NATO to Discuss Ukraine as Russia Pulls Some Troops Back

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A woman and a child walk by a mural depicting Russian president Vladimir Putin in Simferopol, Crimea, on March 12, 2014. Close

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A woman and a child walk by a mural depicting Russian president Vladimir Putin in Simferopol, Crimea, on March 12, 2014.

NATO foreign ministers meet today to discuss their next steps after Russian President Vladimir Putin began withdrawing forces stationed on Ukraine’s border.

In the wake of Russia’s annexation of Crimea, the North Atlantic Treaty Organization will recommit to the defense of its eastern European allies and pledge long-term support for Ukraine at a meeting that starts at 1 p.m. in Brussels. Putin told German Chancellor Angela Merkel yesterday that he’d ordered a partial pullout of troops and Russia’s Defense Ministry said some were returning to their bases after drills.

Discussions between the top U.S. and Russian diplomats during the past two days have helped cool investors’ concerns over the Ukraine crisis, the worst standoff between Russia and NATO countries since the fall of the Soviet Union. The ruble gained for a second day to the highest since mid-February.

“If there was any geopolitical risk, it’s calmed down and we’re showing some economic momentum,” James Paulsen, chief investment strategist at Wells Capital Management, which manages about $360 billion, said yesterday by phone.

Putin told Merkel of the plans to pull back some troops in a phone call, the German leader’s office said in a statement in Berlin. The leaders also discussed “possible further steps to stabilize the situation in Ukraine and in Transnistria,” a breakaway pro-Russian region of Moldova on Ukraine’s southwest border, according to her office.

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A man stands near a trainload of modified T-72 Russian tanks at Gvardeyskoe railway station near the Crimean capital Simferopol, on March 31, 2014. Close

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A man stands near a trainload of modified T-72 Russian tanks at Gvardeyskoe railway station near the Crimean capital Simferopol, on March 31, 2014.

‘Constitutional Reforms’

The Russian president’s office said in a statement that the two leaders agreed to continue close cooperation, while saying that Putin stressed the need for “constitutional reforms” in Ukraine that would also reflect the interests of Russian speakers concentrated in the country’s east. Ukraine has spurned Kremlin demands that it grant its regions greater powers.

The ruble strengthened 0.1 percent to 35.09 per dollar by 1:07 p.m. in Moscow after advancing yesterday by the most since September 2012. That trims this year’s decline to 6.3 percent. The Micex Index fell 0.3 percent to 1,365.59 and has lost 9.2 percent in 2014.

In Russia, a motorized battalion was heading back to its headquarters in the Samara region on the Volga River after exercises near the Ukrainian border, the Interfax news service cited Russia’s Defense Ministry as saying.

Russia doesn’t pose a risk to Ukrainian statehood, Russian Defense Minister Sergei Shoigu said today in Tajikistan, the RIA Novosti news service reported.

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Soldiers of the newly founded Ukrainian National Guard take part in military exercises at a shooting range not far from Kiev on March 31, 2014. Close

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Photographer: Sergei Supinsky/AFP/Getty Images

Soldiers of the newly founded Ukrainian National Guard take part in military exercises at a shooting range not far from Kiev on March 31, 2014.

‘Welcome’ Step

A partial Russian withdrawal would be a “welcome preliminary step” if reports of the troop moves are accurate, U.S. State Department spokeswoman Jen Psaki said in an e-mail. Defense Secretary Chuck Hagel told reporters at the Pentagon he couldn’t confirm whether Russia is pulling its troops back.

In Washington, the U.S. House may vote as soon as today on a package of aid to Ukraine’s government. The measure, passed by the Senate last week, includes about $1 billion in loan guarantees and allows $150 million in direct assistance to Ukraine. It also would impose sanctions on Ukrainians and Russians deemed responsible for corruption and violence.

Shrugging off sanctions from the U.S. and its European allies, Putin has justified Russia’s takeover of Crimea as righting a historical wrong that split the region off from Russia when the Soviet Union collapsed.

OAO Gazprom, Russia’s natural-gas export monopoly, raised prices for Ukraine by 44 percent after a discount deal expired, heaping financial pressure on the government in Kiev as it negotiates international bailouts.

Kerry-Lavrov Call

U.S. Secretary of State John Kerry and his Russian counterpart, Sergei Lavrov, discussed Ukraine in a telephone call yesterday, the Russian Foreign Ministry said. Russia provided no details of the conversation, which took place a day after the two diplomats held four hours of talks in Paris.

At the meeting in Paris, the secretary of state demanded that Russia pull its forces back from the frontier, saying they were “creating a climate of fear and intimidation in Ukraine.”

Kerry, who’s scheduled to attend today’s NATO meeting after a stop in the Middle East, expressed concern that what the U.S. estimates to be 40,000 troops massing on Ukraine’s border may signal Russia is ready to invade.

“Any real progress in Ukraine must include a pullback of the very large Russian force,” Kerry told a news conference.

Common Ground

Lavrov said that while he and Kerry expressed differing views on the reasons behind the crisis, they were in agreement on “the need to seek common ground on the diplomatic path for an exit from this situation that will meet the interests of the Ukrainian people,” according to Russia’s Foreign Ministry.

Russian Prime Minister Dmitry Medvedev yesterday paid the first visit to Crimea by a top official since Putin annexed the Black Sea peninsula. He pledged to create a special economic zone in the region and to raise state salaries to the Russian average by July.

“No resident of Crimea or Sevastopol should lose anything as a result of joining Russia, they should only gain,” Medvedev told a government meeting in the Crimean capital, Simferopol.

Russia is in the process of granting citizenship and contracts to 7,800 Crimean military personnel who asked to join Russian forces, Deputy Defense Minister Nikolay Pankov said.

‘Defiant Provocation’

“We’re not forcing anyone,” Pankov said in an interview in Simferopol. “We’re not trying to convince anyone. We’re being genuine and respectful to everyone.”

Medvedev’s trip without the agreement of Ukraine is “a crude violation of the existing norms in international communication,” Ukrainian Foreign Ministry spokesman Yevhen Perebyinis said in televised remarks. The ministry will monitor “such defiant provocation and anti-Ukrainian steps by the Russian Federation,” he said.

Acting Ukrainian President Oleksandr Turchynov dismissed the Kremlin’s demands for more regional autonomy in his country. “Russia’s leaders should deal with the problems of the Russian Federation, not Ukraine’s problems,” he said in a statement on his website.

The U.S. and the European Union have vowed to intensify sanctions on Russia’s military, energy and financial industries if it pushes further into Ukraine.

U.S. officials stopped negotiations on agreement for implementation of U.S. Foreign Account Tax Compliance Act, Russia’s Vedomosti newspaper reported today, citing an unidentified federal official and a person close to the Kremlin. Talks with the U.S. on FATCA have been scaled back, Russian Finance Minister Anton Siluanov told reporters in Moscow.

To contact the reporters on this story: Ilya Arkhipov in Simferopol, Crimea, at iarkhipov@bloomberg.net; Henry Meyer in Moscow at hmeyer4@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Andrew Langley, Torrey Clark

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