Russia Stands Fast on Crimea as Ukraine Boosts Defenses

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The Ukrainian warship Ternipol sits anchored in Sevastopol on March 10, 2014. Close

The Ukrainian warship Ternipol sits anchored in Sevastopol on March 10, 2014.

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Photographer: Sean Gallup/Getty Images

The Ukrainian warship Ternipol sits anchored in Sevastopol on March 10, 2014.

Russia showed no signs of yielding in the Crimea standoff as Ukraine bolstered its defenses before its prime minister meets U.S. President Barack Obama tomorrow.

In addition to testing its military’s combat readiness, Ukraine may mobilize 20,000 people to protect borders, Interior Minister Arsen Avakov said today. Russia has vowed to defend the ethnic Russians who dominate the Crimean peninsula after an uprising unseated Ukraine’s Moscow-backed leader. It rejects the legitimacy of the new cabinet in Kiev.

Ukrainians “are hoping for the best but preparing for the worst,” said Arseniy Svynarenko, a lecturer at the University of Helsinki. “If there’s violence, they need to be able to put forces on the border and to move in quickly. The worst-case scenario is separatists trying to escalate the crisis.”

More on the Crisis in Ukraine:

Russia is wresting Crimea, home to its Black Sea Fleet, from Ukraine following last month’s ouster of President Viktor Yanukovych. Ukraine says its neighbor has almost 19,000 soldiers in the region, which will vote on joining Russia on March 16. The confrontation is the worst between Russia and the West since the Cold War, with the European Union and the U.S. threatening to tighten sanctions if Russia fails to defuse tensions.

Photographer: Filippo Monteforte/AFP/Getty Images

Pro-Russian forces dubbed the "military forces of the autonomous republic of Crimea" attend their swearing-in ceremony in the military enlistment complex in Simferopol on March 10, 2014. Close

Pro-Russian forces dubbed the "military forces of the autonomous republic of Crimea"... Read More

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Photographer: Filippo Monteforte/AFP/Getty Images

Pro-Russian forces dubbed the "military forces of the autonomous republic of Crimea" attend their swearing-in ceremony in the military enlistment complex in Simferopol on March 10, 2014.

National Guard

Ukraine may “in nearest future” create a National Guard to secure the nation’s borders and help keep order, Avakov said via Facebook Inc. The move would provide a non-military “answer to destabilization in the country,” according to the minister, who said Ukraine had detained a Russian intelligence officer yesterday in the eastern city of Donetsk.

Triggering the Standoff in Ukraine

In Ukraine, the government dispatched troops yesterday to training grounds after alleging that Russian soldiers seized a missile unit at Chornomorskoe in Crimea. Ukraine’s border service said Russian forces now control 13 border bases and the ferry crossing across the Kerch Strait to Russia.

Russian soldiers opened fire with automatic weapons in an attempt to capture a Ukrainian motorized battalion near the southern Crimean town of Bakhchisaray, Russia’s Interfax news service reported, citing an unnamed representative of the Ukrainian battalion’s command. There were no injuries, Interfax said. A Ukrainian Defense Ministry spokesman said a lieutenant colonel from a battalion in the town had defected.

‘Coup’ Recognition

Russian Foreign Minister Sergei Lavrov yesterday faulted a U.S. plan for easing the crisis that he said would have required recognizing the ouster of Yanukovych, who’s speaking today at 1 p.m. local time in the Russian city of Rostov-on-Don.

“Our partners are proposing, it seems, that we take the situation that the coup d’etat has created as the starting point,” Lavrov said at a meeting with President Vladimir Putin in the southern Russian resort of Sochi.

Lavrov said U.S. Secretary of State John Kerry postponed a visit to Russia to discuss the standoff, while Russia has drawn up its own proposals in response to those offered by Kerry last week. The Russian ideas would take into account the interests of “all Ukrainians without exception,” Lavrov said.

