U.S., EU Mull Sanctions After Ukraine Protest Crackdown

Photographer: Viktor Drachev/AFP/Getty Images

Anti-Yanukovych protesters defend their barricades in front of anti-riot police at Independence Square in Kiev on Dec. 11, 2013. Close

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Photographer: Viktor Drachev/AFP/Getty Images

Anti-Yanukovych protesters defend their barricades in front of anti-riot police at Independence Square in Kiev on Dec. 11, 2013.

Ukraine’s government is facing increasing pressure as the U.S. is considering sanctions against the country in response to a crackdown on protesters, while European lawmakers ratcheted up their criticism of Russia.

The European Parliament today urged the European Union to “consider possible countermeasures” against Russia in the dispute. All policy options, including sanctions, “are on the table,” U.S. State Department spokeswoman Jen Psaki said yesterday in Washington.

The stakes have been raised for Ukrainian President Viktor Yanukovych, whose decision to pull out of an EU trade deal sparked mass demonstrations that have lasted three weeks. The opposition yesterday rejected an offer of a round-table meeting, saying the government must pledge not to use force, free dozens of detained protesters and punish those responsible for violence against them before negotiations can start.

“Obviously, sanctions may be damaging not just for Yanukovych, but also his personal surrounding and financial supporters and they would surely carry wight in their decision making,” Otilia Dhand, an analyst at political risk evaluator Teneo Intelligence, said by e-mail. “This is the first time the U.S. government has strongly weighed in on the situation, having previously left the matter to Brussels to deal with.”

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Anti-government protesters huddle under a makeshift shelter built into a barricade to block the street near Independence Square in Kiev on Dec. 11, 2013. Close

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Photographer: Brendan Hoffman/Getty Images

Anti-government protesters huddle under a makeshift shelter built into a barricade to block the street near Independence Square in Kiev on Dec. 11, 2013.

The yield on Ukraine’s dollar-denominated notes due in 2023 declined to 10.33 percent at 3:39 p.m. in Kiev, the lowest since the Nov. 30 police crackdown on protesters, from 10.408 yesterday, according to data compiled by Bloomberg. The hryvnia weakened 0.2 percent to 8.28 per dollar, a two-month low.

EU Measures

The EU should consider measures that it can evoke “when Russia breaks World Trade Organization trade rules for short-sighted political ends,” the European Parliament said today in a non-binding resolution. The trading bloc needs “to react when it or its partner countries come under political and economic pressure.”

U.S. Defense Secretary Chuck Hagel called on his counterpart in Kiev, Pavlo Lebedyev, to avoid involving the military. Lebedyev told him that Yanukovych’s position is to not deploy troops in confrontations against the protesters, according to a statement from the Pentagon.

Barring a “dramatic political move” such as calling early elections, “Yanukovych is now down to two simple choices, either to accept a deal with the EU/IMF or accept what has been tabled by Russia,” according to Chris Weafer, a senior partner at Moscow-based Macro Advisory.

“Either choice will lead to a much more divided Ukraine and almost kill off any chance for his re-election in February 2015,” he said today in an e-mailed report.

‘Confrontation, Ultimatums’

Yanukovych asked the opposition not to follow “the path of confrontation and ultimatums,” urging a national dialog that also includes clergy and civil society activists, according to an e-mailed address yesterday.

Hundreds of riot police with shields flooded into a camp built by protesters in the early hours yesterday and were met by crowds of people in orange helmets, with some scuffles breaking out. City workers used bulldozers and chainsaws to help clear makeshift wooden and metal defenses.

Clashes during the raid and a standoff at City Hall with demonstrators sent 42 people to seek medical aid and 20 to hospital, the Kiev government said yesterday.

Activists rebuilt their wooden and metal barriers yesterday, shoring them up with sandbags and mounds of snow. About 20,000 people gathered to protect the camp during the night, according to Interfax news service. The Interior Ministry said it was 5,000.

Economy Focus

Yanukovych on Dec. 10 sought to switch the focus to the shrinking economy after First Deputy Prime Minister Serhiy Arbuzov said at least $10 billion was needed to avoid a default.

EU foreign policy chief Catherine Ashton repeated today in Brussels that Yanukovych had “made it clear to me that he intends to sign the Association Agreement” in a meeting they had during her two-day visit to Kiev that ended yesterday.

Yanukovych said Dec. 10 that he intended to sign the EU accord at a March meeting and restart talks with the International Monetary Fund if “conditions are acceptable.”

A letter from the Washington-based lender outlining conditions for a bailout loan was the “last straw” that led to its decision to pull out of the EU negotiations last month, the government said Nov. 22. The administration has repeatedly refused IMF conditions of budget consolidation and utility price increases in exchange for a deal.

EU Aid

Ukraine is seeking 20 billion euros ($27.6 billion) in financing from the EU, Prime Minister Mykola Azarov said yesterday at a government meeting. Yanukovych has no plans to sign up to a Russia-led customs bloc at a Dec. 17 trip to Moscow, he said.

Speculation at the weekend that a deal with Russia was close fired up a rally that drew about 500,000 people, local media estimated. Ukraine’s interest will grow in the Customs Union as it expands, President Vladimir Putin said today.

The choice between closer ties with Russia or the EU is Ukraine’s and Russia will support “any decision” it makes, Russia’s First Deputy Prime Minister, Igor Shuvalov, said in an interview with state television.

“As far as we understand, we all are interested in the events in Ukraine coming to an end peacefully,” Shuvalov said yesterday in Washington, according to state news service RIA Novosti. “No one wants an escalation.”

To contact the reporters on this story: Ilya Arkhipov in Kiev at iarkhipov@bloomberg.net; Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net

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