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Russia Urges 'Emergency Steps' Over Ukraine After Rebel Losses

Wednesday, 28 May 2014 05:32 PM

(For more on the crisis in Ukraine, see EXT2.)

May 29 (Bloomberg) -- Russia called for unspecified “emergency” measures to halt the violence in eastern Ukraine after separatist militias suffered the heaviest casualties of their insurgency.

“It’s necessary to take emergency steps to stop the bloodshed and start an inclusive internal Ukrainian dialogue,” Foreign Minister Sergei Lavrov told his old German counterpart Frank-Walter Steinmeier by phone yesterday, according to the ministry’s website. “There’s no excuse” for military action in the southeastern part of the country, Lavrov said.

Ukraine stepped up air patrols over the eastern city of Donetsk yesterday as a convoy of pro-Russian rebels moved through the city with an anti-aircraft gun in tow, threatening renewed violence after dozens of militants were killed in a government operation to retake the area’s biggest airport.

Both sides suffered casualties as rebels stormed a National Guard base in Luhansk last night, the Interior Ministry said on its website, without further details.

President-elect Petro Poroshenko has vowed to wipe out the insurgents and re-establish order after winning office May 25. He’s faced with trying to stabilize an economy the European Bank for Reconstruction and Development expects to shrink 7 percent this year while reclaiming swaths of the Donetsk and Luhansk regions captured by pro-Russian militias.

Russia is reducing the number of soldiers stationed on its border with Ukraine to about 20,000 from about 50,000, the press service of Ukraine’s border guards said yesterday. The Russian troops are leaving behind military infrastructure, suggesting they may return, the service said.

‘Threatening, Capable’

Even so, a “threatening, capable” Russian force remains “poised along the Ukrainian border,” Col. Steve Warren, a spokesman for the Pentagon, told reporters yesterday.

The Foreign Ministry in Moscow said earlier yesterday that Russia is being asked to provide humanitarian aid to people in eastern Ukraine affected by the conflict. Russia wants Ukraine’s help delivering supplies across the border and expects “the fastest possible answer” to its proposal, the ministry said on its website.

Ukraine said thanks, but no thanks.

“We will consider it, but Ukraine doesn’t have a shortage of anything,” Yevhen Perebyinis, a spokesman for Ukraine’s Foreign Ministry, said by phone. “Pro-Russian militias aren’t allowing us to deliver goods. People can’t get salaries and pensions. State institutions can’t work because of them.”

Putin’s Call

Putin, who has repeatedly denied aiding the insurgency, told Italian Prime Minister Matteo Renzi in a phone call on May 27 that Ukraine’s military operations must stop. Lavrov repeated that position in a phone call with U.S. Secretary of State John Kerry, the Foreign Ministry in Moscow said yesterday.

“Russia’s goal was and is to keep Ukraine so unstable that we accept everything that the Russians want,” Poroshenko said in an interview with German newspaper Bild that was published yesterday. “I have no doubt that Putin can end the fighting with his direct influence.”

As the violence continued, Ukraine stopped short of accepting an EU proposal to reach a debt and price deal for natural gas from Russia and avert a threatened shutoff. Russia, the world’s largest supplier of the fuel, has twice cut gas flows to Ukraine since Putin came to power in 2000, leading to shortages throughout Europe.

Gas Plan

Under the EU plan, Ukraine’s state energy company, NAK Naftogaz Ukrainy, would pay Russian gas exporter OAO Gazprom $2 billion by May 30 and a further $500 million by June 7. That would partially cover Ukraine’s outstanding debt, which Gazprom Chief Executive Officer Alexey Miller said yesterday will reach $5.2 billion by June 7.

Ukraine’s government is “ready to clean the bill” and “pay the arrears” of its bill, Prime Minister Arseniy Yatsenyuk said in Berlin yesterday. The country is seeking a market-based price of $250-$350 per 1,000 cubic meters, he said.

