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Ukraine Sees More Russian Incursions as Standoff Worsens

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Photographer: Anatoly Medved/Demotix/Corbis

A protester demonstrates against the Russian military's actions in Crimea in St. Petersburg on March 3, 2014.

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Photographer: Anatoly Medved/Demotix/Corbis

A protester demonstrates against the Russian military's actions in Crimea in St. Petersburg on March 3, 2014. Close

A protester demonstrates against the Russian military's actions in Crimea in St. Petersburg on March 3, 2014.

Photographer: Etienne De Malglaive/Getty Images

A convoy of armoured personnel is seen in the evening 3km from Simferopol, Ukraine, where they were reportedly heading, on February 28, 2014. Close

A convoy of armoured personnel is seen in the evening 3km from Simferopol, Ukraine, where they were reportedly... Read More

Photographer: Mandel Ngan/AFP/Getty Images

Russia may lose its membership of the G-8, while the U.S. is considering imposing sanctions, U.S. Secretary of State John Kerry said yesterday. Close

Russia may lose its membership of the G-8, while the U.S. is considering imposing sanctions, U.S. Secretary of State... Read More

Photographer: Genya Savilov/AFP via Getty Images

A Russian flag flies in the foreground as armed men in uniform block a Ukrainian military base near the village of Perevalne. Close

A Russian flag flies in the foreground as armed men in uniform block a Ukrainian military base near the village of Perevalne.

Ukraine warned that Vladimir Putin’s military is strengthening its presence in Crimea amid the worst standoff between the West and Russia since the Cold War ended.

Russian servicemen confronted Ukrainian army units in the Black Sea district in the last 24 hours, while fighter jets violated airspace and more war ships arrived, border guards and the Defense Ministry said today. U.S. Secretary of State John Kerry is traveling to Kiev after discussing sanctions against Russia. European Union foreign ministers will meet in Brussels.

Crimea, where ethnic Russians comprise the majority, has become the focal point of Ukraine’s crisis after an uprising triggered last month’s ouster of President Viktor Yanukovych. Ukraine has mobilized its army and called for foreign observers after Russian forces took control of the peninsula. Russia raised its interest rates today as asset prices plummeted.

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“Russia would most likely like to maintain its pressure and this will continue to create tensions,” Nomura Holdings Inc. said in an e-mailed report. “We wouldn’t expect any military involvement outside the Crimean peninsula at this stage, but direct military action between Ukraine and Russia can’t be excluded.”

Ukraine’s hryvnia weakened 1.8 percent to 9.775 per dollar, while the yield on its dollar debt due 2023 jumped 103 basis points to 10.475 percent, data compiled by Bloomberg show.

IMF Mission

A Snapshot of Ukraine's Past and Future

An International Monetary Fund mission starts in Ukraine tomorrow, Managing Director Christine Lagarde said today in Bilbao, Spain. Ukraine, a key east-west transit nation for Russian energy, needs $15 billion in the next 2 1/2 years to stay afloat, Finance Minister Oleksandr Shlapak said March 1.

In a bid to shore up asset prices, Russia unexpectedly raised its benchmark interest rate by 150 basis points to 7 percent after leaving it unchanged since August 2012. Even so, the ruble weakened to a record low against the central bank’s basket, the Micex stock index tumbled the most since 2008 and the yield on 2017 bonds soared to the highest since last June.

Ukrainian Premier Arseniy Yatsenyuk yesterday urged Russian President Putin to pull back his military forces, warning that the two nations were “on the brink of disaster.” He reiterated calls today for a political solution, though said Russia is refusing to hold bilateral talks.

Troop Buildup

While Russia keeps its Black Sea fleet at the Crimean port of Sevastopol, Yuriy Sergeyev, Ukraine’s ambassador to the United Nations, said the number of Russian soldiers in Crimea is increasing “every hour.” Putin claims extremists orchestrated a coup to dislodge Yanukovych and says Russian speakers in Ukraine’s east and south need protection.

Ukraine’s acting President Oleksandr Turchynov told Russia March 1 that a military invasion would be an act of war, saying Putin has no reason to use force as Russians aren’t at risk.

EU and U.S. officials who’d been racing to secure billions of dollars of bailout cash for Ukraine’s new cabinet have been forced to switch their focus to averting a military conflict.

Kerry will travel to Kiev this evening, U.S. officials said. He said yesterday that Russia may lose its membership of the Group of Eight industrialized nations and raised the prospect of asset freezes, visa bans and trade disruptions.

G-7 leaders condemned Russia’s “clear violation” of Ukraine’s sovereignty in an e-mailed statement from the White House. U.K. Foreign Secretary William Hague today called the situation the “biggest crisis in Europe in the 21st century.”

G-8 Meeting

The leaders of Canada, France, Germany, Italy, Japan, the U.K. and U.S., along with the heads of the European Council and the European Commission said they wouldn’t resume preparations for the summit in Sochi, Russia, “until the environment comes back where the G-8 is able to have meaningful discussion.”

Putin agreed to create a group to begin dialog on Ukraine, according to a German government statement after a phone call between the Russian leader and Chancellor Angela Merkel, who called Russian intervention in Crimea unacceptable.

Russia doesn’t want a war and the situation “can normalize” if the new government “starts to resolve domestic problems in accordance with international law,” Deputy Foreign Minister Grigory Karasin told Russian state TV yesterday.

Sending foreign observers to Crimea may be destabilizing, Russia’s ambassador to the Organization for Security and Cooperation in Europe, Andrei Kelin, said today in Vienna.

Khrushchev Gift

Crimea was given to Ukraine by Russia in 1954 by then-Soviet leader Nikita Khrushchev. People who identified themselves as ethnic Russian comprise 59 percent of Crimea’s population of about 2 million, with 24 percent Ukrainian and 12 percent Tatar, according to 2001 census data. Russians make up 17 percent of Ukraine’s entire population of 45 million.

Emrullah Isler, deputy premier of Turkey, located across the Black Sea, said today that his government is working to protect the country’s ethnic brethren in Crimea. The region will hold a referendum to help determine its status on March 30.

In the port of Odessa, west of Crimea, about 10,000 people marched yesterday to vent their anger at Putin, while about 100 cars belonging to pro-Russia demonstrators sought to block access to the city’s army base, Ukraine’s Espresso TV reported.

On Kiev’s Independence Square, the center of the anti-government uprising that toppled Yanukovych, protesters yesterday carried British, French and German flags and held banners with slogans including: “Putin -- hands off Ukraine!”

UDAR Party leader Vitali Klitschko told the crowds that the new government remains committed to signing an EU association agreement, whose rejection by Yanukovych sparked the street demonstrations in November. Russia opposes the pact.

Pro-Kremlin Rally

About 50 people were detained yesterday in Moscow for public disturbances at unsanctioned anti-war rallies, Interfax reported, citing the police. A Kremlin-sanctioned march backing intervention in Ukraine drew 27,000 people, it said.

Russia’s actions in Ukraine continued to spark anger in Europe, where Polish Foreign Minister Radoslaw Sikorski labeled the situation as intolerable.

“Events in Crimea are a completely unprovoked, duplicitous armed intervention against a sovereign state,” he told reporters in Warsaw. “We know that predators grow hungrier as they eat and it’s up to the free world to oppose this logic.”

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Volodymyr Verbyany in Simferopol, Ukraine at vverbyany1@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; John Walcott at jwalcott9@bloomberg.net; James M. Gomez at jagomez@bloomberg.net

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