European Union leaders will discuss tougher sanctions against Russia over the worsening conflict in Ukraine, where insurgents are making gains against the army and the death toll has exceeded 2,500.
The 28-member bloc gathers today in Brussels to elect a new president and foreign-policy chief, and will also meet Ukrainian leader Petro Poroshenko. Pro-Russian militants made more gains yesterday near the Sea of Azov as Russia dismissed NATO allegations of its involvement and said a rebel fightback is protecting civilians from army shelling.
“The effective rebel counter-offensive followed Russia’s injection of fresh muscle into the insurgency and looks set to lead to a further wave of U.S. and EU sanctions,” Christopher Granville, managing director of London-based research group Trusted Sources, said yesterday in an e-mailed note.
The U.S. and Europe are threatening Putin with more penalties after the North Atlantic Treaty Organization reported a surge of Russian troops and advanced equipment into the war zone. Ukrainian Prime Minister Arseniy Yatsenyuk has called for parliament to debate NATO membership. His army is on the defensive after penning in the rebels in recent weeks. The United Nations says the conflict has claimed 2,593 lives.
Ruble Sinks
The EU and the U.S. have already slapped visa bans and asset freezes on Russian individuals and companies, and most recently imposed measures targeting the country’s energy, finance and defense industries.
The ruble sank 1.1 percent against the dollar yesterday, weakening for a fourth session after closing at a record-low on Aug. 28. The Micex Index (INDEXCF) plunged 1.6 percent, extending the previous day’s 1.7 percent tumble, the steepest since Aug. 6.
Russia’s equity markets may face a “Lehman moment” if the Ukraine crisis deteriorates further, JPMorgan Chase & Co.’s Moscow-based research head Alexander Kantarovich said in a note.
Russia risks more penalties if the escalation of fighting continues, according to French President Francois Hollande. President Barack Obama said Russia faces “more costs and consequences” because it “has deliberately and repeatedly violated the sovereignty and territorial integrity” of Ukraine. Obama ruled out “a military solution to this problem.” Russia has repeatedly denied involvement in the unrest.
Hope ‘Dashed’
German Chancellor Angela Merkel’s chief spokesman, Steffen Seibert, said yesterday that reports from the ground in Ukraine “amount to a Russian military intervention.” Her foreign minister, Frank-Walter Steinmeier, said the Ukrainian conflict was demonstrating a “new dimension” and that hope talks between Putin and Poroshenko could diffuse the situation had been “dashed.”
Swedish Foreign Minister Carl Bildt said on Twitter that “this is the second Russian invasion of Ukraine within a year,” referring to Russia’s seizure and annexation of Crimea in March. French Foreign Minister Laurent Fabius told France 24 television that sanctions should be used to increase pressure, though “nobody wants a war” with Russia.
In the combat zone, Ukraine’s Aidar battalion retreated from the outskirts of Luhansk, abandoning two villages in the face of a large enemy force, the Interfax news service reported yesterday, citing the battalion’s commander. Showing the level of concern at the rebels’ advance, Valeriy Baranov, governor of the Zaporizhzhya region west of Donetsk, said the authorities would build defenses and form a 550-man military unit.
Won’t Kneel
“Ukraine isn’t ready to kneel in front of the aggressor,” Ukrainian military spokesman Andriy Lysenko said yesterday in Kiev. “We’re ready to fight until the end.”
Putin, who’s repeatedly called for a cease-fire, said talks would “easily” resolve issues such as border security. He hailed the rebel counteroffensive, likening Ukrainian military tactics to those of Nazi Germany.
“Why do they call this a military-humanitarian operation?” Putin said at a youth camp at Lake Seliger in the Tver Region outside Moscow. “What’s the purpose of today’s actions? To push artillery and rocket launchers away from big cities so people aren’t killed.”
Ukraine, which is reintroducing the military draft, is seeking U.S. support and special partner status, Mykhailo Koval, the deputy head of Ukraine’s National Defense and Security Council, told reporters.
NATO Secretary General Anders Fogh Rasmussen yesterday reaffirmed a 2008 Bucharest summit pledge that “Ukraine will become a member of NATO” if it so wishes and provided it fulfills the necessary criteria.
‘Hollow Denials’
“Despite Moscow’s hollow denials, it is now clear that Russian troops and equipment have illegally crossed the border into eastern and southeastern Ukraine,” Rasmussen told reporters in Brussels. “Russian forces are engaged in direct military operations inside Ukraine.”
Russia is masterminding the rebel counteroffensive, with more than 1,000 of its troops operating inside Ukraine to man sophisticated weaponry and advise the separatists, NATO said yesterday. The rebels may be planning to establish a land corridor to Crimea, Brigadier General Nico Tak told reporters.
Russian Foreign Minister Sergei Lavrov dismissed NATO’s allegations.
“There was news that space imagery shows movements of Russian troops and the images turned out to be from computer games,” he told reporters yesterday in Moscow.
To contact the reporters on this story: Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net; Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net
To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Andrew Langley
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