Ukrainian Troops Retake Eastern Territory as Rebels Muted

Photographer: Krisztian Bocsi/Bloomberg

Ukraine's President Petro Poroshenko said a new round of peace talks with Russia and the Organization for Security and Co-operation in Europe could be possible as early as tomorrow, according to a statement on his website. Close

Ukraine's President Petro Poroshenko said a new round of peace talks with Russia and... Read More

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Photographer: Krisztian Bocsi/Bloomberg

Ukraine's President Petro Poroshenko said a new round of peace talks with Russia and the Organization for Security and Co-operation in Europe could be possible as early as tomorrow, according to a statement on his website.

Ukrainian government troops retook control of almost two-thirds of districts in the country’s battle-torn east and separatist activity dropped after President Petro Poroshenko ended a 10-day unilateral cease-fire.

“Militant activity has decreased significantly,” National Security Council chief Andriy Parubiy said today in the capital, Kiev. The insurgents “have taken severe losses that already count in the hundreds.”

As government forces are beginning to dislodge rebels from a swathe of territory in the Donetsk and Luhansk regions, Russia is sending weapons across the frontier and allowing militants to attack border checkpoints from its territory, senior Ukrainian security officials said. Russia rejects the “tired and unsubstantiated” accusations that it’s arming insurgents, according to the Foreign Ministry in Moscow.

The months-long conflict is coming to a head after Poroshenko sent troops to oust the insurgents across the mainly Russian-speaking border regions. Ukrainian forces have retaken 17 cities and villages since the military operation against the separatists began, including four villages since the truce ended on July 1. The government now controls 23 of the 36 districts in the regions of Donetsk and Luhansk, Parubiy said.

Ukraine’s hryvnia strengthened 0.7 percent against the dollar at 6:29 p.m. in Kiev. It’s lost 30 percent this year, the worst performance among more than 170 currencies tracked by by Bloomberg show. The ruble weakened 0.5 percent to 34.44 per dollar by 6 p.m. in Moscow. Its 2 percent slide this week is the most among more than 100 global currencies tracked by Bloomberg on a closing basis.

Weaponry Supplies

About 20 military vehicles including tanks were allowed to enter Ukraine from the Russian side of the border during the past four days, Valentyn Nalyvaychenko, the chief of Ukraine’s state security service, told reporters in Kiev today. Rebels receive financing from Russian banks and enjoy the backing of Russia’s security and military intelligence agencies, he said.

Russia denounced the intensified campaign, with the Foreign Ministry pointing to the heavy civilian toll, power shortages and destroyed infrastructure as a result of the offensive. The reliance on armed forces and preference for “ultimatums and ever new demands” by the authorities in Kiev contradicts an agreement reached by the top diplomats from Ukraine, Russia, Germany and France, it said.

Diplomatic Efforts

The foreign ministers from the four countries agreed at a meeting in Berlin two days ago to work for a comprehensive cease-fire in another round of talks by tomorrow.

French President Francois Hollande and German Chancellor Angela Merkel called Russian President Vladimir Putin, raising pressure on him to push the militants to reach an agreement with Ukraine, as they stepped up diplomacy aimed at reinstating the cease-fire.

U.S. President Barack Obama and Merkel agreed the U.S. and Europe should take additional measures to “impose costs” on Russia if it doesn’t take steps to ease the crisis “in short order,” the White House said in a statement.

As Europe and the U.S. consider tightening sanctions, there’s little chance of an enduring truce, said Jan Techau, director of Carnegie Europe.

‘Long Game’

“The long game has started -- the real game between the Russians who want to keep the conflict simmering and the West that wants to stabilize situation to win political and economic progress in Ukraine,” Techau said today. “A cease-fire is unrealistic as long as Russia is not sealing and controlling its borders. But this would likely mean the separatists would lose.”

Poroshenko said a new round of peace talks with Russia and the Organization for Security and Co-operation in Europe could be possible as early as tomorrow, according to a statement on his website. He ended a cease-fire by government forces this week, blaming the insurgents for breaking the truce more than 100 times, while killing 27 soldiers and wounding 69. He discussed the situation with U.S. Vice President Joe Biden yesterday, Poroshenko’s office said in a statement.

While Poroshenko said he’s ready to resume peace talks without any additional conditions, he stressed that a truce could only come about after he gets confirmation it will be observed by separatists, and once all hostages are released and observers from the Organization for Security and Cooperation in Europe are monitoring the border with Russia.

Continuing Threat

Russia continues to pose the threat of a direct invasion after amassing 40,000 soldiers on its borders with Ukraine and failing to pull them back, Parubiy said. Nine government soldiers died and 13 were wounded during fighting today, the country’s military said.

Ukrainian forces have killed about 150 rebels near the village of Nikolaevka in the past week, the Interfax news service reported, citing Defense Ministry spokesman Oleksiy Dmytrashkovsky. On the Ukrainian side, two soldiers were killed yesterday, he said. It was impossible to confirm the numbers, and the separatists don’t regularly comment on their casualties.

Russia is still seeking to roil the situation and plans a new wave of measures to destabilize eight regions in southeastern Ukraine, Parubiy said.

To contact the reporters on this story: Daria Marchak in Kiev at dmarchak@bloomberg.net; Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net; Patrick Donahue in Berlin at pdonahue1@bloomberg.net

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

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