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Putin Warns of Consequences as Ukraine Steps Up Offensive

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Photographer: Kirill Kudryavtsev/AFP via Getty Images

Ukrainian special forces take position in the eastern Ukrainian city of Slavyansk on April 24, 2014.

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Photographer: Kirill Kudryavtsev/AFP via Getty Images

Ukrainian special forces take position in the eastern Ukrainian city of Slavyansk on April 24, 2014. Close

Ukrainian special forces take position in the eastern Ukrainian city of Slavyansk on April 24, 2014.

A member of the Ukrainian special forces takes position at an abandoned roadblock in the eastern Ukrainian city of Slavyansk on April 24, 2014. Kirill Kudryavtsev/AFP via Getty Images Close

A member of the Ukrainian special forces takes position at an abandoned roadblock in the eastern Ukrainian city of... Read More

Photographer: Kirill Kudryavtsev/AFP via Getty Images

A member of the Ukrainian special forces takes position at an abandoned roadblock in the eastern Ukrainian city of Slavyansk on April 24, 2014. Close

A member of the Ukrainian special forces takes position at an abandoned roadblock in the eastern Ukrainian city of... Read More

Photographer: Kirill Kudryavtsev/AFP/Getty Images

Ukrainian special forces take position in the eastern Ukrainian city of Slavyansk on April 24, 2014. Close

Ukrainian special forces take position in the eastern Ukrainian city of Slavyansk on April 24, 2014.

President Vladimir Putin warned Ukraine against continuing its anti-separatist offensive after government troops killed five rebels and prompted Russia’s military to begin new drills on the two nations’ border.

“If it’s true that the current regime in Kiev sent the army against citizens inside its country, then it is a very serious crime against its own nation,” Putin said today in St. Petersburg. “It will have consequences for the people who make such decisions, including relations between our countries. We’ll see how the situation develops and we’ll make conclusions based on the reality on the ground.”

Ukrainian Interior Ministry and army troops destroyed three road blocks as they fought pro-Russian separatists in the Donetsk region city of Slovyansk, the ministry said today on its website. Russia’s latest drills are a response to events in eastern Ukraine and involve warplanes near the border, Defense Minister Sergei Shoigu said, according to Interfax.

Full coverage of the Crisis in Ukraine:

An agreement to disarm rebels signed last week in Geneva by Ukraine, Russia, the European Union and the U.S. is on the brink of collapse. President Barack Obama said today the U.S. and its allies have additional sanctions against Russia ready to go because Putin’s government has yet to abide by the accord.

Russia’s Micex Index (INDEXCF) fell for a fourth day, losing 2.2 percent and taking its decline since Putin’s intervention in Crimea started March 1 to 10 percent.

IMF Loan

After rallying on the prospect of an International Monetary Fund loan, Ukrainian bonds fell. The Washington-based lender’s staff endorsed a $17 billion bailout that may get board approval April 30, according to government officials. The yield on the government’s dollar-denominated note due April 2023 rose 0.03 percentage point to a month-high 10.09 percent.

A Snapshot of Ukraine's Past and Future

“Ukraine is at risk of a foreign invasion, or a civil war, or both at the same time,” Czech President Milos Zeman said today at a meeting of east European leaders in Prague. “The older among us experienced something similar about 20 years ago in Yugoslavia.”

After an operation to rein in the separatists resumed this week, Ukrainian Interior Minister Arsen Avakov said security forces cleared the mayor’s office in Mariupol, less than 60 kilometers (37 miles) from the Russian border. There were no casualties, he said on his Facebook page.

Ukrainian troops also repelled an attack by about 70 gunmen on a military base in Artemivsk, north of Donetsk, during the night, Avakov said. One soldier was wounded.

‘Successful’ Operation

Acting Ukrainian president Oleksandr Turchynov called the operation to counter the separatists “successful” and said it would continue. In a live television address, he urged Russia to pull back its forces from his nation’s border.

“Russia has switched from public threats to concentrating its forces on our eastern border,” Turchynov said. “There’s an increasing number of troops, who’ve been threatening our country for some time.”

Deputy Foreign Minister Danylo Lubkivsky said in Washington that while a Russian invasion is possible, Ukraine is prepared. The ministry later said Russia should explain its latest military drills in the next 48 hours.

An attack on a Russian citizen is an attack against Russia and “if we’re attacked, we’d certainly respond,” Russian Foreign Minister Sergei Lavrov said yesterday in an interview with state-run broadcaster RT. Speaking in Moscow today, he called on Ukraine to pull back its army, stop “illegal actions” and disarm the nationalist Pravyi Sektor group.

‘Serious Question’

The offensive in the east is “criminal” and raises a “very serious question” about planned May 25 presidential elections called to help end the nation’s political crisis, Putin’s spokesman Dmitry Peskov said in St. Petersburg.

Turning up the economic heat on Ukraine, Russia’s state-run OAO Gazprom presented the nation with an additional $11.4 billion bill for gas it promised to buy last year.

The U.S. has been preparing for the prospect of further sanctions against Russia, Obama said today.

Russia has yet to act in the spirit or the letter of the Geneva agreement, and if there’s no progress in the coming days, “we will follow through,” he told a news conference in Tokyo. All that’s required is some “technical work” and coordination with allies, he said.

The U.S. joined the EU in imposing sanctions after Russia annexed Crimea from Ukraine last month. “Already you’ve seen a whole lot of money and investors leave Russia,” Obama said.

‘Legitimate Actions’

French President Francois Hollande told reporters in Paris that unless the Geneva deal was implemented fully, “we would by necessity have to apply the sanctions as planned by Europe.”

The EU didn’t criticize the Slovyansk operation. While calling on “all parties” to live up to the Geneva pledges, EU spokesman Michael Mann told reporters in Brussels that the Kiev government has the “right to take legitimate actions to defend its sovereignty and territorial integrity.”

Ukraine’s SBU State Security Service pledged yesterday to use “all means” to restore order in the east. As many as 1,300 separatists were involved in holding government buildings in the Donetsk region, according to the SBU.

The government in Kiev accuses Putin of instigating turmoil to possibly lay the groundwork for an invasion. The separatists who took over buildings in eastern Ukrainian cities say they’re not subject to the Geneva accord.

Troop Approval

Putin has parliamentary approval to deploy troops in Ukraine to protect Russian speakers and those of Russian heritage. He has about 40,000 troops massed on the border with Ukraine, according to NATO.

The Russian exercises announced today are “exactly opposite of what we have been calling on the Russian’s to do, which is to de-escalate the situation, so we again call on them to act responsibly,” Army Colonel Steve Warren, a U.S Defense Department spokesman, told reporters at the Pentagon.

“We have seen some movement associated with” Russia’s announcement “but it’s too early to tell what it is.” he said.

Obama stressed that there won’t be a “military solution” to the confrontation and held out the chance diplomacy will work. “There’s always the possibility that Russia tomorrow or the next day takes a different course,” he said.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net

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

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