Ukraine Warns of Russia Troop Buildup as Premier Meets Obama

March 12 (Bloomberg) -- Alexander Kliment, a director at Eurasia Group, and Jim O'Neill, Bloomberg View columnist and former chairman of Goldman Sachs Asset Management, talk about the outlook for U.S. President Barack Obama’s meeting with Ukrainian Prime Minister Arseniy Yatsenyuk in Washington today and Germany's stance on the crisis in Ukraine. They speak with Tom Keene, Adam Johnson and Scarlet Fu on Bloomberg Television's "Surveillance." (O'Neill is a Bloomberg View columnist. The opinions expressed are his own. Source: Bloomberg)

Ukraine warned Russia is amassing troops near its border as Prime Minister Arseniy Yatsenyuk visits Washington to step up the search for financial aid.

Russian forces, who’ve already seized control of the Crimean peninsula, continue to deploy along Ukraine’s eastern frontier and are “constantly increasing their presence,” First Deputy Premier Vitaliy Yarema told the government in Kiev. Yatsenyuk, whose cash-strapped nation needs as much as $15 billion in loans, will meet President Barack Obama today.

Russia’s takeover of Crimea, home to its Black Sea Fleet, has sparked the worst crisis with the West since the Cold War as the European Union and the U.S. try to use sanctions to force President Vladimir Putin to retreat. Russia’s incursions may spread to Ukraine’s east, according to Amanda Paul, an analyst and program executive at the European Policy Centre.

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“With Crimea apparently well under Russia’s control, it can now play around with the east,” she said by e-mail from Brussels. “Ukraine seems to be doing its best not to be provoked by Russian aggression. But it’s like having your house robbed and having to stand and watch without doing anything.”

Putin spokesman Dmitry Peskov today declined to comment on the Ukrainian claims of a military buildup.

Photographer: Spencer Platt/Getty Images

Russian paramilitaries stand guard outside a Ukrainian military base in the town of Perevevalne near the Crimean city of Simferopol on March 11, 2014 in Perevevalne, Ukraine. Close

Russian paramilitaries stand guard outside a Ukrainian military base in the town of... Read More

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Photographer: Spencer Platt/Getty Images

Russian paramilitaries stand guard outside a Ukrainian military base in the town of Perevevalne near the Crimean city of Simferopol on March 11, 2014 in Perevevalne, Ukraine.

The Russian leader says ethnic Russians in Crimea are at risk after an uprising in Kiev toppled Moscow-backed President Viktor Yanukovych, an assertion Ukraine’s new leaders deny. Putin supports Crimea’s recently appointed administration, which has organized a March 16 referendum on joining Russia.

‘Clear Orders’

Crimean Prime Minister Sergei Aksenov said in an interview today that the southern region could be integrated into Russia within two months if voters back the move in the weekend ballot.

“Procedures to join Russia are now being widely discussed by parliament groups and with” Russian lawmakers, Aksenov said in Simferopol. “It wouldn’t take more than two months.”

World leaders sought to increase pressure on Putin. German Chancellor Angela Merkel said European sanctions were “unavoidable” unless Russia moved to reduce tensions in Crimea. French President Francois Hollande told Putin the referendum planned for Crimea had no legal basis, according to a statement from the Elysee Palace.

In Washington, U.S. Secretary of State John Kerry said at a congressional hearing that he’d travel to London tomorrow for a meeting with his Russian counterpart, Sergei Lavrov, to seek a way forward. Sanctions on Russia could “get ugly fast” if events justified them, Kerry said.

Photographer: Filippo Monteforte/AFP via Getty Images

Soldiers patrol on board the Slavutich Ukrainian navy ship anchored at the harbor of Sevastopol on March 11, 2014. Close

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Photographer: Filippo Monteforte/AFP via Getty Images

Soldiers patrol on board the Slavutich Ukrainian navy ship anchored at the harbor of Sevastopol on March 11, 2014.

Border Buildup

Crimea’s isolation from Ukraine has intensified. Kiev’s Boryspil airport said today on its website that Simferopol, the southern region’s capital, has canceled flights linking the two cities until the day after the referendum.

Russian forces control the roads leading to the peninsula and have also taken charge of a ferry crossing at Kerch and blocked harbors, according to Ukrainian border guards. More than 100 Russian military trucks, armored personnel carriers and rocket launchers had been sent to Crimea, the border service said today.

