Ukraine Rebels Seek to Join Russia as Gas Deadline Is Set 

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Photographer: John Moore/Getty Images

Election workers dump a ballot box for counting following a referendum on independence for eastern Ukraine in Slovyansk, Ukraine, on May 11, 2014.

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Photographer: John Moore/Getty Images

Election workers dump a ballot box for counting following a referendum on independence for eastern Ukraine in Slovyansk, Ukraine, on May 11, 2014. Close

Election workers dump a ballot box for counting following a referendum on independence for eastern Ukraine in... Read More

Photographer: Brendan Hoffman/Getty Images

A woman casts her ballot at a polling station on May 11, in Hartsizk, Ukraine. Close

A woman casts her ballot at a polling station on May 11, in Hartsizk, Ukraine.

Photographer: Dimitar Dilkoff/AFP via Getty Images

A member of an election commission counts ballot papers at a polling station in the eastern Ukrainian city of Lugansk, on May 11, 2014. Close

A member of an election commission counts ballot papers at a polling station in the eastern Ukrainian city of Lugansk, on May 11, 2014.

Photographer: Max Vetrov/AFP via Getty Images

The votes went ahead amid violent clashes between government troops and pro-Russian rebels. Close

The votes went ahead amid violent clashes between government troops and pro-Russian rebels.

Photographer: Brendan Hoffman/Getty Images)

A ballot box is carried into a hospital to allow patients to vote in a referendum, in Mariupol, Ukraine, on May 11, 2014. Close

A ballot box is carried into a hospital to allow patients to vote in a referendum, in Mariupol, Ukraine, on May 11, 2014.

Rebels in eastern Ukraine said they’re seeking to join Russia after disputed referendums yesterday as the government in Kiev was handed a deadline to pay for Russian gas to prevent supplies being cut off.

The self-styled Donetsk People’s Republic declared itself a sovereign state today after saying 90 percent of voters backed breaking away from Ukraine yesterday. Separatists in neighboring Luhansk announced a similar move. Russia’s state-controlled gas monopoly, OAO Gazprom (OGZD), said Ukraine must pay for next month’s supplies by June 2 or face a shutoff the next day.

The moves ratchet up tensions in eastern Ukraine, where the government in Kiev and its U.S. and European allies accuse Russian President Vladimir Putin of stoking unrest that’s threatening to rip the former Soviet republic apart in the run-up to a May 25 presidential election. The events of the past two days in eastern Ukraine echo those that preceded Putin’s annexation of the Crimean peninsula in March.

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“We have chosen a way of independence from the outrage and the blood-stained dictatorship, fascism and nationalism of Kiev’s junta,” Russia’s state-run RIA Novosti news service cited Valery Bolotov, the governor of the self-proclaimed Luhansk People’s Republic, as saying today. “We chose the way of freedom.”

Company Sanctions

In Brussels, the European Union imposed sanctions on companies in Crimea for the first time and threatened more measures, along with the U.S., to target Russian industries.

Even so, Russian stocks advanced on bets the latest penalties won’t hurt the economy. The Micex Index (INDEXCF) gained 0.3 percent to 1,375.31. while the ruble strengthened 0.4 percent to 35.1005 per dollar. Ukraine’s hryvnia fell 1.1 percent, extending this year’s slide to 30 percent.

A Snapshot of Ukraine's Past, Present and Future

“The preliminary results of the vote convincingly show the real sentiment of citizens in the Donetsk and Luhansk regions for the right to independently make decisions over questions vital to them,” the Russian Foreign Ministry said on its website. “We expect the Kiev authorities to take real action, not make general declarations of intent, and hold urgent and effective meetings with representatives of the southeast of Ukraine that would lead to a stabilization of the situation.”

The U.S. and the EU deem the votes illegal and Ukraine’s government denounced them.

‘Propagandistic Farce’

The referendums were “inspired by Russia’s leaders to completely destabilize Ukraine, undermine presidential elections and overthrow Ukraine’s authorities,” Ukraine’s acting president, Oleksandr Turchynov, said on parliament’s website. “This propagandistic farce will have no legal impact apart from criminal responsibility for those who organized it.”

The balloting was “illegal under Ukrainian law” and a “transparent attempt” to create further division, White House spokesman Jay Carney told reporters in Washington. He said there were cases of pre-marked ballots and children voting and that the U.S. was “disappointed” Russia didn’t use its influence to prevent the referendums from taking place.

Igor Girkin, known as Strelok or Shooter, who was named today as the head of the rebel forces in the Donetsk region, ordered all Ukrainian government troops and police to submit to his command or leave the region within 48 hours. The rebels will start an “anti-terrorist operation” against the Ukrainian military if the deadline is ignored, the head of the separatist group, Denis Pushilin, said by phone.

Gas Prepayments

Russia is moving Ukraine to prepayments for gas because it owes $3.5 billion for fuel delivered in 2013 and through April this year, Chief Executive Officer Alexey Miller said at a meeting with Russian Prime Minister Dmitry Medvedev. Gazprom will send Ukraine the bill tomorrow.

Ukraine, which depends on Russia for half of its gas consumption, has the opportunity to pay as it received the first $3.2 billion of an international aid package last week, Medvedev said.

“It’s time to stop coddling them,” he said. “I think that all possible ways to settle this situation -- one way or another -- were undertaken by Gazprom.”

Stopping shipments to Ukraine may have a knock-on impact on the rest of Europe because about 15 percent of the region’s gas supply travels through the country’s Soviet-era pipelines.

EU foreign ministers added two expropriated companies in Crimea and 13 people to its list of those sanctioned with asset freezes and travel bans. The names will be released later today.

Broader Measures

They also vowed to accelerate preparations for broad economic sanctions against Russia should it disrupt Ukraine’s presidential election, pressing the Kremlin to back down in the biggest standoff since the Cold War. NATO says there are about 40,000 Russian troops near the Ukrainian border.

“Preparatory work is under way,” EU President Herman Van Rompuy told a news conference in Kiev this evening. “I want Ukraine to remain strong and united.”

“Separatist referendums in the east of Ukraine are a brutal mockery of democracy and are all part of the plan to split the Ukrainian state,” Polish Prime Minister Donald Tusk told officials in Warsaw. “We are dealing with a sophisticated and so far unheard-of form of aggression and these referendums have nothing to do with democracy.”

A study by the Pew Research Center found that 70 percent of respondents in eastern Ukraine, where Russian is widely spoken, and 93 percent in the west wanted the country to remain unified within current borders.

Further sanctions against Russia risk undermining the economies of some EU member nations. France’s government said today it will deliver Mistral helicopter carriers to Russia as planned, rejecting requests from its European and U.S. allies to cancel the sale to punish Russia.

Ukrainian Prime Minister Arseniy Yatsenyuk has said national reconciliation talks will start May 14, though it’s unclear who’ll take part. Two months of clashes in the Donetsk region have left 40 people dead and 245 hospitalized, the Unian news service reported today, citing the governor’s office.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net; Anton Doroshev in Moscow at adoroshev@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Eddie Buckle

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