losers from the Russia-Ukraine conflict.

A few years ago Belarusian President Alexander Lukashenko was panned as the "last dictator" in Europe. Now he is reinventing himself as a mediator in the Ukraine-Russia peace process.

"He appears 'useful' as an arbiter for all sides - perhaps less so for Moscow, as Lukashenko and Putin personally suffer a very poor relationship," said emerging market specialist Standard Bank in a research note last week.

"That said, the crisis in Ukraine has served to help warm relations with the West - or at least re-open doors."

The hardline former Soviet Republic is sandwiched between Russia and Ukraine. The government hopes to gain from Western sanctions on Russia via increased imports to the rest of Europe, particularly food products, which could boost real GDP growth.

Meanwhile, Moscow appears eager to keep Belarus onside. Already this year, Belarus has secured an agreement to retain around $1.5 billion in export duties from fuel from Russia.

"If Russia wants to keep Belarus 'in' and loyal it will have to be generous with pricing for energy and in the provision of cheap Russian loans," said Standard Bank.

Danske Bank cuts its growth forecast for the Baltic state of Finland on Wednesday, citing Russian sanctions and relating uncertainty. In addition, the emerging recession in Russia could "cast a shadow" on exports-as well as tourism and foreign direct investment.

Finnish GDP is now seen shrinking by 0.4 percent in 2014, before growing by a weak 0.8 percent in 2015.

Russia's financial straits were thrown into sharper relief this Tuesday when the country's former finance minister forecast 2014 net capital outflows of $110 billion. On the same day, the finance ministry announced it might tap the reserve fund next year due to increasing capital flight and falling oil prices.

Georgia may gain from a warming of relations with Russia, which imposed a trade embargo on the ex-Soviet republic after the 2008 Russo-Georgian war.

Already, Moscow has relaxed import restrictions on a raft of food and agricultural products from Georgia.

Like Belarus, Georgia is simultaneously seen gaining from strengthening ties with Western Europe. It signed a free trade agreement with the European Union this June, along with Ukraine and the Republic of Moldova.

Standard Bank forecast that growth in both Lithuania and Latvia will suffer this year due to the Russian ban on Western food imports-which includes products from the two Baltic nations.

"Historically both countries had strong trading ties into Russia, and the Russian market was important for food/agricultural exports," the bank said.

Growth in Latvia slowed to 2.6 percent year-on-year in the first half of 2014, several percentage points down on the year-ago period. Industrial production has also been weak.

Recent industrial production and retail sales from Lithuania have also been weak, which Standard Bank said may reflect damage to sentiment done by the conflict in Ukraine, and concerns over the possible fall-out to the Baltics.

-By CNBC's Katy Barnato