US Worried as Russia Masses Troops on Ukrainian Border

Friday, 21 Mar 2014 11:54 PM

 

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Western nations voiced growing concern over Russian troops massed along Ukraine’s eastern border as Russia formalized its annexation of Crimea in defiance of sanctions imposed by the U.S. and European Union.

With President Vladimir Putin signing legislation to absorb the Black Sea peninsula and its port, Sevastopol, from Ukraine, attention shifted to whether Russia would seek to claim other parts of Ukraine. White House National Security Adviser Susan Rice said the U.S. has been monitoring developments on Russia’s frontier with Ukraine.

“The Russians have stated that they are intending military exercises,” Rice said at a briefing yesterday in Washington. “Obviously, given their past practice and the gap between what they have said and what they have done, we are watching it with skepticism.”

The presence of Russian forces near Ukraine’s border and protests by pro-Russian activists in the east and south of Ukraine have raised alarms that Putin may push further into the second-most-populous former Soviet republic. European leaders signaled that Russia may face further repercussions if it doesn’t stop what they see as destabilizing actions.

If Russian troops enter east Ukraine, it “would trigger far-reaching consequences in a broad range of economic areas,” U.K. Prime Minister David Cameron told reporters yesterday after a summit in Brussels. “That must include the key areas like finance, like the military, like energy,” he said, adding that “Russia needs Europe more than Europe needs Russia.”

Worst Confrontation

The crisis over Crimea has embroiled Russia and the West in their worst confrontation in decades. Russia’s moves to claim Crimea highlight Putin’s disregard for the post-Cold War security order in Europe, according to Andrew Kuchins, director of the Russia and Eurasia Program at the Center for Strategic and International Studies in Washington.

“There’s nothing Vladimir Putin would rather do than to de-legitimize the post-Cold War order, expose the transatlantic partnership as a sham, and deeply degrade U.S. leadership in the world,” Kuchins said at a media briefing yesterday. “He’s already gone pretty far down that path in the past three weeks.”

Leaders of the U.S., EU, China, Japan and other nations meet in The Hague starting on March 24, and President Barack Obama plans to use the gathering to mobilize opposition to Russia’s incursion into Crimea.

Economic Tools

While ruling out military action, Obama has joined European leaders in warning of further consequences if Russia fails to yield. The U.S. is focusing on diplomatic and economic tools to defuse the crisis, Rice told reporters.

“Our interest is not to see the situation escalate and devolve into hot conflict,” she said.

The EU, moving more slowly than the U.S. on sanctions, yesterday expanded to 51 individuals its list of Russians and Ukrainians punished with asset freezes and travel bans.

Twelve new names published by the EU include five officials close to Putin who already face U.S. sanctions. Among them is Russian Deputy Prime Minister Dmitry Rogozin, who mocked his banishment by the U.S. as the product of “some joker,” and two deputy commanders of the Black Sea fleet in charge of Russian forces that occupied Crimea.

The U.S. on March 20 widened its list of people targeted to 27 Russian officials and four Ukrainians. In addition, Obama that day authorized potential future penalties on Russian industries, including financial services, energy, metals and mining, defense and engineering.

Judo Partner

Those targeted by the U.S. include billionaire Gennady Timchenko, a co-founder of oil trader Gunvor Group Ltd., and Arkady Rotenberg, a former judo partner of Putin whose companies won more than $7 billion in contracts for the Winter Olympics.

It also includes Bank Rossiya in St. Petersburg, which U.S. officials said has $10 billion in assets and is the 17th-largest bank in Russia. Bank Rossiya and Rotenberg’s SMP Bank said yesterday that U.S. payment-systems operators MasterCard Inc. and Visa Inc. stopped servicing their cards. Putin plans to open an account at Bank Rossiya, as well as have his presidential salary deposited there, he told reporters yesterday.

Russia’s benchmark Micex Index of stocks fell 1 percent, the most among emerging markets, to 1,307.34 by the close, and the yield on government bonds due February 2027 jumped 12 basis points, the most in a week, to 9.42 percent.

Russian Retaliation

Russia’s Foreign Ministry is proposing retaliatory steps, as “unanswered sanctions may whet appetites to impose new measures,” Deputy Foreign Minister Grigory Karasin told lawmakers.

Putin later said, though, that Russia “should refrain from reciprocal steps for now.” Russia is ready to work with Ukraine’s parliament, Foreign Minister Sergei Lavrov told lawmakers.

The EU said yesterday that Putin so far hasn’t crossed the destabilization threshold. Special trading relationships that several European countries have with Russia, coupled with the fallout from the debt crisis that came close to wrecking the euro, are frustrating a tougher response.

Sanctions require the agreement of all EU governments, a process that can’t match Putin’s speed in mobilizing troops, staging a secession referendum in Crimea and moving to annex the Black Sea peninsula.

Ethnic Russians

Putin says ethnic Russians in the region are at risk from the government in Kiev, a claim that Ukraine denies. Russia backs the recently appointed administration in Crimea that held the March 16 ballot, in which almost 97 backed joining Russia.

As he addressed lawmakers in Moscow on March 18, Putin blamed Western encroachment for forcing him to seize Crimea, describing his move as reversing a historic wrong. Yesterday, after signing legislation annexing the peninsula that’s home to Russia’s Black Sea fleet, he struck a celebratory note.

“I want to congratulate you, all the residents of the country, the citizens of the Russian Federation, residents of Crimea and Sevastopol, on this momentous event,” Putin said.

Acting Ukrainian President Oleksandr Turchynov said his country doesn’t accept Russia’s takeover and won’t allow Russian forces on its mainland. He said yesterday that Ukraine would submit a plan to demilitarize Crimea.

“Ukraine will do everything in order to free the occupied territories,” Turchynov told reporters in Kiev after a meeting with United Nations Secretary General Ban Ki-moon.

EU Accord

In Brussels, the EU and Ukraine sealed the political part of an association agreement. Rejection of that accord in November by Ukraine’s Moscow-backed former President Viktor Yanukovych triggered protests in Kiev that led to his ouster last month and sparked the confrontation with Russia.

German Chancellor Angela Merkel yesterday hailed the Brussels event as “a signal of solidarity” with Ukraine demonstrating “jointly held values.”

After the EU deal was signed, Ukrainian Eurobonds due in June extended the biggest weekly rally this year, gaining to 95.77 cents on the dollar at 3:52 p.m. yesterday in Kiev from 95.06 the previous day.

European leaders are vowing to wean the EU off oil and gas from Russia, echoing a pledge made in 2008 after Russia fought a five-day war with Georgia over a breakaway province.

The bloc relied on Russian suppliers for almost 32 percent of its gas imports and 35 percent of its oil imports in 2010, according to EU data. Interim Ukrainian Prime Minister Arseniy Yatsenyuk called for a reverse flow of natural gas from the bloc to his country.

“I do believe that we need to consider an energy independence of the entire European Union,” Yatsenyuk said in Brussels. “It’s essential for all of us to speak in one single voice, in order not to give anyone including Russia” a means “to use energy as a new nuclear weapon.”

© Copyright 2014 Bloomberg News. All rights reserved.

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