Ukraine Separatists Hold Ground as U.S. Eyes Sanctions

April 21 (Bloomberg) -- Deadly shootouts in eastern Ukraine during the weekend led to renewed calls in the U.S. for economic sanctions against Russia as a diplomatic accord showed little sign of defusing the crisis. Peter Cook reports on Bloomberg Television's “In The Loop.” (Source: Bloomberg)

Deadly shootouts in eastern Ukraine during the weekend led to renewed calls in the U.S. for economic sanctions against Russia as a diplomatic accord showed little sign of defusing the crisis.

Ukrainian and Russian officials traded accusations about responsibility for the attacks, undermining last week’s agreement in Geneva, which called for all illegal groups to disarm and for seized buildings to be evacuated.

With pro-Russian forces holding their ground in several eastern cities, Ukraine has accused Russia of fomenting unrest and exploiting violence to prepare an invasion. Russian Foreign Minister Sergei Lavrov blamed Ukrainian extremists for pushing the nation toward civil war and urged the U.S. to hold the government in Kiev accountable for observing the Geneva accord.

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“I see this as a creeping destabilization,” Angela Stent, director of the Center for Eurasian, Russian and East European Studies at Georgetown University in Washington, said in an interview yesterday. “I’m not sure it’s a civil war yet, but the pre-conditions for a civil war are there.”

Violence, Skepticism

The weekend of violence added to skepticism about whether Ukraine, the U.S. and the European Union will be able to use the April 17 Geneva accord to hold Vladimir Putin accountable for easing tensions that the Russian president says he had no role in creating.

Photographer: Genya Savilov/AFP via Getty Images

An armed pro-Russian protester guards a barricade outside the regional state building seized by the separatists, in the eastern Ukrainian city of Slavyansk, on April 18, 2014. Close

An armed pro-Russian protester guards a barricade outside the regional state building... Read More

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Photographer: Genya Savilov/AFP via Getty Images

An armed pro-Russian protester guards a barricade outside the regional state building seized by the separatists, in the eastern Ukrainian city of Slavyansk, on April 18, 2014.

Russia is getting increasing requests to intervene in eastern Ukraine to protect Russian speakers, Lavrov said today. He called on the U.S. to avoid threats of sanctions, while accusing the Ukrainian authorities of failing to uphold the Geneva agreement.

At least three “activists” were shot to death in a clash at a roadblock in Slovyansk in eastern Ukraine yesterday, the Interior Ministry said. Three other people were injured, the ministry said on its website. The assailants took “wounded and killed along with them,” it said, without providing details. Ukraine’s Security Service said saboteurs carried out the assault.

“This is a crime carried out by those who want to abort the implementation of the Geneva agreement,” Lavrov said today in Moscow. “Everything points to the fact that the Kiev authorities either don’t want to or can’t control the extremists.”

Ukrainian Nationalists

Russia’s Foreign Ministry blamed the Ukrainian nationalist group Pravyi Sektor for the attack -- an allegation that Pravyi Sektor denied in a statement. Viktoria Syumar, first deputy head of the National Security and Defense Council in Kiev, said on her Facebook page that Russia’s accusation and statements show it is preparing grounds to invade Ukraine.

Photographer: Ilya Pitalev/Kommersant Photo via Getty Images

Armed pro-Russian activists march on April 18, 2014 in Kramatorsk, Ukraine. Close

Armed pro-Russian activists march on April 18, 2014 in Kramatorsk, Ukraine.

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Photographer: Ilya Pitalev/Kommersant Photo via Getty Images

Armed pro-Russian activists march on April 18, 2014 in Kramatorsk, Ukraine.

Unrest in Ukraine

Ukraine’s hryvnia strengthened 1.1 percent today to 11.1730 against the dollar, extending last week’s 12 percent rally, according to data compiled by Bloomberg.

Russia’s Micex Index snapped three days of gains, falling 0.7 percent to 1,347.09 as of 1:52 p.m. in Moscow. The ruble weakened 0.1 percent versus the central bank’s target dollar-euro basket to 41.7961. Ruble-denominated government bonds due February 2027 retreated for the first time in four days, lifting the yield three basis points, or 0.03 percentage point, to 9.03 percent.