Russia is ready to discuss the price and is willing to consider canceling a requirement for Ukraine to prepay for the fuel if the country pays Gazprom in accordance with a May 26 agreement, the Energy Ministry in Moscow said in an e-mailed statement.

“I hope that we won’t reach a situation where we have to move to prepayments,” Putin said in the Kremlin yesterday after Energy Minister Alexander Novak laid out a proposal to resolve the dispute.

Merkel Meeting

About 15 percent of Europe’s gas supply flows from Russia through Ukraine, which is counting on $17 billion from the International Monetary Fund to avoid bankruptcy. Ukraine, which gets half of its gas from Russia, will only start paying its debt after Gazprom agrees to cut its price, Interfax cited Energy Minister Yuri Prodan as reiterating late yesterday.

Gazprom raised the price it charges Ukraine by 81 percent to $486 per 1,000 cubic meters after Kremlin-backed President Viktor Yanukovych fled the country in February. Prodan said Ukraine is willing to pay $268.50, according to Interfax.

Yatsenyuk is scheduled to hold talks with German Chancellor Angela Merkel today in Berlin, where he’ll attend a conference on energy security.

“It is very possible that a deal will be struck by the weekend but threats are still being exchanged against a tense political backdrop,” said Chris Weafer, a founder of Macro Advisory in Moscow. “A gas deal or not will provide the clearest signal of the hoped-for pragmatic relationship between Russia and Ukraine and the start of an improvement in Moscow’s relationship with the EU.”

Sanctions ‘Reminder’

EU leaders meeting in Brussels on May 27 decided to put off further sanctions on Russia after Putin showed a willingness to work with Ukraine’s new leader and pulled back some troops from the border.

“The possibility of de-escalation is here, finally,” French President Francois Hollande told reporters after the summit ended. “But we still need this strict reminder.”

In their final statement, the leaders said the EU was working on “possible targeted measures” and agreed “to continue preparations” in case further steps are needed.

Since Putin annexed Ukraine’s southern Crimea region in March, the EU has blacklisted 83 Russian and Ukrainian officials and two companies.

President Barack Obama, who has imposed sanctions of his own on people close to Putin, called Poroshenko this week to congratulate him on his victory and offer “the full support of the United States as he seeks to unify and move his country forward,” according to an e-mailed statement from the White House. The two leaders agreed to continue talking when Obama visits Europe next week, according to the statement.

Smuggling, Abducting

Ukraine is pushing full-speed ahead with its operation to rid the country of insurgents, First Deputy Prime Minister Vitaliy Yarema said yesterday. “We’ll continue this operation until there are no terrorists on Ukraine’s territory.”

Border guards stopped four trucks laden with ammunition from entering the country from Russia two nights ago, Foreign Minister Andriy Deshchytsia said in an interview with Bloomberg TV in Kiev yesterday.

Deshchytsia also said authorities had located the four foreign election monitors who went missing late on May 26. The observers, from the Organization for Security and Cooperation in Europe, where abducted by “Russian Cossacks” and are being held in the Luhansk region, Deshchytsia said, declining to elaborate because talks on freeing them were continuing.

Poroshenko said after winning the election that government forces won’t quit until separatists are completely defeated.

“They won’t last two or three months,” the president- elect said. “They’ll last a few hours.”

--With assistance from Kateryna Choursina, Volodymyr Verbyany, Ryan Chilcote and Elizabeth Konstantinova in Kiev, Olga Tanas, Scott Rose and Elena Mazneva in Moscow, Terry Atlas in Washington, Ewa Krukowska and James G. Neuger in Brussels, Ott Ummelas in Tallinn and Leon Mangasarian and Brian Parkin in Berlin.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Daria Marchak in Kiev at dmarchak@bloomberg.net; Jake Rudnitsky in Donetsk, Ukraine at jrudnitsky@bloomberg.net To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net Brad Cook, Elizabeth Konstantinova

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Wednesday, 28 May 2014 05:32 PM
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