Russia’s military is “acting on clear orders to undermine Ukraine forces in Crimea,” Philip Breedlove, NATO’s top commander, said in a statement posted yesterday on the North Atlantic Treaty Organization’s website.

Ukraine’s military began drills March 10 to test combat readiness, with infantry, tanks and artillery participating in exercises yesterday in the eastern Kharkiv region, where pro-Russian demonstrators have rallied.

Kerry, UN

Russia considers the exercises “risky,” Interfax reported today, citing Deputy Defense Minister Anatoly Antonov.

Photographer: Filippo Monteforte/AFP via Getty Images

Russian military vehicles stand on the main road in Sevastopol. Close

Russian military vehicles stand on the main road in Sevastopol.

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Photographer: Filippo Monteforte/AFP via Getty Images

Russian military vehicles stand on the main road in Sevastopol.

Yatsenyuk, 39, arrives in the U.S. with Ukraine racing to secure cash to repay billions in foreign debt after investors withdrew funds and central bank reserves plummeted. As well as Obama, he’ll meet Kerry before traveling to New York tomorrow to address the United Nations Security Council.

Obama has talked with Putin directly at least three times since the crisis erupted, urging him to accept a plan involving international mediation and the return of Russian troops to their base in Crimea. The Pentagon said today it would send 12 F-16 aircraft to Poland by the end of the week to demonstrate its commitment to defend its allies in the region.

Ukrainian government debt fell for a sixth day today, with the 2014 note dropping 1 percent to 91 cents on the dollar and heading for a record low. The hryvnia, which has slumped 11.9 percent this year, was 1.7 percent weaker at 9.38 per dollar.

Aid ‘Illegal’

The U.S. has pledged $1 billion in loan guarantees to Ukraine, while the EU has outlined an 11 billion-euro ($15 billion) package of loans and grants for the coming years tied to the country agreeing on a program from the International Monetary Fund, which sent a mission to Kiev last week.

“The EU will open its doors to exports from Ukraine,” European Trade Commissioner Karel De Gucht told reporters yesterday in Strasbourg, France. This “is more than a gesture, it is an economic lifeline.” The EU has had 610 million euros ready to go as soon as Ukraine reaches an accord with the IMF.

The World Bank said March 10 it’s ready to provide Ukraine with as much as $3 billion in 2014 after getting an aid request.

Russia’s Foreign Ministry yesterday called possible U.S. financial assistance to Ukraine illegal, saying support would violate American law barring aid to any regime that uses force to take power. Russia considers Yanukovych’s ouster a coup, a claim the U.S. rejects.

Change Course

The U.S. and the U.K. are among Western governments threatening repercussions unless Putin pulls back troops in Crimea and begins talks with Ukraine’s new government.

Yet pro-Russian authorities in Crimea are digging in. Aksenov said further details on the timetable and mechanism for the region to join Russia following a vote in favor could come tomorrow.

The people of Crimea, where ethnic Russians represent about 60 percent of the population, fully support joining Russia, he said, citing a local poll predicting that the move will be backed by 80 percent in the referendum. Crimea was part of Russia until 1954 when it was transferred by Soviet leader Nikita Khrushchev to Ukraine.

“People have very strong patriotic feelings; they all want this accession,” said Aksenov. “They support us and we feel this support.”

Travel Bans

Germany warned Russia yesterday it must switch course by next week or risk more sanctions and urged the cancellation of the Crimean referendum. The EU will discuss harsher penalties on March 17 barring “obvious changes in Russia’s actions,” German Foreign Minister Frank-Walter Steinmeier said in Estonia.

The EU announced a three-stage sanctions process against Russia last week, starting with the suspension of trade and visa-liberalization talks. Stage two includes asset freezes and travel bans for as-yet unidentified officials and would be imposed if Russia boycotts international talks on a settlement. Stage three envisages “additional and far-reaching consequences” if Russia further destabilizes Ukraine.

Britain hosted a meeting yesterday to compile a list of people who could be hit by sanctions. The U.S. banned visas for Russian officials and others it said were complicit in violating Ukraine’s sovereignty. Obama also authorized financial measures.

“We will be pushing for those travel bans to include some prominent Russian members of parliament,” U.K. Premier David Cameron told reporters today. “The criteria is people who’ve been pushing for the unacceptable steps that have been taken.”

To contact the reporters on this story: Kateryna Choursina in Kiev at kchoursina@bloomberg.net; Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net; Helena Bedwell in Tbilisi at hbedwell@bloomberg.net

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

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