Seeking ‘Extermination’

Ukrainian Prime Minister Arseniy Yatsenyuk called Russia a “threat to the globe” in an interview on NBC’s “Meet the Press” program over the weekend. “If Russia pulls back its security forces and former KGB agents, this would definitely calm down the situation and stabilize the situation in southern and eastern Ukraine,” he said.

The country’s acting president, Oleksandr Turchynov, accused Putin of seeking the “extermination of independent Ukraine,” a charge Russia denies.

Turchynov, speaking on the Ukraina television channel yesterday, said his government is willing to increase the autonomy of local regions, including “appointing governors proposed by residents of Donetsk, Luhansk regions” in the restive East. Yet those offers have done little to quell the violence.

Unidentified people attacked Ukrainian marines at a roadblock near Dobropillya in the Donetsk region, the Defense Ministry said late yesterday on its website. One attacker was injured and two were detained, according to the statement.

U.S. Sanctions

As the violence continues, the U.S. President Barack Obama’s administration is facing growing pressure to impose broader economic sanctions on Russia. Two members of the Senate Foreign Relations Committee urged the imposition of sanctions on Russia’s banking and energy sectors yesterday.

“I think the time is now to rapidly ratchet up our sanctions, whether it’s on Russian petrochemical companies or on Russian banks,” said Democratic Senator Chris Murphy of Connecticut, on “Meet the Press.”

Senator Bob Corker of Tennessee, the top-ranking Republican on the committee, said on the same program yesterday the administration should impose sanctions on Russia’s energy and banking industries unless there’s an immediate withdrawal of Russian troops from the Ukraine border.

“Our foreign policy is always a day late and a dollar short because we’re reacting,” Corker said.

‘Further Costs’

In announcing the Geneva accord last week, U.S. Secretary of State John Kerry said, “if we’re not able to see progress on the immediate efforts to be able to implement the principles of this agreement this weekend, then we will have no choice but to impose further costs on Russia.”

Russia’s ambassador to the U.S., Sergei Kislyak, said new economic sanctions against his country would amount to “the revival of the Cold War mentality” and would be counter-productive.

“We can withstand pressures,” Kislyak said on “Fox News Sunday” yesterday. Claims that Putin seeks to restore the former Soviet Union are “a false notion” and Russia seeks only to ensure that Ukraine becomes “a country that is democratic, that supports the rights of all the ethnic groups, including certainly Russia’s, and we want to have a friendly neighbor,” Kislyak said.

Nothing has been done to implement the Geneva agreement, said Stent, author of a new book on U.S.-Russian relations called “The Limits of Partnership.”

‘Political Paralysis’

“I see nothing that persuades me that anyone will be able to dislodge these people,” Stent said of the pro-Russia separatists who occupied government buildings in the Russian-speaking East.

Any civil war likely would be confined to those eastern towns, where the separatist movement is based, she said.

“It’s not a large-scale civil war, but it’s political paralysis because nothing’s going to move forward,” she said.

Geoffrey Pyatt, the U.S. ambassador to Ukraine, said he’s hopeful that Ukraine can avoid a civil war.

“What I hear from Ukrainians across the board, and especially on this Easter holiday, is a desire to bring everybody together,” Pyatt said on CNN’s “State of the Union” program yesterday.

“There are obviously efforts from small, isolated groups to stir division,” Pyatt said. “But that’s not what I hear from most Ukrainians, including, I should add, Ukrainians in the East.”

Separatists who stage demonstrations and take over government buildings don’t represent the majority of Ukrainians, he said. “We’re really just talking about a couple of hundred of people at most of these sites.”

To contact the reporters on this story: Kateryna Choursina in Kiev at kchoursina@bloomberg.net; David Lerman in Washington at dlerman1@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net; James M. Gomez at jagomez@bloomberg.net Torrey Clark, Scott Rose

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