Ukraine’s interim prime minister, Arseniy Yatsenyuk, who meets with Obama in Washington, said in a statement that his country may hold a dialogue about more rights and powers for Crimea, though not “under muzzles of Russian guns.”

‘Illegal Referendum’

Western governments including the U.S. and U.K. are urging Russia to pull back troops and hold direct talks with Ukraine. U.K. Prime Minister David Cameron, who held talks with German Chancellor Angela Merkel on March 9 in Hanover, Germany, called on Russia to “resolve the crisis diplomatically.”

Cameron told U.K. lawmakers yesterday that he and Merkel “were clear that any attempt by Russia to legitimize an illegal referendum would require us to respond by ratcheting up the pressure further.” He said Britain is hosting a meeting today with officials from other western nations to compile a list of people who could be hit by sanctions including asset freezes and travel bans if Russia doesn’t co-operate.

Residents of Crimea will be given the choice between Russian and Ukrainian passports if the peninsula votes to join Russia, Ria Novosti reported, citing Crimean Premier Sergey Aksenov. The region will have two official languages, Russian and Crimean Tatar, he said.

In Crimea and Donetsk, Ukraine’s most pro-Russian regions, 41 percent and 33 percent of voters respectively support union with Russia, a Feb. 8-18 poll by Ukraine’s Democratic Initiative Foundation showed. About 12 percent of all Ukrainians want to join Russia, according to the survey of 2,032 people, with most of those in favor more than 50 years old. The poll had a margin of error of 2.2 percentage points.

French Warning

European sanctions would follow any annexation of Crimea, French Foreign Minister Laurent Fabius said today on France Inter radio. The only valid elections are those to pick a new president on May 25, he said.

As the standoff continued, the World Bank said yesterday it had received a request for aid from Ukraine and that it was ready to provide as much as $3 billion this year. World Bank President Jim Yong Kim said the Washington-based lender would help the new government “undertake the reforms badly needed to put the economy on a path to sustainability.”

Former Yukos Oil Co. owner Mikhail Khodorkovsky, who spent 10 years in jail in Russia for tax evasion and fraud before being pardoned by Putin in December, yesterday urged the West to provide financial aid to Ukraine as security against Russia.

Marshall Plan

“What is needed is a Marshall Plan for Ukraine,” he said, referring to the post-World War II aid program intended to bolster economies and fight Soviet communism.

In Washington, the Senate Foreign Relations Committee delayed consideration of a Ukraine aid plan amid disagreement over whether it will also boost resources for the International Monetary Fund, as the Obama administration has proposed. The panel plans to take the measure up tomorrow instead of today.

Obama has proposed increasing the U.S. share at the Washington-based IMF by shifting about $63 billion from an existing credit line. The Treasury Department says the move would help bolster the Ukrainian government. The Republican-led House didn’t include the IMF provision in a bill passed March 6 to provide about $1 billion in loan guarantees to Ukraine.

The yield on Ukrainian government Eurobonds due 2023 rose 20 basis points yesterday to 10.35 percent, the highest in five days. The hryvnia was little changed at 9.2325 per dollar. The currency has slumped 10.8 percent this year.

In New York yesterday, the United Nations Security Council held a closed-door session on the crisis. UN Under-Secretary-General for Political Affairs Jeffrey Feltman told members that “there was no threat to the Russian minority” as Russia has asserted in justifying its intervention, U.K. Ambassador to the UN Mark Lyall Grant said after the meeting.

Monitors from the Organization for Security and Cooperation in Europe have been denied entry into Crimea and shots have been fired to deter their movements, he said.

“In fact tensions had increased between the different communities in Crimea because of the actions of the Russian military,” Lyall Grant said.

To contact the reporters on this story: Kateryna Choursina in Kiev at kchoursina@bloomberg.net; Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net; Jake Rudnitsky in Kiev at jrudnitsky@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez in Prague at jagomez@bloomberg.net Michael Shepard, Larry Liebert

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